Keeping Current—Property

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

CASES

BONA FIDE PURCHASE: Foreclosure buyer paying low price is not bona fide purchaser when owner lacks notice of sale. After the Georges failed to pay $205 in assessments on their North Carolina home, the homeowners’ association filed a claim of lien and initiated foreclosure proceedings. The homeowners’ association did not serve the Georges personally or by mail at their official residence in the Virgin Islands but personally served a person at the home who represented herself to be Mrs. George but turned out to be the Georges’ daughter. The foreclosure buyer purchased the property for $2,650 and soon resold it to a company that planned to spend $50,000 in renovations and market the property for $240,000. The Georges successfully moved to set aside all proceedings due to a lack of notice of the unpaid fees or foreclosure proceedings. The trial court declared all deeds and transactions null and void. The buyers appealed, claiming they were good faith purchasers for value. The intermediate appellate court held that the trustee failed properly to serve the Georges because the home in question was not their usual place of abode but found the buyers were good faith purchasers for value based on “constitutionally sufficient notice,” given the multiple attempts to notify the Georges of the pendency of foreclosure proceedings. The supreme court reversed. A good faith purchaser for value must purchase “without notice, actual or constructive, of any infirmity” and pay “valuable consideration.” N.C. Gen. Stat. § 1-108. Although mere inadequacy of purchase price alone is not sufficient to upset a sale, there was more here that should have prompted the buyers to question the sale—the deed under which the Georges took title showed they resided in the Virgin Islands, the affidavit of service revealed several unsuccessful attempts at service in the Virgin Islands, the only service was at the property, and the Georges paid over $100,000 for the property, which was free and clear of all liens other than the $205, making it unreasonable to assume that the Georges would knowingly allow the foreclosure to proceed without objection. The court set aside the transfers but remanded for a determination whether restitution was in order. In re George, 856 S.E.2d 483 (N.C. 2021).

DEEDS: Unrecorded plat referred to in recorded deed creates easement appurtenant. RLC contracted to buy a one-acre parcel, Lot C, from 4N. The town approved and recorded a minor subdivision plan dated January 20, 2016, which included a metes and bounds description of the lot and showed access by a 40-foot-wide right of way named Nunes Lane. A second minor subdivision plan, dated January 5, 2016, was also prepared, and it contained the same metes and bounds description for lot C, but it was never approved by the town. The warranty deed from 4N to RLC incorporated by reference the January 5 plan, but not the January 20 plan. After closing, RLC discovered it lacked access to the lot on account of a row of boulders placed at the entrance of the lane. RLC sued, seeking a declaration of a right of way and injunctive relief for the removal of the boulders. The trial court granted summary judgment to RLC, finding the warranty deed clearly and unambiguously granted an easement over Nunes Lane. The court declined to examine extrinsic evidence, including affidavits asserting that 4N told RLC that an easement over Nunes Lane would not be included in the sale and refused to consider the fact of the boulders in place as bearing on intent. The supreme court affirmed. Under well-established principles, when a property owner subdivides land and sells with reference to a subdivision plan, the purchaser of the lot is granted an easement in the roadways shown on the plan. The easement is appurtenant to the property and passes with the conveyance of the property unless specifically excluded, even though not mentioned in the deed. Here, the record reflects that Nunes Lane was platted in town plans since at least 2007 and the conveyance of Lot C was made with reference to the unrecorded January 5 plan. It was not relevant that the town failed to approve or record the January 5 plan. All that mattered was that in the plan, Nunes Lane was depicted as a lane that abutted Lot C. The plan confirmed a lane, not a wall of boulders. Read’s Landscape Constr., Inc. v. Town of West Warwick, 252 A.3d 713 (R.I. 2021).

