ESTATES GENERALLY Estate – an interest in property that is OR may become possessory A life estate IS an estate b/c it is possessory present possessory estate (“PPE”) A reversion IS an estate b/c it may become possessory (NOT possessory at the moment, BUT right to possess in future) future possessory interest (“FPI”) An easement is NOT an estate (never possessory) PPEs 2 categories… Non-Freehold (i.e. landlord-tenant) Freehold 2 types… Life Estate Fee (at least potentially infinite) 3 types… Fee Simple Absolute (will go on forever) Fee Tail (will go on until family ends) Fee Simple Defeasible (can be prematurely cut short) 3 types… Fee Simple Determinable (“FSD”) Fee Simple Subject to Condition Subsequent (“FSSCS”) Fee Simple Subject to Executory Interest (“FSSEI”) FPIs 2 categories… Retained by Transferor (something kept back) 3 types… Possibility of Reverter (“PR”) (follows FSD) Power of Termination (“PT”) (follows FSSCS) Reversion Created in Transferee Executory Interest (“EI”) (follows FSSEI) Remainder FEE SIMPLE ABSOLUTE Language to create FSA… At common law “O to A and her heirs and assigns” (ONLY way to create FSA, NO substitutions) “and her heirs” are words of inheritance (making it clear that estate will last longer than A’s lifetime) “and assigns” are words of alienability (making it clear that estate is transferable) At modern law “O to A” (AND various other possibilities)
Presumption of conveying maximum estate possible (words of inheritance/ alienability NOT necessary) If “O to A forever”, “A” is a word of purchase (describing who is taking)… … AND, “forever” is a word of limitation (describing what is taken) Ambiguities interpreted in favor of grantee (A), NOT grantor (O) Transfer of FSA… Inter vivos (in lifetime) In death 2 types… In will (to will beneficiary/ies) In testate (to prospective heir(s), NOT covered by valid will) If A dies w/ NO heirs, title passes to govt. via escheat (FSA does NOT end) Encumbrance – a non-possessory interest in property that affects title in property O, as holder of FSA, could grant out an easement, AND a creditor could have a lien against O’s property… … BUT, categorically speaking, O still holds 100% of FSA (encumbrances do NOT change estate) FEE SIMPLE DEFEASIBLES & RELATED FPIs Of the 3 FPIs that follow a fee simple defeasible, ONLY EI is subject to the Rule Against Perpetuities (“RAP”)… AND, EI is the ONLY FPI following a fee simple defeasible which is created in a transferee… SO, in order to create a FPI in a transferee, BUT avoid RAP implications… O to A w/ either a PR OR PT retained in O… If restriction violated by A, then estate would return to O… … either automatic (PR) OR optional (PT) … then, O could transfer PR/PT to B… Essentially, B has an EI… … BUT, b/c it is technically a PR/PT, RAP has NO effect … although, there IS a jurisdictional split re: transferability of PR/PT/EI Virtually NO state limits transferability of all 3 in death (in will/in testate)…
… BUT, some states do NOT allow transferability of all 3 inter vivos (CA does allow for all 3) ways around having to research state law re: inter vivos transferability… O could transfer FSD/FSSCS to A, then transfer PR/PT to B in will accomplishes same outcome as inter vivos transfer… AND, O would have more control b/c PR/PT retained by O until death O could transfer FSA to B, then B could transfer FSD/FSSCS to A, w/ B retaining PR/PT accomplishes same outcome w/o O having to transfer the PR/PT itself… though, O has less control (NO guarantee that B will transfer to A, B must be trustworthy) As opposed to jurisdictional split at modern law, there is NO inter vivos transferability at common law 2 reasons why… Avoid forfeiture (b/c the law abhors a forfeiture) Avoid restricting use/development/marketability of property (create a speculative market) 2 exceptions to common law rule re: transferability (which some states still follow, though NOT CA)… Merger – transferring FPI to holder of fee simple defeasible (thereby creating FSA) Transfer incidental to reversion – transferring FPI w/ reversion (i.e. O to A for life w/ PR/PT retained in O O could transfer PR/PT AND reversion to B, but NOT one w/o the other) FPIs as remedial devices (remedy for violation of restriction) Generally, 3 purposes that are served by restriction to compel, to prevent, to control Grantor has purpose(s)… … drafts restriction to comply w/ said purpose(s)… … which includes remedial device for if/when restriction is violated Basic remedy is forfeiture… Automatically w/ PR Optionally w/ PT Either/or w/ EI (though, unlike PR/PT, subject to RAP)
