CH-47-50 Introduction to Property, Property Insurance, Bailments, and Documents of Title – Smith and Robersons Business Law : Book Guide

This Document Contains Chapters 47 to 50 Chapter 47 INTRODUCTION TO PROPERTY, PROPERTY INSURANCE, BAILMENTS, AND DOCUMENTS OF TITLE ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. In January, Roger Burke loaned his favorite nephew, Jimmy White, his valuable Picasso painting. Knowing that Jimmy would celebrate his twenty-first birthday on May 15, Burke sent a letter to Jimmy on April 14 stating: Dear Jimmy, Tomorrow I leave on my annual trip to Europe, and I want to make you a fitting birthday gift, which I do by sending you my enclosed promissory note. Also I want you to keep the Picasso, which I loaned you last January, and you may now consider it yours. Happy birthday! Affectionately, /s/ Uncle Roger The negotiable promissory note for $5,000 sent with the letter was signed by Roger Burke, payable to Jimmy White or bearer, and dated May 15. On May 21, Burke was killed in an automobile accident while motoring in France. First Bank was appointed administrator of Burke's estate. Jimmy presented the note to the administrator and demanded payment, which was refused. Jimmy brought an action against First Bank as administrator, seeking recovery on the note. The administrator in turn brought an action against Jimmy, seeking the return of the Picasso. (a) What decision in the action on the note? (b) What decision in the action to recover the painting? Answer: Transfer of Title: By Gift. (a) Jimmy should not prevail in his action on the note. Professor Graves, "Summary of Title to Personal Property," page 25, says: "In concluding the subject of the execution of gifts inter vivos, it may be well to say that when the donor signs and delivers a note to the donee in which he promises to pay money, this is no delivery of the money, but a mere unenforceable promise for lack of consideration." Accord, U.C.C., Section 3-303. (b) The administrator should not prevail on its counterclaim. As stated by Prof. Graves, pg 17: It is held, * * *, that if a chattel be already in the possession of the donee, as the donor's bailee or agent, a gift inter vivos may be made of such chattel to the bailee or agent, by suitable word of gift, and retention of possession by the custodian as owner, without a return to the donor and redelivery by him. 2. Several years ago, Pierce purchased a tract of land on which stood an old, vacant house. Recently, Pierce employed Fried, a carpenter, to repair and remodel the house. While Fried was tearing out a partition to enlarge one of the rooms, he found a metal box hidden in the wall. After breaking open the box and discovering that it contained $2,000 in gold and silver coins and old-style bills, Fried took the box and its contents to Pierce and told her where he had found it. When Fried handed the box and the money over to Pierce, he said, “If you do not find the owner, I claim the money.” Pierce placed the money in an envelope and deposited it in her safe deposit box, where it presently remains. No one has ever claimed the money, but Pierce refuses to give it to Fried. Will Fried be able to recover the money from Pierce? Why? Answer: Transfer of Title: By Possession. Judgment will vary from jurisdiction to jurisdiction between Fried and Pierce. There are three persons involved in the problem, the owner of the money, Fried the finder, and Pierce the landowner, all of whom have possible claims to the money. The owner, who has the first claim, has not been located and the facts indicate he is not likely to be found. This leaves the conflict between Fried and Pierce. The basic rule favors Fried, the finder, and many of the factors which courts consider in such cases also favor him. Thus, he is likely to win. However, it is equally conceivable that some courts might stress the fact that Fried was an employee of Pierce and also that the money was imbedded in the land belonging to Pierce, and thus justify giving it to Pierce. The basic rule is that the finder is entitled to the lost property as against all persons except the true owner, and that the place of finding is of no consequence. Armory v. Delamirie, 1 Strange 505, 93 Eng. Rep. 664 (1722). However, there have been deviations from the basic rule and various factors have influenced the courts. One of the distinctions which courts frequently make is between lost property and mislaid property, lost property being awarded to the finder while mislaid property is awarded to the landowner. An important factor which the courts often stress is whether the lost property was imbedded in the ground. Here, the money was hidden in a wall of a building which is considered as part of the realty. The justification for stressing this factor is that the owner of the land has more control over the property and should be considered as having possession of it prior to discovery by the finder. The fact that the finder is an employee has sometimes been thought important by the courts in determining who is entitled to lost property where the conflict is between the finder and his employer who is also the owner of the land upon which the property was found. If the duties of the finder expressly or by implication include the obligation to turn such property over to the employer then the relationship is of importance. Otherwise, not. 3. Gable, the owner of a lumber company, was cutting trees over the boundary line between his property and property owned by Lane. Although he realized he had crossed onto Lane’s property, Gable continued to cut trees of the same kind as those he had cut on his own land. While on Lane’s property, he found a diamond ring on the ground, which he took home. All of the timber Gable cut that day was commingled. What are Lane's rights, if any, (a) in the timber and (b) in the ring? Answer: Transfer of Title/Confusion. (a) Lane is entitled to all of the lumber. Here, Gable loses his interest in his own timber within the pile because he fraudulently cut and collected the timber and commingled it with his own, unless he is able to identify specifically and satisfactorily his timber. If he can, then he will retain his interest in the commingled timber. (b) Lane is also entitled to the ring because it was discovered by a trespasser upon his land. 4. Decide each of the following problems. (a) A chimney sweep found a jewel and took it to a goldsmith, whose apprentice removed the stone and refused to return it. The chimney sweep sues the goldsmith. (b) One of several boys walking along a railroad track found an old stocking. All started playing with it until it burst in the hands of its discoverer, revealing several hundred dollars. The original discoverer claims all of the money; the other boys claim it should be divided equally. (c) A traveling salesperson leaving a store notices a parcel of bank notes on the floor. He picks them up and gives them to the owner of the store to keep for the true owner. After three years, they have not been reclaimed, and the salesperson sues the storekeeper. (d) Frank is hired to clean the swimming pool at the country club. He finds a diamond ring on the bottom of the pool. The true owner cannot be found. The country club sues Frank for possession of the ring. (e) A customer found a pocketbook lying on a barber's table. He gave it to the barber to hold for the true owner, who failed to appear. The customer sues the barber. Answer: Transfer of Title. (a) For the chimney sweep. Although he was not the owner, he has title against all but the true owner. (b) Divide it equally. There was no intent to control the contents of the stocking until it burst open in joint play. (c) For the salesman. The finder is the owner against all the world except the true owner. The storekeeper never obtained possession. The finding was in a public place. (d) Frank wins. The finding was in a semi-public place and the club never gained exclusive possession of the ring. (e) For the barber. This is not lost property but merely mislaid and the true owner will have a better chance to recover if the decision is for the barber. 5. Jones had 50 crates of oranges equally divided between grades A, B, and C, grade A being the highest quality and C being the lowest. Smith had 1,000 crates of oranges, about 90 percent of which were grade A, but some of which were grades B and C, the exact percentage of each being unknown. Smith willfully mixed Jones’s crates with his own so that it was impossible to identify any particular crate. Jones seized the whole lot. Smith demanded 900 crates of grade A and 50 crates each of grades B and C. Jones refused to give them up unless Smith could identify particular crates. This Smith could not do. Smith brought an action against Jones to recover what he demanded or its value. Judgment for whom, and why? Answer: Transfer of Title: By Confusion. Judgment for Smith. While the goods have been wrongfully confused by Smith, and if any loss ensues the loss must fall upon Smith, Jones is not entitled to any more than his 50 crates of oranges. Jones will, therefore, be entitled to select any 50 crates, equally divided among grades A, B, and C, and the remainder must be returned to Smith, or Jones must account for their value to Smith. 6. Barnes, the owner and operator of Blackacre, decided to cease farming operations and liquidate his holdings. Barnes sold fifty head of yearling Merino sheep to Billing and then sold Blackacre to Clifton. He executed and delivered to Billing a bill of sale for the sheep and was paid for them. It was understood that Billing would send a truck for the sheep within a few days. At the same time, Barnes executed a warranty deed conveying Blackacre to Clifton. Clifton took possession of the farm and brought along one hundred head of his yearling Merino sheep and turned them into the pasture, not knowing the sheep Barnes sold Billing were still in the pasture. After the sheep were mixed, it was impossible to identify the fifty head belonging to Billing. Explain whether Billing will recover the fifty head of sheep from Clifton. Answer: Transfer of Title: By Confusion. Yes. The sheep were commingled through no fault of Barnes, and where they are of like kind and value, an action will lie although it is impossible to identify the actual sheep sold. If the goods can be apportioned (and in this case, they can), each owner who can prove his proportion of the whole is entitled to receive his share. Billing will receive 50 sheep, Clifton will retain 100. 7. Susan permitted Kevin to take her very old grandfather clock on the basis of Kevin’s representations that he was skilled at repairing such clocks and restoring them to their original condition and could do the job for $60. The clock had been badly damaged for years. Kevin immediately sold the clock to Fixit Shop for $30. Fixit Shop was in the business of repairing a large variety of items and also sold used articles. Three months later, Susan was in the Fixit Shop and clearly identified a grandfather clock Fixit Shop had for sale as the one she had given Kevin to repair. Fixit Shop had replaced more than half of the moving parts by having exact duplicates custom-made; the clock’s exterior had been restored by a skilled cabinetmaker; and the clock’s face had been replaced by a duplicate. All materials belonged to Fixit Shop, and its employees accomplished the work. Fixit Shop asserts it bought the clock in the normal course of business from Kevin, who represented that it belonged to him. The fair market value of the clock in its damaged condition was $30, and the value of repairs made is $220. Susan sued Fixit Shop for return of the clock. Fixit Shop defended that it then had title to the clock and, in the alternative, that Susan must pay the value of the repairs if she is entitled to regain possession. Who will prevail? Why? Answer: Transfer of Title: By Accession. If Section 2-403 of the U.C.C. applies (i.e., if Kevin was a merchant who deals in goods of that kind—which it appears he is), Fixit Shop would prevail. If not, the Fixit Shop would not acquire a title superior to Susan's solely by reason of its purchase from Kevin. Susan may have a claim to the property. The only basis for finding title in the Fixit Shop is by application of the doctrine of accession. This doctrine generally holds that when the goods of two different persons are incorporated, title to the resulting product is in the owner of the principal goods. Some courts have recognized the general rule that an original owner is entitled to regain possession of his property even from an innocent trespasser except when it appears that materials and labor expended upon the property by the trespasser are such that it would be grossly unjust to allow the original owner to benefit by such improvement. Other courts have emphasized the change in value of the goods. It would appear under the facts of the problem, that it could well be concluded that it would be unjust to allow Susan the benefit of the increased value of the clock. If Susan is entitled to possession of the clock, must she pay the value of the repairs? While it would seem that this results in an injustice, the history of the common law clearly indicates that an owner of property cannot be compelled to pay for improvements which were not authorized by him. 8. Under an oral agreement, Hyer rented from Bateman a vacant lot for a filling station. Hyer placed on the lot a lightly constructed building bolted to a concrete slab and several storage tanks laid on the ground in a shallow excavation. Later, Hyer prepared a lease which contained a provision allowing him to remove the equipment at the termination of the lease. This lease was not executed, having been rejected by Bateman due to a renewal clause it contained. Several years later, another lease was prepared, which both Hyer and Bateman did sign. This lease did not mention removal of the equipment. At the termination of this lease, Hyer removed the equipment, and Bateman brought an action to recover possession of the equipment. What judgment? Answer: Fixtures. Judgment for Hyer, who is entitled to remove the equipment. The building and storage tanks constitute trade fixtures, which the lessee may remove without material injury to the landlord's property. 9. Elvers sold a parcel of real estate, describing it by its legal description and making no mention of any improvements or fixtures on it. The land had upon it a residence, a barn, a rail fence, a stack of hay, some growing corn, and a windmill. The residence had a mirror built into the west wall of the living room and a heating system consisting of a furnace, steam pipes, and coils. In the house were chairs, beds, tables, and other furniture. On the house was a lightning rod. In the basement were screens for the windows. Which of these things passed by the deed and which did not? Answer: Real Property/Fixtures. The residence, barn, fence, windmill, panel mirror, entire heating system and parts, and lightning rod constitute permanent improvements to the real estate which, when made, became part of the real estate and would pass to any subsequent purchaser. The window screens, being specifically fitted for the particular building, also become part of the real estate and would pass by the deed. The stack of hay constitutes personal property, not attached to the real estate, and would not pass by deed. As between grantor and grantee of the land, growing crops are considered real property and pass by the deed. The growing corn passed by the deed. The items of furniture are all items of personal property which do not pass by the deed. 10. John Swan rented a safe deposit box at the Tenth Citizens Bank of Emanon, State of X. On December 17, 2014, Swan went to the bank with stock certificates to place in the safe deposit box. After he was admitted to the vault and had placed the stock certificates in the box, Swan found lying on a chair in the privacy booth of the vault a $5,000 negotiable bearer bond issued by the State of Wisconsin with coupons attached, due June 30, 2021. Swan picked up the bond and, observing that it did not carry the name of the owner, left the vault and went to the office of the president of the bank. He told the president what had occurred and delivered the bond to the president only after obtaining his promise that, should the owner not call for the bond or become known to the bank by June 30, 2015, the bank would redeliver the bond to Swan. On July 1, 2015, Swan learned that the owner of the bond had not called for it, nor was his identity known to the bank. Swan then asked that the bond be returned to him. The bank refused, stating that it would continue to hold the bond until the owner claimed it. Explain whether Swan will prevail in his action to recover possession of the bond. Answer: Transfer of Title: Lost/Mislaid Property. The Bank may retain possession of the bond. The bond was not lost property, but was mislaid property, it having been found in a non-public place (although one can debate the public versus non-public location) where the proprietor had a right of possession superior to that of a finder. 11. Lile, an insurance broker who handled all insurance for Tempo Co., purchased a fire policy from Insurance Company insuring Tempo Co.’s factory against fire in the amount of $1.5 million. Before the policy was delivered to Tempo and while it was still in Lile’s hands, Tempo advised Lile to cancel the policy. Prior to cancellation, however, Tempo suffered a loss. Tempo now makes a claim against Insurance Company on the policy. The premium had been billed to Lile but was unpaid at the time of loss. In an action by Tempo Co. against Insurance Company, what judgment? Answer: Fire and Property Insurance. Judgment for Tempo Company. A fire insurance policy is effective from its issuance until it has been canceled or until it has expired. An insured has a right to cancel the policy at any time and the premium which is due for the time the policy is in effect will be computed on the customary short rates. This right is specified in the standard fire policy. It is immaterial whether the broker has in fact paid the premium to the company at the time the loss occurs. 12. On July 15, Adler purchased in Chicago a Buick sedan, intending to drive it that day to St. Louis, Missouri. He telephoned a friend, Maruchek, who was in the insurance business, and told him that he wanted liability insurance on the automobile, limited in amount to $50,000 for injuries to one person and to $100,000 for any one accident. Maruchek took the order and told Adler over the telephone that he was covered and that his policy would be written by the Young Insurance Company. Later that same day and before Maruchek had informed the Young Insurance Company of Adler’s application, Adler negligently operated the automobile and seriously injured Brown, who brings suit against Adler. Is Adler covered by liability insurance? Answer: Nature of Insurance Contracts: Offer and Acceptance. Yes. Adler is protected by public liability insurance in these circumstances because agents of casualty insurance companies are normally authorized to issue a temporary binder and to cover an insured immediately upon request, without notice to or acceptance by the insurance company of the risk. 13. Graham owns a building having a fair market value of $120,000. She takes out a fire insurance policy from the Bentley Insurance Company for $72,000; the policy contains an 80 percent co-insurance clause. The building is damaged by fire to the extent of $48,000. How much insurance is Graham entitled to collect? Answer: Fire and Property Insurance: Co-insurance. Graham is entitled to collect $36,000. The formula is Face Value of Policy $72,000 divided by the Fair Market Value of the Property ($120,000) times the co-insurance percentage (80%) times the loss ($48,000). Thus you get: $72,000/$96,000 X 48,000=$36,000. 