Property Law – 2

  1. ESTATES GENERALLY
  2. Estate – an interest in property that is OR may become possessory
    1. life estate IS an estate b/c it is possessory à present possessory estate (“PPE”)
    2. reversion IS an estate b/c it may become possessory (NOT possessory at the moment, BUT right to possess in future) à future possessory interest (“FPI”)
    3. An easement is NOT an estate (never possessory)
  3. PPEs à 2 categories…
    1. Non-Freehold (i.e. landlord-tenant)
    2. Freehold à 2 types…
      1. Life Estate
      2. Fee (at least potentially infinite) à 3 types…
        1. Fee Simple Absolute (will go on forever)
        2. Fee Tail (will go on until family ends)
  • Fee Simple Defeasible (can be prematurely cut short) à 3 types…
    1. Fee Simple Determinable (“FSD”)
    2. Fee Simple Subject to Condition Subsequent (“FSSCS”)
    3. Fee Simple Subject to Executory Interest (“FSSEI”)
  1. FPIs à 2 categories…
    1. Retained by Transferor (something kept back) à 3 types…
      1. Possibility of Reverter (“PR”) (follows FSD)
      2. Power of Termination (“PT”) (follows FSSCS)
      3. Reversion
    2. Created in Transferee
      1. Executory Interest (“EI”) (follows FSSEI)
      2. Remainder
  1. FEE SIMPLE ABSOLUTE
  2. Language to create FSA
    1. At common law à “O to A and her heirs and assigns (ONLY way to create FSA, NO substitutions)
      1. “and her heirs” are words of inheritance (making it clear that estate will last longer than A’s lifetime)
      2. “and assigns” are words of alienability (making it clear that estate is transferable)
  1. At modern law à “O to A” (AND various other possibilities)
    1. Presumption of conveying maximum estate possible (words of inheritancealienability NOT necessary)
      1. If “O to A forever”“A” is a word of purchase (describing who is taking)…
      2. … AND, “forever” is a word of limitation (describing what is taken)
    2. Ambiguities interpreted in favor of grantee (A), NOT grantor (O)
  2. Transfer of FSA
    1. Inter vivos (in lifetime)
    2. In death à 2 types…
      1. In will (to will beneficiary/ies)
      2. In testate (to prospective heir(s), NOT covered by valid will)
    3. If A dies w/ NO heirs, title passes to govt. via escheat (FSA does NOT end)
  3. Encumbrance – a non-possessory interest in property that affects title in property
    1. O, as holder of FSA, could grant out an easement, AND a creditor could have a lien against O’s property…
    2. … BUT, categorically speaking, O still holds 100% of FSA (encumbrances do NOT change estate)
  • FEE SIMPLE DEFEASIBLES & RELATED FPIs
  1. Of the 3 FPIs that follow a fee simple defeasible, ONLY EI is subject to the Rule Against Perpetuities (“RAP”)… AND, EI is the ONLY FPI following a fee simple defeasible which is created in a transferee… SO, in order to create a FPI in a transferee, BUT avoid RAPimplications…
    1. O to A w/ either a PR OR PT retained in O…
      1. If restriction violated by A, then estate would return to O…
      2. … either automatic (PR) OR optional (PT)
    2. … then, O could transfer PR/PT to B…
      1. Essentially, B has an EI
      2. … BUT, b/c it is technically a PR/PTRAP has NO effect
    3. … although, there IS a jurisdictional split re: transferability of PR/PT/EI
      1. Virtually NO state limits transferability of all 3 in death (in will/in testate)…
  1. … BUT, some states do NOT allow transferability of all 3 inter vivos (CA does allow for all 3) à ways around having to research state law re: inter vivos transferability…
    1. O could transfer FSD/FSSCS to A, then transfer PR/PT to B in will à accomplishes same outcome as inter vivos transfer… AND, O would have more control b/c PR/PT retained by O until death
    2. O could transfer FSA to B, then B could transfer FSD/FSSCS to A, w/ B retaining PR/PT à accomplishes same outcome w/o O having to transfer the PR/PT itself… though, O has less control (NO guarantee that B will transfer to A, B must be trustworthy)
  2. As opposed to jurisdictional split at modern law, there is NO inter vivos transferability at common law
    1. 2 reasons why…
      1. Avoid forfeiture (b/c the law abhors a forfeiture)
      2. Avoid restricting use/development/marketability of property (create a speculative market)
    2. 2 exceptions to common law rule re: transferability (which some states still follow, though NOT CA)…
      1. Merger – transferring FPI to holder of fee simple defeasible (thereby creating FSA)
      2. Transfer incidental to reversion – transferring FPI w/ reversion (i.e. O to A for life w/ PR/PT retained in O à O could transfer PR/PT AND reversion to B, but NOT one w/o the other)
    3. FPIs as remedial devices (remedy for violation of restriction)
      1. Generally, 3 purposes that are served by restriction à to compel, to prevent, to control
        1. Grantor has purpose(s)…
        2. … drafts restriction to comply w/ said purpose(s)…
        3. … which includes remedial device for if/when restriction is violated
      2. Basic remedy is forfeiture
        1. Automatically w/ PR
        2. Optionally w/ PT
        3. Either/or w/ EI (though, unlike PR/PT, subject to RAP)
  1. Other promissory remedies are damages ($$) OR injunction (specific performance), which come w/ a covenant/equitable servitude (“C/ES”) (an interest, NOT an estate)
    1. Covenants run w/ land, are enforceable at law (strict requirements)…
    2. … whereas, equitable servitudes are NOT as strict (more defenses apply)
  2. If NO remedy provided, then deed merely contains a declaration of purpose (“no teeth”/“learning experience”)
  3. Overall, 3 issues to consider…
    1. Is there any enforceable remedial device? à if NO, then dealing w/ declaration of purpose
    2. If YES, then what type? à either C/ES (damages/injunction) OR PR/PT/EI(forfeiture)
    3. What is the scope? àe. what constitutes a violation (i.e. [_] purposes only”)
  4. Flag Words (for differentiating b/w remedial devices)…
    1. For FSD/PR
      1. “O to A…
        1. … so long as [restriction]
        2. … while [restricton]
  • … during [restriction]
  1. … until [restriction]
  1. In FSDs/PRs, there is specific language re: A’s estate, but NO specific language re: O’s future interest à it is implied that, b/c property must go to someone, it goes to O
  1. For FSSCS/PT
    1. “O to A…
      1. … on condition that [restriction]… and if [violation]… O has the right to reenter
      2. … provided that [restriction]… and if [violation]… estate may be terminatedby O”
  • … but if [restriction/violation]… O reserves the power to terminate
  1. … if however [restriction/violation]… O can forfeit the estate”
  1. In FSSCSs/PTs, there is specific language re: both A’s estate AND O’s future interest à w/o the latter, there is NO implication that O would want property back in case of violation
  1. For C/ES à “enjoined”“abated”
  1. As per constructional preference (to favor grantee over grantor, avoid forfeiture of property/restriction of use), courts will construe ambiguities (i.e. conflicting flag words) as to the least harsh remedy
    1. Thus, if ambiguous as to whether O, in transfer to A, wants (in case of violation of restriction) damages/injunction from A (C/ES) OR forfeiture of property (PR/PT), courts will favor former (b/c less harsh)…
      1. C/ES and PT are consistent w/ one another, as O has options as to how to proceed against A who violates…
      2. … BUT, PR is NOT consistent, as O has no choice but to take property back (in some cases, O may NOT want property back)
    2. … AND, likewise, courts will favor optional forfeiture (PT) over automaticforfeiture (PR) (though, if O wants property back, then NO practical difference b/w PR and PT)…
    3. … BUT, in case of adverse possessionPR is actually the less harsh than PT(reversal of traditional presumption)
      1. If O possesses PR, then SoL begins immediately upon A’s violation (b/c O became owner, AND A became trespasser, at time of violation)…
      2. … BUT, if O possesses PT, then SoL does NOT begin until O brings action (SO, A is NOT yet trespasser)
        1. In CA, SoL is 5 yrs.…
        2. … SO, if O brings action 5+ yrs. from date of A’s violation, O would want to argue for PT (b/c SoL has NOT yet began)…
  • … whereas, A would want to argue for PR (b/c O would be time-barred)
  1. Standing/enforcement…
    1. The party that has the benefit can enforce remedial device against the party that has the burden (“good defendant”)
      1. In Atkins v. Anderson, Shepherd grants land to Atkins (FSSCS/PT), Atkins then grants part of land (subdivision) to Anderson (Shepherd’s PT still applies to entire lot)…
      2. … Anderson then violates restriction, Atkins sues Anderson (files lis pendens, giving notice of action to 3rd parties)…
      3. … BUT, only Shepherd, as holder of PT, can sue Anderson to enforce restriction…
        1. Also, Anderson cured breach after Atkins filed suit, which would’ve been too late at common law (Anderson still would’ve lost property)…
        2. … BUT, at modern law, Anderson likely would’ve kept property if cure was in good faith…
  • … AND, if notice grace clause, then D may cure breach within “reasonable amount of time… so long as acting expeditiously”
  1. … thus, when Shepherd granted land to Atkins, Atkins should’ve demanded that Shepherd grant PT as well à Atkins had ONLY the “substantial interest”, but NOT the remedial device (needed both)
    1. If purpose is land-related (i.e. height-limit on residence on Lot 1 to protect view of Lot 2), then grantee has substantial interest
      1. Often not practical for grantor (i.e. land developer) to hold remedial device, then enforce on grantee’s behalf (time, expenses, liability involved)…
      2. … AND, if multiple grantees (i.e. lot owners), then grantor could transfer undivided interest in remedial device to all grantees (as co-tenants), OR form organization (for all grantees to join) to hold remedial device
    2. If purpose is personal (NOT land-related, i.e. “research purposes only”), then grantor has substantial interest
  • If purpose is hybrid b/w land-related AND personal (benefitting both grantor AND grantee), then MAY be enforceable by both
    1. If O donates land to city for purpose of maintaining free public library dedicated to O (w/ O holding PT if restriction violated)…
    2. … AND, city wants to build shopping center around library…
    3. … b/c city is committing illegal expenditure/waste/injury to public entity, residential taxpayers have standing to bring taxpayer lawsuit (since violating O’s restriction could result in loss of property)
  1. NO self-help à even if forfeiture has technically occurred (i.e. PR), must get court order to recover possessment (action for ejectment)
  2. If holder of fee simple defeasible has paid for improvementsforfeiture is of land AND improvements à holder gets NO reimbursement, w/ 2 exceptions…
    1. Improvement is fixture (removable by holder)
    2. Eminent domain (govt. entity condemns land, BUT compensates for $$ put into land)
  1. Defenses…
    1. Legal defense equitable defense
      1. Legal defenses (i.e. adverse possession/SoL) can be raised against any restriction…
      2. … whereas, in many jurisdictions, equitable defenses can ONLY be raised against certain restrictions
