CH-7 The Property System – The Legal and Regulatory Environment of Business : Exam Guide

07 Key 1. Upon the death of a joint tenant, his interest automatically transfers to the other tenants. Answer: True Joint tenants, but not tenants in common, can have the right of survivorship. This right means that if one of the joint tenants dies, the remaining tenant becomes the sole owner of the entire resource. 2. Easements by prescription pertain only to land around hospitals. Answer: False Once an easement by prescription arises, the titleholder cannot now use the land in such a way to prevent the easement holder from crossing it, and the easement holder can legally exclude a titleholder from trying to prevent passage. 3. Property is the legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud. Answer: True Property is the legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud. 4. Private property is a system of law under which the state recognizes and enforces an individual's rights to acquire, possess, use, and transfer scarce resources. Answer: True Private property is a system of law under which the state recognizes and enforces an individual's rights to acquire, possess, use, and transfer scarce resources. 5. A fee simple absolute represents restricted, limited ownership of personal property. Answer: False The fee simple absolute estate has no limitations or conditions attached. 6. Zoning laws apply to types and locations of physical structures but not to aesthetic characteristics such as color and exterior design. Answer: False Zoning ordinances may impose aesthetic requirements concerning color and exterior design. 7. In a bailment for the sole benefit of the bailor, the bailee owes a very high duty of care. Answer: False In a bailment for the sole benefit of a bailor, the bailee owes only a slight duty of care while the object is in the bailee's possession, but in a bailment for the sole benefit of the bailee, such as where the bailee has borrowed the object, the bailee owes a very high duty of care. 8. Zoning ordinances are implemented through a state or local government's police powers. Answer: True Through their exercise of the police powers, states and local governments protect the public health, safety, morals, and general welfare. It is under the police powers that a major governmental regulation of land use, zoning, takes place. 9. Common carriers are not responsible for acts of God or of public enemies. Answer: True Common carriers are also not responsible for acts of God or of public enemies, the acts of the bailor in failing to package properly, defects in the packaged object itself, or acts of the public authority. 10. Mike repaired Rosie's car and Rosie refused to pay the bill. Mike was still in possession of the car and therefore could claim a mechanic's lien on the car. Answer: False A mechanic's lien arises only when someone contributes materials and/or services to real estate. 11. The right of redemption allows a mortgagor, before foreclosure, to get back land upon payment of the full amount of the debt. Answer: True The right of redemption allows a mortgagor, before foreclosure, to get back land upon payment of the full amount of the debt. 12. No bailment has been formed if a student leaves a book bag in class by accident and the professor takes possession to safeguard the bag. Answer: False The focus of bailment relationships is intent. The professor became a bailee when he or she took intentional possession of the bag. 13. A purchase money security interest creates a perfected interest without the need to put a document on public record. Answer: True A purchase money security interest is perfected by attachment alone. 14. House-sitting would be an example of a bailment because you are in temporary possession of someone's house with the intention to return full possession to the owners upon their return. Answer: False Bailments are situations where an owner puts an object protected by personal property into the intentional possession of another person with the understanding that the other person must return the object at some point or otherwise dispose of it. 15. Property ownership helps generate prosperity by establishing the conditions necessary for capital formation. Answer: True Property helps generate prosperity by establishing the conditions necessary for capital formation, which refers to that quality of resources that produces new or different resources. 16. A buyer in an ordinary course of business has priority over a perfected security interest. Answer: True A buyer in the ordinary course of business will have priority over a perfected security interest. For example, if the seller of the printing machinery is a manufacturer of that machinery and is selling in the ordinary course of business, a buyer would take the machinery free and clear of a bank's previously perfected security interest. 17. The women in the house next to you party all the time and keep you up most nights. They are creating a public nuisance. Answer: False Any unreasonable use of one's property so as to cause substantial interference with the enjoyment or use of another's land establishes a common law private nuisance. 18. Indirect taxes like the progressive income tax are authorized by the Bill of Rights. Answer: False Because the Supreme Court ruled that Article 1, Section 8, did not authorize indirect taxes, like the progressive income tax, the Constitution was amended in 1913 by the Sixteenth Amendment, which permits such taxes. 19. Ken is having a bad morning. He has to go to work and can't find his car keys. After searching for 20 minutes, he finds them in the pocket of the jeans he wore the previous day. The keys would have been considered lost until he found them. Answer: False The law distinguishes things that have been lost from things that have simply been mislaid. The difference in the way the law treats these two situations is based on an assumption that the original owner will know where to come back and reclaim mislaid things. 20. Through the government's power of eminent domain, it can take private property for "public use," upon the payment of "just compensation." Answer: True Eminent domain exists specifically to limit the exclusive right of property in order to serve the common good by allowing the government to take away property-protected resources from owners. 