14. Phil was the owner of a herd of twenty highly bred dairy cows. He was a prosperous farmer, but his health was very poor. On the advice of his doctor, Phil decided to winter in Arizona. Before he left, he made an agreement with Freya under which Freya was to keep the cows on Freya’s farm through the winter, be paid the sum of $800 by Phil, and return to Phil the twenty cows at the close of the winter. For reasons that Freya thought made good farming sense, Freya sold six of the cows and replaced them with six other cows. After winter was over, Phil returned from Arizona. Is Freya liable for conversion of the original six cows? Why? Answer: Restoration of Possession to the Bailor. Yes, the transaction was a bailment, with a duty resting upon Freya to return Phil's 20 cows to him at the close of the winter. Freya was without authority to sell six of the cows and replace them with six other cows. In so doing she converted the six sold to her own use. Freya's obligation was to return the identical 20 cows owned by Phil to Phil upon his return from Arizona at the close of the winter. This she did not do and she is therefore liable to Phil for the conversion of the original six cows. 15. Hines stored her furniture, including a grand piano, in Arnett’s warehouse. Needing more space, Arnett stored Hines’s piano in Butler’s warehouse next door. As a result of a fire, which occurred without any fault of Arnett or Butler, both warehouses and their contents were destroyed. Is Arnett liable to Hines for the value of her piano and furniture? Explain. Answer: Bailee's Duty to Exercise Due Care. Decision for Hines for the value of her piano. Decision in favor of Arnett on Hines' claim for the value of her furniture. Arnett, a warehouseman, is an ordinary bailee, with the duty to exercise reasonable care as to the safety of the goods stored with him, and he is liable for loss or injury to the goods only where caused by his failure to exercise such care. Section 7-204, U.C.C. provides: "A warehouseman is liable for damages for loss or injury to the goods caused by his failure to exercise such care in regard to them as a reasonably careful man would exercise under like circumstances but unless otherwise agreed he is not liable for damages which could not have been avoided by the exercise of such care." Since Hines' furniture was stored in Arnett's warehouse, conformably to the agreement between Arnett and Hines, and the fire occurred without any fault on the part of Arnett he is not liable to Hines for the value of the furniture. "Where goods, which have been removed by the bailee from an agreed to another place of storage without notice to or consent of the bailor, are destroyed by fire, the bailee is liable in an action at law for the reasonable market value of the goods." Schouler, Bail, sec. 106. "The bailee may not, to suit his own whim or interest change his place of business and move the goods to a new place, and, if the goods be destroyed, refuse the bailor both his property and its value." McCurdy v. Wallblom Furniture & Carpet Co., 94 Minn. 326, 102 N.W. 873. Since Hines' piano was stored in violation of the bailment agreement, Arnett is liable for the value of the piano. 16. Curtis rented a safe deposit box from Reliable Safe Deposit Company, in which he deposited valuable securities and $4,000 in cash. Later, after opening the box and discovering $1,000 missing, Curtis brought an action against Reliable. At the trial, the company showed that its customary procedure was as follows: that there were two keys for each box furnished to each renter; that if a key was lost, the lock was changed; that new keys were provided for each lock each time a box was rented; that there were two clerks in charge of the vault; and that one of the clerks was always present to open the box. Reliable Safe Deposit Company also proved that two keys were given to Curtis at the time he rented his box; that his box could not be opened without the use of one of the keys in his possession; and that the company had issued no other keys to Curtis’s box. Explain whether Reliable is obligated to pay Curtis for the missing $1,000. Answer: Essential Elements of a Bailment. Decision in favor of Reliable Safe Deposit Company. The relationship of a bailor-bailee existed, and the evidence on behalf of Reliable Safe Deposit Company was not an insurer. Curtis made a prima facie case in his showing that the money was missing; the burden was then on Reliable Safe Deposit Company to show that it was not negligent. There was a showing that the safe deposit company was exercising ordinary care. 17. A, B, and C each stored 5,000 bushels of yellow corn in the same bin in X’s warehouse. X wrongfully sold 10,000 bushels of this corn to Y. A contends that inasmuch as his 5,000 bushels of corn were placed in the bin first, the remaining 5,000 bushels belong to him. What are the rights of the parties? Answer: Essential Elements of a Bailment. A, B, and C are each entitled to one third of the remaining 5,000 bushels. The corn was fungible goods, defined by Section 1-201(17) of the UCC as "goods * * * of which any unit is, by nature or usage of trade, the equivalent of any other like unit." Because the corn is considered fungible goods, it becomes immaterial that A placed his corn in the bin first. Each of the three A, B, and C must share the loss equally. 18. (a) On April 1, Mary Rich, at the solicitation of Super Fur Company, delivered a $13,000 mink coat to the company at its place of business for storage in its vaults until November 1. On the same day, she paid the company its customary charge of $50 for such storage. After Mary left the store, the general manager of the company, on finding that its storage vaults were already filled to capacity, delivered Mary’s coat to Swift Trucking Company for shipment to Fur Storage Company. En route, the truck in which Mary’s coat was being transported was badly damaged by fire caused by the driver’s negligence, and Mary’s coat was totally destroyed. Is Super Fur Company liable to Mary for the value of her coat? Why? (b) Would your answer be the same if Mary’s coat had been safely delivered to Fur Storage Company and had been stolen from the company’s storage vaults without negligence on its part? Why? Answer: Bailee's Absolute Liability. (a) Yes. Super Fur Company is liable for the value of Mary's coat. One of the duties of the bailee is not to exceed the contract of bailment. Super Fur Company had no right to deliver the coat to either Swift Trucking Company or Fur Storage Company without Mary Rich's consent. If the bailee entrusted with goods for a particular purpose puts them into the hands of a third person without authority, it is a conversion. (b) Yes. An unauthorized use constitutes a conversion of the chattel, rendering the bailee liable even for a loss which due care could not have prevented. 19. Rich, a club member, left his golf clubs with Bogan, the pro at the Happy Hours Country Club, to be refinished at Bogan’s pro shop. The refinisher employed by Bogan suddenly left town, taking Rich’s clubs with him. The refinisher had previously been above suspicion, although Bogan had never checked on the man’s character references. A valuable sand wedge that Bogan had borrowed from another member, Smith, for his own use in an important tournament was also stolen by the refinisher, as well as several pairs of golf shoes that Bogan had checked for members without charge as an accommodation. The club members concerned each made claims against Bogan for their losses. Can (a) Rich, (b) Smith, and (c) the other members compel Bogan to make good their respective losses? Answer: Bailments. Bogan must only pay damages to Smith for loss of his sand wedge. The delivery of the golf clubs, sand wedge, and shoes each constituted a bailment. Bailments may be divided into three classifications: (1) bailments for mutual benefit (in which bailments for compensation or hire are included); (2) bailments for the sole benefit of the bailee; and (3) bailments for the sole benefit of the bailor. (a) In the case of the clubs to be refinished, the bailment is one for mutual benefit with the bailee to receive compensation. The bailee and his employees, while acting in the course of their employment, are held to the exercise of ordinary care, which is the same degree of care and diligence as a person of ordinary caution would exercise with respect to his own property. A bailee is not liable for the theft of property by his employee where he has not been negligent in selecting and keeping the employee. The most that can be said against Bogan selecting and keeping the refinisher in his employ was that Bogan had failed to check the man's character references. (b) The sand wedge was for the sole benefit of the bailee, Bogan, and he is bound to exercise great care or extraordinary diligence and is responsible for slight neglect with respect to the goods bailed. It appears that Bogan was guilty of such neglect when he permitted an employee to have access to such valuable property when it was not at all necessary. Bogan must make good the loss of the sand wedge. (c) In the case of the shoes, there is a bailment for the sole benefit of the bailors, namely, the club members. The bailee is bound to take only slight care of the goods bailed in order to protect the bailor from loss and is liable only for gross negligence. Since the bailment was said to be an accommodation, Bogan would appear to have exercised sufficient care under the circumstances, and therefore, was not liable for their loss. 20. Donna drove an automobile into Terry’s garage and requested him to make repairs for which the charge would be $125. Donna, however, never returned to get the automobile. Two months later, Carla saw the automobile in Terry’s garage and claimed it as her own, asserting that it had been stolen from her. Terry told Carla that she could have the automobile if she paid for the repairs and storage, which Carla did. One week later, Molly appeared and proved that the automobile was hers, that it had been stolen from her, and that neither Donna nor Carla had any rights in it. Discuss whether Terry is liable for conversion of the automobile. Answer: Restoration of Possession to the Bailor. Molly will recover in the action against Terry. The question is whether the bailee from a thief is liable for conversion for delivering the car in good faith to one who is neither the bailor nor the true owner. If he had redelivered the automobile in good faith to the bailor, Donna, he would not be liable for conversion to Molly. But he did not do this. He delivered it to Carla, a person to whom he was not bound by his bailment contract. Hence, he was liable for conversion as his delivery was without the consent of either the bailor or the owner. The bailee's obligation to deliver or account for the property can be satisfied only by a delivery to the person entitled to the property, who is ordinarily the bailor herself, someone claiming to be her, or one duly authorized on her behalf to receive it. The bailee is bound at his peril in case he delivers the property to one other than the bailor, to determine the right of such person to receive it, and as a general rule the only surrender he can rightfully make of the property is on the order of the bailor, express or reasonably implied. 21. On June 1, Cain delivered his 2013 automobile to Barr, the operator of a repair shop, for necessary repairs. Barr put the car in his lot on Main Street. The lot, which is fenced on all sides except along Main Street, holds one hundred cars and is unguarded at night, although the police make periodic checks. The lot is well lighted. The cars do not have the keys in them when left out overnight. At some time during the night of June 4, the hood, starter, alternator, and gearshift were stolen from Cain’s car. The car remained on the lot, and during the evening of June 5, the transmission was stolen from the car. Did Barr exercise due care in taking care of the automobile? Answer: Bailee's Duty to Exercise Due Care. The situation created by the delivery of the car by Cain to Barr was a bailment for hire. Under such circumstances, a bailee for hire is bound only to use ordinary care, and it is neither an insurer of the chattel entrusted to his care nor responsible for failure to return the chattel where it has been lost or destroyed without fault on his part. Where, as in the problem, a bailor has shown a receipt of the goods by the bailee and the failure to return the same on demand, he has made a prima facie case of negligence against the bailee and the bailee must show that the loss or damage was caused without his fault. In order to rebut the presumption of negligence which arises on proof of delivery and failure to return, the defendant bailee must not only show a theft or loss by fire, but must further show that the theft or loss by fire was not due to circumstances created by his negligence. The problem presents a fact situation which would probably warrant the trier of facts in favor of Cain. However, one may argue that the first loss (value $1,900) was not Barr’s fault and that he did exercise due, the second theft is more arguable the fault of Barr. 22. Seton in Phoenix, according to a contract with Rider in New York, ships to Rider goods conforming to the contract and takes from the carrier a shipper’s order bill of lading that Seton indorses in blank and forwards by mail to Clemson, his agent in New York, with instructions to deliver the bill of lading to Rider on receipt of payment of the price for the goods. Forest, a thief, steals the bill of lading from Clemson and transfers it for value to Pace, a bona fide purchaser. Before the goods arrive in New York, Rider is insolvent. What are the rights of the parties? Answer: Negotiability of Documents of Title. When Seton indorsed in blank the shipper's order bill of lading, namely, one to the order of himself, it became negotiable by delivery. Section 7-501(1) of the U.C.C. provides: "A negotiable document of title running to the order of the named person is negotiated by his indorsement and delivery. After his indorsement in blank or to bearer any person can negotiate it by delivery alone." When the thief, Forest, delivered the bill of lading to Pace, a bona fide purchaser for value, Pace, upon his negotiation of the document of title, acquired all of the rights provided in Section 7-502 of the U.C.C. These rights are much greater than those which his transferor, the thief Forest, possessed. 23. Scarola purchased an automobile for value and without knowledge that it was stolen. After he insured the car with Insurance Company of North America (INA), the car was stolen once again. When INA refused to reimburse Scarola for the loss, contending that he did not have an insurable interest in the car, Scarola brought an action. Did Scarola have an insurable interest in the automobile? Why? Answer: Insurable Interest. Yes. Decision for Scarola. Scarola had a right to possession of the car against any contrary assertion except that of the true owner. This right ought to be regarded as an insurable interest. Scarola v. Insurance Co. of North America, 31 N.Y. 2d 411, 340 N.Y.S.2d 630, 292 N.E.2d 776 (1972). 24. Sears had sold to and installed in the Seven Palms Motor Inn a number of furnishings, including drapes and bedspreads, in connection with the construction of a motel on land Seven Palms owned. Sears did not receive payment in full for the materials and labor and brought suit to recover $8,357.49, with interest, and to establish a mechanic’s lien on the motel and land for the unpaid portion of the furnishings. Seven Palms asserted that neither the drapes nor bedspreads were fixtures and that, thus, Sears could not obtain a mechanic’s lien on them. Explain whether the drapes and bedspreads are fixtures. Answer: Fixtures. Judgment for Sears, granting a mechanic's lien for the draperies but not the bedspreads. The characterization of an otherwise personal item as a fixture depends on (1) the item's annexation to the realty, (2) adaptation of the item to the use to which the realty is devoted, and (3) the annexor's intent that the object become a permanent accession to the realty. Here, the draperies were hung from traverse rods that were attached to the walls. The purpose of hanging the drapes was to grant the motel's guest the control of privacy and amount of light in his room. The traverse rod, by itself, did not accomplish this purpose. Rather, the rod and drapes, as a unit, were adapted to this particular use for the motel rooms. They were placed in the rooms with the intent that they would form a part of the special purpose for which the building was designed. Thus, the draperies are fixtures. On the other hand, the bedspreads were not physically attached to the realty in any way. They cannot be "constructively annexed" merely because they match the drapes. The bedspreads were not essential to the use of a fixture (e.g., the drapes). In addition, it was not shown that they could not readily be used independently elsewhere. The bedspreads, therefore, are not fixtures. Sears, Roebuck & Co. v. Seven Palms Motor Inn, Inc. 25. David E. Ross, his two brothers, and their families operated and owned the entire stock of five businesses. Ross had three children: Rod, David II, and Betsy. David II and Betsy were not involved in the operation of the companies, but Rod began working for one of the firms, Equitable Life and Casualty Insurance Company, in 2010. Between 2012 and 2016, the elder Ross informed a number of persons of his desire to reward Rod for his work with Equitable Life by giving him stock in addition to the stock he would inherit. He subsequently executed several stock transfers to Rod, representing shares in various family businesses, which were reflected by appropriate entries on the corporate books. Certificates were issued in Rod’s name and placed in an envelope identified with the name Rod Ross, but they were kept with the other family stock certificates in an office safe to which Rod did not have access. In all, one-fourth of the stock holdings of David E. Ross were transferred to Rod in this manner. This fact is consistent with the elder Ross’s expressed intention that Rod should ultimately receive a total of one-half of the stock upon his father’s death. David E. died in April 2016. His will divided the estate equally among the three children and made no reference to prior gifts of stock to Rod. David II and Betsy brought an action contesting the validity of the stock transfers. Are the inter vivos gifts of the stock valid? Explain. Answer: Delivery of Gift. Judgment for Rod Ross affirmed. A donee must prove the existence of a gift by "clear and convincing" evidence. The three essential elements are a clear intention on the part of the donor to pass immediate ownership, an irrevocable delivery, and acceptance. David II and Betsy contend that the element of irrevocable delivery was not adequately established. They claim that their father should have physically conveyed the stock certificates to Rod and that the transfer of ownership on the corporate books did not effect a delivery. But "transferring the shares. . . upon the books of the company. . . stands in the place of a delivery" and [t]he best evidence of [the donee's] ownership is the transfer on the books of the company." Other opinions support this position. David II and Betsy cite the Utah Uniform Commercial Code requirement that a donor must make actual manual delivery of stock certificates to his donee to effect a valid gift. Courts have generally concluded, however, that rigid application of this provision to stock gifts is inappropriate. Rather, the transfer of ownership on the corporate records, plus evidence of donative intent, may constitute a sufficient constructive delivery. In this case, manual delivery of the certificates to Rod was not essential to a valid gift. The elder Ross clearly intended that Rod be made the owner of the stock. The change in ownership was recorded on the books, and new certificates were issued in Rod's name. While Rod's father may have maintained physical custody of the certificates, he did not exercise control or possessory rights over any of that stock. 26. Mrs. Laval was a patient of Dr. Leopold, a practicing psychiatrist. Dr. Leopold shared an office with two associates practicing in the same field. No receptionist or other employee attended the office. Mrs. Laval placed her coat in the clothes closet in the office which was placed in the reception area for the use of the patients. Later, when she returned to retrieve the coat to leave, she found it missing. Is Dr. Leopold liable to Mrs. Laval for the value of her coat? Explain. Answer: Bailment: Delivery of Possession. Judgment for Mrs. Laval. The maintenance of the closet in Dr. Leopold's office created an implied invitation to Mrs. Laval to deposit her coat there. It is customary for a patient to remove her fur coat when undergoing treatment in a psychiatrist's office. Therefore, Mrs. Laval cannot be said to be contributorily negligent in placing her coat in the closet in Dr. Leopold's reception room. It can be implied from the physician-patient relationship between the parties that Dr. Leopold became a bailee of Mrs. Laval's coat. Laval v. Leopold, 47 Misc.2d 624, 262 N.Y.S.2d 820 (1965). 