We do not have absolute property rights ± public policy could override property rights (eminent domain; private/public

necessity). (Blackstone disagrees: Property ownership is sole, despotic and absolute). 4 Types of Property: 1- Real Property: Land and all interests in land, including improvements of land 2- Personal Property: Tangible, movable objects that are subject to ownership and not classified as real property 3- Choses in Action: A thing in action; what you own is a cause of action to recover money, a debt or a thing, and the property in question is usually an intangible item; ex) stock in a corporation; patent/copyright; personal property that one person owns but another possesses, the owner being able to regain possession through a lawsuit; when prof took classmate's $20--classmate has a chose in action 4- Chattle Real: An interest in real property that is more than possession, but less than ownership, such as the tenant¶s interest in the landlord-tenant relationship, or an estate for years in land, which is considered a chattel because it lacks the indefiniteness of time essential to real property. Why do the distinctions matter? 1. Different rules for its transfer: -with real property, deeds must be recorded; with personal property, you can't sell what you don't have -people who inherit real estate are called ³heirs,´ those who inherit personal property are called ³next of kin´ 2. Different legal rules govern 3. Different procedural remedies may be available: The Statute of Limitations for bringing suit to recover real estate is typically much longer than the Statute of Limitations to recover personal property. ((adverse possession: a method of acquiring title to real estate, accomplished by openly occupying the property to the exclusion of everyone and in defiance of the rights of the real owner for a period of set time. If the owner fails to take appropriate action to oust you within that time, the property is yours)) 4. Classification may make a difference as to ownership: ex) tenant puts in light fixtures during lease; at end of lease who does it belong to? if real property-->landlord; if personal-->tenant 5. Taxes may apply differently depending on the property interest. 6. Difference in applicable law when there is a conflict of laws: -Real Property: the traditional rule is the law of the place where the land is situated or located is the law that will control. -Personal Property/Choses in Action: the controlling law is the law that controls the owner of the property (based on his domicile)

WILD ANIMALS A. Possession- The only way to get an enforceable property right in a wild animal is by reducing it to possession

B. What Constitutes Possession? 1. Possession is the seizing or holding of personal property, with or without a claim of ownership 2. 2 Elements of Possession: a. Objective manifestation of intent to control b. Actual control - actual seizure or holding of the property

2 Types of Possession: a- Actual possession: direct or immediate occupation or control of the property b- Constructive possession: the power of exercising control over property that is in the possession of someone else (ex: owner of a house occupied by a lessee, owner of furniture stored in a warehouse)

3. Legal Relativity: a. Courts have consistently held that some degree of control is required for possession. b. Degree of Control i. Absolute Dominion (All Steps Necessary to Render Escape Impossible; animal cannot physically escape/completely captured/actual control over animals) a. Pierson v Post 1. Fact Summary: Post pursued a fox on a public beach. Pierson shot the fox and claimed it. 2. Mere pursuit of a wild animal is not enough to constitute possession or give a party an enforceable property right. 3. The court held that Post had to have actually seized the fox with the intent to do so, before Pierson¶s interference could be actionable b. Young v. Hichens 1. Fact Summary: Action of trespass (possession required). Young shot out a net to capture a school of fish. The fish were not completely enclosed in the net. Hichens entered through the opening and captured the fish. 2. The court defined possession as absolute dominion of control over the animal. The court held that Young had not yet taken actual possession, nor did he have constructive possession, because all but reducing the fish to possession is not the same as possession. c. Buster v. Newkirk 1. P shot and wounded wolf and followed it onto D¶s land where D killed and took it. 2. Court said that since P had not gained absolute control over the wolf, he couldn¶t get a directed verdict.

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ii. All Steps to Render Escape Practically Impossible a. State v. Shaw 1. Fact Summary: Shaw took fish from a third party¶s nets and was charged with larceny. To be convicted of larceny, Shaw must have taken the fish from the possession of the owner with the intent to deprive. On trial, the court entered a directed verdict of not guilty for Shaw, because not all steps necessary to render escape of the fish impossible had been taken. 2. State appeals and higher court holds that the standard for possession is more relaxed and possession should be defined as taking all steps necessary to render escape practically impossible.

a. this seems to be a policy decision based on desire not to punish D and not reward him for criminal behavior

iii. why have these two different rules? 1. might just be different approaches taken in different jurisdictions 2. theory of relativity: possession might have a different type of legal meaning depending on the cause of action (civil case/ criminal case) and the purpose for which we are seeking to make a definition. 4. Always take into account and advise your client: are the benefits of possibly prevailing worth the expenses of litigation?

C. Prior Possessors: First in Right, First in Time 1. If there are two legitimate claims and not enough to go around, the earlier claim often wins. The rule of first in right, first in time establishes a priority of property rights based on acquisition of the right in question. a. A prior possessor, even if a wrongful possessor, will prevail. Prior possession even though wrongful, is enough to bring suit against a subsequent wrongful possession -Jus Tertii: making an argument for a 3rd party in attempt to justify entitlement to possessory rights based on the showing of legal title in another person -wrongdoer, however cannot assert the rights of third parties

2. Exceptions a. Custom: Custom and usage in a locale can become a source of law & a basis for awarding possession i. Ghen v. Rich: 1. Fact Summary: Ghen is a whaler pursuing a whale off Cape Cod. He shoots a bomb lace and hits the whale, which dies of the wound. The whale sinks and two days later is discovered on a beach by Ellis, who sells it to Rich. 2. The person who was not the first possessor gets an enforceable property right. The court held that the mortal wound inflicted by Ghen, constituted constructive possession based on the custom of the locale. ii. However, Mayu v. Sullivan and Johnson v. Husky Industries--if the custom is unreasonable, then court may not follow it -courts more likely to accept a custom of the community than the custom of an industry When does a communal custom become a source of law: antiquty, continuity, peace, obligatory, certainty, reasonable, principle of law iii. Mussel hypo: -You find a case where even when A owns the bed and banks of a stream, he can¶t recover trout taken by T since they are ferae naturae. You could distinguish that in this case the mussels are imbedded in the soil so they are A¶s through rationi soli. -You also find a case holding that even in an enclosed pond entirely owned by one person, the custom in the county is that anyone can fish there unless notice is given otherwise. You could distinguish that there¶s a big difference between a few fish and tons of mussels. No implied consent to take that much. Community custom might justify implicit consent to some fishing, but probably not a massive operation.

a party loses its qualified property interest (not necessary that the animal returns to its natural habitat) Exceptions: 1. Degree or extent to which the value of the object has been enhanced/ and or its identity changed ± the more the change. -However. as long as he is in fresh pursuit. Wild Baseballs (Popov v. and the party is pursuing the animal. Albers rule if you've gone through a lot of expense for the gas) 5.e. title in the animal will go to the possessor. Under the doctrine of Accession (occurs when a wrongdoer takes another's property and changes its identity and value). to regain possession of the animal (But. Schwartz says error in reasoning here .1. courts have held they will not lose their property interest if the animal escapes and is captured by another(Stephens v.S. can¶t be guilty of larceny through R. Animus Revertiendi: If an animal has animus revertiendi or the habit of returning. the court evaluates: 1. the party does not lose his property right. Money Invested: if a party has spent a lot of money to enhance or cultivate their property interest. only power of regulation (passing statutes) D. Common Law Rule of Qualified Property Interests -When a wild animal is reduced to possession. (so perhaps 2 wrongs can make a right). if the animal living on land is captured on another land. The State doesn¶t have a property right over wild animals in its territory.court rules that the value of the ball should be split between the two (equitable division). i. Fresh Pursuit: If a wild animal has escaped. then it is part of the land and the owner of the land owns the animal. some courts hold that the pursuit of O ends when the animal of O enters into the property of a third party) 3. Hayashi). Degree of culpability .. you lose your qualified property interest (argument can be made to maybe use the Stephens v. the more the scale tips toward the wrongdoer (he¶ll still be liable for the original value) b. then a party does not lose its property right. and the party¶s interest is unqualified (1 escape and return is sufficient) 2. under the privilege of necessity. 3. there it only applies to Personal property) and for other purposes as personal property (perhaps in resolving civil property disputes). he may enter private property. If so. -possession should be untainted c. Albers) 4. -Concept of relativity: Rights acquired through Ratione Soli are treated for some purposes as real property rights (criminal law. -If O is in fresh pursuit. a qualified property interest is acquired.willful or innocent wrongdoer? 2. Ratione Soli (Constructive Possession): legal conclusion that a person in possession of the land has ³constructive possession: of things that are on or under his land even though they are not actually in his control. The property interest in a wild animal is conditional upon possession being maintained -Once a wild animal escapes and is free to go as it chooses. If the possessor violated the Criminal Law: Those who broke the criminal law in obtaining possession of the animal do not get title to the animal.. 1) The animal must be living on the land and 2) It must be captured on the land. Wild Gas: common law tends to treat gas as wild animal and if the "wild gas" escapes.

