I. Transfers of Land (Contract v. Deed)
A. The Contract of Sale
1. A broker or agent owes to her principal a fiduciary duty.
2. This duty requires the agent to never put herself in an antagonistic position to her principal’s interest.
3. It includes the duty to use only for the principal’s benefit any information that the broker knows by virtue of her superior experience and learning.
4. Rule of Law: Whether a fiduciary relationship is a question of fact to be determined by all relevant facts.
a. Exception to the general rules: Statute of Frauds & Caveat Emptor
b. Caveat Emptor- no duty to disclose defects in title/condition of property
i. Exception: Unmerchantable title- hazard of litigation (Lohmeyer)
a. Restrictive covenant in Lohmeyer (requirement of 2nd story).
b. Because the home doesn’t comply makes title unmerchantable.
ii. Condition that seller created that materially impairs the market value either
a. Not discovered by a reasonably prudent buyer (Stambosvsky)
b. That is peculiarly within the seller’s knowledge
c. Statute of Frauds
i. Statute of Frauds: 2 relevant provisions (Hickey v. Green)
a. Actual transfer of writing itself (deed- identifies property, signed by Grantor and has to be delivered.)
b. Any agreement to transfer title must be in writing
ii. Two different moments: Purchase/Sale of land k; Closing
a. SOF applies to both moments
b. Requires both k and transfer to be in writing
b. Exception to SOF:
1. Estoppel (prevents promissory to use SOF as a defense)
i. Take some detrimental action in reliance upon promise (further refinement of rule developed in Walker – must be action of which the seller is aware or the detrimental action, which is foreseeable or action the seller intends. Detrimental reliance is foreseeable.
ii. Oral agreement undisputed or clearly proven; this can satisfy the doctrine of partial performance, estoppels. This will satisfy the wrong that the Statute was designed to prevent.
2. Partial performance- 2 elements
i. Buyer must actually take possession
ii. Must either improve property or pay full price
5. Marketable Title
6. Duty to Disclose Defects
a) Leaky roof (Johnson): Whether a seller of a home has a duty to disclose latent material defects to the buyer? (defects that are not known or reasonably discovered- leaky roof not readily observable until it rains.
7. Implied Warranty of Quality- this doesn’t arise out of sale, but the service k b/w builder and original owner (not b/c of builder’s sale of land, but b/c of the efforts of construction dwelling.
a) Warranty does not merge but survives closing
b) Majority: Implied only b/t builder and 1st buyer
c) Minority: Builder is liable to subsequent purchasers for breaches of work where defect is latent at time of subsequent purchase and which reasonable inspections failed to be discovered becomes patent or manifest (obvious) b/t reasonable period of time.
d) Remedies in event of breach:
(1) Non-breaching party may elect 1/3 remedies. Specific performance- you must buy or sale.
(2) Retention or return of deposit.
(3) Actual damages (if liq. Clause, then liq. Dmgs.)
(a) In minority of states or efficient breach theory in absence of liquidated damages clause on breach, seller must return portion of deposit to (sellers actual dmgs are less than dep) seller has to return the difference. This is the minority rule.
8. Doctrine of Merger- Passing of title and closing are two different events. You cannot sue for b/K after closing because there is no K after the closing.
B. The Deed – Instrument by which title is conveyed.
Once the buyer takes the deed, Merger occurs with the contract and all questions of:
(1)Title and (2)Quantity of land are only recoverable through the deed.
1. Types of Deed
a) General Warranty Deed – Seller is guaranteeing the six covenants including acts done by third parties before he owned it.
b) Special Warranty Deed – Seller is guaranteeing the six covenants, but only as to himself. He is not guaranteeing against third parties actions. If he caused it or it happened on his watch he is liable.
c) Quitclaim Deed – Seller is not making any guarantees at all only that seller is giving all that he has, if anything.
2. Present Covenants – A breach of these covenants can only occur at the time of conveyance. You don’t need to be in possession. If they are broken, Majority says only the immediate buyer can sue on them, Minority says they are impliedly assigned to remote grantees (Rockafellor). Sol starts to run on day of the original transfer though so it could have run.
a) Covenant of Seisin – Grantor owns the property he is granting. Damages: return all or part of the purchase price.
b) Covenant of Right to Convey – Grantor has the right to convey the property (can be different from 1 but they are similar)
c) Covenant Against Encumbrances – No mortgages, liens, easements, restrictive covenants, etc. encumber the land in question except as included in the deed (if any). If it is in violation of zoning ordinance that is not enough (although it is enough for rescission of the contract before closing). Exception: If buyer has actual or constructive knowledge of a visible and public encumbrance, it does not violate this covenant and there is no remedy (Ex: 405 through your yard is no violation b/c obviously visible and used by public– RR tracks are the same – no violation of this covenant b/c visible and public).
(1) Frimberger – Guy sold land to D by quitclaim deed, who then sold land to P which was in violation of a wetlands statute. P sued on present covenant, but court held that latent violation of statute was not sufficient alone, absent any government threat or fine or fee levied by the gov’t for the violation. This would violate maybe 5 or 6, but not 3. Also, the fee has to be in place a the time of transfer so that would be an issue here too. Buyer assumes the burden of complying with public land use controls like zoning and codes. Ct. said
iving a bad check from buyer and this is voidable by seller, but if buyer resells to bfp, bfp would be protected.
(2) In the inception – this is when the owner doesn’t even know he is executing a deed and this is void just like a forged deed because there was no intent.
d) Damages –
(1) Maximum any grantee can recover is what he paid his grantor. Also, the maximum a remote grantor will have to pay is the amount he received from his purchaser. i.e. remote grantee can only recover what original grantor received b/c that is all the original grantor “insured.”
(2) For covenants 1-5 the remedy is money damages, not recession. For 6 you can get specific performance. The amount of money damages is the amount it costs to remove the encumbrance or the diminution in value for having the encumbrance. Ex: For 1 if the guy didn’t own the property, you would get the whole purchase price back. For a mineral rights though you would only get however much the value of the land decreased because of the superior title.
(3) Attorney’s Fees – Grantor is liable to Grantee for attorney’s fees only if the 3rd party prevails, and only those incurred in defending title.
e) Estoppel by Deed – If A deeds to B but doesn’t actually own the property at the time of the deed but gets it later, A is estopped from claiming ownership of the land. i.e. once title vested in A it went automatically to B.
5. Steps to analyze a deed issue:
a) What kind of deed did the guy get so you are clear which warranties are included. General, special, or quitclaim. If they say warranty it is general.
b) Does the deed have an express exception or exclusion. If it is silent, then you have fsa. If there is someone else with a property interest, that should be in the deed.
c) Which covenants have been violated – Hit as many as you can – Present, future, etc.
d) Who are you suing? Your own grantor or a remote grantor.
e) Double check to see if Statute of limitations has run. This will be a particular problem with present covenants.
6. Delivery
C. The Mortgage –
1. It is the lein that secures the debt; the debt is evidenced in the note; Leins have priority in order in which they are recorded
2. Allows foreclosure upon property and judicial sale if mortgagor defaults
3. Mortgage Transaction- secured by note (this is a loan k that is a negotiable instrument that can be sold;) & mortgage
a) Implied is the duty of good faith on part of mortgagee