FORECLOSURE: Filing fee assessed against residential foreclosure plaintiffs violates free access clause of state constitution. An Illinois statute created state programs to provide nonlegal housing counseling for citizens and to maintain abandoned residences, funded by a $50 filing fee for all residential mortgage foreclosure cases. 735 Ill. Comp. Stat. 5/15-1504.1. Plaintiffs who had filed foreclosure cases sought injunctive relief, claiming the fee violated the “free access” clause of the state constitution. Ill. Const. 1970, art. I, § 12. The government argued that the voluntary payment doctrine precluded the plaintiffs’ claims because they did not pay the filing fee “under protest.” The trial court ruled for the plaintiffs, finding the duress exception applied, and went on to declare the statutes facially unconstitutional. The supreme court affirmed, agreeing that the voluntary payment doctrine did not bar the plaintiffs’ claims. When a mandatory filing fee is required for access to judicial process, duress is implied. The court also affirmed the holding of unconstitutionality, applying a rational-basis analysis for free-access claims involving filing fees. To be constitutional, the purpose of the fee must relate to the operation and maintenance of the courts. The relationship cannot be attenuated; it must be direct, clear, and ascertainable. The ends asserted by the government—serving to prevent foreclosures, thereby reducing their numbers and facilitating the functioning of the courts—were too remote. Instead, the court saw the additional fee as a “litigation tax,” a revenue-raising measure to fund statewide social programs, which required foreclosure litigants to bear an unfair share of that burden. Walker v. Chasteen, 2021 Ill. LEXIS 612 (Ill. June 17, 2021).

FORECLOSURE: Sale of condominium unit by homeowners association in violation of bankruptcy automatic stay is void. After Hill fell behind in his condominium assessments, the homeowners association (HOA) recorded a notice of delinquent assessment lien. The next month, the HOA recorded a notice of default and notified Hill that he must pay $3,120 or his home would be sold. Shortly thereafter, Hill filed a chapter 13 bankruptcy petition and stated in his plan that he was surrendering the property to the HOA and the bank, which held a deed of trust senior to the assessment lien. An automatic stay under the Bankruptcy Code went into effect. 11 U.S.C. § 362(a). While the bankruptcy petition was still pending, the HOA recorded a notice of foreclosure sale and, several weeks later, sold the property to a trust for $6,072. The bank sued to quiet title, for declaratory relief that the sale was void and did not extinguish its first lien, for a preliminary injunction to prevent the trust from selling or transferring the property, and for an order declaring the bank could foreclose on its deed of trust. The bank also sued the HOA for violation of Nev. Rev. Stat. § 116.1113 (requiring good faith in the performance of a contract) and for wrongful foreclosure. The trial court granted summary judgment to the trust, simply ruling that the foreclosure sale extinguished the bank’s deed of trust, and the trust purchased the property free and clear of the bank’s claim. The Ninth Circuit Court of Appeals reversed. First, it determined that the bank had standing to challenge a violation of the automatic stay—the extinguishment of the deed of trust could be fairly traced to the HOA’s violation of the stay. Second, the court held that the bank’s grievance fell within the zone of interests protected by the statute under which the bank brought its claim, which allows suit “by any person against another who claims an estate or interest in real property, adverse to the person bringing the action, for the purpose of determining such adverse claim.” Nev. Rev. Stat. § 40.010. Third, under Nevada law, HOA foreclosure sales in violation of a bankruptcy automatic stay are not merely voidable but void. Bank of New York Mellon v. Enchantment at Sunset Bay Condo. Ass’n, 2 F.4th 1229 (9th Cir. 2021).

MECHANICS LIEN: Failure to file affidavit of service makes lien unperfected and invalid. Homeowners hired Terra Firma to do construction work but dismissed the company after a dispute about the work it had performed. Terra Firma sued for damages for breach of contract and unjust enrichment and filed a mechanics’ lien for unpaid labor and materials in the amount of $131,123, under Mechanics’ Lien Law of 1963, 49 Pa. Cons. Stat. §§ 1101- 1902. As required by section 502 of the statute, Terra Firma effectuated service of the mechanics’ lien on the homeowners by the sheriff. 49 Pa. Cons. Stat. § 1502. Later Terra Firma voluntarily discontinued its mechanics’ lien claim and filed another claim for the same dollar amount as the discontinued lien. The new claim was assigned a new docket number, but Terra Firma failed to file the required affidavit showing service on the homeowners. The homeowners answered the lien claim with a counterclaim for breach of contract. In none of the ensuing enforcement actions over the next five years did they challenge the lien based on the failure to file an affidavit of service. Only after the trial court found Terra Firma had breached the contract did the homeowners file a petition to strike the mechanics’ lien, to which Terra Firma responded that they had waived the objection. The trial court ruled that the failure to file the affidavit of service made the lien unperfected and on that basis granted the petition to strike. A divided appellate court reversed, holding that the homeowners were obligated to file preliminary objections to the mechanics’ lien in the enforcement action. The supreme court, in turn, reversed. Section 502 states that to perfect a mechanics’ lien, an affidavit “shall be filed” and the failure to file the affidavit “shall be sufficient ground for striking off the claim.” Id. Because mechanics’ liens are statutory rights, a party seeking protection “must comply strictly with the provisions of the statute conferring the right. Terra Firma never filed the affidavit of service, leaving its lien unperfected and invalid. This defect was not curable. The court chided the appellate court on the waiver issue because nothing in the statute imposes a time limit on filing an objection to a lien. Indeed, to the contrary, section 505 provides that the failure to file an objection preliminarily “shall not constitute a waiver of the right to raise the same as a defense in subsequent proceedings.” 49 Pa. Cons. Stat. § 1505. The court saw the waiver claim as an attempt to give legal force to an invalid judgment. Terra Firma Builders, LLC v. King, 249 A.3d 976 (Pa. 2021).