        1. Less likely that an equitable defense will “knock out” PR/PT/EI
        2. … esp. in Eastern states, where PR/PT/EI are viewed more so as “estates” than “remedial devices” (as opposed to in more liberal Western states)
      3. In some jurisdictions (i.e. CA), defenses can be brought up by grantee – before actually violating restriction – as initial action to quiet title (“knock out” restriction in advance)
        1. CCP § 1060 (as noted in Hess) allows grantee (who possesses land subject to restriction) to obtain such declaratory relief (“pre-breach judgment”)…
        2. … BUT, some courts do NOT waste time w/ informational judgments (ONLY a “real” dispute)…
        3. … thus, grantee would have to violate restriction (AND thereby risk losing title) to determine whether defense is valid
      4. Laches estoppel
        1. Laches – “equitable SoL” (NO specific time limit, BUT within “reasonable time”)
        2. Estoppel – detrimental reliance
          1. Do NOT need reliance w/ laches
          2. … BUT, do NOT need long period of time w/ estoppel
        3. Changed conditions – purpose of restriction no longer achievable
          1. When facts support changed conditions à 3 potential outcomes…
            1. Restriction is gone
            2. Scope of restriction is less narrow (restriction still controls, BUT permissible uses expanded)
  • Estate is gone (“return to sender”)
  1. In Bolotin, lot owner wants “residential purposes only”-restriction gone (outcome #1), so as to use property for commercial purposes (appraiser claims lot is economically worthless if restricted to residential purposes)… BUT, purposes are much broader than economic benefits
    1. Purpose of restriction was to benefit adjoining land owners (keep subdivision entirely residential)…
    2. … AND, allowing restriction to be gone would go against said purpose (regardless of potential profitability)
      1. If one lot goes commercial, then other lots will want to go commercial as well (“domino effect”)…
      2. … thus, owners of perimeter lots in subdivision have duty to fight off adverse influence from neighboring lots bordering the outside of the subdivision (maintain residential lot regardless)
    3. In Faus, city (as grantee) wants to create bus system on lot w/ “electric passenger railway only”-restriction, change scope of restriction (outcome #2) to allow for “transportation system only”-restriction (from specific to general)
      1. Here, city held limited use easement, SO if it argued to have the restriction gone (outcome #1), then it would’ve lost easement as well à thus, city argued for outcome #2 instead, to make scope of restriction less narrow
      2. Whereas, if city held FSD/FSSCS, and grantor held PR/PT, then city would want restriction gone (outcome #1) à thus, city would end up holding FSA
    4. Changed conditions may “knock out” purpose, but may NOT “knock out”restriction b/c it is an equitable defense (recall jurisdictional split)
      1. Some such states have adopted statutes enacting artificial limit on length of restriction (i.e. 30 yrs., 40 yrs., 50 yrs.)
      2. Other states have held such statutes to be unconstitutional
  • CA, which allows changed conditions defense, has adopted Marketable Record Title Legislation, which states…
    1. FSD/PRs are converted into FSSCS/PTs
    2. PTs expire 30 yrs. after recording (though, can be renewed indefinitely)
    3. 5-yr. SoL to enforce PT
  1. Illegality of restriction (unenforceable)…
    1. 3 levels of illegality
      1. Constitutional
      2. Statutory
  • Case decision
  1. Also, issues of retroactivity à when something was legal when restriction made, BUT becomes illegal thereafter
  1. Other defenses/issues…
    1. Waiver as per lack of uniform plan/scheme – if all lots within subdivision are subject to same restriction, BUT restriction is NOT enforced against all violators (OR, if some, but NOT all, lot owners are voluntarily released from restriction)
      1. If one lot owner can quiet title based on lack of uniform plan/scheme, then restriction is lost as to all lot owners…
      2. … though, if restriction is left out of certain lots, it MAY not affect uniform plan/scheme (“checker-boarding”, i.e. if 4 lots w/o restriction make up square)
    2. Unclean hands – if grantor violates restriction on own lot, BUT enforces restriction against others
      1. Equitably unfair…
      2. … BUT, if restriction is left out of grantor’s lot, it MAY serve purpose (i.e. if grantor wants own lot to be ONLY lot on subdivision which serves alcohol, prevent competition)
    3. Grantor can include 2 remedial devices, so long as consistent (i.e. C/ES and PT), and make election in the future
      1. Generally, choice is grantor’s, NOT judge’s…
      2. … BUT, if seeking forfeiture, MAY be risky to include C/ES language
    4. If violations occur consistently (i.e. serving alcohol daily on dry lot)…
      1. As per constructional preference against restricting land use, court will more likely view as a single continuous breach (such that SoL begins at initial breach, potential for adverse possession w/ PR)…
      2. … as opposed to viewing as multiple consecutive breaches (such that SoL began w/ latest breach)
    5. In community interest developments (i.e. condominiums, anything w/ common area), C/ESs are enforceable, unless unreasonable (as per Nahrstedt)… and, NOT unreasonable to bind original parties and successors
  2. Eminent domain gives govt. power to take one’s property in exchange for just compensation
    1. ONLY a property interest is subject to such protection/compensability à up to state to define “property interest” (jurisdictional split re: whether a restriction is a property interest)
    2. Property may be “taken”/“damaged” regardless of whether a physical taking OR regulatory taking (NOT physically taken, BUT prevented from certain use, i.e. height limit on owner’s building due to nearby airport runway)
    3. Just compensation typically interpreted to mean fair market value à price that property would bring on open market, from a “ready, willing and able” seller to a “ready, willing and able” buyer (appraisal)
      1. Burden of proof re: fair market value is on landowner
      2. Landowner entitled to value of land to landowner (NOT to public)
        1. O conveys land to A for church purposes ONLY (FSSCS/PTpersonalrestriction), land w/ church on it valued at $600K ($900K w/o church), city condemns land…
          1. A entitled to $600K (even though comparable piece of property would cost $900K)
          2. O likely gets $0 (PT too remote/speculative)
        2. O conveys land to A w/ height-limit restriction to protect O’s view (FSSCS/PTland-related restriction), A’s land worth $250K w/ restriction ($300K w/o), O’s land worth $900K w/ legally-protected view ($600K w/o), city condemns A’s land…
          1. A entitled to $250K
          2. O would want $300K for PT b/c of decrease in value of O’s land… whereas, govt. would rather give O $50K b/c O’s land was NOT condemned (“pie theory”)
        3. Inverse condemnation à if govt. takes property w/ NO notification, and individual deprived of property initiates action
          1. In Faus, if city used its eminent domain power to create bus system (rather than reliance on changed conditions to change scope of restriction), then grantor would’ve sued city for just compensation
          2. … in which case, city would’ve denied having taken property (b/c restriction is NOT property interest)…
          3. … OR, that grantor’s just compensation is $0 (b/c restriction was NOT violated)
        4. In CA, as per CCP § 1265.410, holder of PR/PT/EI on property which is taken by eminent domain is entitled to just compensation if violation of PR/PT/EI was “reasonably imminent”
          1. In Palm Springs, woman transfers land to city for desert wildlife reserve ONLY (FSSEI/EI, LDR as transferee), city takes immediate possession (via court order) to build golf course…
          2. … city then brings eminent domain action against LDR (to change FSSEI into FSA), claiming that golf course was consistent w/ desert wildlife reserve (Faus-type argument)…
          3. … BUT, b/c restriction was violated, AND violation was reasonably imminent, LDR is compensated (given value of FSA)
        5. Applying RAP
          1. EI, which is created in transferee, is subject to RAP, meaning that it may NOT have perpetual duration (NO cut-off point)…
            1. … thus, any remedial device other than EI may have perpetual duration
            2. … AND, EIs are exempt from RAP if from charity-to-charity (charitable exception)… but, NOT if charity-to-noncharity OR noncharity-to-charity
          2. Recall transferor’s/grantor’s drafting options to avoid RAP à retaining PR/PT and subsequently transferring to transferee(inter vivos depending on jurisdiction, in death everywhere) –OR– transfering FSA to transferee to subsequently be transferred elsewhere (w/ PR/PT retained by transferee)
          3. When EI is void under RAP (i.e. O conveys FSSEI to A, subsequently-voided EI held by B)…
            1. 2 alternative outcomes…
              1. If original language conveying EI is optional à A holds FSA (w/ NO restriction)
              2. If original language conveying EI is automatic à A holds FSD, O holds PR
            2. 2 underlying theories (expressing same idea in different ways)…
              1. Termination of language (automatic language stays, optional language goes)…
                1. “O to A so long as [_]… if not, then to B” à FSD/PR
                2. “O to A on condition that [_]… if not, then to B” à FSA
              2. Under FSD/PR, possessory estate ends automatically(upon violation of restriction), and since it can’t go to transferee (as per voided EI), it must go to transferor… whereas, under FSSCS/PT, ONLY transferee had option to terminate possessory estate, and subsequently lost said option (as per voided EI)
            3. In Walker, W conveys portion of land to RR, reserving portion for self as FSSEI (RR holds EI)…
              1. … BUT, EI is void under RAP, AND original language is automatic
                1. SO, FSSEI becomes FSD, AND EI (formerly in RR) becomes PR (now in W)…
                2. … thus, W, as holder of FSD AND PR, becomes holder of FSA as to reserved portion (as per merger)
              2. … and, even if original language were optional, then W would still end up w/ FSA
              3. If RR had been given easement instead (which is NOT an estate), then NO RAP issues
            4. In Noble, LAT transfers FSSEI to Hospital, w/ EI in LAT’s residuary estate à void under RAP
              1. LAT and LAT’s residuary estate are separate entities à former is transferor, latter is transferee (thus, NOT a PR/PT)
              2. LAT’s residuary estate ends up consisting of 3 charities… AND, Hospital is also a charity…
                1. … BUT, under RAPEI is void from the very beginning…
                2. … thus, if LAT had named the 3 charities at the time of conveyance, then charity-to-charityexemption would’ve applied (and EI would NOT have been void)
              3. In Fletcher, F transfers to Lodge w/ FPI in F’s heirs… then, F dies, naming F’s wife in will… thus, F’s heirs AND F’s wife in litigation à 2 different interpretations, BUT F’s wife wins either way