**Interference with an Advantageous Relationship: Courts will hold that if a party¶s property interests are maliciously interfered with they will not lose their property interest if the animal escapes because of the interference. (competition is OKAY as long as you don¶t use unfair means) -Motive is very important. -simulation may be used to assess damages if reasonable and if solid foundation for the projections . A good motive may make an action for interference with an advantageous relationship not actionable. A bad motive may revoke the privilege of competition.

LAW OF FINDERS Policy: a. Then it is 0%. A person becomes a finder when they reduce something to possession. McQuade: The court found the owner had a general. -The statute may set up a procedure for giving the finder 100% absolute title (after a certain period after turning it in. -Since he is not an absolute owner. most courts hold that when A makes honest mistake building fence on O¶s property. also allows the finder to have a cause of action against subsequent possessors. liable for only gross negligence. he had an intent to control the property if and only if x condition was met. Delamire: established the finder as a prior possessor with claim good against the whole world except the true owner. the finder may recover 100% of the value of the property from the tortfeasor (we rather penalize the wrongdoer than the innocent party) -If the TO then returns. (in AP. a finder may have a duty of care. b. A had general intent to control the area regardless of whether it was his) -Intent is defined differently based on different policy considerations: to criminalize antisocial behavior. though mistaken. Armory v. Some states have passed statutes criminalizing not turning over or reporting lost chattel over a certain price and then awarding ownership to the finder after a certain period of time. If the TO is nowhere to be found. giving parties their justifiable expectancy. the T. -Phelps v. He is considered a gratuitous bailee. (Dependent Relative revocation: He only had the intention to revoke his first will if his second will was valid) -general intent: general intent to control the property -Peet v. because it makes the chance of returning the property to the true owner greater.O. (nemo dat qui non habet) Becoming a Finder a. The law of finders wants to encourage people to find things. there is only an intent to pass title to the specific person (Condy v. In order to take possession a finder must: 1-actually come upon or discover the property and 2have an intent to control the property (and actually control the property) -specific intent: at the time the party took control of the property. intent to pass the jewel to the person standing in front of him -Correspondence Exception: if the scam was done by correspondence. No finder can give or assign greater rights to a transferee than he initially has.) -A finder gets title against all the whole world save the true owner. Roth Hotel: Court says the hotel had a general intent to be a bailee for whatever the stone was worth even though it turned out that it was worth a lot more than they would have suspected. His interest is 100% until the true owner appears. expecting hotels to have a much higher duty of care. Lindsey). then the finder gets full title). -finder will likely have good title against the whole world except for the true owner Rights & Interests of Finders -Finding property will give a person a right to it over others who later possess it. wanting . (First in right²First in time. has a choice of who to bring a suit against. (TO bears the burden of production and persuasion on whether he is the true owner) -The finder has a qualified property interest. b.

He has the duty to exercise due care under the circumstances. the owner of the premises prevails (to keep it for true owner) How do we reconcile the results of the lost v. If an object is found in a private place. Briggs: O authorized F (who was lessee) to put in a gas holder on premises and F finds sunken ship under the surface. -owners of the locus in quo: ownership of the place of the find gives them constructive possession over everything found there -However. finder prevails Bridges v.) -if you pick up and put back. since the owner has opened up the premises to the public. Peel) -mislaid property: something someone intentionally placed somewhere and then forgot it -in a battle between a finder and an owner of premises for mislaid property. -Pollack: focus on de facto control. the bailee¶s standard of care rises again Rights of Finder -finder feeds horse hay: TO benefited from finder¶s action and finder should be able to recover on quasi contractual benefit -Can he claim a right to continue to possess the lost item until the benefit is paid? NO. realistically. The lost item is given to the person who had possession first. he intends to control everything in that area. Seeing something is not possession. 3. Sharman: guy hired to clean out pool of mud finds ring at bottom. then he cannot recover (in a lawsuit). If it is a public place. the finder is a gratuitous bailee. An owner is less likely to prevail over a finder if he did not know of the presence of the lost object on the realty. Landowners -a landowner is regarded as being in possession of everything found on or under his land -The owner will be found to be the prior constructive possessor of the object although unaware of its presence there. that the owner of the private place intends to exclude the public from that area. if the owner is unaware of the object. -if the bailment benefits the bailee. (Hannah v. Finders v. -what if there was a reward? If he knew previously of the offer. etc. and was not in possession of the realty at the time of its likely loss. no intent to control so no possession -placing buoy over wreck=no possession Liability of Finder: at common law. he cannot intend to possess what he is not aware of. was not on the premises when the object was found. could bring action for tortious interference with advantageous rltshp. then he may recover it.TO to have a better chance at it. If not. Hawsworth: parcel of banknotes found on floor of shop. & you can¶t intend to control what you are not aware of -#4: we award the lost property to the first person to reduce it to possession. finder prevails South Staffordshire v. The O of a premises is . . actually control the property: seeing something does not give you a property interest. O prevails Elwes v. -Salmon: Possession is intent to control. desire for consistency in the law. so we should give it to the finder -#5: we award the goods to the 1st one to reduce the goods to possession. desire to effectuate and implement the dead¶s wishes. O prevails -Holmes view: distinction should be drawn between public and private places. has no intent to control. Peel: breech in crevasse of window. because there is no control (but if get pushed out of way. mislaid cases? Hannah v.

so the finder will prevail over the owner of the location. Mislaid property: Mislaid property is voluntarily put in a certain place by the owner who then overlooks or forgets where the property is. and any permanent damages to the property . but based on the ultimate policy objective²the true owner getting possession. No reclaiming is likely. So the owner of the location is likely to be found in prior constructive possession of it. Abandoned property belongs to the finder of the property against all others. and F finds something there. would be to give the property to the finder after a period of time if the true owner fails to show up.Deemed to possess anything that is attached to or under his land -Schwartz: The right of the finder should not be allocated on the basis of possession. they have abandoned their property interest. (Schwartz) -If O owns building and T leases it. acquires no rights to the property. and the custom is that the first person who reduces it to possession has title. as against all persons other than the true owner. Stolen property found by someone who did not participate in the theft is lost property. The right of possession of mislaid property belongs to the owner upon which the property is found. it is the procedural action to recover for conversion of personal property. the property must have been hidden or concealed for such a length of time that the owner is probably dead or undiscoverable. A better rule. unintentionally separated from its owner. it goes to T since a lease is a temporary sale. -An owner mislaying property is supposed to remember its location and return to reclaim it. When it is hit out of the park. Not relevant in modern U. Treasure Trove: To be classified as treasure trove. including the former owner Abandonment requires: (a) a specific intent to abandon the object and (b) an act abandoning it -passage of time without the intention to abandon the interest will not constitute abandonment -must show a clear. 2. Replevin: seeks the specific recovery of the personal property. Trover: you recover 100% of the value of the chattel.S. but this doesn¶t encourage the finder to disclose his find. Actions to Recover Lost Property 1. but refuses to reclaim it. Abandoned Property: he owner can remember its location. but not the law. Mislaid property found on private property belongs to the owner of the property. Classifications of Found Property Lost property: Lost property has been involuntarily. Conversion: occurs to protect some tangible item of personalty 3. law. along with damages for the value of the possession lost because of the conversion. specific intent from the owner of the chattel to relinquish the chattel -MLB owns the ball.

