Property Knowledge Check

Deed of Trust

"The Power of Sale": The debtor/notemaker is the trustor. He gives a deed of trust to a third-party trustee, who is usually closely connect to the lender (the beneficiary). Upon default, the lender (i.e. beneficiary) instructs the trustee to foreclose the deed of trust by sale

An uncle executed a warranty deed granting a parcel of land to his nephew. The uncle placed the deed in his bedroom closet and told his friend to get the deed and give it to the nephew if the nephew survived the uncle. Several years later, the uncle conveyed the land by quitclaim deed to a purchaser for $20,000. The uncle told the purchaser about the earlier deed to the nephew, and he told the purchaser that he planned to tear it up, but the uncle never did so. The purchaser properly recorded her deed. The uncle died the following year, leaving the nephew as his sole surviving heir. The friend thereupon delivered the uncle's deed to the nephew, which was the first time the nephew knew of the deed. A statute of the jurisdiction in which the land is located provides: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice whose conveyance is first recorded according to law." Was the deed from the uncle to the purchaser effective? A Yes, as a conveyance of title when delivered. B Yes, on recordation, to cut off the nephew's interest in the property. C No, as against the nephew, because the purchaser knew of the deed from the uncle to the nephew when she became a grantee. D No, as against the nephew, because the purchaser took by quitclaim deed and thus stands in the shoes of the uncle.

A Yes, as a conveyance of title when delivered.

Equitable Mortgage

Also known as; absolute deed. An absolute deed if given for security purposes, can be treated by the court as an "equitable mortgage" to be treated as any other mortgage (i.e. creditor must foreclose by judicial action)

A property owner owned a tract of land that he leased to a baker for 27 years. The baker built a large bakery on the property. The baker then sold the bakery building to a buyer, assigning the lease with the property owner's approval. The buyer has failed to make a rent payment for several months and has also failed to build the cafe that the baker had agreed to build in the original lease. The landlord of the property has a cause of action against: A The buyer for the rent only, because the rent covenant runs with the land. B The buyer for the rent and the cafe, but only if the buyer expressly assumed performance of all covenants. C The buyer and the baker for both the rent and the cafe. D The buyer for the rent only, and the baker for the cafe only.

An assignment does not release the tenant from his contractual obligations to the landlord; thus, the baker is still liable for all of the lease provisions. Thus, (D) is incorrect. An assignee is in privity of estate with the landlord and is liable on all covenants in the lease that run with the land. His assumption of these duties is implied; it need not be expressed in the assignment. Covenants to pay money run with the land, as do covenants to perform physical acts on the property. Therefore, the buyer is liable for both the rent and the cafe even if it did not expressly assume performance of the covenants. Thus, (A) and (B) are incorrect.

Warranty Deed

In many states, use of the word "grant" in a deed creates by implication two limited assurances against acts of the grantor (not her predecessors): (i) that the grantor has not conveyed the same estate or any interest therein to anyone other than the grantee; and (ii) that the estate is free from encumberances made by the grantor

A landowner embarked on an expedition into a remote jungle, leaving no means to communicate with him. Because property values suddenly began plummeting in the landowner's neighborhood, his son believed that it was imperative to sell his father's property before it became worthless. Having no way to speak to his father ahead of time, the son prepared a deed conveying the property to a buyer, but left the line for the buyer's name blank. He then signed his father's name on it as the grantor, and handed the deed to the buyer. The deed, however, did not include any language regarding the amount the father was to receive in exchange for the property. The buyer believed that the son was the owner of the property. When the father returned, he was happy that the property had been sold. If the buyer changed his mind and now wishes to have the conveyance set aside, which of the following would be his best argument? A The deed was not valid because the rapidly declining property values amounted to extreme duress. B The deed was not valid because the buyer was not identified in the writing. C The deed was not valid because the consideration for the deed was not contained in the writing. D The deed was not valid because the son signed it. Real Property - Transfer of Title and Recording 3 of 5 Items

The buyer's best argument would be that the deed is void because the son signed it. A valid deed requires a writing containing a description of the land and parties, words of intent, and the grantor's signature. Here, the signature on the deed was forged. A defective deed may be voidable, which means that it would be set aside only if the property had not been conveyed to a bona fide purchaser, or it could be void, meaning that the deed would be set aside regardless of the property having passed to a bona fide purchaser. Deeds obtained by means of, among other things, duress, undue influence, or mistake are considered voidable. Deeds that were forged, never delivered, or obtained by fraud in the factum are void. Here, although the father seems to have ratified the conveyance and the buyer was a bona fide purchaser, the deed is void because the signature was forged. (A) is incorrect. A deed obtained by duress would be merely voidable, and in any case, the pressure caused by rapidly dropping values is not the duress that is contemplated by the common law rule. Duress for voidability purposes means pressure that is brought by an individual or entity in order to procure the deed. (B) is incorrect. Although a deed must identify the parties, courts will presume that the person taking delivery is authorized to fill in the name of the grantee. In the absence of the son's forgery--i.e., if the landowner had executed and handed the deed to the buyer--all the buyer would have had to do was fill in his name and the deed would be valid. (C) is incorrect because a recitation of the consideration for the conveyance is not required to make a deed valid.