Defenses… Legal defense vs. equitable defense Legal defenses (i.e. adverse possession/SoL) can be raised against any restriction… … whereas, in many jurisdictions, equitable defenses can ONLY be raised against certain restrictions Less likely that an equitable defense will “knock out” PR/PT/EI… … esp. in Eastern states, where PR/PT/EI are viewed more so as “estates” than “remedial devices” (as opposed to in more liberal Western states) In some jurisdictions (i.e. CA), defenses can be brought up by grantee – before actually violating restriction – as initial action to quiet title (“knock out” restriction in advance) CCP § 1060 (as noted in Hess) allows grantee (who possesses land subject to restriction) to obtain such declaratory relief (“pre-breach judgment”)… … BUT, some courts do NOT waste time w/ informational judgments (ONLY a “real” dispute)… … thus, grantee would have to violate restriction (AND thereby risk losing title) to determine whether defense is valid Laches vs. estoppel Laches – “equitable SoL” (NO specific time limit, BUT within “reasonable time”) Estoppel – detrimental reliance Do NOT need reliance w/ laches… … BUT, do NOT need long period of time w/ estoppel Changed conditions – purpose of restriction no longer achievable When facts support changed conditions 3 potential outcomes… Restriction is gone Scope of restriction is less narrow (restriction still controls, BUT permissible uses expanded) Estate is gone (“return to sender”) In Bolotin, lot owner wants “residential purposes only”-restriction gone (outcome #1), so as to use property for commercial purposes (appraiser claims lot is economically worthless if restricted to residential purposes)… BUT, purposes are much broader than economic benefits
In Palm Springs, woman transfers land to city for desert wildlife reserve ONLY (FSSEI/EI, LDR as transferee), city takes immediate possession (via court order) to build golf course… … city then brings eminent domain action against LDR (to change FSSEI into FSA), claiming that golf course was consistent w/ desert wildlife reserve (Faus-type argument)… … BUT, b/c restriction was violated, AND violation was reasonably imminent, LDR is compensated (given value of FSA) Applying RAP… EI, which is created in transferee, is subject to RAP, meaning that it may NOT have perpetual duration (NO cut-off point)… … thus, any remedial device other than EI may have perpetual duration… … AND, EIs are exempt from RAP if from charity-to-charity (charitable exception)… but, NOT if charity-to-noncharity OR noncharity-to-charity Recall transferor’s/grantor’s drafting options to avoid RAP retaining PR/PT and subsequently transferring to transferee (inter vivos depending on jurisdiction, in death everywhere) –OR– transfering FSA to transferee to subsequently be transferred elsewhere (w/ PR/PT retained by transferee) When EI is void under RAP (i.e. O conveys FSSEI to A, subsequently-voided EI held by B)… 2 alternative outcomes… If original language conveying EI is optional A holds FSA (w/ NO restriction) If original language conveying EI is automatic A holds FSD, O holds PR 2 underlying theories (expressing same idea in different ways)… Termination of language (automatic language stays, optional language goes)… “O to A so long as [_]… if not, then to B” FSD/PR “O to A on condition that [_]… if not, then to B” FSA Under FSD/PR, possessory estate ends automatically (upon violation of restriction), and since it can’t go to transferee (as per voided EI), it must go to transferor… whereas, under FSSCS/PT, ONLY transferee had option to terminate possessory estate, and subsequently lost said option (as per voided EI) In Walker, W conveys portion of land to RR, reserving portion for self as FSSEI (RR holds EI)…
