Question 1 (90 minutes)

In 1995 Long was the owner of parcel A in the diagram attached at the end of this exam. This tract lay to the north of land owned by Parsons which is indicated as parcels B and C. At the time Parsons owned both of parcels B and C. Long's parcel was bounded by County Highway 12 on the north and by other privately owned land on either side. Parsons' land was bounded by County Highway 8 on the south and by privately owned land on either side. Parcel A was about 15 acres and parcels B and C were each about the same. All of the property was not too far from a newly developed ski area.

Mason was a land speculator who had an interest in the area for its development potential--not that he would have any interest in developing it, but he had a knack for spotting good property that he could sell for a quick profit. On June 1, 1995, Mason and Long signed a purchase agreement for sale of Parcel A for $75,000. June 30, 1995, was set as the closing date at which time Long agreed to deliver a warranty deed to Parcel A in return for the purchase price to be paid in cash.

Mason was absolutely correct in his assessment of the property. On June 15 he met one Nost who was also interested in real estate in the area. Nost made money not just by speculation and quick resale but by developing property herself. When Mason told her about Parcel A, Nost was very interested. They went out to look at the property which was vacant and after several hours of conversation and negotiation, Nost offered $125,000 for the property. The next day Mason gave Nost a warranty deed to Parcel A and Nost gave Mason a check for $125,000. Nost made no title search, but recorded her deed from Mason on June 17.

On June 30, 1995, Mason happily paid Long $75,000 for Parcel A, and Long delivered his warranty deed to the property to Mason. Mason recorded this deed the same day.

Mason was not done. Several days later he met another person interested in the development potential of the area. This time it was a fellow named Ohls who also went with Mason to view Parcel A which was still vacant. Mason saw how excited Ohls was and simply could not help himself. He told Ohls that he, Mason, owned Parcel A and would be willing to sell it for $150,000. Ohls did not hesitate; he accepted the offer. On July 15, Mason gave his warranty deed to Parcel A to Ohls in exchange for Ohls' check for $150,000. Ohls was a trusting sort and thought that Mason looked trustworthy. He did no title search and had no actual knowledge of Mason's earlier deed to Nost. Ohls was very excited about his good fortune--so excited that he forgot to record the deed he had received from Mason.

Ohls went home to New York planning to come back in the spring of 1996 to begin work on the development. In the meantime Nost began to visit the property with builders and planners as she began her development plan for the Parcel. One day while she was on the property she was approached by Parsons, who you recall owned Parcels B and C together. Parsons told Nost that he was interested in acquiring an easement across her property to Highway 12. That would give him much more direct access to the new ski area. He could get to Highway 8 on the old driveway that he has used for years, but Highway 8 went around the mountain and the drive to the ski area was almost an hour. Parsons offered Nost $10,000 for the easement. Because she planned a number of different roads within the tract anyway, Nost saw no problem with a slight extension to Parsons' property. On September 15, 1995, she gave Parsons a deed granting him an easement across the extreme east side of Tract A. Parsons paid her the $10,000 and recorded his deed the same day.

With that done Parsons sold Parcel C to Quick on October 10, 1995. The deed from Parsons to Quick said nothing about a retained easement across Parcel C to Highway 8 even though the driveway which Parsons had used for many years was quite obvious. It was well maintained with fresh gravel. Parsons continued to use the driveway to Highway 8 after the sale to Quick.

In the meantime Ohls remembered that he had failed to record the July 15 deed to Parcel A. He finally did so on November 1, 1995.

Ohls returned to the property with the beginning of spring two weeks ago. (These events obviously occurred somewhere south of Minnesota.) When he did, he found that Nost had begun to clear the land. When Ohls asked her what she was doing, Nost said she was the owner of the land and told him about the deed she had received from Mason. Ohls told Nost that he also had a deed from Mason and considered himself the owner of the land. He told Nost that she must leave the property.

Ohls was further shocked when he saw Parsons using a road that Parsons had built across the east part of Parcel A. When confronted, Parsons told Ohls about the easement that Nost had deeded to him. Parsons also explained that he had not intended to use the road this soon, but had to do so because Quick had blocked off the old driveway to Highway 8 claiming that Parsons no longer had the right to cross Parcel C if he ever did.

1) Ohls has brought an action to quiet title in him to Parcel A. He claims that he owns the property in fee simple, free of any interest in Nost as well as any easement in favor of Parsons. You are the judge assigned to this action. Write your opinion as to who has title to Parcel A, fully explaining your reasoning.

2) Parsons has petitioned for an injunction against Quick's blocking of the driveway across Parcel C to Highway 8. You have also been assigned to this case. Will you grant the injunction? Why or why not?

The jurisdiction where all of the property is located maintains only a grantor-grantee index. The applicable recording statute reads as follows:

"Every conveyance affecting the title to real property within this state which is not recorded as provided by law is void as against any subsequent purchaser or mortgagee of the same property or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded, and as against the heirs and assigns of such subsequent purchaser."

