Keeping Current—Property Editor: Prof. James C. Smith, University of Georgia, Athens, GA  30602, jim@uga.edu. Contributing editors: Prof. William G. Baker and Prof. Daniel B. Bogart.

 

Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

 

 

Cases

 

ADVERSE POSSESSION: Land acquired by public entity for urban renewal is immune from adverse possession. In 1968 a redevelopment authority condemned a parcel of land under an urban renewal plan. The authority immediately removed the improvements from the parcel, which remained vacant until 2004 when the authority agreed to sell the parcel to a private developer for the construction of housing. A neighbor, who had used part of the parcel as a driveway for much of this time period, claimed a prescriptive easement. A Massachusetts statute protects publicly owned land from claims of adverse possession and prescriptive easement if the land is held for “conservation, open space, parks, recreation, water protection, wildlife protection or other public purpose.” Mass. Gen. Laws ch. 260, § 31. The court held that an urban renewal project serves a public purpose, because it eliminates blight, improves the environment, and provides needed housing. According to the court, the delay of almost 40 years in redeveloping the parcel did not alter the authority’s purpose. Aaron v. Boston Redev. Auth., 850 N.E.2d 1105 (Mass. App. Ct. 2006).

BROKERS: A broker’s commission is payable on the condemnation of the listed property. Landowners entered into an exclusive listing contract covering two commercial properties and naming a total price of $3,050,000. Two weeks later, the broker met with an employee of the village where the properties were located to discuss a possible sale to the village. Nothing came of the meeting, but later the village formed a community development authority to redevelop an area that included the properties. The authority began efforts to condemn the properties before the one-year term of the listing contract expired. After the contract expired, the authority paid a condemnation award of $1,382,000 in exchange for the transfer of title. The owners appealed the amount and received an additional $872,000. The contract contained a provision protecting the broker’s right to a commission for any sale made after contract expiration to a person with whom the broker had previously negotiated. The listing contract, which had no express clause governing condemnation, provided for a commission if the “Seller sells or accepts an offer which creates an enforceable contract for the sale of all or any part of the Property.” The court recognized that other states have split over whether a broker earns a commission on the condemnation of the listed property. The court held that the broker earned a 6% commission applied to $1,382,000, but nothing extra for the additional sum received after the owners’ appeal of the award. A dissenting judge contended that the commission provision was ambiguous and should be construed against the broker. Sonday v. Dave Kohel Agency, Inc., 718 N.W.2d 631 (Wis. 2006).

COTENANTS: Homestead interest of a surviving unmarried joint tenant does not prevent the other cotenant from obtaining partition by sale. In 1999 Francis and Ethel purchased a principal residence as joint tenants with the right of survivorship. In 2002 without Ethel’s joinder or consent, Francis conveyed his one-half undivided interest to his son. Francis died in 2004, and his son sought partition by sale. Ethel claimed that Francis’s conveyance was not valid and that her homestead interest precluded partition. The son prevailed on both issues. For the conveyance of a homestead by a married person, a South Dakota statute requires that both spouses execute the conveyance, S.D. Codified Laws § 43-31-17, but Francis and Ethel were not married. Likewise, prior cases established that a surviving spouse acquires a homestead interest in the entire residence, which is immune from partition. The court was unwilling to extend this homestead right to the survivor of an unmarried couple. Wisner v. Pavlin, 719 N.W.2d 770 (S.D. 2006).

EMINENT DOMAIN: No recovery in inverse condemnation for impairment of visibility of billboards from planting of trees. The City of Los Angeles planted palm trees within the right-of-way of a boulevard. The trees impaired the visibility of six billboards, prompting the billboard company to seek compensation by filing an action for inverse condemnation. The court recognized that precedent supported compensation for the loss of visibility when the government physically took part of the owner’s property or substantially impaired the owner’s access rights to the right of way. The court refused to extend this rule to the situation at hand, in which the government’s improvements were confined to the existing right-of-way. The billboard company could not claim unfair surprise, because governments commonly plant trees along roads for aesthetic reasons, to improve the climate, and for other reasons. The billboard company also invoked a statute calling for the government’s payment of compensation when an advertising display is “compelled to be removed” or has “its customary maintenance or use . . . limited.” Cal. Bus. & Prof. Code § 5412. Although the effect of the trees could be considered a limitation on use, the court concluded that the legislature did not intend to enact a “novel compensation requirement” whenever government action had the effect of reducing the visibility of billboards. Regency Outdoor Advertising, Inc. v. City of Los Angeles, 139 P.3d 119 (Cal. 2006).