if they park the car for you and give you a ticket. 3: Mutual benefit bailment -Duty of ordinary care. If you leave a diamond in the trunk they have not necessarily become the bailee of the contents of the trunk ± just the car itself and anything visible.BAILMENTS A bailment is the transfer and delivery by an owner or prior possessor (bailor) of personal property to another (bailee) whose purpose in holding possession is often for the safekeeping for the owner. Prestige: clerk on the otherside immediately sees this is the wrong bond and yells out that it is wrong and pushes it back through slot. there is more control (and intent to control) and this is probably a bailment. even if bailee is slightly N. However. although if there was really bad settlement could possibly sue the bailee on negligence) Example.Safe deposit box: despite not full control. ordinary N More modern approach is that the duty of care owed by any bailee is due care under the circumstances. the bank does not owe you the specific money you dropped off. we view it as a bailment as a matter of policy so that creditors could garnish from it and also people demand a very high duty of care from a bank Checking account: -debtor/creditor. -intent to control hinges on whether we define as general or specific intent (could be disclaimer) Rule: a suit by the bailee precludes the bailor from suing the thief because of the consensual relationship (Winkfield case. Ex-Coat check loses expensive scarf: was there control? Yes. contract is not always needed for a bailment to be valid (Schwartz agrees) -Schwartz said should have looked at ³did they have intent to control depends if you look at them having general intent or specific intent´ . Types of Bailments 1: Solely for the benefit of the bailor (gratuitous bailee) -at common law you have to prove gross negligence -a finder is considered gratuitous bailee 2: Solely for the benefit of the bailee -Don¶t even have to prove ordinary N. Level of control is important: Ex of parking in lot: If you just leave your car there it¶s as if you are just leasing the space and you only have a landlord-tenant relationship so they have almost no duty of care. b/c bailee owes the duty of the highest degree possible. -majority: D was an involuntary bailee but obtained absolute domion and control and is therefore liable. -although a trust/trustee and custodial rltshp would probably be bailments Collins v.not a bailment relationship.

if you have a defective deed . the possessor¶s rights are greater than they were in the finder's unit. but also to innocent possessors How did the doctrine come about? judicial gloss and interpretation says that when the owner¶s ability to bring an action for ejection expires (when SOL has expired). As a result. one may actually gain title by adverse possession Policy reasons: early rationale to punish O who has delayed in bringing claim. this will not be a requirement for adverse possession unless stated in the state's statute -color of title is a requirement for Constructive Adverse Possession: Normally AP will only give you title to the land that you actually occupy and no more. encourages productive use of land Elements of Adverse Possession 1) Possession of someone else's land: exercising the degree of control of the property that the average owner of similar property would exercise under similar or like circumstances. -Adverse possession may apply to both personal property and real property (for personal property the SL relates to an action for replevin. The degree will vary with the nature and location of the property. the standard for possession is objective -exclusivity is not necessary but is relevant based on the nature of the property as evidence -Mere assertions of ownership. he will be estopped from taking a position counter to his prior position) (also some states have passed statutes saying you must have a claim of right--must have a reasonable belief that no one else has title) 4) Color of Title: color of title refers to a claim to title which appears valid. deed or other written instrument that purports to give legal title but for some reason is legally insufficient. people may be barred from suing prior to the acknowledgement of a claim. repose/calm of mind for a possessor. no matter how open and notorious will not suffice 2) Open & Notorious: satisfied if the reasonable person should have known (objective) that he¶s acting as the owner of the property even if he himself doesn¶t realize he¶s not the true O -a furtive concealed possession is not the sort of control that the average owner would exercise 3) Adverse: possession is only adverse when it is without permission from the true owner -does not require hostility according to most courts -permissive possession may become adverse possession (must expressly communicate his repudiation) -oral agreement for land violates statute of frauds but can still be used as evidence that a possession was permissive -a blatant wrongdoer may sometimes gain possession through AP (exception: a blatant adverse possessor might not get title if he makes false representations to the true owner that he will never claim title. to protect against stale claims.ADVERSE POSSESSION In Adverse Possession. -The statute of limitations begins to run when the cause of action accrues. certainty of title. An adverse possessor may gain full-blown legal title of real and personal property even against the TO after the Statue Of Limitations (SOL) has run. for real property the SL relates to an action for ejectment) -applies not only to blatant conscious wrongdoers. However. but may be legally defective.

insane etc. Can also tack different owners together: once the statute starts to run against a former owner. the O sells to a bonafide purchaser. and some jurisdictions require good faith for C. the statute tolls and you can¶t get AP until a certain amount of time after the disability is removed -the disability must be in existence at the time of the accrual of the cause of action -we don¶t tack disabilities. many jurisdictions have changed this . The disability of a subsequent owner is irrelevant and does not trigger the tolling provision -we only take the disability of O at the time the action accrued into account and therefore the subsequent disability is irrelevant -when suffering from 2 concurrent disabilities (as opposed to a supervening subsequent disability). If he never recovers from being nuts. statute stops running as soon as the possession becomes permissive Tacking: 1. the AP wins because O no longer has any title to sell to the BFP -A¶s title should relate back to the moment he went into possession b/c otherwise it would go against the reasoning behind AP Adverse Possession of Personal Property: -differences: statute of limitations will generally be shorter. the AP will never get title Adverse Possessor's Title: the adverse possessor will acquire good title assuming all of the above criteria are met -title is free and clear of claims to the property that are dependant upon a continuation of the prior possessors title -if after the AP acquires title. (must also not be period of interruption. however.P.) when the COA accrues. then the count starts over: -abandoning the AP: will be a question of fact for the jury whether he had abandoned it -true owner bringing an action of ejectment will only constitute an interruption if successful (verdict in an action of ejectment relates back to when the action was first brought) -true owner regains possession (self-help) -Converting the adverse possession into permissive possession. however. the adverse possessor has to do the same things an average owner would do with the land in that location and climate -If there is an interruption in the running of the statute. must be continuous) 2.(color of title).A. the action known as replevin. the disabled owner gets the benefit under the tolling provision of whichever disability lasts the longest. personal property is movable and so harder for true owner to locate -the common law rule is that the statute starts running at time of theft. you are deemed to be in possession of the entire acreage described under that deed. but for continuous. land must be contiguous. 5) Continuous: possession must be continuous and without interruption throughout the period of the statute of limitations -Continuity does not mean every day or even every month. Adverse possessors can combine or tack their period of possession with that of a predecessor. it continues to run against the current owner since he¶s buying the land subject to those former years of AP Tolling: In the event that the TO is suffering from a disability (minor. so that one adverse user need not be in possession for the whole prescriptive period if there is privity of estate or a consensual succession.