21. Public nuisance claims may be brought only by a public official, not private individuals, unless the latter have suffered some special damage to their property as a result of the public nuisance. Answer: True Public nuisance claims may be brought only by a public official, not private individuals, unless the latter have suffered some special damage to their property as a result of the public nuisance. 22. It is presumed in court that a bailee in a mutual benefit bailment is negligent for the loss or damage of the bailor's goods. Answer: True In Semoon v. The Wooster School, Corp., the court stated, "Once a bailment has been established and the bailee is unable to redeliver the subject of the bailment in an undamaged condition a presumption arises that the damage to or loss of the bailed property was the result of the bailee's negligence.' 23. Generally, mortgages and deeds of trust must be registered in a recording office in the county where the land is located. Answer: True Generally, mortgages and deeds of trust must be registered in a recording office in the county where the land is located. Recording gives notice of the security interest to potential buyers of the land and to potential lenders who will then consider that fact in determining whether or not to buy the land or to loan money. 24. If foreclosure and auction does not produce enough money to satisfy the debt owed by the mortgagor, the creditor-mortgagee can still sue the debtor for the balance owed, called a "remainder." Answer: False If foreclosure and an auction do not produce enough money to satisfy the debt owed by the mortgagor, the creditor-mortgagee can still sue the debtor for the balance owed, called a deficiency. 25. Foreclosure means that the court will order the land sold to satisfy the debt owed, usually by auction to the highest bidder, with any excess after payment of what is owed to the secured creditor going to the debtor. Answer: True Foreclosure means that the court will order the land sold to satisfy the debt owed, usually by auction to the highest bidder, with any excess after payment of what is owed to the secured creditor going to the debtor. 26. The collateral may include not only things currently owned by the debtor but collateral known as after-acquired property that the debtor acquires in the future. Answer: True The collateral may include not only things currently owned by the debtor but collateral known as after-acquired property that the debtor acquires in the future. 27. In a determination of private nuisance, a court will declare a nuisance based solely upon the plaintiff's showing that the defendant's use of his or her land produces an offensive result for the community. Answer: False The unreasonableness of the interference is measured by a balancing process in which the character, extent, and duration of harm to the plaintiff is weighed against the social utility of the defendant's activity and its appropriateness to its location. 28. The Supreme Court has stated that it is unconstitutional for governments or government entities to take private land for public development. Answer: False The takings clause of the Fifth Amendment to the Constitution favors Bentham's view that property serves the common good. It allows the government to take specific resources (usually but not always land) away from private owners for "public use" upon the payment of "just compensation." 29. The courts have generally defined just compensation in terms of market value. Answer: True The government can only take what belongs to private owners upon payment of "just compensation." The courts have generally defined just compensation in terms of market value. 30. State law generally specifies that a landlord and tenant must give each other written notice of 30 or 60 days in order to terminate a lease that does not run for a definite duration. Answer: True State law generally specifies that the landlord and tenant must give each other written notice of 30 or 60 days in order to terminate a lease that does not run for a definite duration. 31. Mike has a car accident and Maria saves his life. To show his appreciation, Mike gives Maria a life estate in one of the homes he owns. Maria lives there for a while and then accepts a job in another state so she gives the property to her sister Jackie. (This is permissible to do.) Jackie owns the property until: A. she dies. B. Maria dies. C. Mike dies. D. both Mike and Maria die. E. both Maria and Jackie. Answer: B. Maria dies. A life estate grants an ownership in land for the lifetime of a specified person. 32. Sarah has given 24 acres of land to Kent County for as long as the land is used as a park. Kent County has a: A. life estate. B. fee simple defeasible. C. fee simple absolute. D. tenancy in common. E. warranty deed. Answer: B. fee simple defeasible. The fee simple defeasible may have a condition attached to its conveyance; ownership goes back to the original owner if the condition is not met. 33. Which of the following is intangible property? A. A patent B. A car C. Oxygen D. A house E. Gold Answer: A. A patent Tangible property applies to things one can touch, that is, to physical things. Computers, cars, and carrots are such touchable, tangible things. 34. Which of the following is a bailment for the sole benefit of the bailee? A. Borrowing a pencil B. Renting a car C. Babysitting for free D. Finding lost or misplaced property E. Using a car without permission Answer: A. Borrowing a pencil Bailments may require the bailee to return the objects bailed or to dispose of them. 35. What type of laws divides counties or municipalities into use districts designated as residential, commercial, or industrial? A. Purchase money security interest B. Zoning ordinance C. Adverse possession D. Eminent domain E. Partitioning Answer: B. Zoning ordinance Zoning ordinances are generally laws that divide counties or municipalities into use districts designated residential, commercial, or industrial. 36. Which of the following would be granted the greatest priority? A. A perfected secured lien B. A secured lien C. An attached lien D. A preliminary lien E. An artisan's lien Answer: E. An artisan's lien An artisan's lien has such high priority because the artisan has added value to the goods in question, and can only realize the value of the of the parts and labor that was added. An artisan's lien is possessory, meaning that generally the lien has priority only as long as the creditor keeps possession of the collateral. 