February 2, 1999

Summary of last class:

• when you look at past cases there are clear inconsistencies:

1. guarantees before closing are not the same as guarantees after the closing; definition of word encumbrance is different before the closing than after the closing
2. zoning code is not the same as building codes
3. jurisdictions are split

• all three of these statements are true
• court does not tell us which one is the explanation
• on exam pay attention to what is the question; first issue is what is the better rule if we are in a jurisdiction where there is no law. second question is what is the facts?
• Check web site for lots of old exams on this issue
• Check Lomeyer case and Frinberger case
• How to identify zoning versus building codes? Will do this at the end of the semester
• Marketability
• Rule that insurance never covers anything is the one to remember

Empty lot, developer wants to develop it. What does developer need to do in order to build something new? THIS is the EXAM question

• very typical property case
• this is an issue that the courts rarely address
• indecipherable

Facts of the case:

• Doffing sells property to Rockafeller with a general warratee deed subject to a mortgage
• Gray forecloses to Connelly
• Connelly then sells the deed to Dixon reciting consideration of $4,000
• Dixon then sells to Hansen and Gregerson reciting consideration of $7,000

Issue in this case:

• Rockafeller gets foreclosure set aside
• Special Warrantee Deed – guarantee against defects created by title holder
• Should court follow American view of seizin or follow English view (that seizin runs with the land)?
• Have a violation of the covenant of seizin
• Issue 1: is whether or not the covenant of seizin runs with the land in this state?

Discussion:

• Dixon and H&G never had title to the land
• Breach occurs when Connelly tries to deliver title to Dixon
• Assignment in contracts – assignability of a chose in action (transferability of the right to sue) – in common law this was not transferable; common law new – can assign rights for collection (like credit cards)
• Market value at the time is irrelevant – what mattes is the amount of consideration at the time of transfer to Dixon.
• What about the fact that there is no consideration actually paid? Court says that this is okay because they don’t want to allow contradiction of the written terms
• Why is there no lawsuit for breach of future covenants?
• Because there was no breach of quiet enjoyment – no possession of the land so there can be no interference
• Unlike the covenant of seizin (the right to sue for a chose in actoin), future covenants run with the land; in this case there are a bunch of parties who don’t have title, so it is not clear who has the future covenant – the future covenant does not apply here because there is nothing to attach to.
• Only issue presented in this case is present covenant

Questions page 620:

By general warrantee deed A conveys Blackacre to B for $20,000. B conveys Blackacre to C for $15,000. O, the true owner, ousts C. The jurisdiction holds that present covenants are breached, if at all, when made, and the chose in action (right to sue) is not assigned to subsequent grantees.

1. the deed from b to c is a quitclaim deed. How much, if anything, can B recover from A? answer: B can argue that the $5,000 loss he had to sell it at was because of A. So B can recover $5,000 (difference between purchase and sale price).
2. The deed from B to C is a general warranty deed. C has not sued B nor settled with him. How much, if anything can B recover from A? answer: depends on what the difference is reflecting (defect in title or difference in purchase/sale price)
3. The deed from B to C is a general warranty deed. C sues B and recovers $15,000. How much, if anything can B recover from A? answer:
4. Would your answers be different if the jurisdiction follows the view of Rockafellor v. Gray? answer:

A (20,000) à B, B (15,000) à C, O ousts C.

Assume A, B, C were actually in possession and that C was ousted.

Covenant of quiet enjoyment runs with the land – involves interference with use or possession

General warrantee – means loss in a lawsuit

General warrantee deed - warrants title against all defects in title

Problem 3:

General warranty deed A conveys Whiteacre to B for $15,000. By quitclaim deed B conveys whiteacre to c for 12,000. By general warranty deed c conveys whiteacre to D for $20,000. O the true owner, ousts D at a time that the land is worth $24,000. Advise D and C as to how much the can recover on the warranties.

C can sue D on present covenance AND future covenance.

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February 4, 1999

Sweeney v. Sweeney p.622

Intestate – dies without a will

Jurisdictions are split three ways:

1. invalid deed
2. deed valid à no right to revoke
3. modern trend: valid right to revoke

Most courts say it is valid as long as in writing

Title validly transferred?? Main issue in Sweeney case.