O owns the property. If all a person owns is a future interest. continous.One can¶t get title to the government¶s land through AP since they has sovereign immunity -The state can get title by adverse possession since you can sue the private individuals that work for the state (as sovereign immunity doesn't extend to employees) 3. the t. Future Interests. knows where the good are. for the statutory period) (sidenote hypo: Does A have an easement by prescription to the light and air? No. since no cause of action has accrued since O never could have sued A for looking out his window at the view.o. since they have no standing to bring a cause of action against an adverse possessor. the statute continues to run -AP commences after the conveyance: then the AP will have to start over once the title passes to the inheritor 2.) . open & notorious. State Interests. (side note: an easement appurtenant is attempted to be gained when you use someone else¶s land to benefit your land for the period of s/l) -Easement by prescription can be gained by long-continued adverse use. -some apply a Demand and Refusal Rule: If someone is a bona fide purchaser the s/l does not start to run until there has been a demand by the TO to get the painting back and a refusal by the bfp (though once the t. though you may have acted unreasonably. Easements Interests.an easement is not extinguished by adverse possession of the property. you are held only to know what you actually know instead of what you should know (subjective bona fide standard). then you can¶t adversely affect the interest -AP commences before the conveyance: If the statute begins to run before the conveyance of a future interest. A for the period of the statute of limitations uses O¶s land. so requires the owner to make due diligence (side note: UCC defines bona fide/ good faith as "reasonable in fact". so that a cause of action would have accrued for the person doing the easement Prescription. must make its demand for the property within a reasonable period of time).The owner of a future interest.companion doctrine for adverse possession -In the area of prescription. (side note: the defense of laches: a defense may be raised that the opposing party has failed to raise a claim against you for an unreasonable amount of time and you relied upon the delay to your great detriment) Areas in which Adverse Possession does not work 1. the AP would have had to obstruct or interfere with the easement for the statutory period. the elements are the same as for AP (actual use. cannot be affected by the doctrine of adverse possession or an easement by prescription.-some apply a discovery rule-the statute does not begin to run until the plaintiff ascertains or with the exercise of due diligence could have ascertained who and where the thief is (an objective standard). A will by prescription gain the right to use the land²an easement by prescription. adverse.o.

-seeking tax savings can sometimes undermine the purpose/intent of the donor C. refer to relevant sections. trust will be included in donor¶s estate. and while the donor is living the income received under the trust is taxed on the income of the donor . completely tax free (spouse can also give 13K so 26 K total) -cannot be passed on in trust. Terminology -Basis: The values assigned to a taxpayer¶s investment in property and used primarily for computing gain or loss from transfer of the property. Taxes -Estate tax-applies when you die and seek to transfer your wealth at death by will or intestacy. -advantage: you retain absolute control of your property until death. Schwartz seems to feel the primary purpose of gifts/estates is to benefit a person's beneficiaries. it is revocable -in the event of incompetency. given gratuitously at death (transferred by inheritance). subject to formalities (2 witnesses and in presence of testator) 3. Revocable Intervivos Trust: most prominent estate planning vehicle -trust is created (and now owns the assets put in). Types of Gifts 1. The generation-skipping tax will be imposed only if the transfer avoids incurring a gift or estate tax at each generation level. The beneficiaries have no property right. 5 Million dollar exemption: there is a once in a life time exemption of five million dollars from taxable gifts (technically it is a taxable gift. such as grandchildren. or in a manner the IRS considers to be testamentary in manner. -Generation skipping tax (GST): the generation skipping tax imposes a tax on both outright gifts and transfers in trust to or for the benefit of persons more than one generation younger than the donor. -Carry over Basis: The basis of property transferred by the gift or in trust. -shortfalls: subject to probate. Irrevocable Intervivos gifts -annual exclusion: a living donor may make a non-revocable gift of 13k to as many different people as he wants to each year. and acceptance are all necessary. -Intestacy-act of dying without a will B. equaling the transferor¶s basis -Elements of a gift ± Donative intent. the trustee will have the power to use the property to benefit the donor and his beneficiaries (should appoint someone outside of family because if that person died with power of trustee. trust might be included in his estate as well) -no significant tax advantages. delivery. is the property¶s fair market value at the date of death. but you do not pay taxes on it) 2. Basis sets the starting value of capital assets to determine the extent of a gain or a loss on the sale or transfer of the assets -Step up in Basis: The basis of property. Will: A will is a written document that leaves the estate of the person who signed the will to named beneficiaries. only an expectancy prior to death. There are exceptions.GIFTS AND MODES OF TRANSFERRING WEALTH A. living donor must make the gift 4.

-Cost: after the term of the trust ends. this will be received tax free) b. Specialized Intervivos Trusts: a. capped at the amounts those gifts are normally subject to -Tax consequences: a) Income tax: generally you can avoid having any future income taxation attributed to the donor. GRUT (Grantor Retained UniTrust) -the value of the annuity to be paid out under the trust varies from year to year c. a revocable trust conveys an interest in the trust's beneficiaries immediately 5. 6. Personal Residence Trust -you take a personal residence and you transfer it into an irrevocable trust for a period of time -The gift tax on the property will be calculated based on the day the trust was created. there will no income tax payable by the kids based on the rent they receive -why? b/c for income tax purposes. the donor retains the right to get an annuity for a fixed period of time -At the end of the term. the income may be attributable to you for income tax purposes b) Estate tax: normally once you make the irrevocable intervivos trust. the annual exclusion may apply. depending on who is selected as the trustee and how you draft his powers. On that date. such property will not be included in your estate for the purposes of the estate tax and will be considered a gift (exceptions: unless the donor names himself as one of the trustees or beneficiaries). -benefit 2: because the income of the trust is going to be payable to the donor¶s spouse or his children. since the beneficiary only has a future interest. any remaining value in the trust is passed on to a beneficiary of the trust as a gift. 5M lifetime gift deduction may apply). the present value of the gift may be less than the actual value). GRAT (Grantor Retained Annuity Trust) -a GRAT is a irrevocable intervivos trust (made during life). Irrevocable Intervivos Trust: irrevocable gift during your lifetime that is made in the form of a trust -Benefits: avoids probate.-justify the validity of revocable trust? While a will does not take effect until the date of the testators death. the present value of the gift to the beneficiary will be calculated based on the length of the period of the trust and the interest rate (accordingly. the grantor is treated as the owner of the trust . you may still qualify for the annual exclusion that applies to intervivos gifts. -The value of the gift given to beneficiaries under a GRAT is calculated at the time the GRAT is created and taxes are based on this value (so if the value ends up higher than this. c) Gift tax: a gift tax will generally be computed on the trust in April the year after you made the gift (remember. the beneficiaries will own the property -Example: O could remain in the residence and pay rent -benefit 1: low gift tax. -When calculating the value of the gifts for subsequent grandchildren. none of the tax exemptions will apply. -exception: if you provide flexibility under the trust.

Joint Ownership a. the interest is transferred to the other) . Joint Tenancy -there is a right of survivorship (upon death. except the annuity is not a fixed amount based on the original value. under which he retains a right to keep the annuity for the balance of his lifetime (though this can be paid to a specified beneficiary). the trust will not be subject to estate taxes.d. -one advantage of the CRUT is that if the trust is not making income. CLAT (Charitable Lead Annuity Trust) -create a trust whereby a fixed annuity is paid to a charity for a period of time and when the term expires the remainder of the gift goes to the grantor's children. -One disadvantage of a CRUT is that the grantor lacks stability (does not know how much the annuity will pay). principle and undistributed income gets paid to the former minor (but parent cannot be the trustee for own child no annual exclusion) h. the annuity does not have to be paid that year f. trustee has absolute discretion. CRAT (Charitable Remainder Annuity Trust) -Grantor creates an irrevocable trust and retains an annuity (which must be at least 5%). when he turns 21. which must be a charity. -the charitable portion of the gift is tax free. Present Interest Trust -way to give future gift but qualify for the annual exclusion anyway -must give the trustee absolute discretion to pay out income/principle as he sees fit -until minor turns 21. Tenancy in Common -no right of survivorship -owners can own unequal shares -the interests of the owners are undivided. -advantages: -In the year the donor creates the trust. -avoid a capital gains tax e. but is based on a fixed amount of the trust based on its value from year to year. when the grantor dies. the present value of the charitable gift is deductible on his income tax return -At the grantor's death. there is a unity of possession b. you also avoid an estate tax -the value of the gift to the kids is calculated based on the day the trust is created -Normally only done after death (to avoid income tax on the grantor) g. -there is 100% tax deduction under a CRAT and its value is not included in the grantor's estate for estate tax purposes. CRUT (Charitable Remainder UniTrust) -similar to CRAT. the remaining property in the trust then goes to his beneficiary. Life Insurance Trust -trust owns the policy -can arrange the policy so that the proceeds can be received free and clear of estate tax and gift tax (insurer cannot retain incidence of ownership in the policy and trustee must give each beneficiary notice and the reasonable time to withdraw) 7.