                1. If FPI was retained by transferor (PR/PT), then F devised said FPI to F’s wife in will (“F’s heirs” as words of limitation)
                2. If FPI was created in transferee (EI), then EI is void under RAP… in which case, PR (created as per original language being automatic) was devised to F’s wife in will
              4. Ethical considerations…
                1. Narrow scope of restriction à description as precise as possible (the broader the scope, the more likely to viewed unfavorably in court)
                2. Narrow duration of restriction à usually, NO reason to be perpetual
                3. Understanding of remedial device à get “fight” over w/ before transaction is set in stone
              5. Title insurance provides a guaranteed title search à anyone can do own title search… BUT, no one wants to
                1. Sometimes, violation of restriction does NOT show up in record (i.e. notice of violation NOT recorded, SoL has NOT run)…
                2. … thus, purchaser still faces potential litigation from holder of FPI
                3. … BUT, some title insurance policies will cover such a situation (for extra $$)
  1. FEE TAIL
  2. Original purpose of fee tail, in early England, was primogeniture (perpetuate $$/power by locking land into family)… BUT, abolished in U.S. b/c contrary to basic concepts of property ownership (i.e. free marketability, best use)
  3. Fee tail in U.S. is NOT void à rather, converted into either…
    1. FSA in first grantee
    2. Life estate in first grantee w/ FPI in life tenant’s children (“one-generation lock-up”)
  1. LIFE ESTATE
  2. 2 kinds of life estate
    1. Created by grant
      1. “O to A for life” à life estate granted to A, O has reversion
      2. “O to A for life, then to B” à life estate granted to A, B has remainder
    2. Created by reservation (“O for life, then to A” à life estate reserved in O, A has EI)
  3. Life estate pur autre vie is measured by another’s life
    1. “O to A for life of B” à life estate ends when B dies, NOT when A dies…
    2. … rather, when A dies, life estate continues in A’s will beneficiaries OR testate/heirs (until B’s death)
  4. Life tenant has obligation to make reasonable repairs, but NOT improvements
    1. Volunteer rule – life tenant who makes improvements has NO right to entitlement (“O to A for life, then to B” à if A makes improvements, then B gets benefit thereof, A gets learning experience)
    2. Exception to volunteer rule
      1. If improvement is required by legal/economic necessity
        1. Legal necessity à if city tells life tenant to either make improvement OR vacate premises
        2. Economic necessity à ??
      2. … AND, improvement is made as by reasonably prudent person (NOT more than necessary)…
      3. … then, there will be equitable apportionment of cost b/w life tenant and holder of FPI
    3. Reassessment of property value occurs when life estate ends (AND holder of FPI takes possession)
      1. Property taxes = assessed value X tax rate
  1. Assessed value can be modified by…
    1. Cost of living adjustment
    2. Improvements made to property
    3. Changes of ownership
  1. REVERSION
  2. Reversion is a more patient FPI à PR/PT requires property to be immediately returned to grantor (when FSD/FSSCS is prematurely cut short)… whereas, reversion waits for property to come back to grantor (when life estate naturally expires)
    1. Freely transferable (NO jurisdictional split)
    2. NOT subject to RAP
    3. Arises automatically (NO special language)
  3. “O to A for life” à O owns reversionpossessory size is FSA
    1. Assume A then leases to B for 5 yrs. à A now has reversion (in addition to O’s), possessory size is life estate
      1. If A dies during B’s 5-yr. lease, then B’s lease ends automatically (reverts back to O)…
      2. … b/c it was carved out of A’s life estate
    2. Assume B then subleases to C for 2 yrs. à B now has reversion (in addition to O’s and A’s), possessory size is estate for yrs.
  • REMAINDER & EXECUTORY INTEREST
  1. Remainder – a FPI created in a transferee that can become possessory immediatelyupon the natural expiration of a prior (freehold?) estate in another transfereecreated by the same instrument
    1. 2 (4?) types of remainder
      1. Vested remainder (“VR”) – a remainder in existingascertainedtransferee(s), and NO condition precedent (as opposed to condition subsequent) à 3 types…
        1. Absolutely VR (“AVR”)
        2. VR Subject to Partial Divestment (“VRSPD”)
  • VR Subject to Complete Divestment (“VRSCD”)
  1. If transferee is NOT existing/ascertained, and/or there is a condition precedent à contingent remainder (“CR”)
  1. Jurisdictional splits…
    1. Whether prior estate must be freehold (required at common law)
    2. Transferability of CRs
  2. Analytical path…
    1. Is FPI at issue a remainder? à if NO, then FPI is an EI… if YES…
    2. Is remainder in an existing and ascertained transferee, w/ NO condition precedent? à if NO (to any of the 3), then a CR… if YES (to all 3)…
    3. Is it divestable? à if YES, a AVR… if NO…
    4. Is it all OR only partially divestable? à if the former, then a VRSCD… if the latter, then a VRSPD
  3. Condition precedent condition subsequent à 3 tests, none of which work consistently (though, 3rd test works most often)…
    1. If worded in the affirmative, then likely condition precedent… whereas, if worded in the negative, then like condition subsequent
    2. If wording comes before “to B”, then likely condition precedent… whereas, if wording comes after “to B”, then likely condition subsequent
    3. Pretend that life estate has ended, BUT life tenant is still alive… can remainderman take possession? à if NO, then likely condition precedent (CR)… if YES, then likely condition subsequent (VR)
  4. Notable hypos…
    1. “O to A for life, then to B for life, then to C”
      1. A à life estate
      2. B à AVR (possessory size is life estate)
        1. B is existing and ascertained
        2. … AND, NO condition precedent (B outliving A is NOT a condition precedent)
      3. C à AVR (possessory size if FSA)
    2. “O to A for life, then to O”
      1. A à life estate
      2. O à reversion
        1. NOT a remainder b/c O is the transferor, NOT a transferee
        2. … thus, essentially the same as “O to A for life”
      3. “O to O for life, then to A”
        1. O à life estate
        2. A à EI
          1. NOT a remainder b/c prior estate is in O, who is the transferor(NOT a transferee)…
          2. … thus, O (transferor) may NOT create remainder in O, OR in transferee following reservation to O
        3. “O to A for life, then 1 yr. after A’s death, to B”
          1. A à life estate
          2. B à EI
            1. NOT a remainder b/c will NOT become possessory immediately upon A’s death (natural expiration of A’s life estate)…
            2. … thus, estate reverts to O for the mandatory gap (here, 1 yr.) b/w A’s death and B’s taking possession
          3. “O to A for 40 yrs., then to B”
            1. 40-yr. lease (estate for yrs.) is NOT freehold
            2. … thus, depending on jurisdiction, B MAY have remainderOR EI
          4. “O to A for life, then to B”… B dies during A’s life, leaving C as heir
            1. B had AVR, possessory size is FSA
            2. … thus, C, as B’s heir, takes what B had as per in death transfer
            3. … therefore, if possessory size of B’s AVR was instead ONLY life estate (i.e. “… then to B for life”), then C would get nothing (reversion in O)
          5. “O to A for life, then to B for life if B survives A”
            1. B has AVRpossessory size is life estate (“if B survives A” is unnecessary language, NOT a condition precedent)…
            2. … whereas, if possessory size was FSA (i.e. “… then to B if B survives A”), then B would have CR (“if B survives A” IS a condition precedent)…
            3. … b/c, if B does NOT survive A, then B (more specifically, B’s heirs) would get nothing
          6. “O to A’s children”… at time of conveyance, A has 2 children (B and C)… later, A has 3rd child (D)
            1. Under rule of convenience, assets are distributed to existing members of class upon first point of distribution(which is when class closes)…
            2. … AND, b/c O has directly conveyed interest to A’s children, A’s children (B and C) are entitled to possession immediately…
            3. … SO, B and C have FSA, D has nothing
          7. “O to A for life, then to A’s children”… at O’s death, A has 2 children (B and C)… later, A has 3rd child (D)
            1. B and C have VRSPD (since A can have more children)…
            2. … BUT, unlike above hypo, class does NOT close immediately (rather, class closes upon A’s death, which is first point of distribution)…
  1. … thus, B, C and D all have VRSPD, entitling each to 1/3rd of FSA (although, D arguably has EI, since B’s/C’s prior estate does NOT naturally expire)
    1. Before A had children, O had reversion, AND A’s children (who did NOT exist) had CR
    2. … BUT, upon A having children, A’s children’s FPI became a VRSPD, and O no longer had reversion
  2. “O to A for life, then to B’s children”… at O’s death, B has one child (C)… after A’s death, B has another child (D)
    1. As per rule of convenience, class closes upon A’s death (which is first point of distribution)…
    2. … thus, C has VRSPD (since B could still have children before A’s death)…
    3. … BUT, b/c B does NOT have more children before A’s death, C’s VR does NOT divest, and C entitled to entire FSA (D gets nothing)
  3. “O to A for life, then to B, but if B dies without surviving children, then to C”
    1. B à VRSCD (possessory size is FSSEI)
    2. C à EI
  4. “O to A for life, then to such persons as A appoints, and in default of appointment, to B”
    1. A à life estate AND power of appointment
      1. A has general power of appointment, and thus can appoint anyone (permissible appointees unlimited), including self…
      2. … whereas, if A had special power of appointment (i.e. “… to such of A’s children as A appoints”), then permissible appointees limited (control upon A’s discretion)
    2. B à VRSCD OR VRSPD
      1. Default of power of appointment is NOT condition precedent (so, NOT CR)… rather, exercise of power of appointment is condition subsequent (so, VR)…
      2. … AND, since A could realistically appoint B, unclear whether B could entire w/ all, part, OR none of FSA
    3. “O to A for life, then to B, on the express condition that if the premises are used for other than single family residence, O has power to terminate and reenter” à ambiguous as to when restriction..
      1. If restriction applies at all times…
        1. A à life estate defeasible (b/c could be prematurely cut short)
        2. B à VRSCD (possessory size is FSSCS, which also could be prematurely cut short)
  • O à PT
  1. If restriction applies ONLY during A’s life estate
    1. A à life estate defeasible
    2. B à VRSCD (possessory size is FSA)
  2. If restriction applies ONLY after A’s life estate
    1. A à life estate
    2. B à AVR (possessory size is FSSCS)
      1. If restriction applies during A’s life estate, then possible then B’s VR will NOT divest (since A could violate restriction, thereby allowing O to enforce PT)…