… thus, purchaser still faces potential litigation from holder of FPI… … BUT, some title insurance policies will cover such a situation (for extra $$) FEE TAIL Original purpose of fee tail, in early England, was primogeniture (perpetuate $$/power by locking land into family)… BUT, abolished in U.S. b/c contrary to basic concepts of property ownership (i.e. free marketability, best use) Fee tail in U.S. is NOT void rather, converted into either… FSA in first grantee Life estate in first grantee w/ FPI in life tenant’s children (“one-generation lock-up”) LIFE ESTATE 2 kinds of life estate… Created by grant “O to A for life” life estate granted to A, O has reversion “O to A for life, then to B” life estate granted to A, B has remainder Created by reservation (“O for life, then to A” life estate reserved in O, A has EI) Life estate pur autre vie is measured by another’s life “O to A for life of B” life estate ends when B dies, NOT when A dies… … rather, when A dies, life estate continues in A’s will beneficiaries OR testate/heirs (until B’s death) Life tenant has obligation to make reasonable repairs, but NOT improvements Volunteer rule – life tenant who makes improvements has NO right to entitlement (“O to A for life, then to B” if A makes improvements, then B gets benefit thereof, A gets learning experience) Exception to volunteer rule… If improvement is required by legal/economic necessity… Legal necessity if city tells life tenant to either make improvement OR vacate premises Economic necessity ?? … AND, improvement is made as by reasonably prudent person (NOT more than necessary)… … then, there will be equitable apportionment of cost b/w life tenant and holder of FPI
VR Subject to Complete Divestment (“VRSCD”) If transferee is NOT existing/ascertained, and/or there is a condition precedent contingent remainder (“CR”) Jurisdictional splits… Whether prior estate must be freehold (required at common law) Transferability of CRs Analytical path… Is FPI at issue a remainder? if NO, then FPI is an EI… if YES… Is remainder in an existing and ascertained transferee, w/ NO condition precedent? if NO (to any of the 3), then a CR… if YES (to all 3)… Is it divestable? if YES, a AVR… if NO… Is it all OR only partially divestable? if the former, then a VRSCD… if the latter, then a VRSPD Condition precedent vs. condition subsequent 3 tests, none of which work consistently (though, 3rd test works most often)… If worded in the affirmative, then likely condition precedent… whereas, if worded in the negative, then like condition subsequent If wording comes before “to B”, then likely condition precedent… whereas, if wording comes after “to B”, then likely condition subsequent Pretend that life estate has ended, BUT life tenant is still alive… can remainderman take possession? if NO, then likely condition precedent (CR)… if YES, then likely condition subsequent (VR) Notable hypos… “O to A for life, then to B for life, then to C” A life estate B AVR (possessory size is life estate) B is existing and ascertained… … AND, NO condition precedent (B outliving A is NOT a condition precedent) C AVR (possessory size if FSA) “O to A for life, then to O” A life estate O reversion NOT a remainder b/c O is the transferor, NOT a transferee… … thus, essentially the same as “O to A for life” “O to O for life, then to A” O life estate
… BUT, unlike above hypo, class does NOT close immediately (rather, class closes upon A’s death, which is first point of distribution)… … thus, B, C and D all have VRSPD, entitling each to 1/3rd of FSA (although, D arguably has EI, since B’s/C’s prior estate does NOT naturally expire) Before A had children, O had reversion, AND A’s children (who did NOT exist) had CR… … BUT, upon A having children, A’s children’s FPI became a VRSPD, and O no longer had reversion “O to A for life, then to B’s children”… at O’s death, B has one child (C)… after A’s death, B has another child (D) As per rule of convenience, class closes upon A’s death (which is first point of distribution)… … thus, C has VRSPD (since B could still have children before A’s death)… … BUT, b/c B does NOT have more children before A’s death, C’s VR does NOT divest, and C entitled to entire FSA (D gets nothing) “O to A for life, then to B, but if B dies without surviving children, then to C” B VRSCD (possessory size is FSSEI) C EI “O to A for life, then to such persons as A appoints, and in default of appointment, to B” A life estate AND power of appointment A has general power of appointment, and thus can appoint anyone (permissible appointees unlimited), including self… … whereas, if A had special power of appointment (i.e. “… to such of A’s children as A appoints”), then permissible appointees limited (control upon A’s discretion) B VRSCD OR VRSPD Default of power of appointment is NOT condition precedent (so, NOT CR)… rather, exercise of power of appointment is condition subsequent (so, VR)… … AND, since A could realistically appoint B, unclear whether B could entire w/ all, part, OR none of FSA