tenancy in common: will be includable in estate -b. less your basis on the asset (the amount to originally bought it for) -in a tenancy in entirety. Private Family Annuity -owner of the asset sells it to another party. title and interest -in a tenancy in entirety. then he can get a credit for the repairs -if x makes a lot of improvements. it will get a 100% step up in basis. -Joint ownership is expensive from an estate planning point of view. needs to be unity of time. if x puts in all the money into a joint account. LLC: Limited Liability Corporation -for income tax purposes. the deceased¶s interest will pass free and clear to the other person (at least in NY) -for gift tax purposes. -Since when property passes under a will it is required to be 100% included in the decedent's estate. but not for small improvements or maintenance (in the absence of an express agreement) -however if the repairs were made in order to rent out the premises. no gift is calculated under the gift tax until y makes a withdrawal 8. -estate planning and unity of possession: -exclusion: one co-owner may not restrict the other from any portion of the property -transfer of interest: one co-owner cannot restrict another co-owner from assigning his interest to a third person -duty to account to y for those business activities. this asset will now be out of the sellers estate for estate tax purposes and will not be considered a gift to the buyer (annuity calculated must be sufficiently high) 9. Tenancy in Entirety -there is right of survivorship. creditors cannot reach a deceased persons tenancy upon death. there is no taxation of the corporation . limited to husband and wife rltshp -different than joint tenancy: cannot be unilaterally destroyed by an action of partition or destroyed by way of a conveyance from one owner to a third party. and must be unity of time and title c. you could have put a provision in each spouses will that all property passes to the other person under the will. to avoid a huge capital gains tax: after one spouse dies. he can possibly seek this value later when the property is sold -creditors could reach x¶s ½ of the estate if x was insolvent in a tenancy in common -remember: for joint tenancy.joint tenancy/tenancy in entirety: property interest of the party that dies will escape estate taxation at death (unfortunately IRC 2040 taxes this loophole) -non marital: includable in estate in proportion of consideration paid for it -marital: IRS automatically includes 50% in the first decedent¶s estate -capital gains tax: -gain is measured by the amount realized on the sale of the asset. the other can renounce 50% of the jointly owned property.-must have an equal interest in the property. consideration is rendered by the buyer promising to pay the seller an annuity for the duration of the seller's lifetime. -estate tax: -a.

loss of control. CRAT 6. he must act in the best interest of the principle -limitation: powers of agent not clearly spelled out as clearly as there would be in a trust.D. Avoid probate Costs: affordability. annual exclusion: non-revocable gift of 13K to as many different people as he wants to each year. the proceeds of his account will be payable to another person -the p. also there is an aggregation of your estate when you die.-advantages: offers far greater privacy and less public scrutiny than does corporate law. so why would you want to make a gift since it may push you into a higher bracket? 1. Power of Attorney -An authorization to give someone else the power to act on your behalf and bind you. P. avoids probate -costs: cannot suit unique needs of clients 11. creditors can reach the property before y -since x retains so much power. GRAT 5. very simple to create -costs: cannot suit unique needs of clients 12. -most states now permit the creation of a durable power of attorney: power survives the incompetency (doesn¶t change death rule) -agent is held to a fiduciary standard. carry over basis (done has same basis as donor) . so gift will be free and clear of gift and estate tax 2. (payable on death) -A person opens a security account and states that on his death. the death or incompetency of a principle revoked the power of attorney. Why do people want to make irrevocable intervivos gifts? -gift tax and estate tax rates are the same. 4.d. -the growth in value of the gift received by the donee will be received free and clear of an estate tax or a gift tax. does not need to be a lawyer -under the common law.o. the income is attributable to x for income tax and estate tax purposes -y will only be entitled to the money in the account if y survives x -y has no rights to the account while x is living -benefits: simple to draft. -convenient way for a person to convey benefits to his family by giving them minority membership interests (gift tax will be low as a minority interest is worth less) 10. account is treated. unlimited educational and medical deduction (must pay directly) 3. any asset a donor gifts to another person that then appreciates in value will not be subject to a transfer tax. Totten Trust -a totten trust is a trust formed when a grantor deposits his or her own funds in a bank account in trust for a beneficiary -the trust is revocable -if x dies in debt.O. for all practical purposes like a totten trust -benefits: avoids statute of wills. agent's authority terminates when the principle dies D.

not without a delivery 1st. 1/2 will go to the husband's estate. the property of each person shall be distributed as if that person had survived (died later) -where a testamentary disposition of property depends upon the time of death of two or more beneficiaries designated to take alternatively by right of survivorship (ex: will has two beneficiaries. whoever lives longer. even if the donee doesn¶t know about the gift. by operation of law this will revoke the gift. redelivers the gift.16 EPTL: when the disposition of property depends on the disposition of death. there must be: -donative intent -delivery -acceptance (a donee has ability to disclaim or renounce gift) 2 types of gifts: Irrevocable intervivos gifts and causa mortis (revocable) -a gift causa mortis will be includable in estate for estate tax because its revocable. -The above statute does not deal with a gift causa mortis. Could donor make deed of gift? Yes. Transfer of legal title vs. this presumption can be overcome). equitable title: Ex: Father orally says I declare myself as trustee of these two horses for the benefit of my minor son x. (but NY statute says you can¶t do this orally) Ex: signs a press release stating she is gifting the library to HU (books remain). an irrevocable intervivos will not (though its subject to gift tax-same rate) Purpose of the delivery requirement: -want to impress upon the donor significance of what he¶s doing (ritualistic) -delivery also provides evidence of donative intent because he now has possession -sets up a procedure for a donor to follow Could a donor constitute himself as a bailee for a donee? No. the gift will be revoked -simultaneous death? NY 2-1.SUBSTANTIVE LAW OF GIFTS in order for a gift to be valid. then dies -press release was viewed as a deed of gift. If a gift is delivered. -unlike a will. then both die together). acceptance is presumed (however. the surviving beneficiary will take. gifts causa mortis do not necessarily fit into any of the above categories (perhaps we apply the policy of the statute-but difficult to say) . it was viewed as constructive/symbolic delivery and delivery was satisfied Gift causa mortis: -if a donor recovers from the illness that prompted the gift. if the donee of the gift causa mortis after receiving the gift. title passes to the donee immediately upon delivery -the donor may always revoke a gift causa mortis before his death -general rule that if the donor outlives the donee. the property will de divided amongst the parties and sent to each estate -where there is a joint tenancy or tenancy in the entirety with a right of survivorship and there is simultaneous death. but the deed must still be delivered. common law says he will have enforceable property rights. and since there was a delivery of the deed. Well.16 EPTL states that an express manifestation of intention in a will counter to this statute will be honored (you can state what happens in the event of simultaneous death in your will). 1/2 to the wife¶s -insurance policy: proceeds will be distributed as if the beneficiary predeceased the insured -However. the gift is automatically revoked by operation of law -in some jurisdictions. NY 2-1.