      2. … BUT, if restriction applies after A’s life estate, then B’s VR will absolutely divest (after which point, B could violate restriction, thereby allowing O to enforce PT)
    3. “O to A for life, then to B when B reaches 21”
      1. B à CR
      2. O à reversion
        1. Pretend life estate ended, BUT A still alive à B could NOT move in (unless B were 21)…
        2. … thus, condition precedent
      3. “O to A for life, then to B, but if B dies under 21, then to C”
        1. B à VRSCD (possessory size is FSSEI)
        2. C à EI
          1. Pretend life estate ended, BUT A still alive à B could move in (though, would lose estate if dead before 21)…
          2. … thus, condition subsequent
        3. “O to A for life, then to such of A’s children as survive A”… A has one child at the time (C)
          1. C has CR (NOT VRSPD)…
          2. … b/c, even though C is existing and ascertained, survivorship is condition precedent (C could NOT move in if A were still alive)
        4. “O to A for life, then to A’s children, but if none survive A, then to B”… A has one child at the time (C)
          1. Unlike above hypo, survivorship is condition subsequent (b/c C could move in even if A were still alive)…
          2. … thus, C has both VRSCD (b/c C could lose estate by not surviving A) AND VRSPD (b/c A could have more children)
        5. “O to A for life, then to B when B reaches 21, but if B dies under 21, then to C” à 2 possibilities…
          1. B and C have alternate CRs (B reaching 21 as condition precedent, thereby modifying B’s FPI)
          2. B has VRSCD, C has EI (when ambiguous, VR preferred over CR… thus, court could knock out condition precedent)
        6. “O to A for life, then on A’s death to his surviving children, then to B”
          1. Survivorship is an implied condition precedent (poor drafting)…
          2. … thus, A’s surviving children and B have alternate CRs
        7. “O to A for life, then to B or his children” à ambiguous b/c of “or”
          1. Always analyze first interest in sequence (here, B’s)…
          2. … thus, either B and B’s children have alternate CRs (w/ survivorship as implied condition precedent)…
          3. … OR, B has VRSCD and B’s children have EI (w/ survivorship as implied condition subsequent)
        8. “O to A for life, then to A’s widow for life, then to B”… A is married to W at the time
          1. A’s widow à CR (won’t be ascertained until A’s death)
          2. B à AVR (if A dies w/ NO widow, then prior CR is crossed out)
        9. “O to A for life, then to oldest child of B”… when A dies, B has NO children, BUT has child 1 yr. later
          1. Since B had NO children at time of conveyance (A’s death), B’s (non-existent) children have CR
          2. … BUT, in jurisdiction w/ destructability ruleCR would be destroyed b/c, at the natural expiration of A’s life estate, there was NO one to whom estate could vest…
          3. … thus, reverts back to O (destructability rule applies ONLY to CRs)
        10. “O to A for life, then to A’s first child”… A dies leaving pregnant wife, who gives birth to A’s first child 6 mos. later
          1. A’s first child has CR (b/c NOT existing at time)…
          2. … AND, destructability rule does NOT apply to conceived-but-unborn child (so, NOT destroyed)
        11. “O to A for life, then to A”
          1. A has FSA as per merger of A’s life estate AND A’s VR
          2. … thus, essentially the same as “O to A for life”, followed by O transferring reversion to A
        12. “O to A for life, then to B for life, then to A”
          1. B à AVR
          2. A à life estate AND AVR (NO merger b/c B’s interest intervenes)
        13. “O to A for life, then to B for life if B marries”… before B marries, O transfers reversion to A
          1. A has FSA as per merger of life estate AND reversion
          2. … AND, merger destroys B’s CR (merger destructability)
        14. “O to A for life, then to B for life if B marries, then to A”
          1. Exception to merger destructability à A’s interests (which would otherwise merge) AND B’s CR (which would otherwise be destroyed) were created in same document
          2. Thus, B’s CR is NOT destroyed (AND, consequently, A’s life estate AND VR do NOT merge)
        15. “O to A for life, then to B for life if B marries, then to A”… later, A transfers interests (life estate AND reversion) to C
          1. Exception-to-the-exception to merger destructability à A’s interests created in same document as B’s CR… BUT, then transferred to C
          2. Thus, B’s CR IS destroyed (AND, consequently, C’s life estateAND reversion merge into FSA)
        16. “O to A for life, but if A becomes bankrupt, then to B”
          1. A à life estate defeasible
          2. B à EI (if A becomes bankrupt)
          3. O à reversion (if A does NOT become bankrupt)
        17. “O to A for life, then to A’s children who reach 21 [*], but if A becomes bankrupt, A’s estate shall become void and the property shall pass to A’s children who reach 21”… A has 10-yr.-old child
          1. Before *, A’s child has CR… AND, after *, A’s child has EI
          2. … thus, A’s child can get estate in 1 of 2 ways
        18. “O to A, but if during A’s life the property is used for other than a single family residence, then to B”
          1. A has FSSEI, NOT life estate
          2. … b/c ONLY restriction lasts for A’s life (NO natural expiration of estate)
  1. “O to A for 99 yrs., but if A fails to live that long, to A’s first child to reach 21”… A dies w/ 10-yr.-old child
    1. A’s child has EI, NOT CR
      1. NOT a remainder b/c prior estate (lease/estate for yrs.) is NOT freehold(recall jurisdictional split)…
      2. … AND, if in jurisdiction that allows remainder following non-freehold, also NOT remainder b/c won’t expire naturally
        1. A won’t live for 99 yrs.…
        2. … AND, if A somehow does live for 99 yrs., then would revert to O
      3. Avoid destructability rule by giving A’s child an EI instead of a CR (could also use mandatory gap)
    2. “O to A for life, then to B and C, but if either B or C dies without issue, then to the survivor, and if both die without issue, then to D and E, but if either D or E dies without issue, then to the survivor, and if both die without issue, then to F”
      1. B à VRSCD (completely divested from B if B dies w/o issue)
      2. C, D, E and F à all EIs (everything following VRSCD is an EI)
    3. Houston
      1. Henry’s will/trust contains this clause à On the death of my last surviving child I direct that the whole of the principle of the trust estate shall bedistributed in equal portions to and among my grand-children, the children of any deceased grand-child taking their deceased parents share.”
      2. Henry has 12 grand-children à upon the death of Henry’s “last surviving child”
        1. 8 of Henry’s grand-children are living (A-H)
        2. 1 of Henry’s grand-children (T. Charleton) is dead, leaving 2 great grand-children (D1 and D2)
        3. 3 of Henry’s grand-children (Henry H., H.H., Gert Jr.) are dead, leaving NO great grand-children, BUT 1 heir each (X, Y, Z)
      3. Majority determines that FPI is VRSCD/VRSPD à divided into 12 shares
        1. NO condition precedent à Henry created vested interest, but NOT distributed until death of “last surviving child”
        2. Thus, A-H each get 1 share (8), D1 and D2 split T. Charleton’s share (1), and X, Y and Z each get 1 share (3)
        3. Majority’s 3 regrets…
          1. Henry H., H.H. and Gert Jr. are all long dead
          2. X, Y and Z are NOT even blood relatives
  • All transfers along heirs are taxable
  1. Dissent determines that FPI is CR à divided into 9 shares
    1. YES condition precedent à interest NOT vested until death of “last surviving child”
    2. Thus, A-H each get 1 share (8), and D1 and D2 split T. Charleton’s share (1)… BUT, nothing for X, Y and Z (b/c Henry H., H.H. and Gert Jr. all died before Henry’s “last surviving child”)
  2. Bailey
    1. Husband’s will à “… to wife [W] for life, then to daughter [D] to take possession after the death of W. In case of D’s death before that time, the land shall pass to son [S].”
      1. D gives S quitclaim deed
      2. … then, W dies…
      3. … then, D dies, leaving X as heir
    2. X’s argument (loser) à D and S had alternate CRs…
      1. … AND, depending on jurisdiction, D’s CR may NOT have been transferable, thereby making quitclaim deed an ineffective transfer…
      2. … thus, D retained CR, which would’ve become vested at W’s death, and passed on to X (as D’s heir)…
      3. … BUT, D outliving W is NOT a condition precedent (so, NOT a CR)
    3. S’s argument (winner) à D had VRSCD, S had EI… thus, D effectively transferred VRSCD to S
  3. Kropp
    1. H reserves life estateFPI ambiguous à 2 possible interpretations…
      1. “… then to wife [W] if she survives H. If not, then to the Personal Representative of H’s estate [PRE].” à alternate CRs
      2. “… then to W. If W dies before H, then to PRE.” à VRSCD/EI
    2. W dies (leaving S as heir) before H
      1. Assuming W had alternate CR à W did NOT survive H, SO condition precedent did NOT occur… thus, b/c W’s CR did NOT vest, PRE takes estate
      2. Assuming W had VRSCD à W’s VRSCD did vest… BUT, b/c W died before H, condition subsequent did occur… thus, W’s VRSCD divested to PRE
    3. Thus, doesn’t matter whether W had CR (w/ condition precedent) OR VR (w/ condition subsequent) à W loses either way
  4. Jensen
    1. M’s will devises parcel of real property à “It shall go to H upon payment of $1,160, which shall be divided among M’s 5 sons [one of which is H].”
      1. After M’s death, H waives right to parcel, such that parcel shared equally among M’s 5 sons…
      2. … W (owed $$ by H) claims that waiver was a transfer in fraud of creditors (b/c H could’ve used parcel to pay debt to W), such that W may void it
    2. Regardless of whether condition precedent OR condition subsequent, this is FSSEI/EI à BUT, distinction nonetheless makes difference…
      1. If payment of $1,160 was a condition precedent, then M’s 5 sons had FSSEI, w/ EI in H à thus, H never received parcel, AND, as such, never transferred parcel
      2. If non-payment of $1,160 was a condition subsequent, then H had FSSEI, w/ EI in M’s 5 sons à thus, H had received parcel, AND, as such, transferred parcel in violation of W’s rights
  • POWERS OF APPOINTMENT
  1. If O grants to A for life w/ power of appointment, and then to B in default of appointment
    1. O is donor
    2. A is donee
    3. Those to whom A may appoint are permissible appointees
    4. B is default taker (if power NOT exercised, OR if exercised wrongfully)
  2. Discretion/scope (mix-and-match)…
    1. General power of appointment allows A to appoint anyone (group of permissible appointees very broad)… whereas, special power of appointment limits who A may appoint (group of permissible appointees very narrow)
      1. For tax purposes, A is treated as owner of general power
      2. … whereas, O is treated as owner of special power
    2. Inter vivos/presently exercisable power may be exercised whenever A choose… whereas, testamentary power may ONLY be exercised by will (NO choice)