“O to A for life, then to B, on the express condition that if the premises are used for other than single family residence, O has power to terminate and reenter” ambiguous as to when restriction applies... If restriction applies at all times… A life estate defeasible (b/c could be prematurely cut short) B VRSCD (possessory size is FSSCS, which also could be prematurely cut short) O PT If restriction applies ONLY during A’s life estate… A life estate defeasible B VRSCD (possessory size is FSA) If restriction applies ONLY after A’s life estate… A life estate B AVR (possessory size is FSSCS) If restriction applies during A’s life estate, then possible then B’s VR will NOT divest (since A could violate restriction, thereby allowing O to enforce PT)… … BUT, if restriction applies after A’s life estate, then B’s VR will absolutely divest (after which point, B could violate restriction, thereby allowing O to enforce PT) “O to A for life, then to B when B reaches 21” B CR O reversion Pretend life estate ended, BUT A still alive B could NOT move in (unless B were 21)… … thus, condition precedent “O to A for life, then to B, but if B dies under 21, then to C” B VRSCD (possessory size is FSSEI) C EI Pretend life estate ended, BUT A still alive B could move in (though, would lose estate if dead before 21)… … thus, condition subsequent “O to A for life, then to such of A’s children as survive A”… A has one child at the time (C) C has CR (NOT VRSPD)… … b/c, even though C is existing and ascertained, survivorship is condition precedent (C could NOT move in if A were still alive)
Thus, A-H each get 1 share (8), D1 and D2 split T. Charleton’s share (1), and X, Y and Z each get 1 share (3) Majority’s 3 regrets… Henry H., H.H. and Gert Jr. are all long dead X, Y and Z are NOT even blood relatives All transfers along heirs are taxable Dissent determines that FPI is CR divided into 9 shares YES condition precedent interest NOT vested until death of “last surviving child” Thus, A-H each get 1 share (8), and D1 and D2 split T. Charleton’s share (1)… BUT, nothing for X, Y and Z (b/c Henry H., H.H. and Gert Jr. all died before Henry’s “last surviving child”) Bailey… Husband’s will “… to wife [W] for life, then to daughter [D] to take possession after the death of W. In case of D’s death before that time, the land shall pass to son [S].” D gives S quitclaim deed… … then, W dies… … then, D dies, leaving X as heir X’s argument (loser) D and S had alternate CRs… … AND, depending on jurisdiction, D’s CR may NOT have been transferable, thereby making quitclaim deed an ineffective transfer… … thus, D retained CR, which would’ve become vested at W’s death, and passed on to X (as D’s heir)… … BUT, D outliving W is NOT a condition precedent (so, NOT a CR) S’s argument (winner) D had VRSCD, S had EI… thus, D effectively transferred VRSCD to S Kropp… H reserves life estate, FPI ambiguous 2 possible interpretations… “… then to wife [W] if she survives H. If not, then to the Personal Representative of H’s estate [PRE].” alternate CRs “… then to W. If W dies before H, then to PRE.” VRSCD/EI W dies (leaving S as heir) before H Assuming W had alternate CR W did NOT survive H, SO condition precedent did NOT occur… thus, b/c W’s CR did NOT vest, PRE takes estate