Schwartz said should use objective standard. -you can also give gift to your agent to give to someone (??). the donee gets possession and control -Constructive delivery: delivery to the donee of the means of obtaining possession and control -however. Personal Property Future Interest -generally you can create a future interest in personal property (Exception: can¶t create fee tail in personal prop) . Most cases hold that fears of death from an external source (war. therefore. not by way of a substitute of a symbolic delivery of a deed of gift. other side would want to argue we want to honor the grantor¶s intent Ex: X honestly believes that any time he sits down in the dentist chair he may die. (can argue that¶s evidence of lack of donative intent) -also conflict of authority on whether delivery of a map counts as constructive delivery (note for constructive or symbolic delivery there still needs to be delivery of the symbol) -under most state laws. -you can also deliver gift to the agent of someone -can you be an agent without knowing you¶re one? Authority split. then returning something back to the donor will likely be held to be bailment) What if x does not die of the precipitating peril or illness that caused X to make the gift. donor¶s state of minds as to who is his agent relevant) ((Note: what property conveyed under a will? Neither a present nor future interest. -if irrevocable intervivos. then all that is needed is the donative intent (don¶t need a re-delivery). What is the effect of a donor of a gift causa mortis stating in his will that he hereby revokes the gift he made to y and would instead like to give to z? such a statement in a will. being shot. if you want to effectuate a gift causa mortis. ect. merely an expectancy) -when dealing with gifts causa mortis perhaps we relax the agency delivery requirement since the gifts are revocable anyways Some states hold you cannot effectuate a gift causa mortis by symbolic delivery because it violates all of the policy of the statute of wills. if the deed is recorded. if an actual delivery is feasible then an actual delivery will be required (why? Ritualistic function) -what if donor had duplicate key that he held onto? Authority split. there is a conclusive presumption that the deed was delivered from the grantor to the grantee -If the donee is already in possession of the gift. you must do it by a delivery of the subject matter of the gift. Delivery Element: -Normal standard: actual delivery of the gift. He gives friend ring but then asks for it back.) are not legitimate to support causa mortis gifts. but dies of some other cause of death? authority is divided. will not revoke the gift. Authority is divided. but some cases apply subjective.(Not every deathbed gift is necessarily a gift causa mortis²could meet the irrevocable intervivos requirements (depending on intent of the donor).

not supported by any consideration). a check is accordingly just a promise to pay (a gratuitous promise. he cannot get the ring back. does not operate as the assignment of funds in the bank to the donee. -many courts have interpreted the UCC to mean that a check does not operate as an assignment of funds (effects the donor/donee relationship). Effect of the gift of a check: -authority split -UCC states that a check. by itself. It depends on who was at fault in causing the marriage not to occur. -Ex: suicide with checks written: well. minority/dissent rejects it (Schwartz says it should be a gift) Engagement ring -at common law. there is a preliminary question of whether suicide is a threat from some internal bodily malady? would have to view the internal processes of the mind as being some internal malady. majority opinion in smith upholds it. you may be able to sue for the ring or the value thereof under an unjust enrichment theory) . as well as 1/3 of testamentary substitutes (substitutes to a will. revocable trust. but would such a gift causa mortis be in violation of public policy? split of authority between cases. with no present transfer taking place by way of an assignment.-you cannot create future interest in a consumable -it is possible to have a gift intervivos of personal property in which the donor retains possession and enjoyment for the balance of his lifetime and the donee is given a future interest and it does not violate the statute of wills (but delivery/donative intent will still need to be satisfied) -the owner of a future interest has enforceable rights NY Elective Share: NY Elective Share: if a surviving spouse is not happy with the provisions made for the spouse in the decedents will. If G is at fault or the break is mutual B can get the ring back. -Many states have passed statutes that abolish actions for breach of promise for engagement (however. intervivos future interest gift). If B is at fault. if this is a gift causa mortis. the spouse can waive the will and get 1/3 of the assets owned by the decedent at death outright (within the decedent's probate assets).

-The BFP who innocently purchases and later sells stolen goods is liable in trover for the full market value of the goods as of the date of conversion. (no jurisdiction has adopted this in the US) 2. legally regulated public market. At common law. (nemo dat qui non habet) (Note:-in NY. business and free trade 3. Market Overt -In an open. or that he has the authority to sell them. Estoppel (Possession Plus) -If an owner. the owner is estopped from denying the truth of these representations to a BFP who buys in good faith reliance on the representation -does silence constitute representation that could be considered estoppel? Authority split -Ex: BFP comes in and store wrongfully sells him O¶s watch. sales in bulk. has expressly or impliedly represented that the possessor (bailee/business partner. -not speaking of a BFP but of a ³buyer In the ordinary course of business´²good faith. General Rule -As a general rule. Consequently. burden would be on t he BFP here and leans toward the O recovering.) of the goods is the owner of them. UCC expands doctrine -a purchaser who buys goods in the ordinary course of business from a merchant to whom the goods who have been entrusted (that is in the business of selling those goods) will be protected. a seller of personal property can¶t convey a better title than that which he holds. the bfp under the common law becomes a converter as of the day he purchased the goods. stock) will prevail over the true owner. under the UCC the BFP would actually prevail. Sale of Money or Negotiable Instruments -A BFP who buys money or negotiable instruments (check. BFP might have recovered.) --A BFP is under a pre-existing duty to return all items -Ex: BFP insures car.BONA FIDE PURCHASERS OF PERSONAL PROPERTY A. by his words or conduct. However. etc. Exceptions (to nemo dat qui non habet) 1. Bonafide-ness -some cases and UCC use subjective standard (what they actually knew. There is clause that states insured party has to be the sole and unconditional owner of the car. -promotes commerce. buyers can acquire good title to products regardless of any defects in the seller's title. barrer bond. in contrast. needs to be a demand and refusal for conversion) C. a bfp will become a converter from date there is a demand/refusal. even if negligent) -other cases use an objective standard (whether BFP exercised due care and diligence) B. -The majority holds that a BFP is a converter on the day he purchases the goods (in NY. and there must be valid consideration (and not just the cancellation of a pre-existing debt) . buyer must be without knowledge that the sale to him is in violation of the ownership rights of a 3rd party (subjective standard) -exception: sale from pawnbroker. the insurance company is not liable for the damages. If not for the clause.

we leave title where it is ± with BFP.) -UCC continues: When the goods have been delivered under a transaction of purchase the purchaser has such power even though (a) the transferor was deceived as to the identity of the purchaser. vi.person to person) à BFP (BFP will prevail b/c voidable title. BFP will get legal title) Oà Fà P (purchaser but has reason to believe fraud has been perpetrated) under these circumstances he can¶t qualify under exception 5 and the general rule is that a river cannot rise above its source. a purchaser. -the BFP will cut off O¶s remedies. if the donee relied on the gift and had a change of position. Factor¶s acts-Authorized Agent/Entrustment -A factor is an agent a person has authorized to sell his goods iii. and unless rescinded. Donor did not pay anything. iv. A BFP will prevail but not a BFD.UCC: 2-403(1): a person with voidable title. He is not out of pocket. -In a trust arrangement. Illustrations: i. -P will be protected. O is going to prevail even against the BFD) (perhaps under unjust enrichment or equitable principles. Say the trustee wrongfully sells the paintings to a BFP-the equities are in balance. the trustee has the legal title in paintings. Since BFP and O¶s equities are in balance. b/c we want the BFP¶s title to be worth something. There is no reason to protect BFD b/c it was a -gift and not out of pocket. and the BFP will prevail. while the beneficiaries have equitable title. and the BFP will prevail. most courts have adopted a subjective standard. has the power to transfer a good title to a good faith purchaser for fair value (reflects phelps so far. What result? -The BFP of the legal title will cut off all equities. -General intent vs. Oà Fà BFD (O would prevail because b/c we don¶t have a BFP.fraudulent participant gets title b/c what would the title be worth?) OàFà BFP à F (F cannot have a washed sale curing from his defect. BFP of Legal Title Chops Off All Equities a) The BFP of legal title will chop off equitable title. In the area of real estate. so the title is left where it is. Oà F (fraud. -O prevails b/c there is no balance of equity. non. v. -we draw the line here at the frauder getting it back (this is not allowed) Courts are divided as to whether bonafideness is an objective or a subjective standard. . under those circumstances he may have a better claim) OàFà BFD à BFP (BFP will prevail) Oà Fà BFPà P à D (BFP owns the property outright so a regular. who knows of the original fraud.in the BFP.4. ii. specific intent will come up here again . or sheltered by the BFP. (If BFD expended a tremendous amount of money in reliance upon the gift he might prevail) -Ex: BFP turns around and sells to P. So this may be an exception to an exception) F cannot be sheltered 5.