37. The limits all exercise of property over resources to a duration of "lives in being plus twenty- one years." A. rule of transaction B. rule against perpetuities C. rule of first possession D. rule against lateral transfers E. rule against eventualities Answer: B. rule against perpetuities The rule against perpetuities limits all exercise of property over resources to a duration of "lives in being plus twenty-one years." 38. A deed makes no guarantees other than that the grantor surrenders all claim against the land. A. simple warranty B. trust C. quitclaim D. special warranty E. fiduciary Answer: C. quitclaim A quitclaim deed makes no guarantees other than that the grantor surrenders all claim against the land. 39. An easement: A. creates ownership of the land in question. B. exists for the benefit of pharmaceutical corporations. C. occurs when landlocked property is purchased. D. creates a leasehold estate. E. places a particular use of land behind the exclusive legal fence. Answer: E. places a particular use of land behind the exclusive legal fence. An easement places a particular use of land behind the exclusive legal fence. Usually, this use involves the right of passage across the land. 40. A(n) gift is made through a will. The rules of such a gift pass ownership not by delivery but upon the death of the donor and the proving of a valid will that specifies the gift. A. fee simple. B. life estate. C. fungible. D. testamentary. E. accession. Answer: D. testamentary. Receiving a gift is also a way of acquiring ownership. A particular kind of gift is a testamentary gift, or one that is made through a will. The rules of such a gift pass ownership not by delivery but upon the death of the donor (called a "testator") and the proving of a valid will that specifies the gift. 41. A deed promises the grantee (usually, the buyer) that the grantor (seller) has good ownership and the full power to convey it. A. special warranty B. pass title C. quitclaim D. freehold E. warranty Answer: E. warranty A warranty deed promises the grantee that the grantor has good ownership and the full power to convey it. The buyer can sue the seller if someone else claims the land. 42. Mike rents a car from Brandy for a day for $40. Which of the following statements is correct? A. This is a bailment for the sole benefit of the bailor. B. Brandy is the bailee. C. Mike owes the duty of slight care. D. Brandy must tell Mike of any defects regarding the car that aren't obvious. E. This is a bailment for the sole benefit of the bailee. Answer: D. Brandy must tell Mike of any defects regarding the car that aren't obvious. It is a mutual benefit bailment. According to the type of bailment, the bailor also warrants or guarantees that she has no knowledge of defects in the objects bailed or no knowledge of defects that could have been discovered through reasonable inspection. 43. Larry loses his watch in a city park. Frieda finds the watch lying in the grass while strolling through the park. Frieda discovers Larry's name and address engraved on the back of the watch. Which of the following is correct (assume no city statutes exist regarding lost property)? A. Frieda may keep the watch because it is a misplaced property. B. Frieda may keep the watch because it is a lost property. C. Frieda must contact Larry and tell him that she has his watch. D. Frieda must turn the watch over to whoever runs the park. E. Larry may sue Freida for the watch. Answer: B. Frieda may keep the watch because it is a lost property. The finder of a lost item becomes its owner by reducing it to possession and following a statutory procedure, which may require the finder to turn the item over to the police and to advertise it in a local paper for a period of time to allow the original owner to claim it. 44. Which of the following most accurately describes dirt in your neighbor's wheelbarrow? A. The dirt in the wheelbarrow is an intangible good. B. The dirt in the wheelbarrow is a fixture. C. The dirt in the wheelbarrow is personal property. D. The dirt in the wheelbarrow is real property. E. The dirt in the wheelbarrow is considered abandoned. Answer: C. The dirt in the wheelbarrow is personal property. Personal property applies to movable resources, those things that people do not annex to the land. 45. Willie gave his girlfriend Madonna a gold necklace for her birthday. The next day Madonna broke up with Willie and started dating his best friend Waylon. Willie is heartbroken and furious. He becomes so upset that he commits suicide. Can Willie's estate get the necklace back from Madonna? A. Willie's estate can recover the necklace because a donor is entitled to revoke or withdraw a gift within a reasonable period of time. B. Willie's estate can recover the necklace because Madonna paid no consideration for the gift. C. Willie's estate cannot recover the necklace because he intended to make the gift, delivered it, and Madonna accepted. D. Willie's estate can recover the necklace because it was wrongful of Madonna to cheat on him. E. Madonna may keep the necklace but must compensate Willie's estate for the fair market value of the necklace. Answer: C. Willie's estate cannot recover the necklace because he intended to make the gift, delivered it, and Madonna accepted. Once the three rules of gift-giving have been completed, the donee becomes the new owner with rights against all others. 46. Which of the following can ONLY apply to real property? A. Confusion B. Gifts C. Accession D. Bailments E. Easements Answer: E. Easements Ownership of personal property may change through confusion, gift-giving, or accession, but easements concern the exclusive legal fence protecting land. 47. Seth takes his laundry to Denise's Dry Cleaners (DDC). When Seth gets his clothes back he notices that two of his shirts, perfect when brought in, are now ripped. Which of the following is correct? A. This was a mutual benefit bailment and DDC owed a duty of reasonable care. B. This was a bailment for the sole benefit of the bailee and DDC owed a duty of slight care. C. This was a bailment for the sole benefit of the bailor and DDC owed a duty of great care. D. This was not a bailment. E. This was an unintentional bailment, so DDC does not owe a duty of care. Answer: A. This was a mutual benefit bailment and DDC owed a duty of reasonable care. In a mutual benefit bailment, the bailee has an absolute duty to return the object to the bailor (or to dispose of it as the bailor directs), and becomes liable to the bailor for failing to do so correctly. 