Question 2 (30 minutes)

Developer owned 10 acres of vacant land which he subdivided into 10 one acre lots. He recorded a subdivision plan, but it contained no restrictions on the use of the lots. In May, 1994, he sold lot 1 to Abel giving a deed which contained the following language, 'Grantee hereby agrees for Grantee, his heirs and assigns that the property conveyed shall be used only for residential purposes.' This deed was recorded immediately.

In July, 1994, Developer sold lot 2 to Baker giving a deed that contained no restrictions on the use of the property. This omission was inadvertent. This deed was recorded the day after its delivery.

Between July, 1994, and August, 1995, lots 3 through 8 were sold with deeds to the grantees containing the same language contained in the Developer to Abel deed. All of these deeds were recorded immediately.

On August 15, 1995, Developer conveyed lot 9 to Carter with a deed containing the following language, 'Grantee hereby agrees for Grantee, his heirs and assigns that the property conveyed shall be used for residential purposes only, and Grantor similarly restricts all other lots in the subdivision.'

In January, 1996, Dawes bought lot 10 from Developer. The deed for the conveyance contained no restriction on the use of the lot. Dawes had visited the site, but did no title search before taking the deed which was recorded immediately.

In April, Baker opened a beauty shop in the back part of her house on lot 2. Her shop had room for 5 beauticians and substantially increased traffic in the neighborhood. At about the same time, Dawes started to erect a convenience store on his lot 10. Abel, Carter and the other owners of lots 4 through 9 have brought an action for enjoin both Baker and Dawes from continuing or opening their commercial enterprises and for damages.

Assume that the applicable recording act is a notice statute, and that the jurisdiction has only a grantor-grantee index and no tract index. What are the chances that the plaintiffs will succeed in their actions against Baker and Dawes? Explain.

Question 3 (60 minutes)

In 1950 Smelting and Refining, Inc. purchased a 12 acre tract of land about three miles east of Whitehall, a city of about 50,000 residents. At that time, all of the land in use in the vicinity of the tract was being used for farming. Much of the land in the area was untillable. It was unused and remained in its natural wooded state. Smelting built a factory on its tract and began doing business smelting copper.

After 10 years Smelting was doing quite well. It had gross receipts of $8,000,000 per year and net earnings of $3,000,000 per year. It employed 300 persons and contributed much to the local economy. The down side was that the plant had adverse impacts. The smelting process caused substantial noise and smoke in the area. In addition, the factory emitted microscopic particles of arsenic and cadmium that dispersed in the air. Despite these effects, Smelting received no complaints from the area farmers in the early years of its operation.

By 1965 real estate developers began to acquire tracts of land east of Whitehall. The city was experiencing an exceptional period of growth and prosperity and needed room to expand. The developers subdivided the tracts and sold them for residential purposes. By 1970 the expansion had moved so far to the east that the city expanded its limits one mile to the east as it was permitted to do under state law.

Pressure for development to the east of Whitehall continued unabated over the next few years until the residential area came within 1,000 feet of Smelting's tract. Again in 1990, the city limits were expanded to the east, this time bringing Smelting's property within the city. Shortly thereafter the city council passed an ordinance zoning the newly annexed area. In this ordinance Smelting's property was zoned I-1 or heavy industrial. The smelting factory was a permitted use under this classification. The ordinance was cumulative so that other commercial and residential uses were permitted as well.

Since 1990 the residential development has continued. Many new developments are now located near the factory. Commercial establishments such as retail stores and gas stations have also grown up to serve the local population. The only other industrial use in the area, a small lumber mill, closed in 1993. At present, the streets surrounding the factory are full of commercial establishments and beyond that ring are all residential properties.

As this expansion has occurred, the number of complaints from citizens has increased. The city has recorded over 500 complaints in the last 6 months. These complaints center on the noise of the factory and the smoke and bad smelling fumes coming from it. A local TV station had a report last week that documented the dangers to human health posed by continuous exposure to arsenic and cadmium particulates. The management of Smelting has responded by publishing studies that show that the microscopic particles dissipate in the air and do not reach the ground and that the public danger is not great. Further, it emphasizes that it employs 350 people with a payroll of $14,000,000 per year. It has estimated that the land's value for industrial purposes with its present structure is $25,000,000. For commercial or residential purposes it would be worth a fraction of that. The going concern value of the business is $60,000,000.

Answer the following two questions.

1) A group of 15 citizens living within a mile of Smelting's factory have sued Smelting alleging that the factory is a nuisance and asking for injunctive relief and damages. What arguments might be made on behalf of the citizens and on behalf of Smelting in this litigation? What is the likely outcome of this action?

2) Alternatively, suppose that in April, 1996, the Whitehall City Council passed an amendment to its comprehensive zoning ordinance. Under this new ordinance industrial zones are limited to an area on the south side of the city. The Smelting land is rezoned for commercial and apartment residential use only. Smelting's land use is defined as a 'nonconforming, pre-existing use.' The ordinance further provides that any 'nonconforming, pre-existing use' may be continued until December 31, 1998, at which time the use will become unlawful and must be discontinued. Smelting has brought an action alleging a violation of the Takings Clause. What arguments may be advanced by the two sides in this action? What is the likely outcome?