Property II Exam, Spring 1998

SPECIAL INSTRUCTIONS

This is a closed-book Property II examination consisting of three questions. The total time allowed will be three and one-half hours. The questions are of equal weight. That is, each answer will be counted as one-third of the final grade.

Each answer will be graded separately and so must stand alone. Thus, in writing any single answer, do not refer to anything in any other answer. You may refer to statements made earlier within a given answer.

Discuss all issues reasonably presented, even if resolution of any particular one would by itself dispose of the problem. Specify all reasons supporting your conclusions, including alternative grounds and possible contrary arguments.

If you believe that, with respect to any particular issue, there are insufficient facts to warrant drawing any conclusion, indicate what kinds of additional facts would be relevant and why.

If you believe that any of the statements of fact is ambiguous, resolve the ambiguities for yourself, indicating briefly their nature and your method of resolution.

No credit will be given for simply observing that the examination instructions state that a certain issue should not be discussed or that the reader should assume that a particular legal principle is satisfied.

Please write on only one side of each page. Please use complete sentences. Thanks very much.

QUESTION I

This Question has two parts.

Part 1

On November 1, 1995, A was the owner of Parcel P. Advanced in years and in poor health, A began thinking about how to dispose of her property at her death. She had great difficulty in reaching any final decision. After much anxious reflection, she finally decided to arrange her affairs so as to retain the greatest possible degree of flexibility right up to the moment of death. She executed a quit-claim deed to Parcel P, naming B as the grantee. The deed contained the following language: "The grantor hereby reserves a life estate in and to said property, with power to sell, rent, lease, mortgage or otherwise dispose of said property during her natural lifetime." She placed the deed in a locked safe in her basement. She did not tell B what she had done. She telephoned a friend, Z, and told Z that she had executed a deed in B's favor and had placed the deed in a locked safe in her basement. She told Z the formula for unlocking the safe and asked Z to "open the safe immediately after my death, and, in the event that the deed to B is still there, to deliver the deed to B." Z agreed. A died six weeks later. Z went to the safe in A's basement, unlocked the safe and found the deed to B. Z delivered the deed to B. The administrator of A's estate claimed that Parcel P was an asset of A's estate. B claimed that he owned parcel P. Litigation between B and the administrator of A's estate resulted.

Discuss and resolve the issues of Property Law which might reasonably arise in this litigation.

Part 2

Suppose that B prevailed in the litigation described in Part 1 and that on March 1, 1997, B was the rightful record owner of Parcel P. Assume that at all relevant times the market value of Parcel P was $300,000.

Assume that the applicable recording act is a Race-Notice statute and that applicable law requires that any county recorder may, but is not required, to maintain a tract index. Assume that all of the recordings mentioned were filed in a county which maintains a grantor-grantee index, but which does not maintain a tract index.

On April 1, 1997, C executed and delivered a general warranty deed to Parcel P in favor of D. At that time C had no title to Parcel P. D paid C $300,000 as consideration. The deed from C to D was recorded on April 1, 1997.

On May 1, 1997, B executed and delivered a quit-claim deed to Parcel P in favor of C. C paid B $300,000 as consideration. The deed from B to C was recorded on May 1, 1997.

On June 1, 1997, C executed and delivered a quit-claim deed to Parcel P in favor of E. E paid C $25,000 as consideration. As C handed the deed to E, C said, "You don't have to worry about D. Despite what you may have heard, D has no legitimate claim to this land." E had never heard of D and didn't know what C was talking about. But E didn't ask C any questions about C's remark because E knew C to be a person of strange and unpredictable behavior who frequently made pointlessly obscure comments. The deed from C to E was recorded on June 1, 1997.

On July 1, 1997, E executed and delivered a quit-claim deed to Parcel P in favor of F. F paid E $300,000 as consideration. E said nothing to F about C's remark about D. The deed from E to F was recorded on July 1, 1997.

Assume that litigation arises between F and D over title to Parcel P. Discuss and resolve the issues of Property Law which might reasonably arise in this proceeding.

QUESTION II

On June 1, 1994, A purchased a large tract of undeveloped land. She subdivided the tract into 300 parcels and built a four-bedroom house and a three-car garage on each one. She called the development "Leisure Hills" and advertised the individual parcels as "providing a unique opportunity for a truly genteel life in a deeply harmonious setting of undisturbed tranquility, completely free from all the overwhelmingly tiresome annoyances of commercial and industrial activity."

A began selling the parcels to individual buyers. She sold the first parcel (Parcel #1) on June 1, 1995, to B. One day after A executed and delivered a deed to Parcel #1 to B, B signed, at A's request, a document providing that "B covenants that the property shall be used for single-family use only." Neither the deed from A to B nor the document which B signed a day later contained any covenant purporting to restrict any of the parcels A retained. B paid $300,000 as consideration. The deed from A to B was recorded on June 1, 1995. The document B signed a day later was recorded on June 2, 1995. The county in which the Leisure Hills subdivision was located maintained a grantor-grantee index, but not a tract index.

