Property II Outline Zeiner Spring 2014
I. Statute of Frauds – memorandum of sale must, at a minimum, be signed by the party to be bound, describe the real estate, and state the price. If no price is agreed upon, a court may imply an agreement to pay a reasonable price.
a. Under Uniform Land Transactions Act, the parties may enter into a binding contract without having agreed on the price.
i. Not enforceable unless the parties refer to price and indicate the method they intend to use in fixing it.
b. Exceptions
i. Part Performance – allows specific enforcement of oral agreements when particular acts have been performed by one of the parties
ii. Estoppel – when unconscionable injury would result from denying the enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract.
Hickey v. Green – Green (Δ) owned a parcel of land and engaged in negotiations with the Hickeys (∏) to sell it to them. The parties came to an oral agreement for the sale and the Hickeys told Green that they were going to sell their old house and build on Green’s lot. Relying on the oral agreement, the Hickeys sold their house. Subsequently, Green told the Hickeys that she no longer intended to sell to them as she had found another buyer. The Hickeys brought suit for specific enforcement of their agreement with Green. The lower court ruled in favor of the Hickeys. Green appealed.
c. Electronic Signatures in Global and National Commerce Act (“E-Sign”) – a signature, K, or other record may not be denied legal effect, validity, or enforceability solely because it is in electronic form.
i. Signature is defined as an electronic sound, symbol, or process, attached to or logically associated with a K or other record and executed or adopted by a person with the intent to sign the record.
II. Marketable Title – Title that would assure the transferee the quiet enjoyment of property free from reasonable doubt as to its salability.
a. To render the title to real estate unmarketable, the defect of which the purchaser complains must be of a substantial character and one from which he may suffer injury or be exposed to the hazard of litigation.
i. Facts must be known at the time which fairly raise reasonable doubt as to the title; mere possibility or possibility of future facts to develop is not sufficient.
b. A Title is marketable if the seller has a fee simple, the title is free from any encumbrances, and the buyer is entitled to possession.
i. Although buyer may not be able to reach the property, it does not affect its marketability or merchantability.
Lohmeyer v. Bower – Dr. Lohmeyer (∏) contracted to purchase property from the Bowers (Δs). The deed that transferred with the sale warranted (among other things) that the property was transferred “free and clear of all encumbrances,” but “subject to all restrictions and easements of record applying to this property.” Lohmeyer had a lawyer examine the title, and determined that two zoning violations existed on the lot: the house situated on the house was only one story high, whereas the regulations required that all houses be two stories in height; and it was situated too close to the border of a neighboring lot. After Lohmeyer informed Bowers of the violations, Bowers offered to purchase and convey additional land behind the house (correcting the second violation), but Lohmeyer refused. Lohmeyer brought suit against the Bowers seeking to rescind the contract of sale and for return of his earnest money deposit. Bowers counter-sued demanding specific performance of the contract. The trial court ruled in favor of the Bowers and ordered specific performance. Lohmeyer appealed. The court reversed the trial courts decision stating that deeming the title to be merchantable or marketable would create a hazard of litigation.
Stambovsky v. Ackley – Stambovsky (∏) entered into a contract for the purchase of a home in Nyack, New York, with Ackley (Δ). Unbeknownst to Stambovsky, Ackley had held the house out to the public as a haunted house. An article had been written about the home in Reader’s Digest, and the home was included on a haunted homes tour of Nyack. Ackley did not disclose these facts to Stambovsky during their negotiations. Upon learning that the home was haunted, Stambovsky brought this action to rescind the sales contract for the home. The trial court dismissed the complaint, stating that no remedy at law was available. Stambovsky then appealed to the First Department.
Johnson v. Davis – Johnson (Δ) agreed to sell his house to the Davises (∏), but did not tell them what he knew about the poor structure of the roof. Mrs. Davis specifically asked about water marks on the ceiling, but Johnson told her that they were not water marks and that the roof was in good working order. After the Davises paid a deposit to Johnson for the house, a rainstorm occurred and Mrs. Davis entered the house to find water gushing in from the windows and ceiling. The Davises brought suit alleging breach of contract and fraudulent misrepresentation.
III. Implied Warranty of Quality
a. Suits on the warranty can arise ONLY AFTER the closing has taken place and the ∏ has accepted the deed.
Lempke v. Dagenais – ∏ complaint alleging breach of implied warranty or workmanlike quality and negligence. ISSUE is whether a subsequent purchaser of real property may sue the builder/contractor on the theory of implied warranty of workmanlike quality for latent defects which cause economic loss, absent privity of K. HOLDING privity of K is not necessary for subsequent purchaser to sue a builder or contractor under an implied warranty theory for latent defects which manifest themselves within a reasonable time after purchase and cause economic harm.