MORTGAGE: Lender may foreclose reverse mortgage when deceased husband is sole borrower and surviving wife signs mortgage but not promissory note. The Palmeros sought a reverse mortgage for their primary residence and homestead, ultimately having Mr. Palmero apply solely so that they could borrow a higher sum. Mr. Palmero signed the necessary documents individually as the borrower, including a reverse mortgage instrument and an adjustable-rate note. Mrs. Palmero also signed the mortgage as was required for marital homestead property. Both spouses signed a nonborrower spouse ownership interest certification. Mr. Palmero died, and his estate did not repay the loan, triggering a foreclosure action which Mrs. Palmero defended by arguing she was a co-borrower. The note and mortgage allowed foreclosure only if a borrower died and the property was not the principal residence of a surviving borrower. The trial court ruled she was not a co-borrower but denied foreclosure based on a federal law that insures reverse mortgages. The appellate court reversed, finding Mrs. Palmero was a co-borrower and that the lower court applied the federal statute in error. The supreme court reversed, holding that Mrs. Palmero was not a co-borrower. The court cited its long line of precedents establishing that a mortgage is construed together with the promissory note it secures, with deference given to the note if a conflict arises. This means that the rights and obligations of the parties are determined by reference to the note. The note represents a promise to pay, and the mortgage merely secures that promise in case of default. Because Mrs. Palermo did not sign the note, she was not a co-borrower. There was no need to look at any additional documents or employ the doctrine of adverse construction in construing the documents against the drafter. Having resolved the issue based on the documents, it was unnecessary to address the federal law issues. A thoughtful dissent made the argument for a different rule, given that in the context of reverse mortgages, the mortgage is the primary instrument because the borrower has no personal liability under the note; the lender is limited to foreclosure in certain events. WVMF Funding v. Palmero, 320 So. 3d 689 (Fla. 2021).

PREMISES LIABILITY: Commercial landowner is not liable to pedestrian for failure to remove snow and ice from abutting sidewalk before storm has ended. Pareja slipped and fell on ice on a driveway apron during a wintry mix of light rain, freezing rain, and sleet. He sued the landowner and the snow removal company hired by the landowner to clear the sidewalk. The trial court granted summary judgment to the landowner, but the appellate court reversed, declining to apply the “ongoing storm rule” under which a landowner has no duty to clear a sidewalk until a reasonable time after the storm concludes. The supreme court reversed, reaffirming the “ongoing storm rule,” at the same time recognizing some limiting principles. The court agreed with the landowner and amici that requiring the clearing of snow and ice during a storm would be both futile and dangerous. The court also believed that imposing such a duty on all commercial landowners swept too broadly, as it failed to take into account differences in abilities depending on the size and means of the owners. Nonetheless, if it is shown that the actions of the landowner increased the risk of injury to pedestrians or that the injuries resulted from a pre-existing risk, such as not clearing snow and ice from an earlier storm, then there might be a basis for liability. Here, none of these circumstances existed. Pareja v. Princeton Int’l Properties, 252 A.3d 184 (N.J. 2021).

