Chapter 48 Introduction to property

Real Property - land and anything attached to the land (fixtures)

Fixture - tangible property permanently attached to the realty

Gift - title passes upon transfer of possession, requirements for a valid gift:

 Intent to make gift: Donor's intent can be determined by what the donor says and does as well
as by the surrounding facts and circumstances.
 Actual or Constructive Delivery of Item: If item is too large for easy, physical, delivery,
constructive delivery can be accomplished by transfer of symbol. (Car keys symbolize delivery of
car)
 Acceptance of the item
 Gratuitous promises are not enforceable. Executed gifts can’t be revoked.
 Gifts may not be conditional
 Gifts cannot be revoked upon the happening of an event.
 Rule of Law: For an effective gift inter vivos (during life) the donor must have a clear and
unmistakable intention to pass immediate ownership, an irrevocable delivery, and there must
be an acceptance by the donee.

causa mortis (in contemplation of death) - Dying Declaration requirements:

 the donor die as anticipated,

 the death be imminent (death bed declaration),
 the donor does not revoke the gift prior to death and
 the donee survives the donor.

Title by Accession - when the value of personal property increases because it is added to or improved by
natural or manufactured means
Title by Confusion - identical goods (fungible goods) belonging to different people are commingled so
that the owners cannot identify their own property

Title by Possession

Abandoned Property - Owner no longer wants to possess property as demonstrated by facts

o Lost Property - Owner unintentionally and involuntarily parts with possession and does not
know where property is. Finder has better claim against all except the true owner.
o Exception: lost property in the ground. Landowner has better claim than finder. Stolen
Property found by someone who did not participate in theft is construed as lost
property. Again true owner has best claim if owner can be found.
o Mislaid Property - landowner has better claim than finder but true owner has best claim.
Mislaid means the owner PLACED the property but forgot where it was. Distinguish: textbook on
desk vs. textbook on sidewalk. (mislaid vs. lost)
 o Treasure Trove - valuables hidden by owner. Finder has first claim unless owner can be found.
Treasure Trove applies after property was hidden for a long time and it is not likely true owner
will be found.

o Title by Adverse Possession – title to real property can be acquired by adverse possession
(open, notorious, continuous, hostile for the statutory period

Bailment - transfer of possession of personal property with the intent that it be returned.

o Bailor - original owner of bailed property (hint: bailor, owner)

o Bailee - person who receives bailed property (hint: bailee, receives property)
o Possession - bailee must have power to control the personal property and either the bailee's
intention to control or the awareness that the rightful possessor has given up physical control is
important.
o Property – bailment applies to personal property, not real property
o Conversion is the exercise of ownership rights over another's property.
o Bailee's Duty of Reasonable Care (p 1017)
o Jurisdiction may distinguish duty based on type of bailment.
o Commercial bailment (mutual benefit)- reasonable prudent person standard
o Benefit of Bailee - more than reasonable, almost strict liability
o Benefit of Bailor – slightly less than reasonable but duty still exists.

Rule of Law: A party can limit liability for damages resulting from negligence.

General Liability Rules - In an ordinary bailment, bailee is liable for the loss or injury that results from
failure to exercise ordinary or reasonable care.

Bill of Lading - document issued by carrier on receipt of goods for transportation. It is a receipt for
goods, evidence of contract of carriage and document of title. It can be a negotiable instrument. Carrier
may limit liability but limitation does not apply to conversion.

Chapter49 Interests in Real property

Fee Estate - right to immediate ownership of real property for an indefinite time and the right to
transfer the interest by deed or will.

Fee Simple property is owned, absolutely, and can be sold or conveyed by death. Deed language: "to
A, in fee simple…

Fee Simple Defeasible or Conditional Fee - conveyance language imposes a condition

Life Estates -ownership is granted to the life tenant for the period of his/her life and then reverts to
original owner or goes to third party (remainderman) Intent is clear that ownership is only for the
period of life of the named tenant.

Reversionary interest - property passes back to the original owner

Remainder interest - property passes to a named third party upon the termination of the original
conditional interest

Leasehold Estates - landlord grants to tenant an exclusive right to use and possess the land for a definite
or ascertainable period of time.

Tenancy at Sufferance - tenant fails to leave premises at termination of lease. Remaining after period of
lease means the landlord "suffers" the presence of the tenant until the landlord takes affirmative action
to evict.

Tenancy in Common - property is transferred to more than one owner with the intent that they would
share and share alike (two people - 1/2 each; three people - 1/3 each, etc.) If one dies, his/her share
goes to heirs through the laws of intestate succession or by will. No special language is necessary to
create.