WASTE DOCTRINE Waste – an injury of lasting character committed by the holder of a PPE which affects a FPI, OR concurrent interest, OR security interest Injury is NOT necessarily physical or economic, BUT much broader (i.e. change in character of property, boundary lines) Lasting is NOT necessarily permanent, BUT more than temporary Trespass is committed by one w/ NO right to be on property… thus, action against holder of PPE is for waste (NOT trespass) Waste action may be brought against holder of PPE by… Holder of FPI Co-tenant (2(+) people w/ simultaneous right of possession) Lender (if/when borrower trashes property upon default/foreclosure) Types of waste… Active waste – holder actively doing something NOT entitled Passive waste – holder failing to fulfill duty to do something (inactive) Ameliorating waste – change in character of property that benefits property Grantor MAY expressly state whether or not holder of PPE may make changes to property… … BUT, if grantor’s intent is NOT clear, then factual analysis is required… … thus, if A (holding PPE) wants to make change, and B (holding FPI) wants to block change factors to consider… Length of time (i.e. 99-yr. lease vs. 1-yr. lease) Certainty of possession of FPI (i.e. reversion vs. CR) Changes in area AND impact Cause of changes Time b/w grantor’s conveyance and A’s desire to make change Remedies… B learning of A’s desire to make change MAY obtain injunction… … BUT, if B is unable to enjoin A, then MAY bring suit for… Diminution in value/economic damages (though, MAY not be available w/ ameliorating waste) Specific performance (replace waste, though unlikely as remedy) Punitive damages (secondary remedy when economic damages not available)
Forfeiture (common law remedy for waste… though, grantor MAY make estate defeasible upon commission of waste) House of Isaac… Isaac gives residence to wife for life (OR upon remarriage), then to George for life, then to George’s then-living children (daughter) OR Isaac’s surviving children (Howie, Irv, Elvira) George VR (upon natural termination of wife’s life estate defeasible, i.e. wife’s death) AND EI (upon premature termination of wife’s life estate defeasible, i.e. wife’s remarriage) George’s daughter AND Howie/Irv/Elvira alternate CRs George wants to demolish residence, build 13-story apartment complex (make $$, leave something for daughter)… … BUT, Howie/Irv/Elvira object (own neighboring lots w/ restrictions preventing them from doing the same, and do NOT want 13-story apartment complex towering over their lots)… … AND, Howie/Irv/Elvira win George (as life tenant) may NOT exercise act of ownership, but ONLY what is required for general use/ enjoyment of estate as received Similar facts in Melms v. Pabst (mansion torn down, business erected)… … BUT, different outcome (complete change of conditions, property no longer desirable for residence) Baker v. Weedon… John gives Anna life estate, CR in Anna’s children (Anna has NO children at time of conveyance), alternate CR in John’s grandchildren from prior marriage Anna (now an old woman stuck w/ life estate) in need of immediate economic relief, asks for judicial sale of property and investment of proceeds in trust… BUT, b/c value of property increasing, remaindermen stand to suffer great financial loss trial court holds for Anna, BUT appellate court remands DOCTRINE OF WORTHIER TITLE Doctrine of worthier title (“DWT”) converts FPI in transferee into FPI in transferor… “O to A for life, then to O’s heirs” CR in O’s heirs becomes reversion in O “O for life, then to O’s heirs” EI in O’s heirs becomes FSA in O
Reasons for DWT… At common law, when FPI in O’s heirs is converted into FPI in O (inheritance by O’s heirs), then it becomes taxable (feudal incidence)… … BUT, today, 2 purposes served… Clear title (since heirs NOT ascertained until death of transferor) Probable intent (thus, can be avoided through drafting) Doctor v. Hughes… O reserves life estate, EI to O’s heirs… O has 2 daughters (O still alive)… daughter1 in debt to creditor… … BUT, as per DWT, O has FSA… thus, creditor out of luck If daughter1 had remainder, then creditor would’ve been able to seize interest… … BUT, if O wanted to create a remainder in O’s heirs, then O would’ve drafted differently express intent to avoid DWT (DWT a rule of construction) To trigger DWT, must use “heirs” (OR functional equivalent) In Levy, when mother’s life estate ends, then to Levy for life, then FPI exists in Levy’s“lawful surviving issue” OR mother’s “lawful surviving issue”… … AND, mother dies w/ Levy as ONLY child… thus, Levy is mother’s “lawful surviving issue”… … BUT, “lawful surviving issue” is NOT the same as “heirs”… thus, Levy cannot trigger DWT to give self FSA (rather, stuck w/ life estate w/ FPI in his “lawful surviving issue”) A trust is automatically revocable, unless it is expressly unrevocable… … AND, even if expressly unrevocable, MAY still be revoked if trustor is also sole beneficiary… … BUT, in Levy, Levy became trustor upon mother’s death, but NOT sole beneficiary (b/c, again, “lawful surviving issue” is NOT the same as “heirs”) Rebuttal of DWT must come in original, NOT susequent, document If O reserves life estate, w/ EI in O’s heirs (O has 2 children)… … then, O wills estate to A, including clause stating “Having amply provided for my 2 children…”… If DWT applies, then EI in O’s heirs converted to FSA in O, which was then transferred to A in will