27. Mr. Sewall left his car in a parking lot owned by Fitz-Inn Auto Parks, Inc. The lot was approximately 100 by 200 feet in size and had a chain link fence along the rear boundary to separate the lot from a facility of the Massachusetts Bay Transportation Authority. Although the normal entrance and exit were located at the front of the lot, it was also possible to leave by way of small side streets on either side of the lot. Upon entering the lot, the driver would pay the attendant on duty a fee of $5 to park. The attendant’s duties were limited to collecting money from patrons and directing them to parking spaces. Ordinarily, the attendant remained on duty until 11:00 A.M., after which time the lot was left unattended. Furthermore, a patron could remove his car from the lot at any time without interference by any employee of the parking lot. On the morning of April 15, Sewall entered the lot, paid the $5 fee, parked his car in a space designated by the attendant, locked it, and took the keys with him. This was a routine he had followed for several years. When he returned to the unattended lot that evening, however, he found that his car was gone, apparently having been stolen by an unidentified third person. Is Fitz-Inn, the owner of the lot, liable for the value of the car? Why? Answer: Delivery of Possession. No, Fitz-Inn is not liable. The existence of a bailment is a prerequisite to Sewall's right to recover because, in the absence of such a relationship, Fitz-Inn had no duty to safeguard the car against theft. A bailment arises only upon delivery of possession of the property sought to be bailed and at least some degree of control over that property. If there has been no delivery of either possession or control, however, the intended bailee cannot be regarded as having undertaken to protect the property and owes the owner no duty to do so. If Sewall had been required to surrender his keys to the parking lot parking facility and the sole means of exit had been staffed by an attendant responsible for checking each car leaving the facility, then a sufficient delivery of possession and control would have been present to create a bailment. Here, however, Sewall retained possession of the keys, and the attendant did not control egress from the lot. Accordingly, neither type of control over Sewall's car was exercised by the parking lot, and thus, no bailment and its accompanying duty can be found. Rather, Sewall bore the responsibility for the theft of his car. Sewall v. Fitz-Inn Auto Parks, Inc., 330 N.E.2d 853 (Mass. App. Ct. 1975). 28. Mrs. Mieske delivered thirty-two 50-foot reels of developed movie film to the Bartell Drug Company to be spliced together into four reels for viewing convenience. She placed the films, which contained irreplaceable pictures of her family’s activities over a period of years, into the order in which they were to be spliced and then delivered them to the manager of Bartell. The manager placed a film processing packet on the bag of films and gave Mrs. Mieske a receipt that stated, “We assume no responsibility beyond retail cost of film unless otherwise agreed to in writing.” Although the disclaimer was not discussed, Mrs. Mieske’s parting words to the store manager were, “Don’t lose these. They are my life.” Bartell sent the film to its processing agent, GAF Corporation, which intended to send them to another processing lab for splicing. While at the GAF laboratory, however, the film was accidentally placed in the garbage dumpster and was never recovered. Upon learning of the loss of their film, the Mieskes brought action to recover damages from Bartell and GAF. The defendants argued that their liability was limited to the cost of the unexposed film. Are GAF or Bartell liable to the Mieskes? If so, for how much? Answer: Bailee's Duty to Returned Bailed Property. Judgment for the Mieskes affirmed. Because the negligence of both Bartell and GAF contributed to the loss of the film, both are liable as bailees to the Mieskes. The real question, however, is the proper measure of the Mieskes’ damages. The general rule of recovery for destruction of personal property is as follows: (1) if the personal property that is destroyed has a market value, then the market value is the measure of damages; (2) if the property has no market value but it can be replaced or reproduced, then the measure of damages is the cost of replacement or reproduction; and (3) if the destroyed property has no market value and cannot be replaced or reproduced, then the value to the owner is to be the proper measure of damages. In the last situation, however, damages are not recoverable for the sentimental value that the owner places on the property. Here, the property lost was thirty-two reels of film with images that had no market value and that cannot be replaced or reproduced by thirty-two reels of blank film. Therefore, the proper measure of damages is the value of the film to the Mieskes. This type of damage is difficult to ascertain and contains a subjective element, but it must be remembered that compensation for sentimental value is not allowed. With these constraints in mind, the award of $7,500 returned by the jury appears to be appropriate. Mieske v. Bartell Drug Co. 92 Wash.2d 40, 593 P.2d 1308 (1979). 29. Plaintiff, Heath Benjamin (Benjamin), found more than $18,000 in currency inside the wing of an airplane. At the time of this discovery, State Central Bank (State) owned the plane and it was being serviced by Lindner Aviation, Inc. (Lindner). Benjamin at the time was employed by Lindner and was conducting a routine annual inspection of the plane. As part of the inspection, Benjamin removed panels from the underside of the wings. Although these panels were to be removed annually as part of the routine inspection, a couple of the screws holding the panel on the left wing were so rusty that Benjamin had to use a drill to remove them. Benjamin testified that the panel probably had not been removed for several years. Inside the left wing Benjamin discovered two packets approximately four inches high and wrapped in aluminum foil. He removed the packets from the wing and took off the foil wrapping. Inside the foil was approximately $18,000, tied in string and wrapped in handkerchiefs. The money was eventually turned over to the Keokuk police department. No one came forward within twelve months thereafter claiming to be the true owner of the money. Explain who is entitled to receive the money. Answer: Mislaid Property. Judgment reversed on the bank's cross-appeal and affirmed on the remainder of the judgment of the district court. Benjamin argues that lost property statutes are intended "to encourage and facilitate the return of property to the true owner, and then to reward a finder for his honesty if the property remains unclaimed." According to Iowa law, however, "[t]he rights of finders of property vary according to the characterization of the property found." We think there was substantial evidence to find that the currency discovered by Benjamin was mislaid property. The bills were carefully tied and wrapped and then concealed in a location that was accessible only by removing screws and a panel. These circumstances support an inference that the money was placed there intentionally. Both logic and common sense suggest that it is unlikely someone would voluntarily part with over $18,000 with the intention of terminating his ownership. The location where this money was found is much more consistent with the conclusion that the owner of the property was placing the money there for safekeeping. A degree of unintentionality must be present in order for a court to rule as a matter of law that the item was stolen, then lost. This money was not treasure trove since, based on the dates of the currency, the money was no older than thirty-five years. These conclusions support the judgment that the money was mislaid. The finder of mislaid property acquires no rights to the property. The right of possession of mislaid property belongs to the owner of the premises upon which the property is found, as against all persons other than the true owner. Because the money discovered by Benjamin was properly found to be mislaid property, it belongs to the owner of the premises where it was found. But is the premises considered to be the airplane or the hangar? We think that the premises where the money was found is the airplane, not Lindner Aviation's hangar where the airplane happened to be parked when the money was discovered. The policy behind giving ownership of mislaid property to the owner of the premises where the property was mislaid supports this conclusion. If the true owner of the money attempts to locate it, he would initially look for the plane; it is unlikely he would begin his search by contacting businesses where the airplane might have been inspected. Therefore, we affirm the trial court's judgment that the bank, as the owner of the plane, has the right to possession of the property as against all but the true owner. 30. Calvin Klein, Ltd., a New York clothing company, had used the services of Trylon Trucking Corporation for more than three years, involving hundreds of shipments. After completing each carriage, Trylon would forward to Calvin Klein an invoice that contained a limitation of liability provision. The provision stated, “In consideration of the rate charged, the shipper agrees that the carrier shall not be liable for more than $50 on any shipment accepted for delivery to one consignee unless a greater value is declared, in writing, upon receipt at time of shipment and charge for such greater value paid, or agreed to be paid, by shipper.” On April 2, Trylon dispatched its driver Jamahl Jefferson to the John F. Kennedy International Airport to pick up 2,833 blouses sent from Hong Kong, China, to Calvin Klein. The driver disappeared, stealing both the truck and the blouses. Calvin Klein sued Trylon for the full value of the blouses. Does the limitation of liability provision extend to the shipment? Explain. Answer: Lien of Carrier. Yes. According to the UCC, a shipper and a common carrier may contract to limit the carrier's liability in cases of loss to an amount agreed to by the parties, so long as the language of limitation is clear, the shipper is aware of the terms of the limitation, and the shipper can change the terms by indicating the true value of the goods being shipped. Such a limitation agreement is generally valid and enforceable despite carrier negligence. The shipper can calculate the specific amount of its potential damages in advance, declare the value of the shipment based on that calculation, and pay a commensurably higher rate for carriage of the goods. In effect, the shipper can thus buy additional insurance from the common carrier. Here, Calvin Klein and Trylon were business entities with an on-going commercial relationship spanning over three years and numerous transactions. In this commercial setting, the clear limitation agreement between Calvin Klein and Trylon will be enforced. This is not a case where the shipper was dealing with the carrier for the first time, or under new or changed terms. Calvin Klein was aware of the terms and was free to adjust the limitation upon a written declaration of the value of a given shipment, but failed to do so with the shipment at issue. The terms of the unmodified liability limitation provision must be enforced. Therefore, Trylon must pay Calvin Klein $50 for the lost shipment. 31. Francis B. Freeman, Jr., purchased a cattle scale for $11,000. The scale, which weighs approximately six thousand five hundred pounds, was sold as a portable model. The manufacturer sold additional items that permitted the scale to be moved. Freeman did not buy that equipment. Freeman placed the scale in a barn on a concrete pad poured for the scale, then poured concrete ramps that would allow cattle to enter and exit the scale. Freeman further welded an iron fence into place to help funnel the cattle through the scale area. Although the scale was designed to be portable, 70 percent of the scales sold were installed the same way as Freeman installed it. The scale has remained in place since its installation. The scale could be moved by cutting away a welded metal fence and lifting the scale with heavy machinery. The removal of the fence would take approximately one hour with use of a cutting torch, after which the scale could be moved within fifteen minutes. Mary Ann Barrs purchased the land—including the barn that housed the cattle scale—from Freeman for $3.5 million. Barrs claims that the cattle scale was a fixture that was part of the land and passed to her in the sale. Explain whether the cattle scale is a fixture. Answer: Fixtures. The scale is a fixture. A fixture is an article of personal property that has been so annexed to the realty that it is regarded as part of the land and belongs to the person owning the land. The test for determining whether property has become a fixture is threefold, consisting of (1) the annexation to the realty, (2) the adaptation to the use to which the realty is devoted, and (3) the intent that the object become a permanent accession to the land. The latter two elements, adaptation and intent, are more important in determining whether a chattel became a fixture than the method by which the chattel is affixed to a freehold. Annexation. *** The scale weighs approximately six thousand five hundred pounds. A fence and gates within the structure had to be cut off in order to install the scale. A concrete slab was poured in the structure for placement of the scale. The size and shape of the slab were designed to accommodate the scale. Concrete ramps were installed on two sides of the scale and fencing was constructed to direct cattle onto the scale. The concrete construction (other than the slab) and the metal pipe fencing were completed after the scale was placed on the slab in the pole barn. The metal posts for the fence were set in the concrete. The scale has remained in place since its installation. Adaptation. Ray Stone had been ranch manager for plaintiff. *** He told the trial court that the scale was integral to a cattle-working facility. The scale was used to weigh cattle for sale and to determine required dosages of medicine administered to cattle. Intent. The scale was described as portable by its manufacturer. The manufacturer sold peripheral items that permitted the scale to be moved. This included a trailer and an inverter. Plaintiff did not buy that equipment. Ray Stone told the trial court that the scale was purchased “to be stationary whether it was portable or not.” *** A six-thousand-five-hundred-pound scale placed on a specially sized concrete pad and surrounded by metal pole fencing set in the concrete is annexed to the real estate on which the concrete pad is poured. *** The scale was put in place to facilitate the cattle operation on the premises. Its adaptation for that purpose enhanced the operation of the cattle ranch. The evidence demonstrates the plaintiff's intent for the scale to be a permanent installation. Therefore the scale is a fixture and, accordingly, the sale of the real estate on which the scale was situated included the sale of the scale. Freeman v. Barrs, Missouri Court of Appeals, Southern District, Division One, 237 S.W.3d 285 (2007). ANSWERS TO “TAKING SIDES” PROBLEMS The plaintiffs are public utilities providing telecommunications services in New Hampshire. The plaintiffs commenced separate actions for abatement of real estate taxes against sixteen municipalities. The plaintiffs disputed the defendants’ treatment of its communications equipment as real estate, thereby challenging their authority to tax its equipment. The communications equipment at issue involves two basic categories: (1) distribution plant, which includes telephone poles, wires, and underground conduits; and (2) central office equipment, consisting of frames, switches, and other power equipment. The plaintiffs submitted affidavits setting forth the following facts. All of the plaintiffs’ poles, wires, and underground conduits located in the municipalities are placed either on public rights of way or on private property owned by third parties. Approximately 90 percent of the poles are located on public rights of way pursuant to licenses issued by the state or the municipalities. The remaining 10 percent of the poles are placed on private property either by consent of the property owner or pursuant to an easement. The poles, wires, and underground conduits are installed in a manner that permits and facilitates their removal and relocation. Consequently, removal of that equipment is neither complicated nor time consuming, and does not harm the underlying land or change its usefulness. The plaintiffs remove and relocate their poles, wires, and underground conduits at the request of the state or the applicable private landowner or municipality. In obtaining the licenses, consents, or easements for their poles, wires, and underground conduits, the plaintiffs insist on maintaining ownership of that equipment and refuse any requests to make the equipment a permanent part of the realty. The plaintiffs’ central office equipment, most of which is located in buildings owned by the plaintiffs, is both portable and designed to permit removal and relocation. The plaintiffs’ practice and policy is to move pieces of central office equipment among buildings in response to changes in technology or system use. Although certain frames are bolted to the buildings, their removal is achieved without affecting the usefulness of the buildings or the frames themselves. When the plaintiffs ultimately vacate a building used as a central office, they remove all of their equipment and merely transfer the building “as a shell.” The vacated building, though devoid of central office equipment, retains utility for other commercial or professional uses. The defendants did not dispute the specific facts set forth by the plaintiffs. (a) What are the arguments that the property is not real property and therefore not subject to taxation by the municipalities? (b) What are the arguments that the property is real property and can be taxed by the municipalities? (c) Who is correct? Explain Answer: (a) The plaintiffs would argue that the property is personal property—that it can easily be moved and used elsewhere. The parties did not intend the property to be fixtures and their nature and use clearly indicated such. (b) The argument that the property is real property is that it is placed in the ground and placed in such a way as to be safe from storms and accident. The telephone poles and related equipment have long useful lives and are fairly permanent. The exclusive use of the communications equipment is intimately intertwined with the primary use of the real property. It is only fair to allow the municipalities the right to tax the plaintiffs. (c) Whether an item of property is properly classified as either personal or a fixture turns on several factors, including the item’s nature and use, the intent of the party making the annexation, the degree and extent to which the item is specially adapted to the realty, the degree and extent of the item’s annexation to the realty, and the relationship between the realty’s owner and the person claiming the item. In this case, the items of communications equipment did not constitute fixtures. Each of the relevant factors supports the superior court’s holding that the property remained personal. The poles, wires, and central office equipment, though placed in the ground or bolted to the buildings, were readily removable and transportable without affecting the utility of the underlying land, the buildings, or the equipment itself. Because removal of the equipment would not render the land or buildings “incomplete and unfit for use,” and because the equipment could be “equally useful and adapted for general use elsewhere,” the communications equipment did not constitute fixtures. Furthermore, the statute governing the licensing of telephone poles and wires on public ways specifically provides for their removal on ten days’ notice and therefore establishes, as a matter of law, their impermanence. Finally, the defendants never challenged the plaintiffs’ asserted intent to maintain the communications equipment as personal property. New England Telephone and Telegraph Co. v. City of Franklin, Supreme Court of New Hampshire, 1996 141 N.H. 449, 685 A.2d 913. Chapter 48 INTERESTS IN REAL PROPERTY ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. Kirkland conveyed a farm to Sandler to have and to hold for and during his life and on Sandler’s death to Rubin. Some years thereafter, oil was discovered in the vicinity. Sandler thereupon made an oil and gas lease, and the oil company set up its machinery to begin drilling operations. Rubin then filed suit to enjoin the operations. Assuming an injunction to be the proper form of remedy, what decision? Answer: Life Estates. For Rubin. While a life tenant may use the land during his lifetime he cannot commit waste. An attempt by the life tenant to extract all or an unreasonable amount of the mineral wealth is a use not intended by the grantor. As it is a use which would damage the remainderman, it is one which he can enjoin. 