INSTALLMENT LAND CONTRACTS: Buyer can recover statutory damages for deficient annual statement only if seller did not make good faith attempt to provide information. A Texas statute requires the seller under an installment land contract to provide the buyer with an annual statement that includes seven items of information. Tex. Prop. Code § 5.077. For a violation, the statute provides for liquidated damages of $250 per day. A home seller hired a firm to service its contracts. The firm sent annual statements with the same format it used for traditional mortgage loans. The statements omitted two of the statutorily required items: the amount paid under the contract and the number of payments remaining under the contract. The statements disclosed the balance due under the contract. The court held that the buyers were not entitled to liquidated damages, because the seller had made a good faith attempt to inform the buyers of the current state of their contractual relationship. Flores v. Millennium Interests, Ltd., 464 F.3d 521 (5th Cir. 2006).

LANDLORD-TENANT: Action filed to collect rent from a residential tenant is subject to the federal Fair Debt Collection Practices Act. A landlord retained an attorney to file a complaint in New York state court to recover unpaid rent from a residential tenant. The tenant filed an action in federal district court, claiming a violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.
§§ 1692–1692p. The court held that the lawsuit was a “communication” under the FDCPA, which triggered the obligation to provide the debtor with a “validation notice” disclosing statutorily required information. This holding extends a prior case, which determined that an attorney who regularly seeks to obtain the payment of consumer debts through litigation is a “debt collector” under the FDCPA. Heintz v. Jenkins, 514 U.S. 291 (1995). A problem raised by the new decision is that the FDCPA notice sets up 30-day periods for various actions, which are not consistent with timetables that govern litigation. The court recommended that attorney debt collectors who file litigation “should ensure that their validation notices (a) advise the debtor that the . . . notice in no way alters the debtor’s rights or obligations with respect to the legal proceedings and (b) emphasize that courts set deadlines for filings that may differ from the deadlines set forth under the FDCPA.” Goldman v. Cohen, 445 F.3d 152 (2d Cir. 2006).

MORTGAGE PRIORITY: Refinancing lender is not entitled to equitable subrogation to gain priority over intervening mortgage. In 1997 a borrower granted a mortgage to secure a loan for $100,000. In 2002 the borrower granted a second mortgage to a different lender to secure a loan made to a business entity controlled by the borrower. The next year the borrower obtained a new mortgage loan to repay the 1997 mortgage. The new lender obtained a title insurance commitment, which showed both earlier mortgages as prior liens. All three mortgages were properly recorded in the sequence in which they were granted. The borrower defaulted, and in the ensuing foreclosure action the third mortgagee claimed first priority based on the doctrine of equitable subrogation. This doctrine allows a subsequent lender who supplies funds to pay off a prior mortgage to take over the priority of the prior mortgage, up to the amount of the refinanced debt. Many courts have applied the doctrine to protect refinancing lenders, especially since publication of Restatement (Third) of Property: Mortgages § 7.6 (1997), which validates equitable subrogation even if the refinancing lender has notice of the intervening lien or is negligent. Rejecting this position, the court stated that equitable subrogation was inconsistent with the Wyoming recording statute, which provides that recorded instruments effect notice to subsequent purchasers. Wyo. Stat. § 34-1-121. From the opinion, it does not appear important to the court whether the refinancing lender had actual notice, or only constructive notice, of the intervening mortgage. Countrywide Home Loans, Inc. v. First Nat’l Bank of Steamboat Springs, N.A., 144 P.3d 1224 (Wyo. 2006).