 WASTE DOCTRINE

  1. Waste – an injury of lasting character committed by the holder of a PPE which affects a FPI, OR concurrent interest, OR security interest
    1. Injury is NOT necessarily physical or economic, BUT much broader (i.e. change in character of property, boundary lines)
    2. Lasting is NOT necessarily permanent, BUT more than temporary
    3. Trespass is committed by one w/ NO right to be on property… thus, action against holder of PPE is for waste (NOT trespass)
    4. Waste action may be brought against holder of PPE by…
      1. Holder of FPI
      2. Co-tenant (2(+) people w/ simultaneous right of possession)
      3. Lender (if/when borrower trashes property upon default/foreclosure)
    5. Types of waste
      1. Active waste – holder actively doing something NOT entitled
      2. Passive waste – holder failing to fulfill duty to do something (inactive)
      3. Ameliorating waste – change in character of property that benefits property
    6. Grantor MAY expressly state whether or not holder of PPE may make changes to property…
      1. … BUT, if grantor’s intent is NOT clear, then factual analysis is required…
      2. … thus, if A (holding PPE) wants to make change, and B (holding FPI) wants to block change à factors to consider…
        1. Length of time (i.e. 99-yr. lease vs. 1-yr. lease)
        2. Certainty of possession of FPI (i.e. reversion CR)
        3. Changes in area AND impact
        4. Cause of changes
        5. Time b/w grantor’s conveyance and A’s desire to make change
      3. Remedies…
        1. B learning of A’s desire to make change MAY obtain injunction
        2. … BUT, if B is unable to enjoin A, then MAY bring suit for…
          1. Diminution in value/economic damages (though, MAY not be available w/ ameliorating waste)
          2. Specific performance (replace waste, though unlikely as remedy)
          3. Punitive damages (secondary remedy when economic damagesnot available)
          4. Forfeiture (common law remedy for waste… though, grantor MAY make estate defeasible upon commission of waste)
  1. House of Isaac
    1. Isaac gives residence to wife for life (OR upon remarriage), then to George for life, then to George’s then-living children (daughter) OR Isaac’s surviving children (Howie, Irv, Elvira)
      1. George à VR (upon natural termination of wife’s life estate defeasible, i.e. wife’s death) AND EI (upon premature termination of wife’s life estate defeasible, i.e. wife’s remarriage)
      2. George’s daughter AND Howie/Irv/Elvira à alternate CRs
    2. George wants to demolish residence, build 13-story apartment complex (make $$, leave something for daughter)…
      1. … BUT, Howie/Irv/Elvira object (own neighboring lots w/ restrictions preventing them from doing the same, and do NOT want 13-story apartment complex towering over their lots)…
      2. … AND, Howie/Irv/Elvira win à George (as life tenant) may NOT exercise act of ownership, but ONLY what is required for general use/ enjoyment of estate as received
        1. Similar facts in Melms v. Pabst (mansion torn down, business erected)…
        2. … BUT, different outcome (complete change of conditions, property no longer desirable for residence)
      3. Baker v. Weedon
        1. John gives Anna life estateCR in Anna’s children (Anna has NO children at time of conveyance), alternate CR in John’s grandchildren from prior marriage
        2. Anna (now an old woman stuck w/ life estate) in need of immediate economic relief, asks for judicial sale of property and investment of proceeds in trust… BUT, b/c value of property increasing, remaindermen stand to suffer great financial loss à trial court holds for Anna, BUT appellate court remands
  1. DOCTRINE OF WORTHIER TITLE
  2. Doctrine of worthier title (“DWT”) converts FPI in transferee into FPI in transferor
    1. “O to A for life, then to O’s heirs” à CR in O’s heirs becomes reversion in O
    2. “O for life, then to O’s heirs” à EI in O’s heirs becomes FSA in O
  3. Reasons for DWT
    1. At common law, when FPI in O’s heirs is converted into FPI in O (inheritance by O’s heirs), then it becomes taxable (feudal incidence)…
  1. … BUT, today, 2 purposes served…
    1. Clear title (since heirs NOT ascertained until death of transferor)
    2. Probable intent (thus, can be avoided through drafting)
  2. Doctor v. Hughes
    1. O reserves life estateEI to O’s heirs… O has 2 daughters (O still alive)… daughter1 in debt to creditor…
    2. … BUT, as per DWT, O has FSA… thus, creditor out of luck
      1. If daughter1 had remainder, then creditor would’ve been able to seize interest…
      2. … BUT, if O wanted to create a remainder in O’s heirs, then O would’ve drafted differently à express intent to avoid DWT (DWT a rule of construction)
    3. To trigger DWT, must use “heirs” (OR functional equivalent)
      1. In Levy, when mother’s life estate ends, then to Levy for life, then FPI exists in Levy’s“lawful surviving issue” OR mother’s “lawful surviving issue”
      2. … AND, mother dies w/ Levy as ONLY child… thus, Levy is mother’s “lawful surviving issue”
      3. … BUT, “lawful surviving issue” is NOT the same as “heirs”… thus, Levy cannot trigger DWT to give self FSA (rather, stuck w/ life estate w/ FPI in his “lawful surviving issue”)
        1. trust is automatically revocable, unless it is expressly unrevocable…
        2. … AND, even if expressly unrevocable, MAY still be revoked if trustoris also sole beneficiary
        3. … BUT, in Levy, Levy became trustor upon mother’s death, but NOT sole beneficiary (b/c, again, “lawful surviving issue” is NOT the same as “heirs”)
      4. Rebuttal of DWT must come in original, NOT susequent, document
        1. If O reserves life estate, w/ EI in O’s heirs (O has 2 children)…
        2. … then, O wills estate to A, including clause stating “Having amply provided for my 2 children…”
          1. If DWT applies, then EI in O’s heirs converted to FSA in O, which was then transferred to A in will
          2. If DWT does NOT apply, then O’s heirs get estate (since what O transferred to A did NOT include EI)
  1. While DWT creates a FPI in transferor’s heirs, Rule in Shelley’s Case creates FPI in transferee’s heirs (though, abolished in most states, including CA)
    1. “O to A for life, then to A’s heirs” à A has FSA (O’s reversion destroyed)
    2. Notable considerations re: Rule in Shelley’s Case
      1. Applies to real property ONLY (whereas, DWT applies to real AND personal property)
      2. FPI must be remainder (whereas, DWT applies to EIs as well)
      3. “Heirs” (OR functional equivalent) must be used
      4. Rule of law (NOT rule of construction, so NO consideration of intent)
  1. DESTRUCTABILITY RULE
  2. As per destructability ruleCR is destroyed when…
    1. … prior estate ends AND CR can’t vest
    2. … 2 interests in same person are separated ONLY by CR
      1. Avoid destructability rule by NOT creating CR (i.e. EI w/ mandatory gap)…
      2. … OR, by putting CR in a trust
      3. … BUT, RAP would still apply either way
    3. If subject to destructability rule, then (likely) NOT subject to RAP… BUT, if NOT subject to destructability rule, then subject to RAP (Abbiss)
      1. “O to A for life, then to first son of A to reach 25”… at the time, A has 10-yr.-old son
        1. Under destructability ruleCR is destroyed if, when A dies, A’s first son is NOT 25
        2. Under RAPCR is void b/c it is possible that CR would vest 21 yrs. after A’s death (i.e. if A’s first son dies, A has second son, A dies, and A’s second son does NOT reach 25 within 21 yrs. of A’s death)
      2. Thus, CR could be voided by either/or…
        1. … BUT, destructability rule at least allows for opportunity for CR to vest
        2. … whereas, RAP voids CR from the very beginning
      3. Destructability rule w/ alternate CRs (Festing)…
        1. “O to A for life, then to children of A who reach 21, but if none of A’s children reach 21, then to B”
        2. … if A dies w/ child(ren) under 21, then both alternate CRs are destroyed
          1. First CR is destroyed b/c NO children of A reached 21 before A died (thus, no one in whom CR could vest)
          2. Second CR is destroyed b/c A’s children still MAY reach 21 (thus, CR may NOT vest in B b/c condition precedent did NOT occur)
        3. CR in trust is NOT subject to destructability rule… BUT, CR in mortgage? (Astley)
          1. In title theory jurisdiction, lender holds title as security until borrower pays off loan à thus, since lender is essentially a trusteeCR is NOT destroyed… at least, NOT until loan paid off
          2. In lien theory jurisdiction, lender holds lien as security à thus, since borrower retains title, lender is NOT a trustee… and, thus, CR IS destroyed
        4. Like DWT, purpose of destructability rule stems from common law(“smooth flow of seisin”, NOT “in abeyance”)… BUT, still useful today to clear title
  • RULE AGAINST PERPETUITIES
  1. In order for a contingent future interest (i.e. CR/EI) to remain valid, it must vest (if ever) before the end of the RAP period à life/lives in being (at time that interest is created) + 21 yrs.
    1. Deal w/ actual facts as of that time that interest is created (RAP period begins)…
    2. … during RAP period, imagine possibilities…
    3. … if there is any possibility that interest will vest outside of RAP period, then it is void
      1. Choose a measuring life (a life in being)…
      2. … if there is NO way that CR/EI would vest 21 yrs. after that the death of that measuring life, then CR/EI is valid (measuring life “works”)…
      3. … BUT, if it is possible that CR/EI would vest 21 yrs. after the death of that measuring life, then CR/EI is void (measuring life does NOT “work”)…
      4. … unless another measuring life would “work”
    4. Theories behind RAP
      1. Don’t want vesting to take place too far into future…
      2. … AND, don’t want power of alienation to be suspended too far into future (though, some states allow transferability of CRs/EIs)
        1. RAP is rule of law, NOT rule of construction (can’t avoid through drafting)…
        2. … though, in case of ambiguity, MAY be interpreted so as to avoid RAP
        3. … AND, in seldom cases, court MAY rewrite document so as to avoid RAP (equitable approximation)
      3. Notable hypos…
        1. “A by will to B for life, then to such of A’s lineal descendants as are alive 50 yrs. after the date of B’s death”… at A’s death, A has 1 child (C)
          1. A’s lineal descendants have EI (as per 50-yr. gap)… SO, subject to RAP
            1. A (dead) is NOT a life is being