2. Smith owned Blackacre in fee simple absolute. In section 3 of a properly executed will, Smith devised Blackacre as follows: “I devise my farm Blackacre to my son Darwin so long as it is used as a farm.” Sections 5 and 6 of the will made gifts to persons other than Darwin. The last and residuary clause of Smith’s will provided: “All the residue of my real and personal property not disposed of heretofore in this will, I devise and bequeath to Stanford University.” What interests in Blackacre were created by Smith’s will? Answer: Future Interests. Darwin received only a qualified fee title and therefore has no power to convey title in fee simple absolute. The words "so long as it is used as a farm" purports to create a possibility of reverter in Stanford University. The answer is based upon common law rules rather than statutory provisions. 3. Panessi leased to Barnes for a term of ten years beginning May 1 certain premises that were improved with a three-story building, the first floor being occupied by stores and the upper stories by apartments. On May 1 of the following year, Barnes leased one of the apartments to Charles for one year. On July 5, a fire destroyed the second and third floors of the building. The first floor was not burned but was rendered untenantable. Neither the lease from Panessi to Barnes nor the lease from Barnes to Charles contained any provision in regard to the fire loss. Discuss the liability of Barnes and Charles to continue to pay rent. Answer: Tenant's Obligations: Destruction of the Premises. Barnes is liable for rental after the destruction of the premises, but Clinton is not liable. The lessee of an entire building is deemed to have leased the real estate, consisting of the land and the improvements. Since after the destruction of the building, Barnes is still in a position to make use of the land, he is deemed liable for the payment of the rent. The lease of an apartment, however, is not considered to carry with it a lease of the land; consequently, such a lessee is not liable after the destruction of his apartment. 4. Ames leased an apartment to Boor at $200 a month, payable the last day of each month. The term of the written lease was from January 1, 2016, through April 30, 2017. On March 15, 2016, Boor moved out, telling Ames that he disliked all the other tenants. Ames replied, “Well, you’re no prize as a tenant; I probably can get more rent from someone more agreeable.” Ames and Boor then had a minor physical altercation in which neither was injured. Boor sent the apartment keys to Ames by mail. Ames wrote Boor, “It will be my pleasure to hold you for every penny you owe me. I am renting the apartment on your behalf to Clay until April 30, 2017, at $175 a month.” Boor had paid his rent through February 28, 2016. Clay entered the premises on April 1, 2016. How much rent, if any, may Ames recover from Boor? Answer: Tenant's Obligations: Eviction or Abandonment. Boor is liable to Ames for the rent ($600) that accrued on March 31, 2016, and for $175 a month thereafter until April 30, 2017. A lease vests in the lessee’s exclusive possession of the premises for its duration. He gains an estate in the land. He cannot relieve himself of his rent obligation by abandoning the premises. His promise to pay rent is an "independent covenant," and he continues to be liable on it even though he abandons the premises. Surrender is the technical term for transfer of a leasehold from the lessee back to the lessor. Ordinarily, a surrender of a leasehold of more than a year's duration must be accomplished in a writing delivered to the lessor. But in some circumstances surrender occurs by operation of law. When surrender occurs, the covenant to pay rent is dissolved, although the lessee continues to be liable for rent that has already accrued. A surrender cannot be forced upon a lessor. Rejection of it preserves the lessee's obligation on his covenants. Boor has a leasehold for one year and four months. By his unilateral act of moving out he cannot force a surrender on Ames. He continues to be liable on his covenant to pay rent. Surrender by operation of law may occur in different ways. In general, if a lessee abandons a leasehold and the lessor manifests an intention to accept the abandonment and takes possession of the premises, surrender occurs by operation of law. On the facts stated, a finding that Ames accepted Boor's abandonment of the leased property is not warranted. The words between the parties and their fight do not appear to add up to an acceptance of abandonment on Ames' part. If there was acceptance, then the lease ended, and Boor never became liable for rent accruing subsequent to March 31, 2016. By the majority rule, leasing of the premises after the lessee abandons them is not an acceptance of the abandonment if the lessor notifies the lessee that the premises will be leased in his behalf. In these circumstances the lessor mitigates the damages for the breach of the rent covenant by the lessee. If this notice is not given, then surrender occurs by operation of law. In the problem presented Ames protected himself by notifying Boor that he (Ames) intended to re-lease the premises on behalf of Boor. 5. Jay signed a two-year lease containing a clause that expressly prohibited subletting. After six months, Jay asked the landlord for permission to sublet the apartment for one year. The landlord refused. This angered Jay, and he immediately assigned his right under the lease to Kay. Kay was a distinguished gentleman, and Jay knew that everyone would consider him a desirable tenant. Is Jay’s assignment of his lease to Kay valid? Answer: Assignment of a Leasehold. Jay's assignment of his lease to Kay is valid. The lease prohibited subletting but contained no provision forbidding an assignment. The law recognizes a distinction between a sublease and an assignment. A sublease involves the transfer by the tenant (Jay) of less than all of his rights in the lease. Since the lease to Jay contains no restrictions, specific or otherwise, against assignment, the lease is freely assignable. The assignee became liable to the landlord to pay rent. In the event the assignee Kay fails to pay the agreed rent, the tenant Jay will be liable for the rent and upon paying it has the right to be reimbursed by the assignee Kay. 6. In 2005, Roy Martin and his wife, Alice, their son, Hiram, and Hiram’s wife, Myrna, acquired title to a 240-acre farm. The deed ran to Roy Martin and Alice Martin, the father and mother, as joint tenants with the right of survivorship, and to Hiram Martin and Myrna Martin, the son and his wife, as joint tenants with the right of survivorship. Alice Martin died in 2013, and in 2016, Roy Martin married Agnes Martin. By his will, Roy Martin bequeathed and devised his entire estate to Agnes Martin. When Roy Martin died in 2018, Hiram and Myrna Martin assumed complete control of the farm. State the interest in the farm, if any, of Agnes, Hiram, and Myrna Martin immediately upon the death of Roy Martin. Answer: Joint Tenancy/Tenancy in Common. When Alice Martin died, Roy Martin, her husband, as surviving joining tenant in one-half of the farm, became sole owner of that half of the title. Roy Martin's death did not cast his half of the title upon his son, Hiram Martin, and his wife, Myrna Martin. When Roy Martin dies, his second wife, Agnes Martin, could correctly assert a claim to one-half of the farm, as sole beneficiary under her husband's will. Hiram and Myrna Martin continued to own one-half of the farm in joint tenancy upon the death of Hiram's father, Roy Martin. This deed did not create a simple four-party joint tenancy in the entire title. Instead, two separate and distinct two party joint tenancies were created, one in each half of the title. Another incident of his deed is that it created a tenancy in common between the first set of grantees (father and mother) on the one hand as to half of the title, and the second set of grantees (son and son's wife) on the other hand, as to the other half. In short, the right of survivorship did not extend from the owners of one half onto the owners of the other half, as the son and his wife evidently supposed and claimed. Agnes Martin's position would be, and correctly so, that the deed did not create a joining tenancy among all four parties, but rather two joint tenancies in undivided halves, one between the father and his first wife, Alice; the other between the son and the son's wife. Accordingly, when Alice Martin, the mother died, the father, as surviving joint tenant (in one-half), became sole owner of that half of the title. If follows that when the father died testate, his one-half of the title became vested in his second wife, Agnes, the sole beneficiary under his will. 7. In her will, Teressa granted a life estate to Amos in certain real estate, with remainder to Brenda and Clive in joint tenancy. All the rest of Teressa’s estate was left to Hillman College. While going to Teressa’s funeral, the car in which Amos, Brenda, and Clive were riding was wrecked. Brenda was killed, Clive died a few minutes later, and Amos died on his way to the hospital. Who is entitled to the real estate in question? Answer: Remainders. Clive's heirs-at-law. This question involves the application of basic rules with respect to life estates, remainders, and joint tenancies. Upon Teressa's death, Brenda and Clive became the owners of the real estate as joint tenants, subject to the life estate of Amos. Upon Brenda's death, the surviving joint tenant, Clive, owned the real estate subject to the life estate of Amos. Upon Clive's death, in the absence of a will, his heirs-at-law became the owners in fee of the real estate, subject to Amos' life estate. Upon Amos' death, Clive's heirs-at-law became the outright owners of the real estate. 8. Otis Olson, the owner of two adjoining city lots, A and B, built a house on each. He laid a drainpipe from lot B across lot A to the main sewer pipe under the alley beyond lot A. Olson then sold and conveyed lot A to Fred Ford. The deed, which made no mention of the drainpipe, was promptly recorded. Ford had no actual knowledge or notice of the drainpipe, although it would have been apparent to anyone inspecting the premises because it was only partially buried. Later, Olson sold and conveyed lot B to Luke Lane. This deed also made no reference to the drainpipe and was promptly recorded. A few weeks later, Ford discovered the drainpipe across lot A and removed it. Did he have the right to do so? Answer: Easements. No. Lot A became subject to an easement in favor of Lot B. Although one cannot truly have an easement over his own land, an easement may be created by implication when a grantor has used one portion of his land for the benefit of another in a manner similar to that of an easement and then conveys one of such portions. This result is reached by calling the original use by the owner of the severed estates a "quasi-easement." It is based upon the presumed intent of the parties that they have dealt with the land in the condition in which it exists, i.e., subject to an "easement." In order to have an easement arise thus by implication, the quasi-easement must be apparent, reasonably necessary for the enjoyment of the land conveyed or retained, and continuous. The element of continuity is satisfied by a condition that is permanent or non-temporary or, as it is sometimes said, there must be a permanent adaptation of the servient tenement to the use. All of these elements exist, so that a quasi-easement may be implied here, subject to the problem of doing so by reservation. With respect to easements not appearing of record, the acts of user to charge a purchaser with notice must be sufficiently open, continuous and unambiguous in character to indicate to a prospective purchaser, if he should view the property, that some person other than the vendor claims an easement therein as indicated by structures or improvements visible on the land adapting it for the exercise of the easement. The fact that the drain is actually visible on the servient tenement would therefore be sufficient to charge the purchaser with notice of an easement therein. 9. At the time of his marriage to Ann, Robert owned several parcels of real estate in joint tenancy with his brother, Sam. During his marriage, Robert purchased a house and put the title in his name and his wife’s name as joint tenants, not as tenants in common. Robert died; within a month of his death, Smith obtained a judgment against Robert’s estate. What are the relative rights of Sam, Smith, and Ann? Answer: Joint Tenancy. Upon Robert's death, his brother Sam, as surviving joint tenant, became the sole owner of the property owned by Robert and Sam in joint tenancy prior to Robert's marriage to Ann. Upon the death of Robert, title to the house being in Robert and Ann as joint tenants, title passed by operation of law to the surviving joint tenant Ann. The judgment creditor, Smith, acquired no rights in any of the property jointly owned by Robert and Sam and by Robert and Ann. At the time Smith obtained a judgment against Robert's estate, all of the joining property of which Robert was co-owner was then owned by Sam and Ann, respectively, as surviving joint tenants, in fee simple absolute. 10. In 1989, Ogle was the owner of two adjoining lots numbered 6 and 7 fronting at the north on a city street. In that year, she laid out and built a concrete driveway along and two feet in front of what she erroneously believed to be the west boundary of lot 7. Ogle used the driveway for access to buildings situated at the southern end of both lots. Later in the same year, she conveyed lot 7 to Dale, and thereafter in the same year she conveyed lot 6 to Pace. Neither deed made any reference to the driveway, and after the conveyance, Dale used it exclusively for access to lot 7. In 2017, a survey by Pace established that the driveway encroached six inches on lot 6, and he brought an appropriate action to establish his lawful ownership of the strip upon which the driveway approaches, to enjoin its use by Dale, and to require Dale to remove the overlap. Will Pace prevail? Why? Answer: Transfer of Property: Easement by Prescription. Decree in favor of Dale. Dale had effective and actual possession of the strip in question, and the statute of limitations had run against Pace. Whether Dale has acquired title to the strip by easement by prescription (adverse possession) and the running of the statute of limitations against Pace depends upon the language of the statute. The typical statute prescribes that no one may bring an action for the recovery of land unless he or those under whom he claims have been seized or possessed of the premises within a stated period prior to the date of commencement of the action. The time period varies widely from state to state. Since Dale's possession or use began in 1989, and since Pace had a cause of action against him beginning in that year, the time period in most states has elapsed and the statute has run against Pace. Judicial construction of the statute has developed that the possession of one claiming the benefits of the statute shall be open, continuous, actual, exclusive, notorious, and hostile. The establishment of a driveway on the land of another is clearly actual and is an effective means of taking possession. The facts show that Dale's possession was exclusive and continuous; it was open and notorious in the sense that the existence of the driveway was apparent not only to the public generally but to Pace in particular. Although Pace did not in fact know that Dale possessed his land, he was in a position to discover it from 1989-2017, for there was nothing secret or hidden about the acts of user. The purposes of the statute, to quiet title and penalize those who sleep on their rights, have been satisfied. 11. Temco, Inc., conveyed to the Wynns certain property adjoining an apartment complex being developed by Sonnett Realty Company. Although nothing to this effect was contained in the deed, the sales contract gave the purchaser of the property use of the apartment’s swimming pool. Temco’s sales agent also emphasized that use of the pool would be a desirable feature in the event that the Wynns decided to sell the property. Seven years later, the Bunns contracted to buy the property from the Wynns through the latter’s agent, Sonnett Realty. Although both the Wynns and Sonnett Realty’s agent told the Bunns that use of the apartment’s pool went with the purchased property, neither the contract nor the deed subsequently conveyed to the Bunns so provided. When the Bunns requested pool passes from Temco and Offutt, the company that owned the apartments, their request was refused. Discuss whether the Bunns have a right to use the apartment’s pool. Answer: Licenses. Whether the Bunns have a right to use the apartment's pool depends on whether the Wynns were granted a license or an easement to use it in the sales contract between the Wynns and Temco. A license is a right given by some competent authority to do some act that otherwise would be a trespass. Because a license is personal between the licensor and the licensee, it cannot be assigned. On the other hand, an appurtenant easement usually runs with the land. Bunn v. Offutt, 216 Va. 681, 222 S.E. 2d 522 (1976). 12. On January 1, Mrs. Irene Kern leased an apartment from Colonial Court Apartments, Inc., for a one-year term. When the lease was entered into, Mrs. Kern asked for a quiet apartment, and Colonial assured her that the assigned apartment was in a quiet, well-insulated building. In fact, however, the apartment above Mrs. Kern’s was occupied by a young couple, the Lindgrens. From the start of her occupancy, Mrs. Kern complained of their twice-weekly parties and other actions that so disturbed her sleep that she had to go elsewhere for rest. After Mrs. Kern had lodged several complaints, Colonial terminated the Lindgrens’ lease effective February 28. The termination of the lease was prolonged, however, and Mrs. Kern vacated her apartment, claiming that she was no longer able to endure the continued disturbances. Colonial then brought this action to recover rent owed by Mrs. Kern. Will Colonial prevail? Has Mrs. Kern been constructively evicted? Explain. Answer: Eviction. Yes, she has been constructively evicted. A constructive eviction is said to occur when the beneficial enjoyment of an apartment by the lessee is so interfered with by the landlord as to justify an abandonment. It does not suppose an actual ouster or dispossession by the landlord. Colonial Court Apartments, Inc. v. Kern, 163 N.W.2d 770 (Minn. 1968). 13. In 1974, a deed for land in Pitt County was executed and delivered by Joel and Louisa Tyson “unto M. H. Jackson and wife Maggie Jackson, for and during the term of their natural lives and after their death to the children of the said M. H. Jackson and Maggie Jackson that shall be born to their inter-marriage as shall survive them and their heirs and assigns in fee simple forever.” Thelma Jackson Vester, a daughter of M. H. and Maggie Jackson, died in 2016, survived by three children. M. H. Jackson, who survived his wife, Maggie Jackson, died in 2017, survived by four sons. The children of Thelma Jackson Vester brought this action against M. P. Jackson, a son of and executor of the will of M. H. Jackson. The children of Vester contended that through their deceased mother they were entitled to one-fifth interest in the land conveyed by the deed of 1974. The executor contended that the deed conveyed a contingent remainder and only those children who survived the parents took an interest in the land. Discuss the contentions of both of the parties. Answer: Remainder Interests. Judgment for executor affirmed. The distinction between a vested and a contingent remainder is the capacity to take upon the termination of the preceding estate. Where those who are to take in remainder cannot be determined until the happening of a stated event, the remainder is contingent. Only those who can answer the roll immediately upon the happening of the event acquire any estate in the properties granted. Here the estate in remainder was not given to the children of M.H. Jackson and Maggie Jackson, but by clear and express language to those children and only those who survived their parents. Since Mrs. Vester did not survive her parents, there was nothing for her children, the plaintiffs, to inherit. It affirmatively appears from the complaint that plaintiffs acquired no interest in the land by virtue of the deed from Tyson and wife to M.H. Jackson and others. Strickland v. Jackson, 130 S.E. 2d 22 (N.C. 1963). 