SALE CONTRACTS: Implied warranty of habitability binds lender who is substantially involved in completion of construction of house. Buyers contracted to purchase a house that was under construction from a financially troubled builder, whose construction lender was considering foreclosure. The three parties agreed that the lender would not foreclose and its debt would be paid out of the purchase price at closing. Subsequently, however, the parties modified their agreement to allow foreclosure when they discovered junior liens that encumbered the property. The lender foreclosed, acquired title, and hired a new contractor to finish the house. The lender paid its contractor over $40,000. The total construction costs were approximately $240,000. After closing, the buyers discovered defects in artificial stucco, which they claimed made the house uninhabitable. They brought an action against the lender, builder, installer of the stucco, and the stucco manufacturer. The trial court dismissed the implied warranty of habitability claim against the lender, reasoning that a “mere lender” is never liable for breach of this warranty. The supreme court reversed, holding that the lender impliedly warranted the habitability of the house if it was “substantially involved in completing the house,” a disputed issue of material fact. The court said it was not significant that the builder’s contractor, not the lender’s contractor, installed the stucco. The court also rejected the lender’s contention that a disclaimer within the warranty deed precluded liability. That disclaimer was insufficient, because it did not meet the court’s newly announced standard that a disclaimer “must be (1) conspicuous, (2) known to the buyer, and (3) specifically bargained for.” Kirkman v. Parex, Inc., 632 S.E.2d 854 (S.C. 2006).

STATUTE OF FRAUDS: Buyer at foreclosure sale is not bound if no writing signed by buyer states the purchase price. In a memorandum, buyers agreed to purchase a property, which was scheduled for foreclosure, “if there is clear title and the price with legal fees after foreclosure does not exceed $75,500.” At the foreclosure sale, the buyers bid $75,500, but the lawyer conducting the sale informed them that, because of taxes and sale expenses, they would have to pay $77,642. They increased their bid to that amount, but did not sign a written contract. The buyers sought financing and learned that the lender’s appraisal valued the property at less than $50,000. They refused to go forward. The seller obtained a judgment for specific performance, notwithstanding the absence of a writing signed by the buyers that stated the price. The Tennessee statute of frauds, like most other states’, requires a writing signed by “the
party to be charged,” Tenn. Code
§ 29-2-101(a), but Tennessee cases dating back to 1857 had interpreted that phrase to require only the landowner’s signature. The state supreme court overruled that precedent, reasoning that “buyers and sellers should receive equal protection in the process of the sale of land” when there is no written contract. Blair v. Brownson, 197 S.W.3d 681 (Tenn. 2006).

ZONING: Owner is entitled to special exception to construct wedding reception facility in agricultural zone. The owner of a 38-acre tract in an agricultural zone requested a special exception to build a banquet hall and wedding reception facility on 10 acres. Neighbors from nearby residential subdivisions objected, claiming the project would increase traffic, cause noise and light pollution, and harm their property values. The county zoning ordinance allowed the board of zoning appeals to grant special exceptions for a “commercial recreational use,” defined as “an occupation, employment, or enterprise that is carried on to provide recreational services for profit. . . .” After the board granted the special exception, the neighbors complained that the board had acted in a “quasi-legislative manner.” The court disagreed, holding that the agency had acted properly, in a “quasi-judicial manner,” because its action determined the legal rights of specific persons. One might think that attending a wedding reception is not a form of “recreation,” but the court concluded that a banquet hall and wedding reception facility is a “commercial recreational use,” observing that “it is clear that providing banquets and celebrating weddings are generally attended with the purpose of having a great time while celebrating a joyous occasion with family and friends.” Green v. Hancock County Bd. of Zoning Appeals, 851 N.E.2d 962 (Ind. Ct. App. 2006).

 

Literature

 