            2. B may be used as a measuring life… BUT, EI could NOT vestwithin 21 yrs. after B’s death (again, as per 50-yr. gap)… thus, B does NOT “work” as measuring life
  • C may be used as a measuring life… BUT, lineal descendants could go on infinitely (i.e. if C has child, then C dies 21+ yrs. before end of 50-yr. gap)… thus, C does NOT “work” as measuring life
  1. … thus, EI is void under RAP
    1. Though, some states have adopted alternate period in gross within which CR/EImust vest or be void (i.e. flat 60 yrs. in CA)…
    2. … thus, even though EI is void under common law RAP, MAY be valid under such a statutory variation
  2. “A to B so long as used for single family residence, then to C”
    1. B has FSSEI, C has EI
    2. … AND, b/c estate could cease to be used for single family residence 21+ yrs. after the death of any measuring life (A, B OR C), EI is void under RAP
      1. The mere possibility that estate could cease to be used as such after RAP period is enough to void under RAP
      2. … thus, irrevelant if/when estate ever actually does cease to be used for single family residence
    3. … thus, size of B’s estate depends on whether original language is…
      1. Automatic (as it is here) à FSD (w/ PR in A)
      2. Optional (i.e. “but if”) à FSA (w/ NO restriction)
    4. “A to B for life, then to the first child of B, whenever born, who becomes a lawyer”
      1. If B is alive w/ 3 children, none of whom are lawyers à void (possible that CR could vest beyond RAP period… even if B’s 3 children are used as measuring lives, still possible for B to have 4th child, who could become a lawyer 21+ yrs. after children #1-3 die)
      2. If one of B’s children is already a lawyer at time of creation à valid (AVR in B’s child who is already a lawyer)
      3. If one of B’s children has graduated from law school and awaiting bar exam results à void (CR could still vest beyond RAP period… consider possibilities, NOT probabilities)
      4. If B is dead w/ 1 child who is NOT a lawyer à valid (B’s child may act as own measuring life… thus, since B’s child is ONLY potential takerCR could NOT vest 21+ yrs. after B’s child’s death, rather must vest in B’s child’s lifetime)
    5. “A to B for life, remainder to first son of B to reach 25”… B is alive w/ 10-yr.-old and 12-yr.-old
      1. Both 10- AND 12-yr.-old would reach 25 within 21 yrs. of any measuring life
      2. … BUT, since it is still possible for B to have 3rd child AND for all measuring lives to die immediately thereafter (such that B’s 3rd child would NOT reach 25 with RAP period), CR is void
        1. Recall that in destructability rule jurisdiction, CR would remain valid until B’s death…
        2. … at which point, it will either vest (to B’s first child to reach 25) OR be destroyed (if B has NO 25-yr.-old children)…
  • … thus, sometimes MAY be beneficial to NOT place CR in trust (since placing in trustwould avoid destructability rule)
  1. “A by will to B for life, remainder to children of B that reach 21”… at A’s death, B is alive w/ 10-yr.-old and 12-yr.-old
    1. Both 10- AND 12-yr.-old would reach 21 within 21 yrs. of any measuring life
    2. … AND, even if B has 3rd child AND all measuring lives die, 3rd child would still turn 21 within RAP period (even if B’s 3rd child is ONLY 1 day over 21-yrs.-old at culmination of RAP period)…
    3. … thus, CR is valid (need ONLY 1 measuring life to “work”)
  2. “A by will to B’s grandchildren who reach 21”
    1. If B is alive w/ children, NO grandchildren à void (since it is possible for B to have another child AND for all measuring lives to die, EI could vest beyond RAP period)
    2. If B is dead w/ children, NO grandchildren à valid (B NOT a life in being, can’t have another child… AND, grandchildren will have reached 21 within 21 yrs. of B’s children’s measuring lives)
    3. If B is dead w/ NO (living) children, 1 grandchild à valid (grandchild as own measuring life)
  3. “Creation in will of interest to vest and be possessory in the person who is A’s youngest lineal descendant at expiration of 20 yrs. from the day of death of the last survivor of all lineal descendants of M. Hubbard, who shall be living at the time of A’s death… M. Hubbard is a famous person w/ many lineal descendants
    1. Use of savings clause creates starting point from which 20 yrs. will run (important that M. Hubbard is famous b/c the death of her lineal descendant will be easily tracked)…
    2. … thus, at A’s death, using M. Hubbard’s living lineal descendants as measuring lives, EI will vest within 21 yrs.… thus, EI is valid
      1. Perpetuity savings clause is NOT properly used if created in deed (since M. Hubbard could have more lineal descendants before A’s death, who would NOT be lives in being, BUT would delay ability of EI to vest)…
      2. … OR, if missing “who shall be living at the time of A’s death”
    3. “A devises to his grandchildren who reach 21”… A dies w/ NO children… BUT, 7 mos. later, A’s widow has A’s child (B)… B lives to 60 and dies w/o children, BUT B’s widow has B’s child (C) 7 mos. later
      1. Under gestation rule, B may be used as measuring life, even though (technically) NOT a life is being when interest created (B’s 7-month gestation period added on)…
      2. … AND, likewise, even though (technically) EI will vest in C more than 21 yrs. after B’s death, C’s 7-month gestation period also added on…
      3. … thus, EI is valid
    4. “A by will to such of A’s descendants that are living 21 yrs., 9 mos. after B’s death”… A leaves 1 lineal descendant, B
      1. Gestation rule ONLY applies to actual gestation…
      2. … thus, EI is void
    5. “A devises to B for life, then to B’s children for their lives, then remainder to B’s grandchildren”… at A’s death, B is 75 yrs. old w/ 1 child
      1. Under fertile octagenarian rule, B can still have children, regardless of age or physical condition…
      2. … thus, since it is possible for B to have 2nd child, then for all measuring lives to die, AND then for 2nd child to have child (B’s grandchild) 21+ yrs. later, CR is void
    6. “A by will to B for life… then to B’s children, who are living at A’s death, for their lives… then to B’s grandchildren through said children”… at A’s death, B is 75 yrs. old w/ 2 children
      1. Granted, B can still have children (as per fertile octagenarian rule)…
      2. … BUT, b/c CR in B’s children is limited to those living at A’s death, CR in B’s grandchildren is valid (whether B has 3rd child is irrelevant b/c CR could NOT vest in 3rd child, anyway)
    7. “A devises to son B for life, then to B’s widow for her life, then remainder to B’s then-living children”… at A’s death, B is married to W
      1. Under unborn widow rule, it is possible for B and W to divorce, AND for B to then marry W2 (who was NOT born when interest created, so NOT a life in being)…
      2. … thus, since it is possible for W2 to die 21+ yrs. after all measuring livesdie, CR is void
        1. CA has done away w/ unborn widow rule (CC § 715.7), conclusively presumes that unborn widow is a life in being (regardless of when actually born)…
        2. … thus, CR would be valid in CA
      3. “A to his descendants who are born within 21 yrs. of A’s death”
        1. If by deed/inter vivos transfer, then EI is valid (using A as measuring life)…
        2. … AND, if by will, then EI is also valid (interest created upon A’s death AND may NOT vest after 21 yrs.)
      4. “A devises the residue of his estate to the Officers of his Elks Lodge who are in office at time of distribution of his estate”
        1. Interest in Officers is created upon A’s death…
        2. … BUT, b/c distribution of A’s estate could theoretically be delayed 21+ yrs. (distribution contingency), EI is void…
        3. … though, EI would be valid if interest created in Officers who survive distribution (Officers that survive distribution as own measuring lives)
      5. “A leases to B for 10 yrs., the term to commence upon completion of a building, commencement and completion of which is to be prosecuted with due diligence” à conflicting authority…
        1. Void under Haggerty b/c a distribution contingency problem (since completion of building could occur 21+ yrs. after interest created)
        2. Valid under Wong if circumstances show that building is to be completed within a reasonable time which is less than 21 yrs.
      6. “A to B alone the option to purchase for $50K at any time”
        1. Some contracts are subject to RAP, including options to purchase(option “vests” when exercised)…
        2. … thus, using B as measuring lifeoption could NOT vest after B’s death, making option valid…
        3. … BUT, if option were “to B” (and NOT “to B alone”), option is presumed to be transferable AND could vest beyond RAP period, making optionvoid
      7. “A to B, subject to option in A to repurchase for $50K”
        1. Option to repurchase is likely treated as an option to purchase, which, in this case, would be void under RAP (since presumed transferable)…
        2. … BUT, option to repurchase could arguably be considered a PT(retained in A, the transferor), which would NOT be subject to RAP(and, thus, valid)
      8. “A leases to B for 65 yrs., with option to purchase for $50K during the term”
        1. Granted, option to purchase could vest beyond RAP period
        2. … BUT, b/c option can ONLY vest within during lease term, it is NOT subject to RAP as per lease option exception
      9. “A to B and assigns under an installment land sale contract… A retains legal title until paid in full”
        1. Installment land sale contract IS subject to RAP… AND, b/c contract could be paid off beyond RAP period, would be void…
        2. … BUT, arguable that A’s retention of legal title is a security interest, which is NOT subject to RAP
      10. “A in trust, income to A for life, then income to A’s children, then principal to A’s grandchildren, reserving to A the power to revoke the trust
        1. RAP period does NOT start until A’s power to revoke is exercised/given up…
        2. … thus, if A dies w/o exercising power to revoke, then interest is valid…
        3. … BUT, if A revokes trust before death (OR, if A never had power to revoke), then interest is void
      11. “A to B Charity, but if cease use for hospital purposes, to C Charity”
        1. As per charitable exception, b/c EI would shift from charity-to-charity, it is valid (exempt from RAP)…
        2. … BUT, if either B or C was NOT a charity (AND, city/govt. constitutes charity), then charitable exception does NOT apply, regardless of possible charitable purpose