If DWT does NOT apply, then O’s heirs get estate (since what O transferred to A did NOT include EI) While DWT creates a FPI in transferor’s heirs, Rule in Shelley’s Case creates FPI in transferee’s heirs (though, abolished in most states, including CA) “O to A for life, then to A’s heirs” A has FSA (O’s reversion destroyed) Notable considerations re: Rule in Shelley’s Case… Applies to real property ONLY (whereas, DWT applies to real AND personal property) FPI must be remainder (whereas, DWT applies to EIs as well) “Heirs” (OR functional equivalent) must be used Rule of law (NOT rule of construction, so NO consideration of intent) DESTRUCTABILITY RULE As per destructability rule, CR is destroyed when… ... prior estate ends AND CR can’t vest … 2 interests in same person are separated ONLY by CR Avoid destructability rule by NOT creating CR (i.e. EI w/ mandatory gap)… … OR, by putting CR in a trust… … BUT, RAP would still apply either way If subject to destructability rule, then (likely) NOT subject to RAP… BUT, if NOT subject to destructability rule, then subject to RAP (Abbiss) “O to A for life, then to first son of A to reach 25”… at the time, A has son Under destructability rule, CR is destroyed if, when A dies, A’s first son is NOT 25 Under RAP, CR is void b/c it is possible that CR would vest 21 yrs. after A’s death (i.e. if A’s first son dies, A has second son, A dies, and A’s second son does NOT reach 25 within 21 yrs. of A’s death) Thus, CR could be voided by either/or… … BUT, destructability rule at least allows for opportunity for CR to vest… … whereas, RAP voids CR from the very beginning Destructability rule w/ alternate CRs (Festing)… “O to A for life, then to children of A who reach 21, but if none of A’s children reach 21, then to B”… old
“A to B alone the option to purchase for $50K at any time” Some contracts are subject to RAP, including options to purchase (option “vests” when exercised)… … thus, using B as measuring life, option could NOT vest after B’s death, making option valid… … BUT, if option were “to B” (and NOT “to B alone”), option is presumed to be transferable AND could vest beyond RAP period, making option void “A to B, subject to option in A to repurchase for $50K” Option to repurchase is likely treated as an option to purchase, which, in this case, would be void under RAP (since presumed transferable)… … BUT, option to repurchase could arguably be considered a PT (retained in A, the transferor), which would NOT be subject to RAP (and, thus, valid) “A leases to B for 65 yrs., with option to purchase for $50K during the term” Granted, option to purchase could vest beyond RAP period… … BUT, b/c option can ONLY vest within during lease term, it is NOT subject to RAP as per lease option exception “A to B and assigns under an installment land sale contract… A retains legal title until paid in full” Installment land sale contract IS subject to RAP… AND, b/c contract could be paid off beyond RAP period, would be void… … BUT, arguable that A’s retention of legal title is a security interest, which is NOT subject to RAP “A in trust, income to A for life, then income to A’s children, then principal to A’s grandchildren, reserving to A the power to revoke the trust” RAP period does NOT start until A’s power to revoke is exercised/given up… … thus, if A dies w/o exercising power to revoke, then interest is valid… … BUT, if A revokes trust before death (OR, if A never had power to revoke), then interest is void “A to B Charity, but if cease use for hospital purposes, to C Charity” As per charitable exception, b/c EI would shift from charity-to-charity, it is valid (exempt from RAP)… … BUT, if either B or C was NOT a charity (AND, city/govt. constitutes charity), then charitable exception does NOT apply, regardless of possible charitable purpose