During the next 12 months A sold all of the remaining parcels. One of those parcels, Parcel #250, A sold to C on June 1, 1996. The deed from A to C did not contain any covenants. C paid $300,000 as consideration. The deed from A to C was recorded on June 1, 1996.

On October 1, 1996, C leased Parcel #250 to D for a 5-year term, commencing on October 1, 1996, and ending September 30, 2001. The written lease agreement provided that "the lessee shall pay the monthly sum of $1200 for the duration of this lease." The lease agreement did not contain any covenant restricting the property to "single-family use." The written agreement between C and D was recorded on October 1, 1996.

On October 1, 1997, D transferred possession of Parcel #250 to E. In order to effect the transfer, D and E executed a document entitled "Agreement for Sublease." This document contained a clause providing that "the sublessee shall have the exclusive right of possession for the period commencing October 1, 1997, and ending September 30, 2001." The agreement stipulated a monthly rent of $1200 and provided that the "sublessee shall remit rental payments directly to C." D and E each signed the document. Immediately above D's signature were the words, "For value received and in consideration of E's promise to faithfully perform all conditions of the lease between C and D, dated October 1, 1996, I hereby sublet the premises to E." Likewise, immediately above E's signature were the words, "The foregoing subletting of the premises is accepted, this first day of October, 1997." The document did not contain any covenant restricting the property to "single-family use." C consented to the transfer from D to E. The written agreement between D and E was recorded on October 1, 1997.

E moved in with his family shortly thereafter. On November 1, 1997, E began operating a computer repair service in the basement of the house on Parcel #250. E put up a sign advertising his repair service in a front window of the house. Nothing in the applicable zoning ordinances prohibited E's engaging in such an activity in that location.

E's repair business did not bring in as much revenue as E had hoped. As a result, E was unable to remit to C the $1200 monthly rent payments for the period from December, 1997, through May, 1998. D did not remit any rent payments to C for that period either.

Two lawsuits were commenced. [1] B brought an action against E, seeking an injunction prohibiting E from operating a computer repair service in his basement. B did not request any money damages. [2] C brought an action against D and E, seeking payment of the rent for the period from December, 1997, through May, 1998.

Discuss and resolve the issues of Property Law which might reasonably arise in these two proceedings.

QUESTION III

A was a famous writer who had published more than 40 best-selling novels. Her income from these books, together with associated movie rights, had made her a millionaire many times over. In 1990 A became romantically involved with B, a nineteen-year-old man with his own aspirations to write novels. B had no regular source of income. On October 1, 1990, A and B began living together in A's home. A few days later they orally agreed that while they lived together they "would combine efforts and earnings and would share equally all property accumulated as a result of our efforts, whether individual or combined." A and B stayed together until March 1, 1998, when, following an argument, B moved out. During the time they lived together, A's total earnings from books and movies was 20-million dollars. During the same period, B earned nothing from his own individual efforts.

On September 1, 1996, A bought a 5,000-acre tract of forested land in the northern part of the State. At the time of her purchase there were no legal restrictions on the uses to which that land could be put. The 5,000-acre tract was part of a larger 20,000-acre tract of forested land. A paid 25-million dollars for the 5,000-acre tract. She planned to use most of it as a source of timber for commercial logging. She planned to use the remaining portions for a ski resort, a golf course, a shopping center and other assorted commercial uses. A expected that, once these planned developments were put in place, the total annual revenue from the tract would exceed 5-million dollars per year.

During the 1997 session of the State Legislature, a strong concern developed over the problem of the rapidly diminishing areas of wilderness in the State. Several legislators proposed that the State use its power of eminent domain to condemn the 20,000-acre forested tract, of which A's tract was a part, and then maintain the entire area as a wilderness area available to the general public for camping, boating and fishing. That proposal was rejected because a majority of legislators believed it would be too expensive. As a compromise measure, the Legislature enacted the Wilderness Preservation Act. The Act designated the 20,000-acre tract as "The Wilderness Area" and contained two substantive sections. Section A required that the 20,000-acre tract be left in its wilderness state and prohibited any development for any purpose whatever, whether personal, residential, commercial, industrial or agricultural. Section B provided that any person owning any land within The Wilderness Area apply within 90 days of the Act's effective date for "a permit to continue being an owner in good standing of land in The Wilderness Area." Section B also provided that, as a necessary condition of obtaining such a permit, any land owner applying for such a permit "must dedicate to the general public a permanent easement to use the applicant's land for recreational uses, including camping, boating and fishing."

Under the restrictions of the Wilderness Preservation Act, the market value of A's 5,000-acre tract was $50,000.

Two lawsuits were initiated. [1] B sued A, seeking one-half of the revenues A had earned during the period of time they had lived together. [2] A sued the State, alleging that the Wilderness Preservation Act constituted a taking under the Federal Constitution.

Discuss and resolve the issues of Property Law which might reasonably arise in these two proceedings.