48. Ruth is visiting her granddaughter Marcy and decides to give Marcy her very expensive cameo brooch. The brooch, an heirloom, has been in the family for over 100 years and is the only item in a safe in Ruth's home. Ruth offers the brooch to Marcy who accepts. Ruth then gives Marcy the only key to the safe. According to the information given in this case, which of the following statements is true regarding the gift? A. This is not a valid gift because there has been no delivery. B. This is a valid gift because there has been an actual delivery. C. This is a testamentary gift and Marcy can claim the gift only after Ruth's death. D. This is a valid gift because there has been a constructive delivery. E. This is not a valid gift because Ruth must provide a document for chain of custody. Answer: D. This is a valid gift because there has been a constructive delivery. Constructive delivery, like turning over the keys to a car or the deed to land, constitutes adequate delivery. 49. When a tenant in common dies, his or her share of the property . A. passes to the state government B. passes to the remaining tenants in common C. passes to the highest bidder in an estate auction D. passes to the federal government E. passes to his or her heirs Answer: E. passes to his or her heirs Joint tenants, but not tenants in common, can have the right of survivorship. This right means that if one of the joint tenants dies, the remaining tenant becomes the sole owner of the entire resource. 50. Brothers Wayne and Garth twins in their mid-40s, but they still live with their parents. Finally on their 45th birthdays, they are told by their parents that they must move out within 60 days. A. Because they have remained on the property for over 20 years as adults, they may remain because of their adverse possession. B. Because they have remained on the property for over 20 years as adults, they may remain because they have an easement by prescription. C. Because they have remained on the property for over 20 years as adults, and have been open and notorious, they may remain on the property based on eminent domain. D. Because their parents have permitted them to stay in the house for over 20 years, they must move out. E. Because they are next of kin, they may stay in the house as potential possessors. Answer: D. Because their parents have permitted them to stay in the house for over 20 years, they must move out. In order to gain the benefit of adverse possession, the possessor must occupy the land in such a way that is open, continuous, exclusive, adverse, and notorious. In order for the occupation to be adverse, it must be wrongful and without permission. 51. Which of the following is a permissible eminent domain action under the takings clause of the Fifth Amendment to the Constitution? A. A pharmaceutical company takes over a residential neighborhood to expend its corporate headquarters. B. A state agency pays a homeowner $200 as compensation for building a highway through his home. C. The state's governor forecloses on a farmer's land to build a personal free-range chicken farm. D. A private non-profit organization brings a foreclosure action against a decrepit tenement in order to build a public park. E. The municipal government pays fair market value for the right to string power lines across a homeowner's property, then sells the right to the state's only electric company. Answer: E. The municipal government pays fair market value for the right to string power lines across a homeowner's property, then sells the right to the state's only electric company. Courts have certainly allowed the government to take private property right for use by electric and other private utility companies. These companies benefit the public greatly. 52. You and your roommate are driving through a nice neighborhood when you see some furniture piled on the curb to be picked up by the trash collectors the next morning. As you pick up a chair, the homeowner opens a window and yells, "Get away from my stuff." A. You may claim the chair as lost property. B. You may claim the chair as mislaid property. C. You may claim the chair as abandoned property. D. The homeowner retains ownership until it is picked up the next morning, so you must leave it. E. The homeowner retains ownership of the property until you buy it from him. Answer: C. You may claim the chair as abandoned property. The law measures intent to abandon by the circumstances of the situation. If it looks like someone meant to abandon something, we say they intended to do it. 53. A(n) lien arises when someone contributes materials and/or services to real estate, usually a building, and is not paid. A. general B. chattel C. surety D. mechanic's E. assayer's Answer: D. mechanic's A mechanic's lien arises when someone contributes materials and/or services to real estate, usually a building, and is not paid. Unlike the artisan's lien, this lien is not possessory and has priority only if it is perfected by the filing of a written notice, usually in the county where the real estate is found. 54. Once a court has determined that an offender has substantially and unreasonably interfered with the use or enjoyment of another's property, the court may issue an injunction forcing the offender to do something to ease the nuisance-creating activity. Which of the following will be conducted by the court in determining whether to issue an injunction? A. An investigation into the relevant political connections of the parties before it B. A balancing of interests looking at the relative economic hardship of the parties and any public interest in the offender's activity C. A balancing of interests looking at the offender's charitable donations and the offender's income tax revenue D. An investigation into what local scientists think the property in question is best suited for E. A determination of how much money can be saved by ignoring the nuisance Answer: B. A balancing of interests looking at the relative economic hardship of the parties and any public interest in the offender's activity The court in Cook v. Sullivan supported the trial court's use of a balancing test to determine whether an injunction forcing the Sullivan to move their house was appropriate. In that case, the trial court "explained in its final verdict that it was prepared to decide what remedy ‘would be equitable and fair under all the circumstances.' Further, the court told the parties during trial that it was considering the equities of both parties when considering the appropriate remedy." 