Joint Tenancy - property is transferred with the intent that the surviving owner will get it all. Requires
special language: To John and Mary, "as joint tenants, with full rights of survivorship and not as tenants
in common." A joint tenant may sell or convey his/her interest but that creates a tenancy in common
with remaining joint tenants. Thus, if property was originally sold to John, Mary, Bob and Betty as joint
tenants with full rights of survivorship, etc. and John sold his interest to Phil, and then Mary died; the
property would be owned by Phil (1/4 interest - tenant in common) and by Bob and Betty (3/4 interest
as joint tenants). If now Bob sells his share to Joel, we have three tenants in common - Phil 1/4 interest,
Joel 3/8 interest, and Betty 3/8 interest). If Bob had died before a sale to Joel, Phil would own 1/4 of
property and Betty would own ¾

Tenancy by Entirety - applies only to conveyance to husband and wife. Neither can convey his/her
interest without the consent of the other.

Community Property - 1/2 of property acquired by one spouse during marriage automatically belongs to
other spouse, does not apply to property owned before marriage or acquired by gift or inheritance
during marriage

Easements - limited right to use another's land, can be created by the acts of the parties or by operation
of law.

 Easement by prescription - use of another's land that is adverse to landowner's rights, open,
notorious and continuous for the statutory period of time. Similar to title by adverse
possession. Easement by prescription is not possible if landowner grants permission to use land.
Use NY case, crossing empty lot, to illustrate.

Chapter 50 Real property transfers

Marketable Title means free of liens and mortgages, easements and restrictive covenants.

DEEDS
  Warranty - grantor guarantees title (no encumbrances) and quiet and peaceful enjoyment of
the land. If warranty is breached, grantor is liable. Language may be "warrant and convey" or
"grant, bargain and sell" as well as promise that grantor will “warrant and defend title.”
 Special Warranty - grantor promises only that grantor has not caused any defects in the title,
will not warrant or guarantee that title is valid against all claims.
 Quitclaim - grantor does not promise any interest in the land but merely conveys whatever
interest grantor may have.
ADVERSE POSSESSION
 Person who occupies land, openly and notoriously and continuously for the statutory period
obtains title to the property via adverse possession. In Iowa, the statutory period is 5 years.
Distinguish prescriptive easement that is limited use of land.
 Zoning - public control over private property to regulate for the safety, health and general
welfare of the community. Thus zoning regulations can set standards for building height, set-
backs from street or property lines, locations of industry, residential, commercial uses, etc.

Non-conforming Use - use which does not match statutory requirements. Non-conforming use may
continue for a reasonable time until:

 Use is discontinued by landowner

 Nonconforming structure is destroyed or substantially damaged
 Nonconforming structure has been permitted to exist for period of useful life as defined by
authorities.
 Imposition of non-conforming use statutes on existing properties which take away property
owner's rights meets the definition of eminent domain.
 EMINENT DOMAIN
 The government's power to take private property for public use with just compensation

Restrictive Covenants

Owners of real property may impose limits or restrictions on the use or ownership of
land and those restrictions run with the land. The restrictive covenant must be in writing and
filed so as to serve notice and be valid against successive owners of the land.

Chapter 51

Fiduciary - one who enjoys a relationship of trust and confidence over the property

Settlor - one who creates the trust

Trustee - holds legal title for benefit of another (fiduciary)

Beneficiary - one who receives the benefit of the trust

A Trust is a fiduciary relationship in which a trustee hold legal title to property while the use, benefit,
etc., belongs to the beneficiary. It is created by the settlor. Trusts may take effect during lifetime OR
become effective upon death.
  Spendthrift - created for the benefit of one who seems unable or unwilling to manage money
and property in a manner acceptable to settlor. Distribution of assets to the beneficiary are
subject to creditor's legal processes.
 Totten Trust - savings account "Sally, in trust for John" which means Sally can deposit and
withdraw funds at will until her death when transfer is complete.
 Constructive - law creates trust to prevent fraud or unjust enrichment
 Resulting Trust - created by implication and operation of law. Effects the inferred or presumed
intent of parties who have not adequately expressed their actual wishes. Intent is presumed by
the parties actions.
Duties of Trustee

 Carry out the purpose of the trust

 Administer the trust prudently and carefully
 Exercise a high degree of loyalty toward the beneficiary.
Most states will use a prudent investor rule. A trustee who fails to comply with trust or with
laws of state is personally liable for any loss.

Rule against perpetuities- a trust cannot last forever; it can only last the lifetime of the named party + 99
years. End of the trust, beneficiary is the remaindermen.

Constructive trust - based on the undue influence exercised by Dorothy. Four necessary elements for
undue influence: grantor's susceptibility to undue influence(dependency, physical disability),
opportunity to exercise such influence (husband and wife) and effect the wrongful purpose(disallowed
the weaker party for independent advise) , disposition to unduly influence to procur improper favor and
a result clearly the effect of undue influence(disinherit daughter)

Probate process- distribution of assets even if you die with or without a will.