RECREATIONAL USE STATUTE: Statute does not confer immunity on owners of property not open to the public. The common areas of Pine Bluff Estates include a beach on the shore of Lake Memphremagog and a one-lane, unpaved road providing beach access. Use of the common areas, including the beach and the access road, is restricted to unit owners and their tenants, guests, invitees, and licensees. Two posts connected by a chain were installed on the beach access road to keep the general public from accessing the lake. One day, the plaintiff rode his motorbike on the road and did not see the chain strung across the road until the last movement, at which point he tried to brake but slid along the ground before striking the chain across his throat, which caused serious injury. The plaintiff ’s mother filed a negligence action against the homeowners association and certain individuals. The trial court granted the defendants’ motions for summary judgment primarily on the ground that the state’s recreational use statute protected them from liability. Vt. Stat. tit. 12 §§ 5791-5795. The supreme court reversed, concluding that the recreational use statute does not apply because the land where the plaintiff was injured was not open to the general public, as required to trigger the statute’s grant of limited liability to landowners. The purpose of the statute is to encourage landowners to make their property “available to the public” for recreational use without consideration, id. § 5791, but here the owners expressly aimed to exclude the general public. The chain was erected specifically to deter members of the public from using the beach. The exclusive use of the beach access road by the development’s residents and their guests cannot be considered use by the public under any reasonable interpretation of the statute. In short, the court concluded, defendants did not satisfy their end of the “inherent bargain” reflected by the statute (public access in exchange for limited liability for injuries). Crogan v. Pine Bluff Estates, 257 A.3d 247 (Vt. 2021).

TAKINGS: Regulation giving union organizers access to farm is per se physical taking. A state regulation granted labor organizations a right to access agricultural property to solicit support for unionization. On notice to the employer, the organizers could enter the employer’s property for up to one hour before work, one hour during the lunch break, and one hour after work. Cal. Code Regs., tit. 8, § 20900(e) (1)(C) (2020). One morning at 5 a.m., members of the United Farm Workers Union entered the strawberry farm run by Cedar Point Nursery. Cedar Point employed more than 400 seasonal workers and about 100 full-time workers, none of whom lived on the property. Calling through bull horns, the union organizers disturbed operations, causing some workers to join the organization in protest and others to leave the work site altogether. A similar event occurred at the Fowler Packing Company, a grower of table grapes and citrus crops, who hired between 1,800 and 2,500 workers, none living on the property. The two growers brought suit, alleging the access regulation effected an unconstitutional, per se taking under the Fifth and Fourteenth the Constitution, by appropriating without compensation an easement for union organizers to enter their property. They sought declaratory and injunctive relief, prohibiting enforcement of the regulation. The district court denied the motion because the regulation did not allow the public to access their property in a permanent and continuous manner. Instead, the court ruled that a multi-factored balancing test applied to determine whether the access regulation was a taking. A divided panel of the Ninth Circuit Court of Appeals affirmed. The Supreme Court reversed. Stating that the Court’s physical taking jurisprudence is “as old as the Republic,” the Court declared that government commits a physical taking when it uses its power of eminent domain to formally condemn property. The is also true when the government physically takes possession of property without acquiring title by, for example, occupying property by recurring flooding as a result of building a dam. On the other hand, when a government regulation restricts an owner’s ability to use his property, a different standard applies. Use restrictions that go “too far” are regulatory takings, tested under a multi-factored, balancing test. The access regulation here appropriates a right to invade the growers’ property and as such constitutes a per se physical taking. This is so because the regulation grants to the unions the right physically to enter and occupy the land for three hours per day, 120 days per year. This appropriates land for the enjoyment of a third party and curtails the owners’ right to exclude—a fundamental property right. It was not necessary that the government appropriate a possessory right; the taking of an easement is enough. Nor is this right of access justified on the basis of abating a nuisance, necessity, or protecting the health and safety of the workers. In the Court’s assessment, the government “literally” took access to the property. Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (U.S. 2021).