55. Josh borrows Amanda's car to get to school. Josh is obligated to exercise _________. A. the level of care imposed by Amanda B. a reasonable duty of care C. a slight duty of care D. the level of care imposed by Amanda's parents E. a very high duty of care Answer: E. a very high duty of care In a bailment for the sole benefit of the bailee, such as where the bailee has borrowed an object, the bailee owes a very high duty of care, one that is greater than merely what is "reasonable." 56. The legal foundation for federal taxation is found in ________. A. yearly power grants from each of the individual states. B. the Declaration of Independence. C. Article 1, Section 8 of the United States Constitution. D. the Congressional Budget and Impoundment Control Act which created the Congressional Budget Office. E. the Transportation Equity Act. Answer: C. Article 1, Section 8 of the United States Constitution. Federal taxation is a specified power of Congress, contained in Article 1, Section 8 of the Constitution. 57. Which of the following is a mutual benefit bailment? A. Renting a car B. Lending your car to a friend without receiving consideration C. Borrowing a car from a friend without paying consideration D. Buying a car E. Riding a bus Answer: A. Renting a car A mutual benefit bailment is beneficial to both the parties involved in the bailment. Renting a car is an example of a mutual benefit bailment. 58. A(n) means that an adjoining landowner cannot do anything that would cause your land to cave in or collapse, such as digging a ditch that would cause the land on your side to collapse. A. easement by prescription B. negative easement C. mutual benefit bailment D. eminent domain E. accession Answer: B. negative easement Under a deed of trust, the deed is held by a trustee who holds full legal ownership to the land. 59. If your home is being foreclosed on, you may retain ownership of the property if you pay the full amount of the debt before the sale. This is called a: A. right of revision. B. right of recovery. C. right to cure deficiency. D. right of redemption. E. right to debt forgiveness. Answer: D. right of redemption. Before the actual foreclosure, most states permit a right of redemption, which allows the mortgagor to get back the land upon payment of the full amount of the debt, including all interest and costs. 60. If Landon, who is 80 years old, writes a trust that states that his property is to go to "my great-great- great grandchild upon my death," and at the time of creating the trust his only child is one year old: A. the trust is valid, but the property must wait until the great-great-great grandchild is born to be transferred. B. the trust is invalid due to the rule against eventualities. C. the trust is valid due to the rule of progression. D. the trust is invalid due to the rule against perpetuities. E. the trust is valid, but the property must wait until Landon's child dies to be transferred. Answer: D. the trust is invalid due to the rule against perpetuities. The rule against perpetuities limits all exercise of property over resources to a duration of "lives in being plus twenty-one years." The rule prevents an owner from controlling resources through many future generations by setting up trust arrangements, under which trustees are legally required to carry out the wishes of the owner for extended duration. 61. The eminent domain clause is contained in: A. Article I of the Constitution. B. the Fifth Amendment to the Constitution. C. state property codes. D. state constitutions, but not the federal Constitution. E. the Declaration of Independence. Answer: B. the Fifth Amendment to the Constitution. The takings clause recognizes the existence and importance of private ownership, but allows the government to "condemn" and take specific private resources for money. 62. Which of the following is NOT a requirement for a successful application of adverse possession? A. The possessor must occupy the land openly and notoriously. B. The possessor must occupy the land continuously. C. The possessor must physically occupy the land. D. The possessor must occupy the land wrongfully. E. The possessor must occupy the land with the owner's permission. Answer: E. The possessor must occupy the land with the owner's permission. In order for the adverse possession to arise, the possessor must be on the land without the consent of the property's rightful owner. 63. In 2008, Donald gives Tony a life estate in a home that Donald owns, specifying that upon the end of the life estate, the property is to go to Tony's son, Mike. Tony dies in 2012. A. If Donald is still alive he may revoke the transfer to Mike and keep the property. B. Mike gets a reversion interest in 2012. C. Mike gets a remainder interest in 2012. D. In 2012, Mike and Donald become joint tenants until Donald's death when Mike becomes the sole owner. E. The property is held in trust until Mike comes of age. Answer: C. Mike gets a remainder interest in 2012. Remainder property interest is a future interest, as opposed to the life estate, which is a present interest. 64. When the owner of an old airplane engine has it restored and has an airplane built around it, the owner of the engine now owns the entire airplane through the doctrine of , which refers to something "added." A. accession B. collateral C. eminent domain D. negative easement E. easement by prescription Answer: A. accession When the owner of an old airplane engine has it restored and has an airplane built around it, the owner of the engine now owns the entire airplane through the doctrine of accession, which refers to something "added." 65. Which of the following is a valid bailment? A. Babysitting your sister's child for the weekend B. House-sitting for a friend over the weekend C. Feeding your neighbor's dog (who lives in the yard in a doghouse) by tossing food over the fence D. Borrowing your friend's car for a day E. Accidentally dropping your car keys in a restaurant Answer: D. Borrowing your friend's car for a day In many common situations, an owner puts an object protected by personal property into the intentional possession of another person with the understanding that the other person must return the object at some point or otherwise dispose of it. This property arrangement is known as a bailment. 