Wills - a written instrument disposing of testator's property upon death. Can be revoked at any time
during life of testator by word or deed.

Testamentary Capacity - Testator must:

 Understand nature and extent of property

 Appreciate natural objects of bounty (who are the heirs)
 Formulate an orderly plan of distribution
 Wills executed under fraud, duress or undue influence are not valid.
Formal Requirements of a Will

 Written (no requirement as to pen or pencil or type of paper, etc)

 May incorporate a will by reference into another document
 Memo must be in writing
 Must be in existence when will is executed
 Must be adequately described in the will as being in existence
 Signed by the testator
 Attested to by witnesses (whether two or three varies from state to state)
 Testator must sign in the presence of the witnesses and
  Declare document to be last will and testament
 Witnesses must sign in presence of testator and each other
 Some states will disqualify a witness who also inherits under the will and some states will void
the bequest to the witness under the will.
 Wills can be revoked at any time prior to death. The execution of a new will does NOT
automatically revoke a previous will. The new will revokes only those provisions of the former
will(s) that are inconsistent with the new provisions. To avoid the problem, the new will should
specifically revoke previous wills.
 Codicil is a revision or amendment to a previous will. Must satisfy all requirements of a regular
will (written, witnessed, signed by testator)
 In many states, including Iowa, surviving spouse has the right to elect to take against the will,
(633.236) usually receiving intestate succession share.
Intestate Succession - testator dies without a will, statutes provide for distribution
Surviving spouse inherits and so do children. If child is deceased but leaving surviving children
(grandchildren) the grandchildren inherit parent's (child's) share. This is called per stirpes. If all
children and grandchildren inherit equal shares, this is called per capita. Iowa law provides for
per stirpes inheritance. Collateral heirs inherit if no children or parents. Stepchildren do not
inherit but adopted children do inherit as well as natural children if paternity is established. (see
handout)
 The Executor or Administrator holds title to all property and has the responsibility to file an
inventory of the estate. They must then collect the assets, pay the debts and disburse the
remainder. They have a fiduciary duty and can be held personally liable for violating same

Chapter 24 negotiable instruments

Is the instrument negotiable on its face?

in writing
signed by the maker or drawer
containing an unconditional promise or order to pay
sum certain in money
payable on demand or at a definite time
to order or bearer
Signed by the Maker or Drawer
Maker - two party instrument (note)
Drawer - three party instrument (check)
Unconditional Promise or Order to Pay UCC 3-106
Promise - two party instrument
must contain language promising or agreeing to pay
Conditional
subject to or governed by another agreement
indication of another agreement OK
By this reference made a part hereof – NO
payable from a particular fund or source of funds
indication of account or fund - OK
payable from checking, savings, petty cash
Other promises
promise to do an action in addition to payment NO
failure to state place where instrument is drawn or payable-OK

Sum Certain In Money

"plus interest" is OK judgment rate UCC 3-112
payable in installments or with fixed discount is OK

Payable on Demand or at a Definite Time – UCC 3-108

Demand - payable on holder's request
Any instrument for which no time for payment is stated (i.e.: check)
"payable on sight" "payable on presentation"
Definite Time - payable at a time determined by face of instrument
Payable upon event uncertain as to time of occurrence NO
(pay on my death)
Fixed period after sight or presentation is OK - can be calculated
Subject to Extension by Holder - OK needs no further date
holder always has right to extend by not asking for payment
Subject to Extension by Maker or Drawer
must specify further time period (30 days after demand)

Payable to Order or Bearer – UCC 3-109

Order Paper - use words Order

Pay to order of Jane, Pay Jane or her order
Pay Jeff (non - negotiable except if check, then ok (p. 463)
Payable to Rachel and Bearer… both have to endorse the check
Bearer Paper - use word bearer or cash
Pay to bearer, pay to Jane or bearer, Pay Cash
Pay to order of Jane or bearer
Omissions - failure to state location where the instrument is payable OK
failing to date an instrument is OK
if undated – presume date of issuance
postdated demand instrument (check) becomes time instrument
Incomplete Instruments
will be negotiable when completed as authorized
Ambiguous Terms
handwritten controls typed
Words control figures unless words are ambiguous
Chapter 25 Negotiable instrument
Negotiation is the transfer of an instrument in such a way that the recipient becomes a holder:
Issuance - recipient becomes a holder when document is issued.
Bearer paper - transferee becomes a holder with possession of instrument (includes finders)
Order paper - possession and indorsement by transferor required

Impostor Rule - person misleads maker or drawer as to true identity of transferee. Maker or drawer is deceived
and issues instrument. The indorsement of impostor is valid. Maker or drawer is held liable for failing to properly
identify payee. Note: it is not necessary that the name be fictious.
Examples:
“I'm collecting for United Way” (and I'm not) indorsement “United Way” is valid.
“I'm collecting for the Poor Old Teachers fund” (no such thing) POT is valid.
Distinguish: If I am collecting for United Way and I take checks and indorse the checks "United Way," then those
are forged indorsements, and everyone is a mere possessor. Otherwise instrument is issued to me (doesn't
matter what I'm called: Poor Old Teachers, PGA – ProGolfer Anonymous, United Way, etc.)