TRESPASS: Restaurant customer is not “lawful occupant of real property” entitled to statutory immunity against liability for injury to trespasser. Stroede became violently drunk at the Railroad Station bar. He was ordered to leave and was escorted out of the bar but returned minutes later, still acting combative. Tetting, an employee of the bar but at the time there only as a customer with his family, grabbed Stroede and walked him back to the stairway near the entrance. Stroede fell down the concrete stairs and suffered serious injuries and later filed suit against the bar and Tetting. Tetting claimed protection under Wis. Stat. § 895.529, which immunizes and protects a “possessor of real property” from claims of trespassers for certain conduct. A “possessor of real property” is defined as an “owner, lessee, … tenant, or other lawful occupant of real property.” Id. § 895.529(1)(a). The trial rejected Tetting’s defense. The appellate court reversed, finding Tetting qualified for immunity as a “lawful occupant” based on dictionary definitions of “occupant.” Stroede appealed, and the supreme court reversed. The majority began its analysis by noting the lack of statutory definition and lack of precedent addressing the meaning of the disputed language. The court looked to Black’s Law Dictionary, which defines “occupant” in a way that supported the trial court’s conclusion, namely, occupant meant someone who has a possessory right in, or control over, certain property or premises. The court further employed a contextual analysis of the phrasing including the use of the canon ejusdem generis, regarding general words following specific words being construed in light of the specific words. The court also looked to noscitur a sociis, indicating words are known from their associates. Thus, the court concluded “other lawful occupant of real property” is limited by the words that precede it, meaning the phrase indicates a person with some dominion or control over the property. Tetting, although lawfully present, was not an occupant but a mere invitee, a patron of the business, and thus not entitled to immunity under the statute. Stroede v. Society Ins., 959 N.W.2d 305 (Wis. 2021).

LITERATURE

EASEMENTS: In Restating The Law of Prescriptive Easements, 104 Marq. L. Rev. 939 (2021), Prof. John A. Lovett describes prescriptive easements as an important but often overlooked component in the structure of property law. In establishing this property interest, the element of adversity has proven to be most contested. Courts have developed many presumptions to guide the analysis of the adversity element. Although two of the off-stated presumptions are polar opposites—an otherwise unexplained open and notorious use of another’s land is presumed to have been adverse and such unexplained use is presumed to be permissive—nonetheless, these two presumptions do not express the view held by the majority of courts. Instead, most courts employ a contextualized approach, what Prof. Lovett calls the Presumption of Adverse Use with Specialized Exceptions (the PAUSE approach), which begins with a presumption of adverse use but then applies counter-presumptions of permissive use in certain circumstances. The PAUSE approach takes into account local customs, social norms, and issues of neighborly accommodation. Prof. Lovett urges the reporters currently preparing the fourth Restatement on the Law of Property to adopt the hybrid approach and fashion a rule that mirrors the dominant judicial practice. He supports this position with a review of the persistent debate about the values of recognizing property interests based upon adverse use or possession, finding some merit on each side of the issue. Nevertheless, if we are not prepared to abolish prescriptive easements altogether, a rule that is flexible and allows for various presumptions based on things like the character of the property (whether wild or undeveloped) and the status of the parties (whether neighbors or family members), a nuanced rule seems in order. In particular, Prof. Lovett believes that the neighborly accommodation exception should be narrowed to circumstances in which community custom is well-established. His assessment of the issues and suggested language for a rule should give the reporters some thought.

LAND USE: In From Smart Cities To Co-Cities: Emerging Legal and Policy Responses To Urban Vacancy, 47 Urb. L. J. 909 (2020), Dan Wu and Prof. Sheila R. Foster offer a case study of Chicago’s Large Lots Program, under which existing property owners can buy up to two vacant residential lots on their blocks for $1 each. In return, these new owners are required to pay property taxes and maintain the property. By the study, the authors explore how local governments can address inequality (from decades of exclusion and discrimination in access to housing) through different uses of vacant land in blighted communities. They examine the program through the lens of the persistent tension between “use” and “exchange” value in urban development. Though they believe that the Large Lots Program has many merits, they caution that other jurisdictions may lack the ability to replicate the program when land costs are prohibitive. They offer some financing strategies to overcome these limits.

