Final Exam (with model answers)
Property II, Spring 2005
Professor Klass
Part I (one hour)
Two elderly neighbors, Josie and Sam, live at the end of a pleasant, suburban street in Mendota Heights, Minnesota. Both like clean, uncluttered homes and manicured lawns. They also believe that neighbors should help each other out. One night, over drinks, they decide that since they are getting on in years, they should formalize their longstanding practice of never putting signs, banners, flags or other distractions on their lawns or in windows. So they draft up a written agreement that they both sign stating:
“Josie and Sam, owners of property at 120 Paradise Lane and 121 Paradise Lane respectively, hereby agree and promise that they will never place signs, flags, banners or placards of any kind on their lawns or in their windows so that they are visible from the outside while the other is still alive. This promise is intended to bind subsequent occupants of the properties.”
After another few drinks, Josie suggests that they add another clause to their agreement. She says “I love taking care of your garden and I know how much it means to you, particularly since you are no longer able to do it yourself, so I want to make sure you always have that benefit.” So they add another clause to the agreement that states:
“Josie, as the owner of property at 120 Paradise Lane, hereby agrees and promises that she and all future occupants of 120 Paradise Lane will care for and maintain the garden at 121 Paradise Lane for as long as Sam resides there.”
Life continues as usual on Paradise Lane until, in May 2005, Josie receives an offer from her daughter to live with her in a remote part of Greece (with limited phone and mail service) to help care for Josie’s grandson until July 2007, when Josie’s daughter plans to return to the United States. Josie was excited by the prospect of an adventure and quickly agreed. Because she intended to return in July 2007, she decided to rent her home rather than sell it. She spoke with her niece Rachel and they agreed that Josie would rent the house to Rachel during Josie’s absence. They signed a short, written lease agreement stating that Josie would lease the house to Rachel until July 2007, that Rachel would keep the house and yard in good condition, and that Rachel would promise to pay $500 per month to Josie’s local bank account as rent. Josie also told Rachel about the agreement with Sam, and left a copy of that agreement on the kitchen table. Josie left the country the next week and Rachel moved in.
Things went smoothly for a couple of months. Rachel paid the rent and maintained Josie’s house and yard and Sam’s garden. Then, in July 2005, Rachel accepted a new job that involved significant travel. Soon, she was asked to take a position with the same company out of town. She didn’t want to pay two rents, so she talked to her friend Bob about living in the house. Bob thought it was a great idea. So they drew up a written agreement stating:
“Rachel hereby agrees to sublet 120 Paradise Lane to Bob until July 2007. Bob hereby promises Rachel that he will pay $500 per month to Josie’s bank account.”
Before signing the document, Rachel explained the agreement between Josie and Sam to Bob, and left a copy of it on the kitchen table.
Once Bob moved into the house in August 2005, things changed. Bob had no interest in gardening and was a big fan of political banners, signs, posters, and lawn signs. Within weeks, Sam’s garden was a mess and political signs dotted the lawn and filled the windows of Josie’s house.
Based on these facts, please answer the following two questions based only on the property law you have learned this semester. Do not discuss any issues relating to adequate consideration for the Josie/Sam promises in your answer.
1. Sam is distressed over the condition of his garden and the signs across the street and comes to you for advice. Advise him of any potential relief that may be available to him and any obstacles to obtaining such relief.
2. Josie returns a year early in July 2006 and is shocked by the signs and banners in her yard and the terrible state of Sam’s garden (the conditions in July 2006 are the same as they were after Bob moved in the previous year). She also learns that Bob stopped paying the rent in January 2006 but appears to have no intention of moving out, claiming that he has a lease that runs until July 2007. Please advise Josie on her potential claims and remedies regarding the rent, as well as any obstacles to obtaining relief. She is furious at Bob but still has a soft spot for her niece Rachel and would like you to take this into account in advising her.
Model Answer to Part I
Question 1 -- The first issue is whether Sam can enforce either of the covenants as either a real covenant (to obtain damages) or an equitable servitude (to obtain injunctive relief). For a real covenant to “run with the land” and be enforceable against successors in interest to the promisor, most jurisdictions require an enforceable agreement between the original parties that meets the statute of frauds, intent that the burden and/or benefit run with the land, that the burden and/or benefit touch and concern the land, horizontal privity between the original parties to the agreement, vertical privity (for the burden to run), and that the subsequent BFP take with notice of the agreement.