      12. “A devised to B for life, then to B’s children for their lives, then principal to such of B’s grandchildren as the oldest child of B shall appoint… B had NO children at A’s death… B’s oldest child appoints during B’s life to X (a grandchild of B)
        1. Powers of appointment are subject to RAP à analysis…
          1. If a general power presently exercisable à RAP period does NOT begin until power is exercised (more favorable)
          2. If “anything else” (general power testamentary OR either type of special power) à RAP period begins when power is created (less favorable)
        2. B’s oldest child has a special power (permissible appointees limited to B’s grandchildren), created at A’s death… thus, b/c power could be exercised beyond RAP period, power is void
          1. Granted, there is NO limitation on when B’s oldest child may exercise special power… thus, it is presumed to be presently exercisable (ONLY testamentary when specified as such)…
          2. … BUT, b/c NOT a general power, then NOT entitled to delayed commencement of RAP period
        3. “A devised to B for life, then to B’s children for their lives, then principal to such person(s) as oldest child of B shall appoint”… B had NO children at A’s death
          1. B’s oldest child has a general power presently exercisable (NO limitation on permissible appointees OR on when exercisable)…
          2. … thus, b/c B’s oldest child would acquire power within RAP period (B as measuring life), AND could exercise power within RAP period as well (within 21 yrs. after B’s death), power is valid
        4. “A devised to B for life, remainder to issue of B such as B might appoint”… C, child of B, is born after A’s death… appointment to C for life, remainder to C’s children
          1. B has a special power, which is created upon A’s death… thus, since B could exercise power within RAP period, power is valid (as is appointment to C)…
          2. … BUT, b/c C is NOT a life is being (born after A’s death, which was when RAP period began), CR in C’s children is void
            1. If B had a general power presently exercisable, then CR in C’s children would’ve been valid (since RAP period would’ve began upon B exercising power, at which point C was alive)…
            2. … likewise, CR would’ve been valid if C was alive when A died (b/c, again, C would’ve then been a life in being)
          3. W devised to H a general power testamentary… H dies 3 mos. after W… H’s will exercises the power as follows à “In trust, income to H’s children for life, the trust to terminate on the death of last survivor of children and grandchildren living at the time of H’s death, and distribution per capita to H’s great-grandchildren”… all children and grandchildren that were alive at H’s death are alive at W’s death
            1. H’s general power testamentary was created at W’s death… AND, b/c power could’ve been exercised beyond RAP period (21+ yrs. after W’s death), power would be void…
            2. … BUT, as per after-developed facts doctrine, b/c NO further children/ grandchildren were born b/w W’s death (when power created) and H’s death (when power exercised), power is valid (saved by after-developed facts)
              1. After-developed facts doctrine does NOT apply to general power presently exercisable
              2. … BUT, applies to “anything else”
            3. “A devised to B for life, then to B’s children for their lives, the principal to B’s grandchildren”… C1 was born to B before A’s death… C2 was born to B after A’s death
              1. Technically, B’s children have a VRSPD (since C1 already born)… AND, VRs are NOT subject to RAP
              2. … BUT, a class gift IS subject to RAP (exception)
                1. Class gift to B’s children is valid à will vest within RAP period (immediately upon B’s death)
                2. Class gift to B’s grandchildren is void à C2 (NOT a life in being) could produce a child (B’s grandchild) 21+ yrs. after C1 (a life in being) dies
              3. “A devised to B for life, then to B’s children who reach 25”… 4 children of B, all under 25, were living at A’s death
                1. Since it is possible for B to have 5th child AND for all measuring lives to die immediately thereafter (such that 5th child would reach 25 beyond RAP period), class gift is void…
                2. … AND, as per all-or-nothing ruleclass gift is void as to all 4 of B’s children (class gift must be entirely valid OR entirely void)
              4. “A devised $1K to each child of B who reaches 25”… 4 children of B, all under 25, were living at A’s death
                1. Since each child of B is entitled to a specific amount, this is NOT a class gift… thus, each gift’s validity is analyzed separately…
                2. … AND, using each of B’s 4 children as their own measuring lives, each child’s gift is valid
              5. “A devised to son B for life, then to B’s children (A’s grandchildren) for life, and at death of each of B’s children, his/her respective share was to pass to his/her issue (primarily great-grandchildren) forever”… B has 2 children before A’s death, AND 2 children after
                1. By severing into respective shares (per stirpes/right of representation), each gift is analyzed separately (sub-classes)…
                  1. Gift in A’s grandchildren born before A’s death is valid
                  2. Gift in A’s grandchildren born after A’s death is void
                2. If, instead, gift was in equal shares (per capita) to A’s grandchildren, then gift would be void as per all-or-nothing rule (class NOT severable)
              6. “A devises to such children of B as reach 25”… at A’s death…
                1. If B is alive w/ 3 children (25, 10 and 5) à valid (b/c 25-yr.-old can take possession now, class is closed to after-born children as per rule of convenience… 10- and 5-yr.-old as own measuring lives)
                2. If B is dead w/ 2 children (5 and 1) à valid (class closed b/c B can have NO more children… 5- and 1-yr.-old as own measuring lives)
                3. If B is alive w/ 2 children (10 and 5) à void (class still open, SO possible for B to have more children)
              7. “A devises to B for life, then to such children of C as reach 25”… at A’s death, B and C are alive, and one of C’s children is 25
                1. C’s 25-yr.-old child has a VRSPD
                2. … BUT, as to C’s other children (born AND unborn), CR is void b/c B is still alive (rule of convenience does NOT apply, class NOT closed)
              8. Uniform Statutory RAP (USRAP)…
                1. Adopted in CA in 1992… BUT, beforehand…
                  1. In 1963, CA passed CCP § 715.8, which defined “vested” by whether there were people in existence who could come together and convey FSA
                    1. Thus, if party holding EI and party holding FSSEI could come together, then EI did NOT violate RAP
                    2. … BUT, this conflicted w/ common law RAP, which was adopted in CA Const.
                  2. In 1970, CA repealed CCP § 715.8, AND amended CA Const. to repeal constitutional provision re: RAP… instead, enact RAP statutorily
                2. USRAP in CA has 3 components à must comply w/ one…
                  1. Common law RAP
                  2. 90-yr. wait-and-see
                  3. Equitable approximation
                    1. Best for draft document that complies w/ common law RAP
                    2. … BUT, if NOT complying w/ common law RAP, may still wait upwards of 90 yrs. for interest to vest OR void (during which time title is screwed up, so NO title insurance obtainable)…
  • … OR, if “necessary”, go to court to seek reformation of document
  1. Potential Posthumous Birth Disregarded à covered under USRAP/CA, but NOT common law RAP
    1. “A to B for life, then to B’s children that reach 21”… B dies leaving pregnant wife, who gives birth several months later (such that B’s child will turn 21 beyond RAP period)…
      1. Under common law RAPgestation rule adds gestation period to B’s life in being, thereby making CR valid…
      2. … BUT, under USRAP/CA, the fact that B’s child was born after B’s death ignored, thereby making CR valid (same outcome, different method)
    2. … now, assume that B’s sperm was frozen, and B has child well after B’s death…
      1. Under common law RAPCR is void b/c B’s child was NOT the product of gestation period
      2. Under USRAP/CA, CR is valid
  • RESTRAINTS ON ALIENATION
  1. Validity of restaint at common law depends on…
    1. Type of estate being restrained…
      1. Fee (being potentially infinite) is most likely to be protected from a restraint on alienability…
      2. … AND, w/ estate for yrs. (landlord/tenant), any restraint is OK…
      3. … whereas, life estate falls in b/w (likely for restraint to be justified)
    2. Type of restraint…
      1. Disabling à any attempt to transfer is void
  1. Promissory à if transferred, then suit for damages/injunction
    1. If suit leads to injunction, then essentially a disabling restraint…
    2. … BUT, possibility of damages makes promissory restraint less harsh
  2. Forfeiture à if transferred, then forfeited
    1. Forfeiture is least disliked restraint b/c, either way, party that attempted to transfer is left w/o property…
    2. … BUT, instead of property going to transferee, property returns to original grantor
  3. In CA, restraints on alienation are void when “repugnant” (CC § 711) à examples…
    1. Due on transfer clause à if transferred, then entire loan to be paid back (economic/indirect restraint, NOT absolute/direct restraint)
      1. NOT void…
      2. … BUT, subject to balancing (Wellenkamp) à justification/rationale for restraint vs. quantum of restraint
    2. Assignment/sublease à consent of landlord for tenant to transfer
      1. NOT void…
      2. … BUT, subject to Wellenkamp balancing (Kendall)
    3. Options to purchase
      1. If option to purchase for property for $100K… BUT, value of property has risen to $2M (such that no one would purchase property on market for more than $100K)
        1. MAY be void under RAP
        2. … if not, then MAY be void as restraint on alienation…
  • … AND, if neither, then MAY just be stuck w/ bad deal
  1. NOT to be confused w/ first right of refusal (in which party that elects to sell must first make offer to holder of right)
  1. Resale restrictions on low-income housing programs
    1. To prevent recipient of low-income housing from getting greater return…
    2. … MAY restrict sale to ONLY program-qualified buyers