66. You're lying in bed when a piece of a meteorite enters the Earth's atmosphere and flies through the window of your apartment, landing at your feet. A. Your apartment complex has a right to claim the property because it landed on their land. B. You may keep the property because of the rule of first possession. C. You and your apartment complex must share the property as equal co-owners. D. The government can exercise its right of eminent domain and claim the property for the good of the public. E. The property must be turned over to police and cannot be claimed until 60 days have passed. Answer: B. You may keep the property because of the rule of first possession. The rule of first possession is that the first person to reduce previously unowned things to possession becomes their owner. 67. Danny has five pit bull dogs. They bark constantly and terrify the neighbor, Terry. When Terry tries to sell his house, no one will even look at it for fear of the dogs. If Terry takes Danny to court, what should he claim that Danny has established? A. A public nuisance B. A private nuisance C. An adverse possession D. An eminent domain E. An accession Answer: B. A private nuisance A private nuisance is an unreasonable use of one's property so as to cause substantial interference with the enjoyment or use of another's land. 68. Which of the following types of easement is also called easement by necessity? A. Negative easement. B. Easement by prescription. C. Easement by reservation. D. Natural easement. E. Functional easement. Answer: D. Natural easement. Natural easement is also called easement by necessity. 69. Rachel owns a beach home and wants to build a deck. Zoning restrictions limit decks to 120 square feet, but Rachel wants to build one that is 144 square feet. A. If she builds it, then she can't be asked to tear it down once it's completed. B. She should ask for a nonconforming exemption. C. She should ask for a variance. D. She must shift to some other location, because once zoning ordinances are in place, they allow for no changes, variations, or exceptions. E. Her only recourse is to lobby her local zoning board to force them to change the restriction. Answer: C. She should ask for a variance. An owner can ask a zoning board for a variance to allow use of land in a way not permitted under a zoning ordinance. The board is likely to grant a variance only when the owner can prove that the ordinance prevents a reasonable economic return on the land as zoned. 70. Ivana's car was stolen. The car needed some repairs and the thief, Donald, had the engine replaced as well as the muffler. Donald was apprehended and the car was returned to Ivana. Which of the following is true? A. Ivana owns the car but Donald owns the engine and muffler. B. Ivana owns the car but must pay Donald for the engine and muffler. C. Donald becomes the owner of the car due to accession. D. Ivana owns the car and owes Donald nothing. E. Donald may sue for ownership of the car if he can show that his additions are worth more than the car. Answer: D. Ivana owns the car and owes Donald nothing. Generally, because you own your efforts, you own what they produce, but this does not apply where the efforts went into wrongfully obtained objects. 71. A valuable object given by a debtor to a creditor to secure a loan is referred to as the . A. collateral B. attachment C. lien D. easement E. reversion Answer: A. collateral Collateral is what secures the interest in a mortgage in a secured transaction. 72. The general way of perfecting a security interest under Article 9 is to file a(n): A. artisan's lien. B. financing statement. C. deed of trust. D. warranty deed. E. creditor's instrument. Answer: B. financing statement. Perfection arises when a security interest has attached and the creditor has taken all proper steps required by Article 9. The general way of perfecting a security interest under Article 9 is to file a financing statement. 73. Stephen, a private individual, intends to bring a public nuisance claim against a textiles plant because its runoff is destroying the natural habitat of the local river's beaver population. Which of the following will permit Stephen to bring a valid claim? A. Stephen is the leading aquatic biodiversity scientist in the state. B. Stephen traps the beavers for a living. C. The state owns the textile plant. D. The runoff has also caused substantial damage to Stephen's property. E. The governor owns the textiles plant. Answer: D. The runoff has also caused substantial damage to Stephen's property. Public nuisance claims may be brought only by a public official, not private individuals, unless the latter have suffered some special damage to their property as a result of the public nuisance. 74. Which of the following is NOT a security interest in land? A. A land sales contract B. A mortgage C. A deed of trust D. A negative easement E. A title Answer: D. A negative easement Security interests in land and the structures on the land include mortgages, deeds of trust, and land sales contracts and the legal ownership of the land is referred to as the title. 75. Zoning boards may create zoning laws for all of the following, EXCEPT: A. to separate commercial districts from residential districts. B. to specify the number of buildings that can be built on land. C. to enforce ethnic or gender diversity. D. to impose specific color requirements. E. to specify a specific design for all buildings in an area. Answer: C. to enforce ethnic or gender diversity. Zoning boards may restrict what types of facilities may be built on land, and may impose strict conditions on what may be built, but may not force people to move onto land in a discriminatory fashion. 76. Explain the rule of first possession. Answer: The rule of first possession says that the first person to reduce previously unowned things to their possession becomes the owner. 