then P is not really a purchaser. and the purchaser fails to record. -Courts will draw a distinction between willful conscious wrongdoers and innocent wrongdoers. and a BFP may still prevail. What if fluctuations in value are not due to wrongdoer but b/c of the market? -Damages will depend on the jurisdiction (written on p. A BFP will not be held liable under one of the exceptions. legal title will pass to the BFP. -If BFP offers to give O the goods back. and it raises the question of whether P can be bonafide. D.-Courts hold that where an agent is entrusted with merchandise and is cloaked with the authority to sell. and O accepts them. Recording Exception -If there is a recording requirement with respect to a transaction. 48) 5. 6. The BFP is liable for the full market value of the goods at the time and place of conversion. -if consideration is grossly inadequate. Majority view: BFP cannot force O to take the goods back. the court may take equitable considerations into account when there is no wrongdoer and allow a lesser recovery 4. -when BFP buys goods he¶s a converter-in possession but no title -Some courts say that to some extent the title may relate back to the day the BFP bought the goods . the BFP will be protected. Judicial Sale in Rem -A BFP who buys at a judicial sale in rem MAY prevail over the true owner.a BFP at a judicial sale in personam will not prevail 7. O can refuse to accept the goods and insist that BFP pay by satisfying a judgment for trover or conversion. even though the agent violates the instructions of the sale. 3. however. Damages only arise under the general rule (nemo dat) and the BFP is liable. 6. but a donee. The general rule is that the BFP will be liable in trover for conversion. -however . the purchaser can pass on a better title than he has. O can force BFP to pay fair market value. -If BFP offers to give O the goods back. When the BFP satisfies the judgment. his damages will be limited to nominal damages (the difference in value). O will still have a cause of action for conversion. Damages & Remedies 1. 2. (discourage thieves since they¶ll know the BFP can then sue them for breach of warranty for this larger amount) --however.

constructive or inquiry notice. or look at the physical condition of the property . even if not bona fide -example of race statute p. the purchaser is deemed to have notice of the unrecorded claim.Some jurisdictions say that if you know someone is in possession of land that you are about to buy. 57 c) race statute: take an objective approach. As between the grantor and grantee. he will not gain the protection of the recording act in a notice or race notice jurisdiction. although the BFP must record to protect his interest against later subsequent purchasers.Once O executes the deed. As between O and A. then you have a duty to make a reasonable inquiry. O is left with nothing. title passes upon the delivery of the deed. only look at who recorded first.THE RECORDING SYSTEM A. --Ex: original owner selling bridge twice might have power to convey better title than he has because of the recording requirements of the jurisdiction Basic Types of Jurisdictions: a) notice statute: grantee number 2 will be protected if he is 1) a subsequent BFP without notice of the prior unrecorded rights of a prior unrecorded deed by grantee number one. Actual Notice -If a subsequent purchaser is shown to have actual notice of the existence of the prior unrecorded interest. possession may not always charge a diligent purchaser with notice -law requires that a person make a reasonable physical inspection of property before taking an interest in it and to make reasonable inquiries about ownership that such an inspection would trigger. 2. as between two grantees from the same grantor. provided 1) he is a subsequent bona fide purchaser without notice of the prior unrecorded deed 2) he must record his deed before grantee one records his deed. -However. 3. . -reasonable person might check out who is in possession of the property. In General 1.The subsequent BFP is not required to record to prevail against prior unrecorded claimants. Inquiry Notice -When the purchaser hears or observes something that would cause an ordinarily prudent person to inquire further and that investigation would have revealed some unrecorded interest in the property. The general rule that you can¶t give more than you has less importance in the area of real estate. 57 B. title will pass from the grantor to the grantee -example of notice statute p. 57 b) race notice statute: grantee number two is protected and given priority over grantee number one. he who records first prevails.Courts define notice in a race-notice state as actual. . . because of recording requirements. even though grantee number 2 has not yet recorded. What Constitutes Notice 1. -example of race notice statute p. . what constitutes adequate notice will vary by jurisdiction 2.

it is sufficient to go back 60-70 years in the index. Mechanics of Recording 1. when someone takes under a will. that is not recorded in the index. Tract-Index (more modern) -shows all transactions in connection with a particular tract of land D. . and b) it protects new buyers by allowing them to qualify for bona fide purchaser protection after careful title searching reveals no prior interests . Functions of the Recording System -determine a priority of rights -informational -assures title p. courts often favor maintaining the integrity of the system over seeking equity and justice in any individual case E. who prevails over B.) 2. (Typically. Purposes and Policy Considerations of Recording 2 basic purposes: a) it protects existing owners from losing their property to later purchasers by providing constructive notice.4.prospective purchaser is deemed to have constructive notice of all recorded documents regarding the property . C.for the recording system to work. all people in the world are deemed to have record notice of its terms. to the extent we can do so.It is not enough to just see if O got it from someone. try to give party its justifiable expectancy. though a living intervivos instruments are recorded. who prevails over C. loss . Grantor-Grantee Index . When it is not possible to give each party his full expectancy. there are different approaches as to what to do: 1-divide assets proportionally 2-allocate it on basis of who was first in time 3-allocate it based on sequence of recordation 4-in any given situation. you must be sure the person O got it from also had valid title. The Problem of Circular Lien: -these statutes are in effect for mortgages as well -problem occurs in notice and race notice jurisdictions where C prevails over A. 58-61 of outline: Recording Hypos H. Constructive or Record Notice -refers to knowledge or notice a purchaser could gain by searching the deed records -if document is properly recorded in the chain of title of property.Every deed that is recorded is indexed under both the grantor index and the grantee index (separate volumes of recording) -Problem: not everything is recorded in the grantor-grantee index.

Hughes) (note: an oral authorization of agency may be sufficient when appointing someone as your agent to fill in your deed to real estate) -filling in a deed makes you a purchaser. it may have be unreasonable for B to rely on the deed to his detriment. and then he does get title.A deed recorded outside the chain of title does not constitute constructive or record notice even though it is physically recorded (p. the title passes immediately to A upon his receipt of title. Approach One: a filed. The grantor.A few jurisdictions hold that the existence of a quitclaim deed anywhere in the chain of title puts the purchaser on inquiry notice as to the possible inadequacy of the title held by the grantor under that quitclaim deed (conflict of authority p. if not. O. If A had conveyed a quit claim deed or a special warranty deed. Approach Two: proper indexing is required for recording.should fall on the party most responsible for causing the problem (note: you do not ordinarily have a duty to help someone out who does not record) (also note: legal duty not to produce a chilling effect on the sale) I. and A might not be estopped. -a full warranty/general warranty deed: expressly guarantees the grantor¶s good clear title. (approach one: ryczkowski/majority/Schwartz preferred). the doctrine is not binding against a subsequent BFP. free of all defects not mentioned in the deed -quit claim deed: conveys a grantor¶s complete interest or claim in certain real property but that neither warrants nor professes that the title is valid (If I own it. otherwise how else would a subsequent purchaser get notice of the prior deed (so must be indexed under proper name) . it¶s yours. Proper Recordation (When is a deed deemed to be properly recorded to afford constructive or record notice?) 1. The Problem of Estoppel by Deed -estoppel by deed: where O makes a conveyance of property to A before he has obtained title. .the recording of a deed gives record notice to a subsequent searcher only if that searcher would have found the document . (court is saying that deeds that are recorded before that person had title do not provide actual or constructive notice to subsequent purchasers) . is estopped from denying the validity of his earlier deed (though it usually needs to be warranted). but not recorded deed may accord constructive notice 2. this is separate from actually recording J. 68) -special warranty deed: grantor warrants only against defects that the grantor created or that came after he was the owner 2 Approaches to estoppel by deed and when to start your search: 1) while the estoppel by deed doctrine applies as between the original grantor and grantee. 65 read a little ???) (Board of Ed v. -duty to search: you should only logically have to search the grantor index book from the date the grantee index volume showed grantor as having acquired title. tough noogies). because there was not a complete warranty.