14. Robert and Majorie Wake owned land that they used as both a cattle ranch and a farm. Each spring and autumn, the Wakes would drive their cattle from the ranch portion of the operation across an access road on the farmland to Butler Springs, which was also on the farmland. In December 1994, the Wakes sold the farm to Jesse and Maud Hess but retained for themselves a right-of-way over the farm access road and the right to use Butler Springs for watering their livestock. In 2001, the Hesses sold the farm to the Johnsons, granting them uninterrupted possession of the property “excepting only that permissive use of the premises” owned by the Wakes. The Wakes continued to use the access road and Butler Springs until 2002, when they sold their ranch and granted the new owners “their rights to the water of Butler Springs,” but they said nothing about the access road. The ranch was subsequently sold several times and all the owners used the access road and watering hole. In 2016, the Nelsons purchased the ranch. Shortly thereafter, the Johnsons notified the Nelsons that they had revoked the Nelsons’ right to use the access road and Bulter Springs. In 2017, the Johnsons closed the access road by locking the gates across the road. The Nelsons brought this action, claiming easements to both the access road and Butler Springs. Does an easement in favor of the Nelsons exist? Why? Answer: Easements. Judgment for the Nelsons affirmed. The Johnsons allege that the Butler Springs easement was "in gross," and therefore personal to the Wakes. An easement in gross is merely a personal interest in the land of another. However, an easement appurtenant is an interest which is annexed to the possession of the dominant tenement and passes with the land to subsequent owners. An instrument granting an easement is to be interpreted in connection with the intention of the parties and the circumstances in existence at the time of the easement's creation. The trial court determined that the Butler Springs easement created in the Wake-Hess contract was appurtenant in nature, with a dominant estate in the cattle ranch and a servient estate in the farmland. The Butler Springs easement consequently has passed with the cattle ranch (dominant estate) upon each transfer of title. The evidence presented at trial fully supports this interpretation. Nelson v. Johnson 15. Clayton and Margie Gulledge owned a house at 532 Somerset Place, N.W. (the Somerset property) as tenants by the entirety. They had three children: Bernis Gulledge, Johnsie Walker, and Marion Watkins. When Margie Gulledge died in 1990, Clayton became the sole owner of the Somerset property. The following year, Clayton remarried, but the marriage was unsuccessful. To avoid a possible loss of the Somerset property, Bernis forwarded Clayton funds to satisfy the second wife’s financial demands. In exchange, Clayton conveyed the property to Bernis and himself as joint tenants. In 2011, Clayton conveyed his interest in the Somerset property to his daughter, Marion Watkins. In 2011, Clayton died. Bernis died in 2017 and Johnsie Walker died in 2014. In these proceedings, Marion Watkins claims to be a tenant in common with the estate of Bernis Gulledge. The estate claims that when Clayton died, Watkins’ interest was extinguished and Bernis became the sole owner of the Somerset property. Who is correct? Why? Answer: Concurrent Ownership. Watkins is correct. The applicable rule in a large majority of jurisdictions is that either party to a joint tenancy may sever that tenancy by unilaterally disposing of his interest, that the consent of the other tenant is not required, and that the transfer converts the estate into a tenancy in common. This position is supported by the nature of a joint tenancy. It is established that “[j]oint tenancy cannot exist unless there be present unity of interest, title, time and possession; that is to say, the interests must be identical, they must accrue by the same conveyance, they must commence at the same time and the estate must be held by the same undivided possession.” The interests held by Marion Watkins and Bernis Gulledge were not created by the same conveyance and were not created at the same time. Therefore, the unities of title and time did not exist between these interests and no joint tenancy could have existed. When Clayton conveyed his interest to Marion, he unilaterally severed the joint tenancy held by himself and Bernis and created a tenancy in common between Bernis and Marion. 16. By separate leases, Javins and a few others rented an apartment at the Clifton Terrace apartment complex. When they defaulted on their rent payments, the landlord, First National Realty, brought an action to evict them. The tenants admitted to the default but defended on the ground that the landlord had failed to maintain the premises in compliance with the Washington, D.C., Housing Code. They alleged that approximately 1,500 violations of this code had arisen since the term of their lease began. Discuss the merits of this case. Answer: Landlords’ Obligations. Traditionally, a lease conveyed an interest in land. Consequently, courts applied the general rules governing real property transactions to lease controversies. The rigid doctrines of real property law have inhibited the application of implied warranties to real estate transactions. Today's tenant is not interested in land, however, but in a suitable place for occupation. The value of the lease for a modern apartment dweller is that it gives him a place to live that includes adequate heat, light, ventilation, serviceable plumbing facilities, secure doors and windows, proper sanitation, and proper maintenance. A tenant's tenure in a specific place is often not sufficient to justify efforts at repairs. Since the lease specifies a particular period of time for the tenant to use the apartment, he may legitimately expect that it will be fit for habitation during this rental period. The landlord should then be obligated to keep the premises in a habitable condition. This court, therefore, holds that a warranty of habitability, measured by housing standards regulations, is implied in leases of units covered by those regulations. In this case, the tenants' obligation to pay rent was dependent upon the landlord's performance of its obligations, which now includes the warranty to maintain the premises in a habitable condition. First National has not fulfilled its implied warranty of habitability; therefore it cannot sue for possession due to the tenants' default. 17. On January 14, 2013, Eura Mae Redmon deeded land to her daughter, Melba Taylor, and two sons, W. C. Sewell and Billy Sewell, “jointly and severally, and unto their heirs, assigns and successors forever,” with the grantor retaining a life estate. W. C. Sewell died on November 18, 2014, and Billy Sewell died on May 11, 2015. Mrs. Redmon died on February 17, 2017. Melba Taylor then sought a declaration that her mother had intended to convey the property to the grantees as joint tenants, thereby making her, by virtue of her brothers’ deaths, sole owner of the property. Descendants of W. C. and Billy Sewell opposed the complaint on the ground that the deed created a tenancy in common among the grantees. Who is correct? Explain. Answer: Joint Tenancy/Tenancy in Common. At common law, joint tenancy was favored in cases in which the wording in the deed was ambiguous. However, in Arkansas, and in many other states, statutes have been adopted which presumptively construe an instrument to create a tenancy in common rather than a joint tenancy. The Arkansas statute reads as follows: “Every interest in real estate granted or devised to two (2) or more persons, other than executors and trustees as such, shall be in tenancy in common unless expressly declared in the grant or devise to be a joint tenancy.” Nothing appears from the deed itself in this case to indicate Mrs. Redmon’s intent to convey a survivorship interest, unless that intention is to be found in the term “jointly and severally.” The problem, however, is that “jointly and severally” are words of tort, not property. They have no meaning in the world of estates. In the context of an ownership interest, such a term is a legal anomaly; several ownership is, by definition, a denial of joint ownership. However, two cases from other jurisdictions have shown that the use of the word “jointly” is not sufficient to create a joint tenancy, and therefore, the term “jointly and severally,” with its elusive connotation, cannot do so either. James v. Taylor, Court of Appeals of Arkansas, Division III, 1998, 62 Ark.App. 130, 969 S.W.2d 672 http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=ar&vol=1998a/980520/ca971404&invol=2 18. Fay and Loretta O'Connell were married and owned several bank accounts as joint tenants with rights of survivorship. While accompanied by Loretta’s sister, Mary Ann, Fay went to the banks where Fay and Loretta had joint accounts and withdrew all the funds from those accounts. Fay deposited the funds into new accounts in his name alone and designated all but the money market account as payable-on-death to Mary Ann. Did Fay sever and destroy the joint tenancy? What rights, if any, does Loretta have to the withdrawn funds? Explain. Answer: Joint Tenancy. Yes, Fay severed and destroyed the joint tenancy, but Loretta is entitled to recover her proportional interest (50 percent) of the withdrawn funds. Kettler v. Security Nat. Bank of Sioux City, Court of Appeals of Iowa, 2011, 805 N.W.2d 817. “Joint tenancy property is property held by two or more parties jointly, with equal rights to share in the enjoyment of the whole property during their lives, and a right of survivorship which allows the surviving party to enjoy the entire estate.” A joint tenant's right to the joint tenancy property can be described as “an undivided interest in the entire estate to which is attached the right of survivorship.” There are two separate features of joint tenancy: the “proportional interest” in the undivided interest in the property and the “accretive interest” in the right of survivorship. A joint tenancy may be severed by the actions of one or both of the joint tenants. Any severance of joint tenancy creates a tenancy in common. Traditionally, Iowa followed the four unities of title test: to create a joint tenancy the four unities had to be present—interest, title, time, and possession. “To sever or terminate a joint tenancy, a joint tenant simply had to destroy one of the unities.” That changed and Iowa adopted an “intent-based approach” in determining whether a joint tenancy had been created, severed, or terminated. Under the intent-based test, a court is not permitted “to determine the intent of a party under the facts and then fulfill it.” “Instead, it seems fundamental that intent must be derived from an instrument effectuating the intent to sever the joint tenancy.” In the present case, the bank accounts were held in joint tenancy, with both Fay and Loretta having an undivided interest in the entire estate. Each joint tenant was permitted to make withdrawals from the account, as was specified in the account agreement. Ultimately, one joint tenant was permitted to deplete the account. Consequently, the withdrawals of funds was valid and could support the termination of the joint tenancy. Fay clearly demonstrated his intent that the funds no longer be held in the joint tenancies. First, he withdrew all of the funds. He then deposited both his and Loretta's proportional interests into accounts in his name only and payable-on-death to Mary Ann. In a case where a joint tenant makes a valid withdrawal of more than his proportional share, the remedy is not to invalidate the entire transaction. Rather, the remedy is a suit between the joint tenants to recover the funds taken in excess of the withdrawing joint tenant's proportional share. Even though the withdrawals from the joint tenancy accounts were valid transactions, this does not determine nor destroy the proportional interests as between Fay and Loretta. Fay had a right to withdraw all of the funds and even to take control of all of the funds. However, he did so at the risk of Loretta claiming her proportionate share. The presumption is that each party has an interest in one-half of the funds in a joint tenancy account. ANSWERS TO “TAKING SIDES” PROBLEMS On June 30, 2008, Martin Hendrickson and Solveig Hendrickson were married, and on January 3, 2009, a home previously owned by Martin was conveyed to them as joint tenants and not as tenants in common. Solveig Hendrickson paid no part of the consideration for the premises. On August 3, 2016, Martin Hendrickson duly executed a Declaration of Election to Sever Survivorship of Joint Tenancy by which he endeavored to preserve an interest in the premises for Ruth Halbert, his daughter by a previous marriage. On the same day, he executed his last will and testament, by the terms of which he directed that his wife, Solveig Hendrickson, receive the minimum amount to which she was entitled under the laws of the State of Minnesota. Martin Hendrickson died with a valid will on October 9, 2016. (a) What are the arguments that the joint ownership was severed by Martin Hendrickson’s declaration thus creating a tenancy in common? (b) What are the arguments that the joint tenancy was not severed by Martin Hendrickson’s declaration and thus the property passed to Solveig Hendrickson by survivorship upon Martin Hendrickson’s death? (c) Which argument should prevail? Explain. Answer: (a) The joint tenancy was terminated by declaration of Martin Hendrickson because he had the legal right to unilaterally terminate his joint ownership and create a tenancy in common. (b) The arguments against the termination of the joint tenancy is that the Mrs. Hendrickson did not agree to the termination and that it is not fair to permit unilateral termination of a joint tenancy. (c) The existence of a joint tenancy requires unity of time, title, interest, and possession. In the past, one joint tenant could unilaterally convert the joint tenancy to a tenancy in common by conveying his interest to a third party who immediately reconveyed the property to the original owner. In the process, the unities of time and interest would be destroyed. Recently, the courts have permitted joint tenants to agree mutually to sever the joint tenancy. In this case, Martin Hendrickson attempted to sever the joint tenancy unilaterally. The method chosen by him was sufficient. Under Minnesota law, a wife is guaranteed the continued occupancy of the place of joint abode upon her husband’s death. This public policy, however, does not necessarily apply to the remainder interest in the home, which can be disposed of without adversely affecting the wife’s rights. Moreover, Martin’s wife took no irrevocable action in reliance upon the existence of the joint tenancy, and no consideration was given or received when the joint tenancy was created. Therefore, the unilateral action taken by Martin was effective to destroy the joint tenancy and create a tenancy in common. Hendrickson v. Minneapolis Federal Savings & Loan Association, 281 Minn. 462, 161 N.W. 2d 688 (1968). Chapter 49 TRANSFER AND CONTROL OF REAL PROPERTY ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. Arthur was the father of Bridgette, Clay, and Dana and the owner of Redacre, Blackacre, and Greenacre. Arthur made and executed a warranty deed conveying Redacre to Bridgette. The deed provided that “this deed shall become effective only on the death of the grantor.” Arthur retained possession of the deed and died, leaving the deed in his safe deposit box. Arthur made and executed a warranty deed conveying Blackacre to Clay. This deed also provided that “this deed shall become effective only on the death of the grantor.” Arthur delivered the deed to Clay. After Arthur died, Clay recorded the deed. Arthur made and executed a warranty deed conveying Greenacre to Dana. Arthur delivered the deed to Lesley with specific instructions to deliver the deed to Dana on Arthur’s death. Lesley duly delivered the deed to Dana when Arthur died. a. What is the interest of Bridgette in Redacre, if any? b. What is the interest of Clay in Blackacre, if any? c. What is the interest of Dana in Greenacre, if any? Answer: Deeds: Delivery. (a) Bridgette has no interest in Redacre. There has been no delivery of the deed. "To constitute the valid delivery of a deed the grantor must absolutely divest himself of all control over the same, and if he retains any custody or control over it, if it is not actually delivered but is to become effective only upon the grantor's death, there is no valid delivery. A deed must take effect upon its execution and delivery or not at all. A deed of land which is not to take effect until the death of the grantor is void, as being an attempt to make a testamentary disposition of property without complying with the Statute of Wills." Benner v. Bailey, 234 Ill. 79. (b) Clay is the owner of Blackacre. There has been a good delivery here of the deed. The provision in the deed does not prevent good delivery. "Where a deed has been actually delivered to a grantee in the life of the grantor, even though it contains a provision that it is not to take effect until the grantor's death, it will be sustained as a present grant of a future interest. The delivery of a deed in the grantor's lifetime changes the effect of an instrument which might but for the delivery be of a testamentary character." Shipley v. Shipley, 174 Ill. 506. (c) Dana is the owner of Greenacre. The delivery to the escrow agent was valid where the grantor parted with all control over the deed. "The unconditional delivery of a deed by the grantor to a third party, to be delivered to the grantee after the grantor's death, is a good delivery. The question of delivery is to a great degree a question of intention, and the presumption of delivery in the case of a voluntary settlement, such as here, is stronger than in an ordinary case of bargain and sale. The deed was delivered to Lesley to keep until the grantor's death and then to deliver to Dana. No condition was attached to the delivery. It was effectual to pass the title and was not testamentary." Newman v. Workman, 284 Ill. 77, 81-82. 2. Arkin, the owner of Redacre, executed a real estate mortgage to the Shawnee Bank and Trust Company for $100,000. After the mortgage was executed and recorded, Arkin constructed a dwelling on the premises and planted a corn crop. After Arkin defaulted in the payment of the mortgage debt, the bank proceeded to foreclose the mortgage. At the time of the foreclosure sale, the corn crop was mature and unharvested. Arkin contends (a) that the value of the dwelling should be credited to him and (b) that he is entitled to the corn crop. Explain whether Arkin is correct. Answer: Transfer of Real Property. (a) The dwelling became a part of the realty and passed to the purchaser. Arkin would not be entitled to the value of the improvement. The mortgagee had an estate in the premises, and when the house was erected, in the absence of a contract that Arkin might sever and remove the house, it became a part and parcel of the premises. (b) Arkin is not entitled to the corn crop. Until the crop is severed from the land, it passes with the land. Crops growing upon mortgaged lands are covered by the mortgage, whether planted before or after its execution, and until they are severed the mortgage attaches as well to the crops as to the land. 3. Robert and Stanley held legal title of record to adjacent tracts of land, each consisting of a number of five acres. Stanley fenced his five acres in 1992, placing his east fence fifteen feet onto Robert’s property. Thereafter, he was in possession of this fifteen-foot strip of land and kept it fenced and cultivated continuously until he sold his tract of land to Nathan on March 1, 1997. Nathan took possession under deed from Stanley and continued possession and cultivation of the fifteen-foot strip that was on Robert’s land until May 27, 2017, when Robert, having on several occasions strenuously objected to Nathan’s possession, brought suit against Nathan for trespass. Explain whether Nathan has gained title by adverse possession. Answer: Adverse Possession. Decision for Robert. In order to gain title by adverse possession of the 15-foot strip there would have to be an open and notorious use of the strip for the statutory period of 20 years (although this varies from state to state), either by the occupier or those in privity of contract with him. Nathan’s use of the land does seem to meet this requirement, but since the true owner of the land, Robert, had “on several occasions strenuously objected to Nathan’s possession,” Nathan’s period of use was interrupted. Therefore, Robert retains ownership and should prevail in his effort to regain possession of his land. 4. Marcia executed a mortgage of Blackacre to secure her indebtedness to Ajax Savings and Loan Association in the amount of $125,000. Later, Marcia sold Blackacre to Morton. The deed contained the following provision: “This deed is subject to the mortgage executed by the Grantor herein to Ajax Savings and Loan Association.” The sale price of Blackacre to Morton was $150,000. Morton paid $25,000 in cash, deducting the $125,000 mortgage debt from the purchase price. On default in the payment of the mortgage debt, Ajax brings an action against Marcia and Morton