77. How would one determine whether found property is lost or mislaid? What are the rights of the finder of lost and mislaid property? Answer: There is no precise way to determine if property is lost or mislaid. One must examine the circumstances surrounding the place where the item was found. If it was obviously placed somewhere such as on a shelf or counter, it is most likely mislaid. If the property is on the ground or behind something, the likelihood is that it was not placed there and is lost. The key is trying to determine whether the item was placed intentionally or if it arrived there accidentally. The finder of lost property has superior right to everyone except the true owner. Such a finder must make a reasonable attempt to find the true owner and becomes the true owner if the original owner cannot be found. The finder of mislaid property gets no rights and must turn the found property over to the proprietor of the establishment where it was found. 78. Wally Wanderer finds an abandoned ranch in Wyoming and begins living there for many years. When the record owner finds out 23 years later, what is Wally's best legal argument that the land is his? Answer: Wally now owns the land by the doctrine of adverse possession because his occupancy of the land was 1) open and notorious; 2) actual and exclusive, meaning that he physically occupied the land; 3) continuous and uninterrupted; 4) wrongful, meaning that he did not have the owner's permission to be on the property; and 5) for a prescribed statutory time. Since all of these requirements appear to be met, the Wally becomes the owner of the property in fee simple. 79. What is meant by a life estate in land and why might one give someone else a life estate rather than a fee simple ownership. Answer: A life estate is an ownership interest given by a property owner to another person for that person's lifetime. The grantee cannot sell the land permanently to anyone but does have the right to own and possess the property until he or she dies. One might grant a life estate to another because they wish to provide them with security for life but ultimately either wants the property back for him or herself or wants to retain the property for their heirs. 80. What is the difference between attachment and perfection of a lien regarding Article 9 secured transactions? Answer: Attachment recognizes that a lien exists giving a lender a secured interest in specific property being used as collateral. Perfection means that the lien has become a priority interest and will be enforced against other claimants, if any. 81. What is the difference between a public and a private nuisance? Answer: A public nuisance arises when a use of land causes inconvenience or damage to the public. A private nuisance consists of an unreasonable use of one's land that that causes substantial interference with the enjoyment of another's enjoyment of their land. Public nuisance claims may be brought only by a public official, not private individuals, unless the latter have suffered some special damage to their property as a result of the public nuisance. 82. Explain what eminent domain is and what must be done for it to be valid. Answer: Eminent domain is the constitutional right of the government to take away privately owned property for public use. The government must pay fair market value for the taken property and the public must benefit from the taking. 83. Name three types of deeds and explain how they differ. Answer: The warranty deed promises the grantee that the grantor has valid ownership and that the grantor has full power to convey title. A special warranty deed specifies that there are specific named legal claims against the property such as mortgages but guarantees that no other legal claims exist beyond those specified. The quitclaim deed simply states that the grantor conveys the property to the grantee without making any guarantees or promises. 84. Name two items on an average university campus that would be classified as personal property and two items classified as fixtures. Fully explain why each item is so classified. Answer: Student answers will vary, but the focus of the answers should be to distinguish movable items from objects of personal property that have become objects of real property (1) by physical annexation (attachment) to the land or its buildings, or (2) whose use has become closely associated with the use to which the land is put. So a dry-erase marker would be personal property, whereas the dry-erase board would be a fixture. 85. You have driven to the local shopping mall in a friend's car. Explain and give examples of how you might park the car in terms of the three different standards of care depending upon the type of bailment relationship you've entered into with your friend. Answer: If it is a bailment for the sole benefit of the bailor, you would need to exercise a minimum of slight care. Parking in any lined space would be sufficient. Leaving a window down or leaving the car unlocked would likely still constitute slight care. (Note, leaving the keys in the ignition or leaving the engine running would likely be negligence.) If the relationship was a mutual benefit bailment you would need to lock the car with the windows up in a lined spot. This would in most cases constitute reasonable care. If the relationship was of a bailment for the sole benefit of the bailee, great care would be required. This could be accomplished by locking the car with the windows up and parking in a remote spot far from other cars. One might also intentionally park under a light if at night or perhaps park next to a security area in the parking lot. 86. Mortimer's father, Loomis, has just lost his home to foreclosure. Mortimer wants to make sure that his father has some land of his own for his remaining years. Mortimer owns Sunnylake, a plot of land nearby. Mortimer knows his father would be happy living on Sunnylake, but he also hopes to develop the land for his own retirement home, when the time comes. Explain what Mortimer should do and why. Answer: Mortimer should grant Loomis a life estate in Sunnylake. Loomis can live on Sunnylake until he dies. Mortimer will have a reversion interest in the land, so he'll be able to use it however he pleases after his father passes. 