Fictitious Payee Rule - disloyal agent or employee causes issuance of instrument. Agent or employee or
accomplice then indorses instrument and the indorsement is valid. The burden is on the employer to determine
the validity of the payee. (I cause Drake to check paycheck to IMA Phonie, and then I cash it.) My indorsement is
valid. I still have liability for fraud, embezzlement etc. But transferees can be holders.

Note: When a person causes an instrument to be issued and does not intend the named payee to have an interest,
the indorsement is still valid. The burden is on the maker or drawer to insure that the instrument is properly
issued. It matters not whether it is the impostor or fictitious payee rule.

Indorsements
Blank Indorsement - signature only - makes instrument bearer paper.
Special Indorsement - "Pay" "Pay to order of" - creates order paper

Restrictive Indorsement - conditional, indorsements that prohibit further transfer, indorsement of deposit or
collection and indorsement in trust.
conditional - indorsement may create condition that would destroy
negotiability on the face but is an acceptable indorsement
"pay to ABC but only if product is delivered by Tuesday"
indorsements that prohibit further transfer - attempt may be made to
restrict further transfer but it is not effective-may still transfer
indorsement of deposit or collection - most common
For Deposit, For Deposit Only, Pay any Bank, For Collection
indorsement in trust - Pay to 3rd party to be held in trust for intended payee
"Pay Bill as Agent for Bob"

Qualified Indorsements –“ without recourse”

Indorser tries to disclaim liability on the instrument
Still liable under warranty rules

Chapter 26 Negotiable instrument

Holder in Due Course - UCC 3-302 HDC is a holder who:
1. gives value in exchange for instrument
2. takes the instrument in good faith and
3. without notice:
 that it is overdue, dishonored
 that instrument has unauthorized signature or alteration
 that any person has a defense or claim to instrument
 w/o reason to question authenticity due to apparent forgery, alteration,
incompleteness, or any irregularity

Assignment is NOT a transfer within the meaning of the UCC for negotiable instrument law. Therefore
the transfer rule does not apply (transferor vests in the transferee such rights as the transferor had…).

A holder in due course must take in good faith. Good Faith means honesty in fact and observance of
reasonable commercial standards of fair dealing

A person has notice when he/she

 Has actual notice

 Has received notification of problem
 From all facts and circumstances, should know problem exists

Shelter Rule - UCC 3-203 b (memorize this version)

Transferor vests in the transferee such rights (HDC) as the transferor has except that a
transferee who has himself been a party to any fraud or illegality may not improve his position to HDC.

Warranty Liability - UCC 3-416 (Students must know!)

Transferor who transfers and receives consideration (contract definition, not value definition) warrants
(guarantees) to the transferee AND if the transferor indorses, the transferor also warrants (guarantees)
to ALL subsequent TRANSFEREES, that:

1. Transferor can enforce (collect) the instrument.

2. All signatures are genuine and authorized (no forgeries).
3. Instrument has not been altered.
4. Instrument is not subject to defenses
5. Transferor has no KNOWLEDGE of the bankruptcy of the maker, drawer or acceptor.

Real Defenses - good against a holder AND a holder in due course

 Infancy
 Incapacity, duress or illegality that makes a K void
 Fraud in the execution
  Bankruptcy
 Any other discharge of which the holder has notice
 Unauthorized signature
 Fraudulent alteration

Personal defenses - good against a holder

 Lack of consideration
 Failure of consideration
 Breach of contract
 Fraud in the inducement
 Illegality that does not make a transaction void only voidable
 Duress, undue influence, mistake, misrepresentation or incapacity that makes a contract
voidable
 set-off or counterclaim
 discharge of which HDC does not have notice
 nondelivery of instrument
 unauthorized completion of instrument
 payment without obtaining instrument
 theft of bearer paper
 lack of authority of corporate officer, agent or partner to issue paper

Chapter 27
 Accommodation Party - indorses only to add security to instrument. The instrument is never
negotiated to accommodating party and thus the party is never a holder or HDC but may be held
liable on the check like the maker or drawer or another indorser.

A person who does NOT indorse does not have liability under indorser rules but may have liability under
warranty rules IF the person transferred AND received consideration.

Indorser Liability - anyone who indorses an instrument is liable on that instrument.

Exceptions:
Qualified Indorsers (without recourse)
Indorser has real or person defense.
If person trying to recover is HDC, indorsers can use real defenses.
If person trying to recover is holder, both real and personal defenses apply