to recover a judgment for the amount of the mortgage debt and to foreclose the mortgage. Can Ajax recover from Marcia and Morton? Explain. Answer: Transfer of Mortgage Interests--Assumption. Ajax can recover against both Marcia and Morton. When Morton purchased the property and deducted the amount of the existing principal indebtedness from the purchase price, he thereby impliedly assumed payment of such indebtedness for which he was personally liable. "Where, in purchasing premises which are encumbered, the amount of the encumbrance is taken into account in fixing the consideration and becomes part of the consideration, the purchaser thereby becomes liable for the amount of the encumbrance." Metzger v. Emmel, 290 Ill. 61. Where a grantee of a mortgagor assumes payment of a mortgage, the mortgagor is not released from liability to pay the mortgage debt. Ordinarily, the provision in a deed, "subject" to the mortgage, would not impose a personal obligation on the grantee to pay the mortgage debt. Here, the situation is changed by the buyer taking as a credit upon the purchase the amount of the mortgage debt thereby obligating him to pay it. 5. On January 1, 2017, Davis and Hershey owned Blackacre as tenants in common. On July 1, 2017, Davis made a written contract to sell Blackacre to Grigg for $250,000. Pursuant to this contract, Grigg paid Davis $250,000 on August 1, 2017, and Davis executed and delivered to Grigg a warranty deed to Blackacre. On February 1, 2018, Hershey quitclaimed his interest in Blackacre to Davis. Grigg brings an action against Davis for breach of warranty of title. What judgment? Answer: Warranty Deed. Judgment for Dibbert. Since the deed of conveyance from Davis to Dibbert was by warranty deed, that deed operated to convey after acquired title to Dibbert. Accordingly, when Davis acquired Hershey's interest in Blackacre on February 1, 2018, title immediately vested in Davis's grantee, Dibbert, pursuant to the earlier warranty deed. 6. Barker operated a retail bakery, Davidson a drugstore, Farrell a food store, Gibson a gift shop, and Harper a hardware store in adjoining locations along one side of a single suburban village block. As the population grew, the business section developed at the other end of the village, and the establishments of Barker, Davidson, Farrell, Gibson, and Harper were surrounded for at least a mile in each direction solely by residences. The village adopted a typical zoning ordinance, the provisions of which declared the area including the five stores to be a “residential district for single-family dwellings.” Thereafter, Barker tore down the frame building that housed the bakery and began to construct a modern brick bakery. Davidson found her business increasing to such an extent that she began to build an addition that would extend the drugstore to the rear alley. Farrell’s building was destroyed by fire, and he started to reconstruct it with the intention of restoring it to its former condition. Gibson changed the gift shop into a sporting goods store and after six months of operation decided to go back into the gift shop business. Harper sold his hardware store to Hempstead. The village building commissioner brings an action under the zoning ordinance to enjoin the construction work of Barker, Davidson, and Farrell and to enjoin the carrying on of any business by Gibson and Hempstead. Assume the ordinance is valid. What result? Answer: Nonconforming Uses. Injunction granted against Barker, Davidson, Farrell and Gibson; no injunction against Hampstead. Nonconforming uses existing at the time of the adoption of a zoning ordinance are generally permitted to remain and constitute a property right, but the nonconforming user may not change the structure or use upon the theory that nonconforming uses should be gradually eliminated. Barker–Although repairs are allowed on nonconforming structures, rebuilding and structural alterations are prohibited. Davidson–Additions to nonconforming building are prohibited. Farrell–Rebuilding after destruction by fire is prohibited. Gibson–Abandonment of a nonconforming use results in its permanent loss. Hampstead–Sale of a nonconforming use for continuance of such use does not destroy it. 7. Alda and Mattingly are residents of Unit I of Chimney Hills Subdivision. The lots owned by Alda and Mattingly are subject to the following restrictive covenant: “Lots shall be for single-family residence purposes only.” Alda intends to convert her carport into a beauty shop, and Mattingly brings suit against Alda to enjoin her from doing so. Alda argues that the covenant restricts only the type of building that can be constructed, not the incidental use to which residential structures are put. Will Alda be able to operate a beauty shop on the property? Why or why not? Answer: Type and Construction of Restrictive Covenants. Decree for Alda. Restrictive covenants are generally strictly construed. Doing so, this restrictive covenant only limits the types of buildings that can be constructed on the lots and not the incidental use to which residential structures may be put. Relevant factors in reaching this decision are the wording of the restrictive covenants and the extensiveness of the business activities conducted within the residential dwelling. 8. The City of Boston sought to condemn land in fee simple for use in constructing an entrance to an underground terminal for a subway. The owners of the land contend that no more than surface and subsurface easements are necessary for the terminal entrance and seek to retain air rights above 36 feet. The city argues that any building using this airspace would require structural supports that would interfere with the city’s plan for the terminal. The city concedes that the properties around the condemned property could be assembled and structures could be designed to span over the condemned property, in which case the air rights would be quite valuable. Can the city condemn the property? Answer: Eminent Domain. No, the city cannot condemn the property, but has the right to an easement. The fact that the city has authority to condemn in fee simple pursuant to a statutory procedure does not give it authority always to condemn a fee simple interest; the condemnor can take no more property than is reasonably necessary for the public purpose for which the property is being condemned. "Where the attempted condemnation seeks property in excess of public needs, judicial intervention is called for. In this case it is clear that [the city] needs no more for its substation than a permanent, nonexclusive easement for the subsurface, surface, and the first 36 feet above the surface. This would not preclude future development of the air space above the easement area so long as the public use and safety is not threatened or impaired." Heirs of W.L. Champion v. City of Atlanta, 254 S.E. 2d 706. 9. In May 2007, Fred Parramore executed four deeds, each conveying a life estate in his land to him and his wife and a remainder interest in one-fourth of his land to each of his four children: Alney, Eudell, Bernice, and Iris. Although Fred executed and acknowledged the four deeds as part of his plan to distribute his estate at his death, he did not deliver them to his children at this time. Instead, he placed the deeds with his will in a safe deposit box and instructed the children to pick up their deeds at his death. Fred later conveyed Alney’s deed to Alney, thereby vesting Alney’s interest in that parcel, but Eudell’s, Bernice’s, and Iris’s deeds were never handed over to them during Fred’s lifetime. Fred, however, acted as if the land were beyond his control, and on one occasion told a prospective buyer that the land had already been deeded away. When Fred died in November 2017, Alney brought this action, claiming that the deeds to Eudell, Bernice, and Iris were ineffective because they had never been handed over during Fred’s lifetime. Accordingly, Alney argued, the remaining land should pass in equal shares to each of the four children under the residuary clause of Fred’s will. Who will prevail? Why? Answer: Delivery. Judgment for Eudell, Bernice, and Iris affirming the validity of their deeds. The appellate court affirmed. Delivery is "the life of a deed;" without it no deed is good, though "the intent to deliver is clear and failure to deliver due to accident.” But a grantor may fully relinquish a deed, signifying a conveyance, otherwise than by placing it in the grantee's hands. There is substantial competent evidence to support the trial court's decision that Fred Parramore, during his life, vested remainder interests in his children by conduct recognizable as delivery of the deeds. * * * It is enough that Fred Parramore, unsophisticated in such matters, signed deeds creating remainder interests in his several children and put the deeds beyond his immediate reach in a place which he understandably regarded and verbally identified as the appropriate depository for instruments having practical effect at life's end. Parramore v. Parramore, 371 So.2d 123 (Ct.App. Fl. 1978). 10. The Gerwitz family resides on a piece of land known as Lot #24 of the Belleville tract, which they acquired by deed in 1998. Shortly thereafter, the Gerwitzes began to use the adjacent vacant Lot #25. At various times they planted grass seed, flowers, and shrubs on the land and used it for picnics and cook-outs. In 2017, Gelsomin acquired Lot #25 and constructed a foundation on it so that he could place a house there. The Gerwitzes then brought this action to stop him, claiming title to Lot #25 by adverse possession. Discuss whether the Gerwitzes have obtained title by adverse possession. Answer: Adverse Possession. Judgment for Gelsomin. The appellate court affirmed because the possession was not hostile to the owner and under a claim of right. Before a claimant may acquire land by adverse possession, he must prove by clear and convincing evidence that his possession of the premises has been (1) hostile and under a claim of right, (2) actual, (3) open and notorious, (4) exclusive, and (5) continuous. The reasonable inference to draw from the evidence is that plaintiffs knew in 1995 that they did not own Lot #25 and they never intended to claim ownership of it. They entered the land to remedy an eyesore next to their home and use the land as they could. Thus, the proof establishes that plaintiffs had clear knowledge of the boundaries of their land by map and deed and because the other lots on the street were the same size. Gerwitz v. Gelsomin, 416 N.Y.S. 2d 127 (1979). 11. Leo owned a one-story, one-family dwelling in a single-family residential zoning district in Detroit. He attempted to sell the house with its adjoining lot for $138,500. Houses in the neighborhood generally sold for $120,000 to $125,000. Immediately to the west of Leo’s property was a gasoline service station. In addition, Leo’s property was located on a corner frequented with heavy traffic. After he received no offers from residential use buyers during the period of more than a year that the property was listed and offered for sale, Leo applied to the board of zoning appeals for a variance to permit the use of the property as a dental and medical clinic and to use the side yard for off-street parking. The variance would be subject to certain conditions, including the preservation of the building’s exterior as that of a one-family dwelling. Puritan-Greenfield Improvement Association, a nonprofit corporation, filed a complaint against Leo’s variance request. Discuss whether the variance should be granted. Answer: Zoning Variance. Judgment for Puritan-Greenfield. Under the Detroit statute, a board of zoning appeals is authorized to grant a variance only upon a showing of practical difficulties or unnecessary hardship. The unnecessary hardship, however, must be unique or peculiar to the property for which the variance is sought rather than due to general conditions in the neighborhood. Furthermore, one seeking a variance must show that the property cannot reasonably be used in a manner consistent with existing zoning. Here, Leo's house would not sell for $138,500 in a neighborhood where houses sell for substantially less. This is not enough to show that the property could not continue reasonably to be used as a single-family residence. The fact that the property would be worth more as a doctor's clinic is immaterial. The standard is one of reasonable use, not reasonable return. Moreover, the presence of heavy traffic and the gasoline station is not unique to Leo's property, but common to the entire neighborhood. A zoning district has to end somewhere. Thus, Leo's property can continue reasonably to be used as a single-family residence. Accordingly, his variance request was denied. Puritan-Greenfield Improvement Association v. Leo, 153 N.W.2d 162 (Ct.App. Mich. 1967). 12. The Glendale Church purchased a 21-acre parcel of land in a canyon along the banks of Mill Creek in Angeles National Forest. The church used the 12 flat acres next to the stream to operate a campground for disabled children. This area had a number of improved buildings located on it. In July, a forest fire destroyed all ground cover upstream from the church’s campground, and a subsequent flood destroyed all the buildings. In response, the county of Los Angeles enacted an interim ordinance that temporarily prohibited the church from constructing new buildings. Is the church entitled to compensation for a temporary taking of its property? Why? Answer: Just Compensation. . Yes, the church is entitled. The just compensation clause of the Fifth Amendment requires that a landowner be compensated when his property is taken by the government. A "temporary" taking such as the one in this case, is not that different from a permanent taking. The just compensation clause does not suggest that a taking must be permanent in order to qualify the landowner for remuneration. First English Evangelical Lutheran Church of Glendale v. Los Angeles County, Calif., 482 U.S. 304 (1987). 13. Robert V. Gross owned certain land on which he proposed to construct an eighty-three-unit apartment house. The land, however, was subject to a restriction imposed by a deed to a predecessor in title that provided that no part of the premises could be used for business purposes other than raising, growing, and selling live bait, fishing tackle, and sporting goods. Explain whether the restriction prohibits the construction and operation of an apartment house? Answer: Restrictive Covenants. Judgment for Gross. The restriction itself gives no significant guidance as to what constitutes a forbidden business purpose other than expressly to permit the retail sale of fishing tackle and sporting goods. The apartment house will be used for residential purposes. That it may be owned for income-producing purposes does not make the use of the premises a use for a business purpose. The restriction is concerned with the physical activity carried on upon the land and not with the presence or absence of a profit-making motive on the part of the landowners. Construed in this manner–strictly against the party asserting the applicability of the restriction–the resolution does not forbid Gross's construction and operation of the apartment house. Walker v. Gross, 362 Mass. 703, 290 N.E. 2d 543 (1972). 14. For seven years, Desford Potts had owned a 6-acre tract of land within the corporate limits of the city of Franklin. The tract contained a livestock barn in which Potts stored lumber and other building materials. Bricks were also stored in stacks 4 or 5 feet high outside and behind the barn. Franklin passed a zoning ordinance by virtue of which Potts’s lot was classified as residential property. Soon afterward, Potts moved some sawn logs onto his back lot, and the city complained that Potts’s use of his property for storage of building materials was a “nonconforming use.” Potts then brought an action to enjoin interference by the city of Franklin. Explain whether Potts will prevail. Answer: Nonconforming Use. Decision for Potts. Storing logs on the property did not constitute an enlargement of a nonconforming use. Since the bricks were already stored before the passage of the zoning ordinance, placing some logs there did not materially change the use of the property. Therefore, there was no enlargement of the nonconforming use. Franklin Planning & Zoning Commission v. Simpson County Lumber Company, 394 S.W. 2d 593 (Ky. App. 1965). 15. Sam and Eleanor Gaito purchased a home from Howard Frank Auman, Jr., in the spring of 2014. Auman had completed the construction of the house in November 2009. In the interim, three different parties had lived in the house for brief periods, but Auman had retained ownership. The last tenants, the Ashleys, experienced difficulties with the home’s air conditioning system. Repairs were attempted, but no effort was made to change the capacity of the air conditioning unit. When the Gaitos moved into the house in June 2014 they too had problems with the air conditioning. The system created only a ten-degree difference between the outside and inside temperatures. The Gaitos complained to Auman on a number of occasions, but extensive repairs failed to correct the cooling problem. In May 2017, the Gaitos brought an action against Auman, alleging that the purchase price of the home included central air conditioning and that Auman had breached the implied warranty of habitability. At trial, an expert in the field of heating and air conditioning testified that a four-ton air conditioning system, rather than the three-and-one-half-ton system originally installed, was appropriate for the Gaitos’ house. The jury returned a verdict in favor of the Gaitos in the amount of $3,655, and the court of appeals affirmed. What result? Answer: Implied Warranty of Habitability. Judgment for Gaitos affirmed. The theory of implied warranty of habitability of a recently completed dwelling relaxes the rigid common law rule of caveat emptor. The theory was originally stated in North Carolina as follows: “[I]n every contract for the sale of a recently completed dwelling, . . . the vendor, if he be in the business of building such dwellings, shall . . . impliedly warrant to the initial vendee that . . . the dwelling, together with all its fixtures, is sufficiently free from major structural defects.” Any defect must be latent or not reasonably discoverable at the time of sale or possession. Auman was in the business of building houses, and the Gaitos were the initial vendees. Auman argues, however, that the theory is inapplicable to this case in that the dwelling was not “recently completed” and that any implied warranty that may have arisen was invalidated by the previous occupancy of the house by tenants. The standard of reasonableness is proper for determining whether a house has been recently completed. Thus, this issue was a question of fact for the jury. The effect of the occupancy by tenants was another factor that was properly allowed consideration by the jury, since many kinds of major structural defects are unaffected by the presence of tenants. Auman also contends that an air conditioning unit is not governed by an implied warranty because it is not “an absolute essential utility to a dwelling house.” The warranty, however, includes “the dwelling, together with all its fixtures.” A defective air conditioning system may properly be considered a major structural defect. Gaito v. Auman, 313 N.C. 243 16. In 1972, South Carolina enacted a Coastal Zone Management Act requiring any person using land in a “critical area” to obtain a permit for any uses other than those to which the critical area was devoted when the act went into effect on September 28, 1977. In 1986, Lucas paid $975,000 for two residential lots on the Isle of Palms in Charleston County, South Carolina, on which he intended to develop a residential subdivision known as “Beachwood East.” Because no portion of those lots was included in a “critical area” at that time, Lucas was not required to obtain a permit. In 1988, however, South Carolina enacted the Beachfront Management Act, which established a “baseline” for the landward-most points of erosion and in effect barred the erection of any permanent habitable structures on his two parcels. Lucas filed suit in state court, claiming that the new statute violated his Fifth and Fourteenth Amendment rights by taking property without compensation. Explain. Answer: Takings. Judgment for Lucas. At the time Lucas acquired his lots, the Coastal Zone Management Act protecting the beaches was already in effect. Under this legislation, Lucas was not limited as to the development of his lots, and the adjacent lots to his had already been built on. However, the Beachfront Management Act drew a new line through the island, on the ocean side of which no permanent habitable structure could be built. The Act permitted no exceptions. Lucas’s lots fell entirely within the proscribed area. It was first established in 1922, in Pennsylvania Coal Co. v. Mahon, that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Prior to that case, a taking was considered only to be a direct appropriation of the property, in which the owner lost possession. After the Mahon case, two categories of regulatory action requiring compensation became recognized — that is, situations in which the owner retains possession but is so affected by the state’s regulations as to have a valid claim to compensation. The second category applies to this case: it is the situation in which regulations deny all economically beneficial or productive use of land. From the owner’s point of view, the extinguishment of economic value is the equivalent of physical appropriation. The Takings Clause of the Fifth Amendment does not require compensation when an owner is barred from putting land to a use that is already proscribed by existing rules. For South Carolina to prove that its regulation takes nothing from Lucas, it must identify principles of nuisance and property law that prohibit Lucas’s intended uses (building single-family houses) in the circumstances in which the property is presently found. The state has not done that. The effect of its Beachfront Management Act on Lucas’s land is indeed a taking. Lucas v. South Carolina Coastal Council, 505 U.S. 1003. 