With regard to enforcing the promise not to place any signs or banners in the lawn as a real covenant to obtain damages, it is necessary that the burden of the covenant run with the land (the benefit need not run because Sam is the original promisee). Because it is in writing the agreement appears to be enforceable as between the original parties, and the parties appear to intend that it run with the land, since Josie might die before Sam and the agreement is express that it applies to future occupants of the properties. Moreover, the benefit arguably touches and concerns the land because an uncluttered lawn arguably increases the values of nearby homes, and the burden touches and concerns the land because it involves what someone can or cannot do on her own property. However, there is no horizontal privity between Josie and Sam because they are not in a landlord-tenant relationship, do not have mutual simultaneous interests (co-owners of land, easements, etc.) and there has been no conveyance of a property interest from one to the other (grantor-grantee). There is also no vertical privity between Josie, Rachel and Bob because Josie conveyed only a leasehold interest in the property and she owned a FS. Both Rachel and Bob did take with notice and so that element is met. In sum, Sam cannot seek damages for breach of the covenant because of lack of horizontal and vertical privity.
However, Sam can enforce the promise regarding the lawn signs as placards as an equitable servitude and thus obtain an injunction prohibiting them. To enforce a promise as an equitable servitude, no horizontal or vertical privity is required but all of the other requirement discussed above are met.
With regard to the promise to maintain the garden, this cannot be enforced as either a real covenant or an equitable servitude. The only difference in the analysis of this covenant and the one discussed above is that with regard to the promise to maintain the garden, the burden arguably does not touch and concern the land because it is personal to the occupant of the burdened property. It does not decrease the valued of the burdened property, a person could maintain the garden in her personal capacity, not simply in her capacity as a landowner, and it doesn’t fit the other analogies we discussed that typically touch and concern land (i.e., repairs made on burdened land, maintenance of road on burdened land). This is similar to the example in one of our handouts where X covenants to maintain an oil well on Y’s property – the benefit touches and concerns Y’s land but the burden doesn’t touch and concern X’s land). This fact pattern is a bit more ambiguous because the parties intended to impose the covenant on future occupants of Josie’s property, but there is still a good argument it doesn’t touch and concern. Thus, Sam likely cannot obtain an injunction or damages associated with promise to maintain the garden.
Question 2 -- Josie has a valid rental agreement with Rachel. Although Rachel’s agreement with Bob says it is a sublet, it is for the full amount of the rental term (July 2007) so it will most likely be interpreted as an assignment, regardless of the plain language of the agreement. If it is an assignment, Josie is in privity of estate with Bob and privity of contract with Rachel. Bob is in privity of contract with Rachel. Josie can have Bob evicted for nonpayment of rent and can also seek damages for nonpayment of rent based on privity of estate. Thus, Josie can obtain all the relief she needs without bringing an action against Rachel.
If, however, the contract is interpreted as a sublet, then Josie is in privity of contract and privity of estate with Rachel only, and has no privity relationship with Bob. Josie can still bring an action for eviction against Bob, but cannot seek unpaid rent from Bob. Instead, she must seek these damages from Rachel who can then seek indemnification from Bob based on privity of contract and privity of estate. Thus, she cannot recover back rent unless she sues Rachel or otherwise reaches agreement with her.
Part II (one hour)
The LA Advertising Company is the largest billboard company in the Los Angeles, California metropolitan area. Among its many billboards advertising all types of products are 20 billboards on Century Boulevard approaching Los Angeles International Airport. These billboards were erected 10 years ago pursuant to a contract with the City of Los Angeles that granted the right to put up the billboards along the Boulevard in exchange for yearly payments. The contract said the City could require the removal of the billboards if necessary for public safety reasons or in the event any billboard was deemed pornographic by the City.
In 2005, Los Angeles decided to make another bid for the Summer Olympics. In connection with that decision, it undertook a city beautifying and improvement plan. Pursuant to that plan, it enacted several zoning ordinance, one of which, Ordinance No. 10, stated its purpose was to beautify the entrances and exits from the airports and bus stations to provide a nicer entrance to the City. That ordinance went on to state that the City was authorized to enter into contracts with private landscaping companies to provide trees and flowers along the roads leading to and from the airports and bus stations.
Pursuant to this ordinance, the City entered into a contract giving full authority to “The Garden Store” to plant more palm trees along Century Boulevard. The Garden Store proceeded to plant 50 trees along the Boulevard (resulting in a wonderful profit for the Garden Store) which everyone agreed resulted a great improvement to the area. Everyone, that is, but LA Advertising. After the palm tree project was complete, two of the billboards were completely obscured, and ten additional billboards were partially obscured. LA Advertising’s chief executive complained to the City, but the City Manager loved the palm trees (as well as all the nice e-mails and calls she had received as a result of the project) and refused to do anything about it other than to say that she would consider allowing LA Advertising Company to enter into contracts with the City for two additional billboards in other parts of the City, that, unfortunately, did not have nearly the visibility of the ones on Century Boulevard. The City Manager also indicated that the City would reconsider the issue of whether some of the problem palm trees could be removed after the big push for the Olympics was over in two years.