PROPERTY THEORY: Will Breland, in Acres of Distrust: Heirs Property, the Law’s Role in Sowing Suspicion Among Americans and How Lawyers Can Help Curb Black Land Loss, 28 Geo. J. Poverty Law & Pol’y 377 (2021), attributes much of the loss of land ownership among blacks to the distrust of legal professionals. Negative experiences with the legal system have discouraged families from engaging in estate planning, leading to the destructive phenomenon of “heirs property,” which divides ownership among cotenants, many of whom are family members who acquire interests through inheritance. Owners are often reluctant to take steps to clear title. The article presents a history of black landholding, including the institutional barriers to ownership and the various legal and structural mechanisms that led to the loss of more than 90 percent of such land in the last century. Alongside the chronicle of landholding among blacks, Mr. Breland claims that the history of racial discrimination by lawmakers and legal practitioners, coupled with a lack of awareness of the past and unscrupulous practices by contemporary attorneys, have created the widespread distrust of the legal system among black landowners. His point is that while staunching the loss of ownership should begin with laws to ensure protection against unfairness and opportunistic conduct, significantly more is needed, in particular, increased awareness of the differing cultural attitudes about family and land when determining property values. To get there, he argues for more cultural competence training for law students and practicing attorneys alike.

LEGISLATION

ALABAMA enacts the LIBOR Discontinuance and Replacement Act of 2021. The act provides for the transition away from the London Interbank Offered Rate (LIBOR) to a Benchmark Replacement as selected by a relevant recommending body, including the Federal Reserve, the Federal Reserve Bank of New York, or Alternative Reference Rates Committee. 2021 Ala. Acts 323.

CONNECTICUT adopts the Uniform Commercial Receivership Act. Under the act, a receiver may be appointed before or after judgment to prevent waste or dissipation of the property or its revenue-producing potential. The act specifies the qualifications for receivership and grounds for the removal of receivers. 2021 Ct. Pub. Acts 80.

CONNECTICUT amends real estate brokerage licensing law. The amendments prescribe minimum requirements for education and experience and specify identification requirements for brokerage “teams.” 2021 Ct. Pub. Acts 167.

ILLINOIS amends eviction statute to require foreclosure of certain installment land contracts. If the buyer has paid 80 percent or more of the original purchase price, the seller may recover unpaid amounts only by foreclosure. The amendment applies to contracts entered into on or after July 1, 1987. 2021 Ill Laws 71.

ILLINOIS amends statute on transfer-on-death deed. The amendments allow a trust, however created, to be a beneficiary, and the property is thereby governed by the terms of the trust. A transfer to a beneficiary or a spouse who attests to the execution of a transfer-on-death deed is void. A surviving spouse may renounce a transfer-ondeath deed and receive one-third of the value of the property. A beneficiary of a transfer-on-death instrument is subject to creditor, administrative, funeral and burial, and statutory claims to the same extent and in the same manner as a beneficiary of a trust that was revocable at the time of the settlor’s death. 2021 Ill. Laws 68.

MARYLAND revises landlord-tenant law on notice required to terminate tenancies. For tenancies for years for a term greater than a week and month-tomonth tenancies, 60-days notice must be given; for tenancies for year-to-year, 90-days notice must be given; and for farm tenancies for year-to-year, 180 days must be given. The amendments do not apply to property in Baltimore and Montgomery Counties with 5 or more dwelling units. 2021 Md. Laws ch. 803.

MARYLAND directs the Legal Services Corporation to provide legal counsel to tenants facing eviction. The law provides the mechanism for providing notice to tenants of the availability of counsel and community outreach and sets up a task force to study the program. 2021 Md. Laws ch. 746.

NEW YORK amends general obligations law to provide for LIBOR discontinuance. The new provisions replace the London Interbank Offered Rate (LIBOR) with the secured overnight financing rate as the benchmark replacement rate and apply to all contracts governed by New York law, if the parties do not agree otherwise. 2021 N.Y. Laws 94.

OHIO amends lien law to provide for liens for architectural services. The amendments prescribe requirements for filing and perfecting liens for services provided. 2021 Ohio Laws 39.

TEXAS adopts law to authorize land banks. The law authorizes certain municipalities to create a land bank to acquire vacant, deteriorated, abandoned, non-revenue generating, and non-tax producing properties. The land bank may dispose of its properties for productive uses, including affordable housing. A board of directors is established to oversee the land bank. 2021 Tex. Sess. Laws ch. 780.

Keeping Current—Property Editor: Prof. Shelby D. Green, Elisabeth Haub School of Law at Pace University, White Plains, NY 10603. Contributor: Prof. Darryl C. Wilson.