87. Kyle and Belinda have been living in their home for 25 years. For the duration of their time in that house, they have used a small cement walkway that passes through a large field to walk to the nearby beach. Gary owns the large field and paved the cement walkway, himself. Last year, Gary decided to build two condominiums on the field, with the walkway dividing them. After noticing Kyle and Belinda using the walkway, he yelled at them and told them that they can never use his walkway again. Gary promptly erected a large gate to prevent Kyle and Belinda from using the Answer: walkway. Because the condominiums are so large, there is no other way for Kyle and Belinda to get to the beach. What may allow Kyle and Belinda to continue using the walkway? Fully explain your answer. Kyle and Belinda may argue that an easement by prescription has arisen. Because they have been crossing Gary's land openly, wrongfully, and continuously for 25 years, Gary cannot prevent them from continuing to do so. Because of the easement by prescription, Gary must take down the gate and permit Kyle and Belinda to use the walkway. 88. Suzette leaves her purse at her favorite restaurant during lunch. Suzette's friend Mary, a waitress at the restaurant, sees the purse and takes it to the back office where she puts it with her own things, reminding herself to return it to Suzette when she gets off work. However, when Mary returns to the back office after her shift, she sees that many things have been stolen, including Suzette's purse. Is the restaurant liable to Suzette for the purse? Fully explain your answer. Answer: Mary created a bailment when she took Suzette's purse, but what type of bailment depends on her intention when doing so. The restaurant may be responsible as a bailee because the purse was taken by a waitress and stored in the restaurant's office. However, Mary, herself, may be the bailee in a bailment for the sole benefit of the bailor, in which case she showed the appropriate slight duty of care. 89. What steps must be taken for a security interest to attach? Answer: Attachment takes place when (1) a secured party has given value, (2) the debtor owns the collateral, and (3) a security agreement is given. This agreement must be in writing, signed by the debtor, and contain a reasonable description of the collateral. 90. Sidney Carton, owner in fee simple of Cartonacre, makes the following grant of his land: "to Lucie Manette for life, then at the death of Lucie Manette, to her children in equal share." At the time of the grant, Sidney Carton has no children or heirs of his own. What interests have been created by this land grant? Answer: Lucie Manette has a life estate, and any children she has have a remainder interest. Sidney has a reversion interest until Lucie gives birth. 91. What property right is granted by a landlord to a tenant, and what are the three ways in which the duration of the grant is qualified? Answer: A tenant is granted a leasehold estate, and the three ways that the duration is qualified are definite duration, indefinite duration, and at will. 92. Wallace buys a television from Dotty, but a week later, a clerk from Conduit City, an electronics store, contacts Wallace to inform him that the store will be repossessing his television. Wallace calmly expresses his confusion, stating that he bought the television free and clear from Dotty. The clerk explains that Conduit City has a purchase money security interest in the television, which permits them to repossess the TV. Fully explain who is right. Answer: Wallace is right; Conduit City cannot repossess his TV. The rule is that if Wallace had no knowledge of the security interest, then he has the television free and clear of the store's perfected interest. 93. Ned's is the only house situated directly on the shore of a small lake just outside of the city of Heart Tree. Heart Tree's city council has decided to turn the lake into a city park, complete with waterslides, theatres, and a dog park. Heart Tree claims that this park will create jobs, increase city revenues, and give the citizens of Heart Tree much needed green space. The park will be run by Geoffrey Corp., a development agency associated with Heart Tree. To create the park, Geoffrey Corp. must use all of the land surrounding the lake, so it decides to initiate condemnation proceedings on the land currently owned by Ned. How could Ned fight this, and what would be the likely result? Answer: Ned can challenge the condemnation as an inappropriate taking under the Fifth Amendment of the U.S. Constitution. Ned may argue that this is an unconstitutional eminent domain action by Heart Tree because it is a taking of private land without just compensation for the benefit of a private corporation. Heart Tree will argue that this is a proper demonstration of eminent domain because the city is taking an underdeveloped lake and turning it into a public good. That Geoffrey Corp. is private does not matter because the purpose for the park is to serve the public. It is likely that the result may require Ned to give up his land, but Heart Tree must provide Ned a just compensation. 94. Explain zoning. Answer: Zoning ordinances are generally laws that divide counties or municipalities into use districts designated residential, commercial, or industrial. Zoning limits the use to which land can be put to that specified. For instance, industrial facilities cannot be built in residential districts. Zoning may also specify the height, size, number, and location of buildings that can be built on land. Restricting buildings in a commercial district to no more than eight stories in height is an example. Zoning may additionally impose aesthetic requirements concerning color and exterior design. 95. Define and contrast private property, public property, and common property. Answer: Private property protects private persons and allows them to exclude others, including in most instances the state, from interfering with resources that are acquired without force, theft, or fraud. Public property refers to the state's right under various circumstances to exclude people from state monuments, buildings, equipment, land, and other public resources. Common property has two meanings. First, it refers to the right we all have to common resources like the air, rivers, or oceans. Second, "common property" sometimes refers to the private ownership by two or more people of a specific resource such as a piece of land. Test Bank for The Legal and Regulatory Environment of Business O. Lee Reed, Marisa Pagnattaro, Daniel Cahoy, Peter Shedd, Jere Morehead 9780073524993, 9780077437336, 9781260161793