∏ predecessors’s (original buyers) contracted Δ to build a garage, 6 months after it was built they sold the property to∏. They noticed problems with the garage and feared it would cave in so they called the Δ to repair it however he never did. They brought suit against the Δ and he filed a mission to dismiss which was granted. 3 claims: breach of implied warranty of workmanlike quality; negligence; and breach of assigned contract rights. HOLDING Court had held that an implied warranty of workmanlike quality applies between the builder of a house and the first purchaser. Court decided that privity should be abandoned in suits by subsequent purchasers against a builder or contractor for breach of an implied warranty of good workmanship for latent defects. “To require privity between the contractor and the home owner in such a situation would defeat the purpose of implied warranty of good workmanship and could leave innocent homeowners without a remedy.
2nd ISSUE whether the court should allow recovery for purely economic loss which is measured by the cost of repairing or replacing the product that does not perform to its expected level. This court believes the courts should allow economic recovery in implied warranty for subsequent purchasers; as there should be no distinction between economic loss and personal injury, they are essentially the same thing.
The builder is not to act as an insurer to a subsequent purchaser; however, the courts have stated that the extent to which a builder owes a duty of an implied warranty of workmanlike quality for latent defects is limited to a “reasonable time,” there is no definite time limit. ∏ still has the BoP to show that the defect was actually caused by the Δs workmanship. Possible defenses for builder are, age or ordinary wear and tear, or that previous owners made substantial changes. Builders DUTY is to perform in a workmanlike manner and in accordance with accepted standards.
RULING: Reversed and remanded for further proceedings, overruling Ellis v. Morris.
b. Uniform Land Transactions Act §2-309(b) – two implied warranties against person who are in the business of selling real estate:
i. Warranty of Suitability – arises in the cases of used as well as new buildings
ii. Warranty of Quality – Arises only with new construction. Defects may not be so serious as to make property unsuitable for its intended purpose, but may nonetheless breach the warranty of quality.
1. Not implied where the seller is not a “merchant of housing”, such as a builder, subdivider, or commercial vendor.
c. §2-311 provides that the warranties implied by law may be excluded or modified by agreement of the parties, or by including expressions like “As is”, except no general disclaimer is effective with respect to a buyer of a home in which the buyer intends to live.
d. §2-312(b) provides that the warranty of quality runs with the land to subsequent buyers. A waiver by the first buyer could not
all persons, including the subsequent bona fide purchasers from the grantee who do not know the deed is forged.
i. Most courts hold that a deed procured by fraud is voidable by the grantor in an action against the grantee, but a subsequent bona fide purchaser from the grantee who is unaware of the fraud prevails over the grantor.
h. Express warranties: (First 3 are present, either they exist or not. Last 3 are future covenant promises, not breached until the grantee or his successor is evicted from the property or is damaged. SoL runs upon date of delivery of the deed for present; for future it runs at the time of eviction or when covenant is broken in the future.
i. Covenant of seisin – The grantor warrants that he owns the estate that he purports to convey
ii. Covenant of right to convey – The grantor warrants that he has the right to convey property. Same as seisin, but possible to have seisin and not RtC. (Trustee may have legal title but be forbidden by the trust instrument to convey it)
iii. Covenant against encumbrances – grantor warrants that there are no encumbrances on the property (ie. Mortgages, liens, easements, and covenants)
iv. Covenant of general warranty – Grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title.
v. Covenant of quiet enjoyment – warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title. (same as GW)
vi. Covenant of further assurances – grantor promises that he will execute any other documents required to perfect the title conveyed.
Brown v. Lober
Frimberger v. Anzalotti – ISSUE whether an alleged latent violation of a land use statute or regulation, existing on the land at the time title is conveyed, constitutes encumbrances such that the conveyance breaches the grantor’s covenant against encumbrances.
i. The measure of damages for breach of a covenant of seisin is the return of all or a portion of the purchase price (if title fails as to 20% of land, you get 20% of the price you paid).
i. For breach of covenant against encumbrances, if it is easily removable, damages are the cost of removal. If not, it is the difference in value between the land with the encumbrance and without it.
Rockafellor v. Gray – ISSUE whether or not the covenant of seizin runs with the land in this state, so that an action thereon may be maintained by a remote grantee. RULE a covenant of seizin is a covenant for the title, and that if, at the time of the conveyance, the grantor did not own the land the covenant is broken immediately and that it is not necessary, in order to recover, to allege or prove an ouster or eviction. MAJORITY OF AMERICAN Courts recognize that the covenant of seizin does not run with the land. THIS COURT WENT WITH ENGLISH RULE that it does run with the land, and is broken the instant the conveyance is delivered, and then becomes a a chose in action held by the covenantee in the deed, and that a deed by said first covenantee operates as an assignment of such chose in action to a remote grantee, who can maintain an action thereon against the grantor in the original deed.