Study study study study study more.

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February 9, 1999

Review of Luthi v. Evans

What is legally binding? Index or full record?

It is the full deed that gives notice.

Actual notice –

Constructive notice – if record is sufficient to give notice

Mother hubbard clause: a deed or other instrument in writing which is intended to convey an interest in real estate and which describes the property to be conveyed as "all of the grantor’s property in a certain county"

Recording acts provide lots of protection. Mother Hubbard clause must be detailed. Burris is not on constructive notice because deed was not detailed enough.

The search was reasonable, but even if he know the M. Hubbard clause existed, figuring out what it referred to was too hard.

Wild deed – a deed that is outside the chain of title

RULE: CA says something is not properly recorded if it is not properly indexed. Kansas says opposite.

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February 11, 1999

Review of problems on page 275

Question 2:

What would happen with a race statute:

Constructive notice – notice that is available from the record

Actual notice – notice that was given orally, or otherwise to the other person

Race-notice statute – like in CA

Good faith means without notice

Board of Education v. Hughes review

Facts:

O à A – a does not record

A à B – who records A à B deed

O à C (good faith valuable consideration)

C records

Under a race-notice statute

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February 18, 1999

Board of Education v. Hughes

Need to record within the chain of title, or else it does not count.

O à a

O à b

B à c

What matters is who wins the race.

Now what would happen if this were a notice jurisdiction?

Read Guillette v. Dry Wall before the final!! PAGE 688

Courts are split over whether a buyer has to search the records of all properties surrounding their property, or whether the grantor has to record within the chain of title to that particular lot.

Jacula à D (with D having right of first refusal for the contiguous parcel should J decide to sell it)

Later:

J à Z of the contiguous parcel – D was not given his chance to exercise his right of first refusal. But D’s wife told Z about the right of first refusal at the time of the sale between J and Z.

• Z was on notice and is therefore not a bona fide purchaser

HOLD:

Shipley à Lewis ($2.3 mil)

After escrow opened, but a few days before title closed Fontana Films recorded a notice of a lawsuit affecting title to the property against S. Recorded on Feb. 24, but not indexed until Feb. 29 (the day AFTER the L acquired title).

L paid $350,000 on Feb 25.

Closing took place on Feb 28 and a note was given for $1,950,000 which was paid a year later.

• Within the next year they spent a lot of money renovating the property
• In Sept 1993, L was served with the lawsuit from Fontana and learned about this
• L brought suit for summary judgement to remove the lawsuit and clear their title
• ISSUE: are the Lewis’s bona fide purchasers?

HOLD: The lis pendens was not properly recorded until it was indexed, which occurred after it passed title. But they were not bona fide purchasers because they did not fully pay for property until after indexing – THIS is the old Davis rule.

Court distinguishes this case from Davis, because this case involves only constructive notice

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February 23, 1999

Statute of frauds question

Constructive notice – review of terminology

1. actual notice – person actually knows
2. constructive notice – person should know – legally charged with duty to inquire

1. record notice
2. inquiry notice

1. inquiry notice

Review of Harper v. Paradise

Diligent inquiry – how far does one have to go when searching title?

If you have a party in possession with valid reason to be there, you are charged with finding out why they are there. (such as if there are people there on an adverse possession claim – would not show up in the record)

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February 25, 1999

Title insurance!!

Read the title company language on handout – useful to be familiar with the language as it will be the same language that is used on the exam

Coverage exceptions and exclusions

• usually, long, specific, language is construed against the drafter
• for our purposes, does not matter, the distinction between exceptions and exclusions

description of coverage:

• title
• defect (encumbrance)
• lack of right of access
• marketability of title

title report will show types of things that are found when record is searched

• will show encumbrances
• constitutes an offer to issue a policy which will exclude this stuff
• title insurance companies want to make clear that these will not be covered

If on the record, insurance company will put it in schedule B. Stuff off the record is also excluded.

Negligent search – failure to disclose

Jurisdictions – split

CA: no

Voluntary agreement …

Title insurance agent conducts the closing

Insurance company:

1. issue policy
2. conduct title search
3. supervises close of escrow – involves making sure all the documents are lined up, and calculating the amount of sale price based on amount of escrow. Has to be material to the transaction