REMAINDERS

Is FPI a remainder?

  • If FPI is created in a transferee –AND– FPI follows a life estate (OR estate for yrs., if jurisdiction allows for remainder to follow non-freehold estate) which is created in another transferee AND– FPI becomes possessory immediately upon natural expiration of life estate AND– FPI created in same instrument as life estate à YES
  • If NOT all above conditions met à NO

Prop1

If a remainder, is it vested (VR) OR contingent (CR)?

  • If remainder is created in transferee that is existing –AND– ascertained –AND– there is NO condition precedent (as opposed to condition subsequent) à VR
    • If VR is NOT divestable, then an absolutely vested remainder (AVR)
    • If VR IS divestable, then either a VR subject to partial divestment (VRSPD) OR VR subject to complete divestment (VRSCD)
  • If NOT all above conditions met à CR

prop2

If CR, is it destroyed?

  • If jurisdiction follows destructability rule, AND CR cannot vest upon natural expirationof life estate à YES…
    • … unless, CR is to vest to conceived-but-unborn child (NOT destroyed)
  • If reversion is transferred to holder of life estate à YES (CR destroyed as per merger of life estate and reversion into FSA)…
    • … but, NOT if life estateCR AND reversion/AVR are all created in the same document… though, if transferee then transfers both life estate AND reversion/AVR to another transferee, then intervening CR would be destroyed

Prop3

prop4

REMEDIAL DEVICES

O (transferor/grantor) conveys to A (transferee/grantee) w/ restriction…

Language

Forfeiture as remedy à PR/PT if to O, EI if to 3rd party

Damages/injunction as remedy à covenant/equitable servitude

NO remedy à declaration of purpose

Differentiating b/w PR and PT

Language re: A’s estate, but NO language re: O’s future interest à PR (automatic forfeiture)

Language re: A’s estate AND O’s future interest à PT (optional forfeiture)

Ambiguous à constructional preference for A

  • Whichever is less harsh for A (damages/injunction <<< optional forfeiture <<<automatic forfeiture)…
  • … unless, multiple remedies are consistent (C/ES consistent w/ PT, but NOT w/ PR) à in which case, O MAY choose

Prop5

EI Void as per RAP

If original language (of now-voided EI) is automatic à A has FSD, O has PR

  • A’s estate must be lost upon violation à since it can’t go to 3rd party, it must go to O

If original language (of now-voided EI) is optional à A has FSA (w/ NO restriction)

  • A’s estate would be lost ONLY if 3rd party exercised option à BUT, 3rd party has lost option

Enforcement of Remedial Device

Party w/ benefit (substantial interest AND remedial device) may enforce against party w/ burden

  • O has substantial interest if purpose is personal (i.e. “for research purposes only”)…
  • … BUT, O may NOT have substantial interest if purpose is land-related (i.e. “for single family residence only” à if O is land-developer, then O would rather transfer remedial device to neighboring lots)

Defenses

Legal defenses always work… BUT, equitable defenses MAY not “knock out” a PR/PT/EI (if state views as more an “estate” than a “remedial device”)

  • In CA, A MAY bring action for quiet title/declaratory relief (as per CCP § 1060) w/o violating restriction (“pre-breach judgment”)…
  • … BUT, other states may require violation of restriction before action may be brought à thus, A risks losing title to determine whether defense is valid

Prop6

RULE AGAINST PERPETUITIES

Is CR/EI valid OR void under RAP?

  • If there is NO way that CR/EI could vest beyond the RAP period (21 yrs. after the death of any measuring life/life in being) à valid
  • If it is possible for CR/EI to vest beyond the RAP period à void
    • Consider à actual facts at time that interest is created (and RAP period begins) AND possibilities during RAP period

Notable consideration #1 à  whether [_] can have more children AND whether [_]’s child(ren) is a life in being (AND, thus, could be used as own measuring life)…

Prop7

Notable consideration #3 à use of (proper) savings clause

Prop8

Prop9

Prop10

Prop11

  • If a general power presently exercisable à RAP period does NOT begin until power exercised
  • If “anything else” (general power testamentaryspecial power presently exercisable OR special power testamentary) à RAP period begins when power created…
    • … BUT, after-developed facts doctrine may apply

Prop12

Prop13

Prop14

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