17. Barba & Barba Construction, Inc., constructed a multilevel addition to a single-family house in Glenview, Illinois. Before the addition, the residence consisted of approximately 2,300 square feet. After the addition, the house consisted of approximately 3,200 square feet. More than eleven years later, John W. VonHoldt purchased the house. Shortly after taking occupancy, VonHoldt noticed a deflection of the wood flooring at the partition wall separating the master bedroom from an adjoining bathroom. This deflection created a depression in the floor plane. VonHoldt maintained that, due to the thickness of the carpet, the depression was nearly concealed. An investigation revealed that the addition had not been constructed in accordance with the architectural plans approved by the Village of Glenview or the Glenview Building Code. This variance resulted in excessive stress on the floor joists and inadequate support for a portion of the roof and ceiling causing a greater-than-expected floor deflection. VonHoldt brought a lawsuit against Barba & Barba for breach of an implied warranty of habitability. Explain who should prevail. Answer: Implied Warranty of Habitability. The implied warranty of habitability is a judicially created doctrine designed to avoid the unjust results of caveat emptor and the doctrine of merger. Initially, Illinois courts applied the doctrine to the sale of new homes to protect innocent purchasers who were not able to determine whether the house they purchased contained latent or hidden defects. The owner needs this protection because he is making a major investment, in many instances the largest single investment of his life. The owner usually relies on the integrity and skill of the builder, who is in the business of building houses, and has a right to expect to receive a house that is reasonably fit for use as a residence. The implied warranty of habitability does include actions against a builder brought by a subsequent purchaser for latent defects in an addition to a home. When a builder makes a significant addition to a previously built home, an action for damages resulting from latent defects affecting habitability exists under the doctrine of implied warranty of habitability. An owner claiming that latent defects exist in a major addition to a structure should be provided the same protection for the addition as that given to the original owners. The purchaser of both a completed home and an addition places the same trust in the builder that the structure being erected is suitable for living. Furthermore, the ordinary buyer is not in a position to discover hidden defects in a structure even through the exercise of ordinary and reasonable care. However, because here the action was time barred, plaintiff's complaint was properly dismissed. VonHoldt v. Barba & Barba Construction, Inc., Supreme Court of Illinois, 1997, 175 Ill.2d 426, 677 N.E.2d 836, 222 Ill.Dec. 302. ANSWERS TO “TAKING SIDES” PROBLEMS Playtime Theaters and Sea-First Properties purchased two theaters in Renton, Washington, with the intention of exhibiting adult films. About the same time, they filed suit seeking injunctive relief and a declaratory judgment that the First and Fourteenth Amendments were violated by a city of Renton ordinance that prohibits adult motion picture theaters from locating within one thousand feet of any residential zone, single- or multiple-family dwelling, church, park, or school. (a) What are the arguments that the city has the right to enforce such an ordinance? (b) What are the arguments that the city does not have the right to enforce such an ordinance? (c) What result? Explain. Answer: (a) The city would argue that adult theaters need to controlled and limited as to where they can locate. It is only natural to limit them away from residential areas, schools, places of worship, and areas that are likely to attract children. The city is not preventing adult theaters from existing but merely restricting their location. The restrictions on speech imposed by the ordinance were no greater than necessary to further the legitimate governmental interests involved. (b) The theater owners would argue that they have the constitutional right to free speech and that these types of regulation substantially restricted their existence and right to free speech. (c) The Supreme Court found in favor of the city. Such an ordinance is a valid government response to the serious problems created by adult theaters and satisfies the dictates of the First Amendment. Since the ordinance does not ban adult theaters all together, it is properly analyzed as a “form of time, place, and manner regulation.” Such content-neutral regulations are acceptable so long as they are designed to serve a substantial government interest and do not unreasonably limit alternative avenues of communication. The ordinance is designed to serve a substantial government interest while allowing for reasonable alternative avenues of communication. A city’s interest in attempting to preserve the quality of urban life, as in the case at bar, must be accorded high respect. City of Renton v. Playtime Theaters, 475 U.S. 41 (1986). Chapter 50 TRUSTS AND DECEDENTS’ ESTATES ANSWERS TO QUESTIONS AND CASE PROBLEMS 1. State whether or not a trust is created in each of the following situations: (a) A declares herself trustee of “the bulk of my securities” in trust for B. (b) A, the owner of Blackacre, purports to convey to B in trust for C “a small part” of Blackacre. (c) A deposits $100,000 in a savings bank. He declares himself trustee of the deposit in trust to pay B $50,000 out of the deposit, reserving the power to withdraw from the deposit any amounts not in excess of $50,000. Answer: Creation of Trusts. (a) A trust is not created because the description is so indefinite that the property cannot be ascertained. (b) No trust is created because of the indefinite description. (c) A trust of the deposit is created of which B is beneficiary to the extent of $50,000. It does not fail because the trustee has reserved power to withdraw property from the trust. Restatement of the Law of Trusts, 2d, Section 58. 2. Testator gives property to Tim in trust for Barney’s benefit, providing that Barney cannot anticipate the income by assignment or pledge. Barney borrows money from Linda, assigning his future income under the trust for a stated period. Can Linda obtain any judicial relief to prevent Barney from collecting this income? Answer: Spendthrift Trusts. No. This is called a spendthrift trust. The beneficiary cannot anticipate the income and his creditors occupy no better position. This is a very common provision and is perhaps one of the reasons why the trust was created. 3. Collins was trustee for the beneficiary Indolent under the will of Indolent’s father. Indolent, a middle-age doctor, gave little concern to the management of the trust fund, contenting himself with receiving the income paid to him by the trustee. Among the assets of the trust were 100 shares of ABC Corporation and 100 shares of XYZ Corporation. About two years before the termination of the trust, Collins purchased the ABC stock from the trust at a fair price and after a full explanation to Indolent. At the same time but without saying anything to Indolent, he purchased the XYZ stock at a price higher than its current market value. At the termination of the trust, both stocks had advanced in market value well beyond the prices paid by Collins, and Indolent demanded that Collins either account for this advance in the value of both stocks or replace the stocks. What are Indolent’s rights? Answer: Duties of the Trustee. Collins can probably keep the ABC Corporation stock, although it was unethical of him to deal with the trust property, but he must account for or replace the XYZ Corporation stock. There is a distinction to be made between transactions occurring directly between a trustee and his beneficiary, and those transactions in which the trustee deals with himself with respect to the trust estate. The latter class of transactions are voidable by the beneficiary at his election without giving any reason or alleging any fraud, or any advantage or inadequacy of price. But where the trustee deals directly with beneficiary the transaction is not by itself voidable at the election of the beneficiary but only presumed to be invalid, which presumption may be rebutted. Owens v. Owens, 196 Va. 960. 4. Joe Brown gave $350,000 to his wife, Mary, with which to buy real property. They orally agreed that title to the real property should be taken in the name of Mary Brown but that she should hold the property in trust for Joe Brown. There were two witnesses to the oral agreement, both of whom are still living. Mary purchased the property on September 2, and a deed to it with Mary Brown as the grantee was delivered. Mary died ten years later, without a will. The real property is now worth $800,000. Joe Brown is claiming the property as the beneficiary of a trust. Mary’s children are claiming that the property belongs to Mary’s estate and have pleaded the statute of limitations and the statute of frauds as defenses to Joe’s claim. There is no evidence to prove whether Mary would or would not have conveyed the property to Joe during her lifetime if she had been requested to do so. What are Joe’s ownership rights to this particular real property? Answer: Resulting Trusts. Joe Brown is the owner of the real property by virtue of a resulting trust and neither the statute of limitations nor other equitable defenses are a bar to his claim. The statute of frauds provides that resulting trusts, trusts created by construction, implication or operation of law need not be in writing, and may be proved by parol evidence. Joe Brown is the beneficiary of a purchase-money resulting trust. It is the duty of the holder of the legal title under a resulting trust to convey the property to the person who paid the purchase price wherever he demands such conveyance. Restatement, Trusts, 2d, Sections 404, 440. Where a husband pays the purchase price for land which is transferred at his direction to his wife, parol evidence is admissible to show that the payor intended that the transferee should not have the beneficial interest in the property. In this problem the intention of the parties is expressly and clearly manifested by an oral agreement between the husband and wife, to which there are two available witnesses. Restatement, Trusts, 2d, Section 443; Scott, Trusts, 2d ed., Section 443. Joe Brown's claim is not barred by the statute of limitations or laches. The beneficiary of an express trust or resulting trust is not barred by the mere passing of time from enforcing the trust; it is only when the trustee has repudiated the trust to the knowledge of the beneficiary that the statute of limitations begins to run. During the continuance and recognition of the trust, the possession of the trustee is presumed to be the possession of the beneficiary. There is no adverse or hostile holding. The cause of action arises when and only when there has been some adverse assertion of adverse ownership, or a refusal to comply upon demand, or a disavowal or repudiation of the trust brought to the attention of the beneficiary. 4 Bogert, 2d, Trusts and Trustees, Sections 951-952; Scott, Trusts, 2d, Section 219. 5. On March 10, , John Carver executed his will, which was witnessed by William Hobson and Sam Witt. By his will, Carver devised his farm, Stonecrest, to his nephew, Roy White. The residue of his estate was given to his sister, Florence Carver. A codicil to his will executed April 15, of that year , provided that $50,000 be given to Carver’s niece, Mary Jordan, and $50,000 to Wanda White, Roy White’s wife. The codicil was witnessed by Roy White and Harold Brown. John Carver died September 1, of that year , and the will and codicil were admitted to probate. How should Carver’s estate be distributed? Answer: Wills: Attestation. Roy White will take Stonecrest, Mary Jordan will receive $50,000 and Carver's sister will receive the residue. The bequest of $50,000 to Roy White's wife is, in many jurisdictions, void because White attested the execution of the codicil. The $50,000 she would have taken becomes a part of the residue. Many statutes on wills provide that a legacy or interest given in a will to a person attesting its execution or to his spouse is void as to that beneficiary and all persons claiming under him, unless the will is otherwise attested by a sufficient number of witnesses as required by law exclusive of such person, although he is entitled to receive so much of the devise, legacy or interest given him by the will as does not exceed the value of the testator's estate to which he would be entitled were the will not established. The statutes are designed to prevent attesting witnesses from taking gifts under a will for the establishment of which their attestation is necessary. Under the statutes a testamentary gift is invalidated only where the witness has attested the instrument under which he or his immediate family takes. A beneficiary who was not a witness to the original will is entitled to the interest given thereunder although he was an attesting witness to a codicil under which he takes nothing. 6. Edwin Fuller, a bachelor, prepared his will in his office. The will, which contained no residuary clause, provided that one-third of his estate would go to his nephew, Tom Fuller, one-third to the city of Emanon to be used for park improvements, and one-third to his brother, Kurt. He signed the will in his office and then went to the office of his nephew, Tom Fuller, who signed the will as a witness at Edwin’s request. No other persons were available in Tom’s office, so Edwin then went to the bank, where Frank Cash, the cashier, also signed as a witness at Edwin’s request. In each instance, Edwin stated that he had signed the document but did not state that it was his will. Edwin returned to his office and placed the will in his safe. Subsequently, Edwin died, survived by Kurt, his only heir-at-law. How should the estate be distributed? Answer: Formal Requirements of a Will. Several questions are posed by the problem. First, the question arises as to whether or not the will has been properly executed. Statutes on wills usually contain provisions to the effect that a will must be signed by the testator or some person in his presence by his direction and shall be attested in the presence of the testator by two or more credible witnesses. The will in the problem was properly executed even though the testator signed out of the presence of the two witnesses. It is not indispensable to a proper attestation of a will that the testator sign in the presence of the witnesses, nor is it essential that the witnesses see the signature of the testator on the face of the will, even though they know the instrument to be a will. All that is necessary is that the testator acknowledge the will. The next question is whether a devisee or legatee can sign as a witness and, if so, what is the effect of doing so. A person who will gain or lose financially as a direct result is generally not a credible witness to attest a will. However, if the incompetence of the witness arises by the act of attesting a will which gives him some interest in the testator's estate, the statute applies, and, while the witness cannot take under the will, nevertheless the will may be established by his testimony. As a result the bequest to Tom will fail. However, Tom's testimony can be used to prove the will. The third question presented is, “What is the effect of Tom not being allowed to take under the will?” Since the will contained no residuary clause the part which Tom was to have taken cannot pass under the will and must pass as intestate property. Since Kurt was the testator's only heir-at-law the property passes to him. The real and personal estate of a testator not devised or bequeathed by his will descends and shall be distributed as intestate estate. Accordingly, the city of Erewhon receives one-third of the estate and the balance of two-thirds passes to Edwin's brother Kurt. 7. Arnold executed a one-page will in which he devised his farm to Burton. Later, after a quarrel with Burton, Arnold wrote the words “I hereby cancel and revoke this will /s/Arnold” in the margin of the will but did not destroy the will. Arnold then executed a deed to the farm, naming Connie as grantee, and placed the deed and will in his safe. Shortly afterward, Arnold married Donna, with whom he had one child, Ernest. Arnold died some time later, and the deed and will were found in his safe. Burton, Connie, and Ernest claim the farm, and Donna claims dower. Discuss the validity of each claim. Answer: Revocation of a Will: Operation of Law. Donna and Ernest share only. A subsequent marriage in most states is one of the ways in which a will is revoked, unless the will contemplates the marriage. Connie, as grantee of an undelivered deed, would take nothing. In most states, Donna, the widow, would be entitled to statutory rights and Ernest, the child, would take the land subject to Donna's dower (widow’s statutory rights). 8. The validly executed will of John Dane contained the following provision: “I give and devise to my daughter, Mary, Redacre for and during her natural life and, at her death, the remainder to go to Wilmore College.” The will also provided that the residue of his estate should go to Wilmore College. Thereafter, Dane sold Redacre and then added a validly executed codicil to his will, “Due to the fact that I have sold Redacre, which I previously gave to my daughter, Mary, I now give and devise Blackacre to Mary in place and instead of Redacre.” Another clause of the codicil provided: “I give my one-half interest in the oil business that I own in common with William Steele to my son, Henry.” Subsequently, Dane acquired all of the interest in the oil business from his partner, Steele, and, at the time of his death, Dane owned the entire oil business. The will and codicil have been admitted to probate. (a) What interest, if any, does Mary acquire in Blackacre? (b) What interest, if any, does Henry acquire in the oil business? Answer: Codicils. (a) Mary receives a life estate in Blackacre, since the codicil substituted Blackacre for Redacre. An incident, quality or condition which attaches to a bequest or devise by express provision in a will, likewise attaches to an additional or substituted bequest or devise under a codicil except where circumstances present show a contrary intent on the part of the testator. (b) Henry is entitled to one-half of the oil business and no more. A specific legacy cannot be expanded beyond its plain import to include an additional interest later acquired, unless it appears from the will, as a whole, that such was the intent of the testator. The principal object and purpose in construing a will is to ascertain and give effect to the intention of the testator. The language used does not indicate the testator's intention to give Henry any greater interest in the oil business than the testator had when the codicil was executed. 