Foxes and Hounds; A Brief Return to Law School. Just about every real property lawyer encountered the case of Pierson v. Post in law school. In that case, two hunters chased the same fox over property that, according to the conventional telling, neither owned. One hunter (Post) chased the fox to exhaustion, but the other (Pierson) shot and took the fox. The latter established a superior right to the fox in a court opinion setting forth a classic statement of the rule of capture. In a recent and very enjoyable article, It’s Not About the Fox: The Untold History of Pierson v. Post, 55 Duke L.J. 1089 (2006), Prof. Bethany R. Berger unearths a different story from the one told to students in law school. Berger begins by retelling the story in the traditional manner and explaining that Pierson “continues to horrify successive generations of law students with the thought that success in law school means understanding debates among 19th century judges regarding the relevance of sixth century treatises about the ownership of a dead fox.” She notes that the rule of capture developed in Pierson is used by lawyers “to argue for contested forms of property from groundwater aquifers to the America’s Cup trophy.” Berger does the hard work of digging through historical sources. She admits that there is a “paucity of the documentary record” and that what is left are “tantalizing clues.” Yet she concludes that, at its core, the conflict between these two men was really a conflict about “land use and control of this Long Island community in the face of the rapid changes occurring in the decades after the Revolutionary War.” Southampton, the land on which the fox was caught and shot, was in dispute. “[C]ommunity rights to [these lands were] simultaneously claimed by the colonial settlers, the English crown, the Dutch government, the Shinnecock tribe, the Pequot and Narragansett tribes, the original settlers, the later town residents, and the State of New York.” One can see how hunters entering into this terrain did so not only with an individual sense of entitlement to the hunted animal, but as a larger part of a community with a claim to the land. Settlers of the land abided by a concept of shared rights in the land. These factors “cast further doubt on Lodowick Post’s declaration that he started the fox on ‘unpossessed and waste land.’” In fact, Pierson, who often seems the villain in the retelling of the story, “had a particular claim to the land on which the fox was caught.” His home and the homes of his neighbors “lay in the undivided lands” near the location of the fatal shot. Pierson was a farmer and would have “resented the damage caused by English gentry chasing game over their common fields.” Post may not have been an English gentleman, but the resentment would have been the same. The author suggests an alternative view of property rules that might come from a more honest retelling of the story. In any event, this article allows the reader, and perhaps the property teacher, to think more carefully about whether it was Post or Pierson who acted most appropriately in the chase of the fox.

Land Use Controls; Freedom of Expression. In his article, The Law of Yards, 33 Ecology L.Q. 203 (2006), Prof. James C. Smith examines the effect that public land use regulations have on limiting the ability of individuals to engage in freedom of expression. He focuses on two types of aesthetic regulations: (1) landscape regulations, including weed ordinances, that regulate yards; and (2) architectural regulations that regulate the exterior appearance of houses. Concluding that such regulations sometimes go too far in curtailing a homeowner’s freedom of expression, Smith calls for the recognition of an owner’s expressive conduct as “symbolic speech” under the First Amendment. To be protected as symbolic speech, the conduct must convey a particularized message, which may be political (such as a yard display that protests a decision made by a local government) or nonpolitical in nature (such as a homeowner’s decision to plant natural landscaping, motivated by ecological concerns, or to install a nativity scene at Christmas). The author concludes that a regulation that restricts an owner’s protected speech is unconstitutional unless the government proves both that the regulation is narrowly tailored and that it protects a substantial public interest. Moreover, he asserts that government regulation for the purpose of protecting aesthetic values ordinarily is not substantial enough to justify the restriction on speech.

Takings; Local Governments. Much continues to be written about the Takings Clause. In his article, Big Differences for Small Governments: Local Governments and the Takings Clause, 81 N.Y.U. L. Rev. 1624 (2006), Prof. Christopher Serkin examines the particular case of smaller, local governments. He argues that local governments are risk averse and should be treated differently from larger governmental entities. One or several large takings judgments may have dire effects on the financial position of a local government. Therefore, Serkin argues that these institutions sometimes choose not to enact regulations for fear of lawsuits premised on the Takings Clause. Serkin suggests that the “expected cost of a regulation should be lowered for local governments. This means shifting compensation downward, limiting or eliminating litigation costs, and removing the threat of temporary takings.”

 

Legislation

Michigan broadens the rights of an owner whose property is taken by a government agency under eminent domain. If the taking might require relocation by a homeowner and higher property taxes on a replacement home, the homeowner is entitled to additional compensation. 2006 Mich. Pub. Acts 439.

Pennsylvania broadens disclosures required by real estate brokers for commercial property. Required disclosures include fees, duties, cooperation agreements, and the nature of the agency relationship. 2006 Pa. Laws
125.