The chief executive of LA Advertising Company is outraged and comes to you for advice as to his possibilities for relief. Please advise him what legal theories he can use to right this grievous wrong and any potential obstacles to those theories. Use only the property law we have studied this year to answer this question.
Model Answer to Part II
The first challenge the Company might bring is to the validity of the zoning ordinance itself, on the ground that there is no rational basis to allow a private company to conduct what should be conducted by city workers. This argument will likely fail because beautifying the City promotes the public welfare, is within the City’s police power, and the means to accomplish it appear reasonable and not arbitrary.
A better attack would be to bring an action for inverse condemnation against the City, on the grounds that the ordinance works a taking of private property without just compensation. First, the Company must establish that the billboards are private property, but this seems apparent by the fact that they have a right to put up the billboards pursuant to contract, pay rent for that right, and there are very few limitations on the continued use of the billboards (public safety and pornography). Thus, there is a private property interest. The Company may try to argue the palm trees are not for a “public use,” but that argument will likely fail because even though a private company is installing them and obtaining an economic benefit, they are being placed on property to which the public has access and the public benefits from the improved look of the City.
The next issue is whether the Company can argue this is a physical occupation or a regulatory taking. The trees are completely obscuring the visibility of 2 of the billboards, meaning that the Company cannot use that space at all. Also, the Company has lost its right to exclude others from interfering with the space. Thus, there is an argument that at least with regard to the fully obscured billboards and, even the partially obscured billboards, this is a physical occupation taking like in Loretto or Causby for which the Company is automatically subject to compensation. This would be true even if the palm trees are removed two years later – physical occupations for less than the full life of the property are compensable.
However, if the doctrine of physical occupation is construed narrowly, the Company can still argue for a regulatory taking under Penn Central on grounds that the regulation and the obscuring of the billboards results in decreased economic value and interferes with reasonable, investment-backed expectations of the Company. Indeed, the Company’s contract states very few conditions that allow removal of the billboards. However, there is an issue regarding how to measure the economic impact. If we use concepts of conceptual severance, there should be a complete taking of the two billboards, resulting in a Lucas-type taking because all value of those two billboards has been denied. Also, the purpose behind the regulation, city beautification, is not the type of common law background nuisance principles that can justify depriving a private property owner of all economic use. Under such a theory, there would be a taking and the Company would be entitled to at least the loss in value of the two billboards.
Most Supreme Court precedent in this area, however, does not support conceptual severance (see Penn Central, Keystone Bituminous, Tahoe-Sierra) which means the economic impact under Penn Central would be measured against the full value of either all the billboards on Century Avenue or even all the billboards in the City that are subject to the regulation. Under such an analysis, the economic impact would be partial only, particularly when coupled with the fact that the City is giving him the possibility of substitute billboards in other parts of the City (similar to the Transfer Development Rights in Penn Central).
Finally, the Company has the right to seek inverse condemnation even though the interference may be only temporary. First, it is unclear whether the City will in fact do anything about the palm trees once the push for the Olympics is over. Second, under the First English Evangelical case, temporary takings are compensable if in fact the regulation amounts to a taking.
Part III (30 minutes)
In January 2005, Alan purchases Purpleacre from Zeke pursuant to a general warranty deed. In June 2005, Alan enters into a purchase agreement with Bob for Purpleacre that contains the following clauses: (1) a promise to provide marketable and insurable title on or before the closing; and (2) a promise to deliver a special warranty deed (also known as a limited warranty deed) at closing. Three months after the closing, in September 2005, Bob learns that four acres of the property were lost by adverse possession during Zeke’s ownership. Bob also learns that there are several housing code violations (problems with the staircases, quality of the siding, no handrails on the staircases, lead paint on the walls) that were never disclosed to Bob by Alan, who was apparently unaware of the violations himself. Evaluate Bob’s claims and potential relief.
Model Answer to Part III
Bob can bring a claim of breach of the present covenant of seisin against Zeke for loss of the 4 acres by adverse possession if the jurisdiction follows the Rockafeller case and allows that cause of action to be assigned to subsequent purchaser. This assumes the statute of limitations has not yet run on the present covenants. Bob cannot bring this claim against Alan because Alan gave a special warranty deed which only warrants against title problems that occurred during Alan’s ownership. Bob cannot obtain relief for breach of the covenant against encumbrances because building code or land use violations do not constitute a breach (see Frimberger) and any lesser post-closing standard (see Loymeyer) does not apply.