-however. owner has outright ownership and there are no restrictions on the use of the property) -Rule: a subsequent BFP without actual or constructive notice of a covenant that runs with the land will take free and clear title. it will be enforceable against a subsequent purchaser even though he was not party to the original contract (exchange of covenants). The searcher does not need to check out O until the present day.a jurisdiction may imply a reciprocal covenant on the part of the grantor when it finds there has been a uniform scheme of restriction having been imposed 3) Covenants Running with the Land . (extends to implied covenants as well) b. he may impose covenants or restrictions on purchasers to ensure that the development will follow a given scheme. he can stop checking the grantor index.If a covenant touches upon and concerns the land (restricts the use that can be made of the property) and there is an intention that it runs with the land (the original parties must have intended for the covenant to run with the land). Deeds Out from a Common Grantor . (approach two: minority/holmes/ayer approach) -(O¶s bankruptcy does not prevent estoppel by deed) Determining When to Stop Your Search 1) Approach One: once a title searcher finds a deed from the prior owner to someone in the chain of title.When a developer owns a development. (Morse case) -this discourages diligent title searching 2) Approach Two: you must check out each prior owner until the present day K. -there can be express covenants that touch upon the land and was intended by the parties to run with a transfer of the land 2) Implied Covenant (Implied Reciprocal Negative Covenant) . Approach 2: Sanborn v.2) you need to check out each prior owner from the time he was born to see if he made a conveyance out. a subsequent purchaser may be bound only if he has constructive or record notice of the restriction: a. There are three ways that a covenant or restriction may be imposed on subsequent deeds. Approach 1: Buffalo Academy (sidenote: every purchase and sales agreement has an implied obligation on the part of the seller. He can stop as soon as his chain of title is complete. 1) Express Covenants . that the seller at the time of closing will have a marketable title (title free from any encumbrances. McLean Rule: a subsequent purchaser of a lot has a duty to check out all of the deeds out from a common grantor in a chain of title (all of the deeds conveyed by O in the lot) for express or implied warranties.expressly created by the terminology in the deed. . depending on the jurisdiction.

C was held to have constructive notice (this places a cloud over the title to the property) .´ the adverse possessor will prevail M. -Approach 2: if the subsequent purchaser does not have ACTUAL notice. nor findable the deed from O to X (from the deeds the grantor conveyed out). Duty to Make Inquiry Outside Registry of Deeds Impact of Possession on Property: -Does B. -so you should visit/see the possession of the land. The Problem of Indefinite Reference -An indefinite reference is a reference in a recorded instrument to some unrecorded right or interest of another party. they are not subject to the recording requirements. the easement may still be implied by operation of law. a) easements can be express and arise by explicit grant b) easements can also arise by a matter of strict necessity c) easements can also be implied -required elements for easement by implication: -to at one point have common ownership of the entire land in 1 person -one portion had to have been used for the benefit of the other portion -such use must have been apparent -such use must have been reasonably necessary to fully enjoy the other portion -so even though the easement is not in your chain of title. the subsequent purchaser. who has no record or constructive notice.Many states today have passed statutes that say an indefinite reference does not constitute constructive or record notice.-also held that a purchaser may have actual notice if he visits/checks out the possession of the property and sees that there is apparently a uniform scheme of restriction (should have made reasonable inquiry) L.adverse possessor is not subject to the recording laws -in a priority dispute between an adverse possessor and a subsequent BFP of land conveyed after the adverse possessor has ³title. As long as you are in good faith and subjectively believe the facts to be.since easements arise by operation of law. Easements. N. Adverse Possession. have any duty to check out the possession of the property? The authority is divided. you are not chargeable and you may take free and clear . -Approach 1: the subsequent purchaser is held to have notice of any facts that would have been revealed by a reasonable inquiry relating to someone else being in possession. Unrecorded Interests 1. an indefinite reference will not prevent a title from being marketable. both an easement by necessity and an easement by implication are likely to place the subsequent purchaser on notice 2. he will not have notice. -a court concluded that since there was a reference in the recorded in the option to the lease.

real property law doesn¶t have to follow UCC so have to look at the circumstances (p. and B only pays O $1. then you have a duty to make an inquiry and are held to know what a reasonable inquiry would have revealed -Exception: when the possession is consistent with the record title. however.-Approach 3: if you actually know that someone else is in possession of the property. for example. A donee should be protected only if there is detriment. 2. Creditor: depends on jx. Donee: A BFD does not prevail in the area of personal property or real property. Parties Protected by the Recording Laws 1. B will get protection of the recording laws -pre-existing debt: under UCC it is valuable consideration. Purchaser for Value: grantee receives the benefit of the recording act only if he gives value for his interest. a subsequent purchaser may not have a duty to inquire O. Consideration Required: Unless the consideration is grossly inadequate. -subsequent purchaser might be able to cover a mortgagor but probably not a creditor -some jx will protect the judgment of a creditor 3. 83) . if property is worth 1 million. 5. Tenant: common law had the rule that says buyers beware²basically the common law enunciated a rule that when you lease premises you are in essence a purchaser -however: subsequent tenant who has no notice of the prior unrecorded deed should be protected 4.

brothers. O will have a right of entry -to A and his heirs but if bananas are consumed upon the premises O and his heirs may re-enter and retake -so here there is only a right to retake. 2 Types: Freehold estates and Non-Freehold estates Freehold Estate . degree. if they win it would spring from O to A ii. iii. sisters. Fee Simple Absolute: largest kind of freehold estate. seisin is in O. children. grandchildren. from and after the time the Red Sox win the pennant. title reverts back to the grantor -to A and his heirs so long as bananas are not consumed on premises (O has inheritable future interest known as possibility of reverter) Fee Simple with a Right of Entry: a grantor conveys title to the grantee. will potentially last forever -O to A and his heirs Fee Simple Determinable: grantor conveys title to the grantee but is subject to a condition.ESTATES IN LAND An estate is the amount. but it is subject to a condition. . until sox win. which if occurs. iv. legal title doesn t automatically pass back to O like in fee simple determinable (there may be practical differences in waiver. Size of an Estate: common law measures estates with respect to size in terms of potential duration (how long an interest can possibly last) b.84-5) Fee Simple subject to an Executory interest a) Shifting executory interest: to A and his heirs. nature and quality of a person¶s interest in land or other property and is the type of right or title that a person has in land or real property.) and or collateral relatives (cousins. B would have a shifting executory interest and A would have fee simple subject to a shifting executor interest b) Springing Executory Interest: to A and his heirs. which if occurs. Fee Simple: the largest estate at common law. adverse possession. but if the Red Sox win then it goes to B and his heirs. etc. you have a title that may potentially last forever i. conveyances to 3rd parties (p. etc). the owner is in possession of the property under a claim of freehold -seisin must be in someone at all times a.estate in which the owner of the estate has seisin. the estate will last as long as a person was lineal (direct descendents.

2 types: -life estates created by operation of law (ex: dower) -conventional life estates created by agreement of the parties . if the person dies without any descendants . Fee Tail Estate: 2nd largest estate. Life Estate: 3rd largest type of freehold estate. normally not inheritable.c.to A and the heirs of his body ( heirs of his body are words of limitation) -O will have retained a future interest known as a reversion (if he got it back through reversion he would again have a fee simple absolute) d. property interest is inheritable by lineal descendants. the property would go back to the person who made the conveyance . but not be collateral relatives.