9. Leonard Wolfe was killed in an automobile accident while driving his Toyota Camry. The car was rendered a total loss, and Wolfe’s insurance carrier paid his estate $18,550 for damage to the vehicle. Under the terms of Wolfe’s will, any car owned at his death was to be given to his brother, David. Wolfe’s daughter, Carol, however, brought an action, claiming that the gift of the car to David was adeemed by its total destruction and that she, as the residuary legatee under the will, was entitled to the insurance proceeds. Who is entitled to the insurance proceeds? Answer: Ademption and Abatement. Decision for David. Put as briefly as possible, ademption means a taking away. It occurs when property which has been specifically given under a will is later destroyed or disposed of so that it does not exist as part of the estate at the testator's death. The general rule is that nothing else may be substituted for that which was originally given, and the gift is then said to have adeemed. There is a split of authority over the part intent should play in resolving ademption problems. The minority view adheres to a rigid "identity" theory, concerning itself solely with the presence of the property in the estate at the time of death. If it is not among the decedent's assets, there has been an ademption, regardless of the reason for its absence. Intent is immaterial under this view. The majority rules gives consideration and effect to circumstances which explain why the property is not among the decendent's assets at the time of his death. This rule, like the minority, finds there has been an ademption where there has been a voluntary sale or other disposal of specifically devised property by the testator during his lifetime. However, when the property in question is missing from the estate because of some act or event there is no ademption. This is the rule the court followed in this case. A critical point missing from this case is that the car (though totaled) was actually still owned by Wolfe at the time of his death, and therefore was part of his estate, and was not adeemed. So, the totaled car should have been passed to David, who would then receive the benefit of the insurance settlement. In Re Estate of Wolfe, 208 N.W. 2d 923 (Ia. 1973). 10. Grace Peterson, a never-married and childless woman, then aged seventy-four, asked Chester Gustafson, a Minneapolis attorney, to draw a will for her. Gustafson, who had also probated Peterson’s sister’s estate, drew this first will and six subsequent wills and codicils free of charge because he claimed that she had no money to pay for his services. Over the five-year period during which Gustafson redrew Peterson’s will, an increasing amount of property was devised to Gustafson’s children, until, finally, the seventh will so devised Peterson’s entire estate. Peterson, however, hardly knew the children except from several chance encounters ten years before. She died, without ever having changed the seventh will, and Gustafson, who was named as executor, now seeks to have the will admitted to probate. Discuss whether the seventh will should be probated. Answer: Mental Capacity. Peterson's will is apparently the product of Gustafson's undue influence, and it cannot be admitted to probate. Undue influence substitutes the intent of the person exerting it for that of the person making the will, thereby making the written result express the purpose of the influencing party and not that of the party making the will. In order to justify the refusal to probate the will, the influence must overpower the intent of the testator at the time the will is made and dominate and control its making. 11. Rodney Sharp was a fifty-six-year-old dairy farmer whose education did not go beyond the eighth grade. Upon the death of his wife of thirty-two years, Sharp developed a very close relationship with Jean Kosmalski, a schoolteacher sixteen years his junior. Sharp eventually proposed to Kosmalski, but when she refused, he continued to make gifts to her in hope of changing her mind. He also gave her access to his bank account, from which she withdrew substantial amounts of money; made a will naming her as sole beneficiary; and executed a deed naming her as a joint owner of his farm. Then, in September 2015, Sharp transferred his remaining joint interest in the farm to Kosmalski. In February 2017, Kosmalski ordered Sharp to move out of his home and to vacate the farm. She then took possession of both, leaving Sharp with assets of $300. Discuss whether a constructive trust should be imposed on the property transferred to Kosmalski. Answer: Constructive Trust. Judgment for Sharp. A constructive trust may be imposed when property has been acquired under such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest. Its application requires a finding of (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance on that promise, and (4) unjust enrichment. Here, a relationship of trust and confidence existed between the parties that is highlighted by the disparity in education between them. As such, Kosmalski must be charged with an obligation not to abuse the trust and confidence placed in her by Sharp. Second, an express promise or formal writing is not essential to the application of the doctrine of constructive trust, and it is not likely that Sharp would have conveyed all of his property, including his home, to Kosmalski without at least her tacit consent that he would be allowed to continue to live on and to operate the farm. Finally, it is clear that the transfer of property resulted in Kosmalski's unjust enrichment. Sharp v. Kosmalski, 40 N.Y. 2d 119, 386 N.Y. S.2d 72, 351 N.E. 2d 721 (1976). 12. By his last will and testament, Henry Nussbaum made a residual bequest and devise of his estate to his niece, Jane Blair, as trustee, in trust for the education of his grandchildren. If the trust could not be fulfilled, the residue was to revert to the plaintiff, Dorothy Witmer. After Nussbaum died in 2005, the plaintiff contended that the trustee had breached her fiduciary duty by failing to invest the trust corpus. A considerable portion of the trust funds were held in a checking account from 2008 to 2017. The trustee claimed that the will failed to specify when and what investments were to be made and, hence, such matters were left to her good-faith discretion. She also explained the large checking account balances by the fact that she thought she would need access to the finds to pay for college in the near future. Decision Answer: Duties of Trustee. Judgment for Witmers. It is a duty of the trustee to keep trust funds properly invested. A trustee generally cannot excuse a failure to invest funds by saying that she kept the funds to pay beneficiaries on demand. A trustee commits a breach of trust when she violates a duty in bad faith, intentionally, or negligently. A trustee may also commit a breach because of a mistake as to the extent of her duties and powers. When in doubt, a trustee can protect herself by obtaining instructions from the court. Here, Blair committed a breach of trust by failing to invest a large amount of the trust fund between 2002 and 2011. Her good faith mistake as to her duties is not a defense. Thus, she is liable for $2,840–the amount the money in the checking account would have earned between 2002 and 2011in an interest-bearing account. She is not liable for the mishandling of the trust after she transferred a substantial portion from checking to savings in 2011. Witmer v. Blair, 588 S.W. 2d 222 (Mo. Wstrn. Div. 1979). 13. John Hobelsberger lived alone on his farm near Kranzburg, South Dakota. A grandniece, Phyllis Raml, and her husband, Ralph, lived on and operated a farm about two miles away. Hobelsberger and the Ramls had a friendly and cordial relationship. The Ramls visited him rather frequently and largely cared for him during his later years. Hobelsberger was hospitalized on October 23, and his condition was diagnosed as intermittent cerebral insufficiency. During his hospitalization, he requested that the Ramls send an attorney to see him about the preparation of a will. Thomas Green, an attorney, interviewed the testator on or about November 10 and prepared a will in compliance with his instructions. Hobelsberger was transferred to a nursing home on November 19. On November 22, Green and a secretary went to the nursing home and witnessed his signing of the will. Hobelsberger was then eighty years old. He subscribed the will with a mark because he was having trouble with his hands. Hobelsberger died on July 19 of the following year,, survived by twenty-seven nieces and nephews and seven grandnieces and grandnephews. The will, after providing for the payment of debts and funeral expenses, left Hobelsberger’s entire estate to Phyllis Raml. Nine of the nieces and nephews contested the will, claiming lack of testamentary capacity, undue influence by the Ramls, and improper execution. The county court admitted the will to probate, the circuit court affirmed, and the contestants appealed. Decision? Answer: Conduct Invalidating a Will/Signature. Decree holding that the will is valid affirmed. Clearly Hobelsberger was aged and infirm when he executed the will. However, one may be physically weak and aged and still possess a sound mind. The testimony concerning Hobelsberger’s state of mind during the period when he executed the will was conflicting. All witnesses (including the doctors and nurses at the hospital), however, testified to his mental competence. In support of their claim of undue influence the contestants urge that the disposition made by the will is unnatural. The will merely prefers a grandniece and her husband who have been helpful to him during the years when he had need of such concern. Such recognition is not necessarily improper. What could be more natural in view of his feeling that he did not have enough to remember all of his heirs? Moreover, his nieces, nephews, grandnieces, and grandnephews because of such relationship alone, are not the natural objects of his bounty. Our law does not require that a testator recognize his relatives equally or at all. Contestants seize on the fact that the Ramls had a motive and the opportunity to exert an undue influence on the testator. To invalidate the will there must be evidence that they did exert such influence. Here there is none. Finally, the contestants argued that, since the testator knew how to write, he was not authorized to execute the will by a signing with a mark. However, the evidence shows that Hobelsberger could not write at the time of the execution of the will because he was having trouble with his hands. Thus, he was able to avail himself of the privilege of signing with a mark. In Re Estate of Hobelsberger 181 N.W.2d 455 (1970). 14. Mamie Henry, a widow, died leaving no children but she was survived by several nieces and nephews. At first no will was found, and Joe Barksdale, a nephew, was appointed administrator of Mrs. Henry’s estate. Later, Rita Pendergrass produced a copy of a will allegedly made by Mrs. Henry. The will left all of Mrs. Henry’s property to Mrs. Pendergrass and appointed her as executrix. When Mrs. Pendergrass sought to have the will admitted to probate, Joe Barksdale and Olen Barksdale filed a contest on the grounds that the purported will was never duly executed, or, if executed, was destroyed by Mrs. Henry prior to her death. Should the will be probated? Explain. Answer: Revocation of a Will. In order to have an alleged lost or destroyed will admitted to probate, the one asserting its effectiveness must first establish that it is a validly executed will and second, rebut the presumption arising from the loss or destruction of the will that it was revoked by its maker. Since Mrs. Pendergrass fulfilled both of these requirements here, she is entitled to submit Mrs. Henry's will to probate. First, Mrs. Pendergrass established that the document was a validly executed will. It was signed by Mrs. Henry and attested by two witnesses in Mrs. Henry's presence with her express or implied knowledge or consent. Second, Mrs. Pendergrass also succeeded in rebutting the presumption that Mrs. Henry had revoked her will by showing that Mrs. Henry wanted Mrs. Pendergrass and not her nieces and nephews to receive her property at her death. Barksdale v. Pendergrass 294 Ala. 526, 319 So.2d 267 (1975). 15. George Washington Croom died testate. In his will Croom left various bequests of real and personal property to his children and a grandchild. In Item Eight of his will Croom stated “I leave nothing whatsoever to my daughter Kathryn Elizabeth Turner, and my son Ernest Edward Croom.” At his death, Croom also left three optional share certificates in Carolina Savings & Loan Association issued to George W. Croom or Kimberly Joyce Croom, the deceased’s minor daughter. Each of these certificates had attached to it an “Agreement Concerning Stock in Carolina Savings and Loan Association” which purported to create a joint account with a right of survivorship. Two of these agreements were signed by George Croom only and the third agreement was not signed at all. None of these certificates were specifically devised by Croom’s will and the will contained no residuary clause. Who is entitled to share in these assets? Answer: Intestate Succession. Judgment for Kathryn and Ernest Croom. The optional share certificates did not satisfy the statutory requirements necessary to pass by joint survivorship, so they become part of the Croom estate. With no residuary clause, the certificates must be distributed by laws of intestate succession. NC statutes direct that such property must pass by intestate succession without regard to the testator's intent expressed in his will. Under the Intestate Succession Act, each of the testator's children is entitled to take an equal share of the property not disposed of by his will. Therefore, despite George's contrary intent, Kathryn and Ernest are entitled to their share of the certificates. Ferguson v. Croom, 326 S.E.2d 373. 16. Willie Mae Arant executed her Last Will and Testament in her home with two witnesses present. The original will could not be found after Arant's death, so a copy of the will was filed and admitted in Probate Court. The will left the bulk of the estate to Melvin Bolton, Arant's nephew, and Kent Sutcliffe, Arant's grandson. The evidence tended to show that the last verifiable location of the will was in Arant's attorney's office. Moreover, Arant told the witnesses to the will that she intended to have the will left with her attorney. Arant's only surviving daughter filed a suit challenging the probate of the will on the ground that because the original will could not be found, it had been destroyed with the intent to revoke. What factors should the court consider in deciding whether to probate the will? Explain. Answer: Revocation of a Will. All parties agree that Arant properly executed her will. The dispute arises over what happened to the original will after its execution. Golini claims the evidence proves that Arant was the last person to have possession of her will because the will was executed in Arant's home and the witnesses to it testified they left the will with Arant after it was executed. Bolton claims, and the lower courts agreed, the evidence tended to show the last verifiable location of the will was in Arant's attorney's office, and therefore, the presumption of animo revocandi (intent to revoke) did not apply. “A will or any part thereof is revoked … by being burned, torn, canceled, obliterated, or destroyed, with the intent and for the purpose of revoking it by the testator or by another person in his presence and by his direction.” Revocation by an act or by a subsequent instrument must be accompanied by an intention to revoke, and, without the intention, revocation does not take place. Generally, those contesting a will have the burden of establishing revocation. However, when the testator takes possession of his will and it cannot be found at his death, the law presumes rebuttably that the testator destroyed the will with intent to revoke. The evidence to rebut the presumption must be clear and convincing. The evidence reasonably supports the findings of the probate court that Arant was not in possession of her will. Both witnesses to the will's execution testified they were the only ones present when Arant signed her will and Arant had possession of the will when they left her home. Arant told the witnesses to the will she intended to have the will taken to her attorney's office. Attorney Thomas Culclasure drafted two wills for Arant. He prepared the first will, which also excluded Golini, in 1988. He prepared the second will in 1992 after Arant's daughter, Sally, died. The second will Culclasure drafted was picked up from his office. After it was executed, Culclasure testified the will was returned to his office. “Proof that a testator, whose will cannot be found after his death, entertained a kindly or loving feeling toward the beneficiaries under the will carries weight and tends toward the conclusion of nonrevocation of the will by the testator.” Numerous witnesses testified as to the love and affection that existed between Arant and Bolton and Bolton's daily visits with Arant as well as his cooking her meals and running her errands. Even Golini testified Bolton was “like a son” to Arant. Before she died, Arant gave Bolton her power of attorney. Numerous witnesses also testified that Arant and Golini did not get along and that Arant stated on numerous occasions she intended to leave Golini out of her will. Golini v. Bolton, Court of Appeals of South Carolina, 1997, 326 S.C. 333, 482 S.E.2d 784. ANSWERS TO “TAKING SIDES” PROBLEMS Upon George Welch’s death, he was survived by his third wife, Dorothy Welch, and his daughter by his first marriage, Patricia Fisher. At the time George and Dorothy were married, George was in very poor health and he relied on Dorothy to care for him. George was suicidal and an alcoholic and suffered from severe depression. During the eight months George and Dorothy were married, George became isolated from his family and his health deteriorated. Prior to his death, George transferred the bulk of his assets to Dorothy. Dorothy assisted in the transfer of George’s assets and often completed checks and other papers for George’s signature. Although George and Dorothy had executed a prenuptial agreement, during the month preceding his death George made a new will that named Dorothy as his sole beneficiary. Patricia had been the sole beneficiary of his prior will. Through the transfers of assets and the new will, Dorothy received $570,000. (a) What are the arguments that Patricia is entitled to the $570,000? (b) What are the arguments that Dorothy is entitled to the $570,000? (c) Who should prevail? Why? Answer: (a) Patricia will argue that a constructive trust should be imposed upon George’s assets. She will contend that (1) Dorothy has abused her confidential position, unfairly taking advantage of George and (2) Dorothy had unduly influenced George. (b) Dorothy would contend that she is George’s legal wife and had taken care of him during his illness. Moreover, George voluntarily and knowingly made the transfer of assets and created the new will. (c) The jury found undue influence and set aside the will. With respect to the transfers of property, the appellate court imposed a constructive trust for the benefit of Patricia. A constructive trust is a remedial device by which the holder of legal title is held to be a trustee for the benefit of another who in good conscience is entitled to the beneficial interest. A court may impose a constructive trust to prevent the unjust enrichment of a person who has abused a confidential relationship with another. The facts of this case indicate that Dorothy abused her relationship with George through undue influence over him in the months prior to his death. Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that the person will not act in a manner inconsistent with his or her welfare. There are four elements to sustain a finding of undue influence: (1) the grantor’s susceptibility to undue influence, (2) opportunity to exercise such influence and effect the wrongful purpose, (3) disposition to influence unduly for the purpose of procuring an improper favor, and (4) a result clearly the effect of undue influence. During the last months of George’s life, Dorothy positioned herself as a dominate influence over him. At the same time, George became particularly susceptible to being influenced due to his advancing age, impending death, deteriorating physical condition, and unstable emotional health. Furthermore, Dorothy isolated George from his family and friends, indicating a disposition to influence unduly. Finally, the manner in which George and Dorothy conducted their business, reveal a pattern of unfair persuasion or influence from which Dorothy benefited. The facts clearly indicate that George was susceptible to undue influence, Dorothy had the opportunity to exercise undue influence, Dorothy had the disposition to wrongfully influence George, and Dorothy benefited from the undue influence. In Re Estate of Welch, 534 N.W.2d 109 (1995). Solution Manual for Smith and Robersons Business Law Richard A. Mann, Barry S. Roberts 9781337094757, 9780357364000, 9780538473637