A wealthy philanthropist owned a mansion built to his exact specifications, featuring a pipe organ built into the wall of the music room. The organ was impressive, with beautiful hand-carved wood scrollwork. The accompanying bench was made from the same wood as the organ and was carved to match the patterns on the organ. The bench was fully movable and could be slid into a niche beside the organ when not in use, although the philanthropist usually left the bench in front of the organ for its matching effect, even when the organ was not being played. The philanthropist died, and his will left all of his personal property to his daughter and all of his real property to a local charity. After the will was admitted to probate, the daughter removed all of the furniture and other movables from the mansion, including the organ bench. The daughter refused the charity's request to return the bench to the mansion. If the charity brings suit against the daughter to replevy the bench, who will prevail? A The daughter, because the bench is personalty since it was not bolted to the floor. B The daughter, because removing the bench does not damage the real property. C The charity, because the bench is integrally connected to the organ. D The charity, because removal of the bench reduces the value of the devise to the charity.

The charity will win because the organ is a fixture and the bench is integrally connected to the organ. Under the concept of fixtures, a chattel that has been annexed to real property is converted from personalty to realty. As an accessory to the land, it passes with ownership of the land rather than with a transfer of the personal property of an estate. The manifest intent of the annexor determines whether the chattel becomes a fixture. The factors for evaluating the annexor's intent are: (i) the relationship between the annexor and the premises, (ii) the degree of annexation, and (iii) the nature and use of the chattel. Under this analysis, the organ itself is clearly a fixture: (i) the philanthropist was the fee owner of the mansion and had the organ built to his specifications when the mansion was constructed; (ii) the organ was built into the wall of the mansion and could not be easily removed; and (iii) the appearance of the organ and how it complemented the rest of the mansion probably were more important to the philanthropist than its function. Constructive annexation occurs when an article of personal property (an "accession") becomes an integral part of the property, even though it is not physically annexed to the property, in the same sense that a fixture becomes an integral part of the realty. The doctrine is fully applicable in this case even though the accession goes with an item of property that is itself converted from personalty to realty, as the organ was here. The bench is an accession because it was created as an integral part of the organ and significantly contributes to an important aspect of the organ: its overall appearance. Removing the bench and replacing it with a bench made of different wood or carvings would damage the aesthetic value of the organ. Thus, the charity will succeed in obtaining the bench because it is not severable from the organ. (A) is incorrect because the fact that the bench was not bolted to the floor is not determinative. The bolting goes to whether the bench alone is a fixture. This is irrelevant because it is an accession to (and thus a part of) the organ, which is clearly a fixture. (B) is incorrect because the fact that removing the bench does not damage the building itself does not give the daughter the right to remove it. Removing the bench will damage the organ because the bench is an accession to the organ. The organ, as a fixture, is part of the real property; thus, removal of the bench will damage the property. (D) is incorrect because harm to the parties is not an issue in determining whether an item is a fixture. The relevant question is whether removal damages the real property. If the bench were found to be personalty, the fact that its removal would reduce the value of the charity's gift would have no impact on the daughter's right to remove it.

Without obtaining the brother and sister's consent, the son borrowed $20,000 from a bank, secured by a mortgage on the land, to make improvements to the land. Five years later, the son died. The brother and sister took possession of the land, but failed to make any mortgage payments. If the bank sues to recover the delinquent payments, the court should render judgment for: A The bank, because a life tenant is obligated to make repairs. B The bank, because the remaindermen are obligated to pay the principal of a debt. C The brother and sister, because the son committed ameliorative waste. D The brother and sister, because the mortgage does not encumber the fee simple.

The court should render judgment for the brother and sister because the mortgage does not encumber the fee simple. A life tenant is entitled to all the ordinary uses and profits of the land, which includes encumbering his own interest, but he cannot lawfully do any act that would injure the interests of the remaindermen. Permissive waste occurs when the life tenant allows the land to fall into disrepair or fails to take reasonable measures to protect the land. Although a life tenant is obligated to pay interest on any encumbrances of the fee simple estate to the extent of the income or profits from the land (or in their absence to the extent of the reasonable rental value of the land), he is liable for both principal and interest payments if the encumbrance is on the life estate alone. Here, because the son did not obtain the consent or joinder of the remainderman when he mortgaged the land, the mortgage attaches only to the life estate. Thus, the remaindermen (the brother and sister) are not liable for the mortgage payments. (A) is incorrect because the son made improvements rather than repairs to the land. Although a life tenant is obligated to preserve the land and structures in a reasonable state of repair, to the extent of the income or profits from the land (or in their absence to the extent of the reasonable rental value of the land), he is under no obligation to make permanent improvements on the land. (B) is incorrect because remaindermen are obligated to pay the principal of a debt only if the debt encumbers the entire fee simple estate. Here, only the life estate is encumbered. (C) is incorrect because ameliorative waste, which occurs when the use of the property is substantially changed but the change increases the value of the property, may have been an appropriate cause of action for the brother and sister to bring against the son for the improvements, but it does not affect the bank's rights.

A testator executed a will, devising his land "to my son and my daughter, share and share alike." Shortly thereafter, the daughter died intestate, leaving a child as her only heir. The next year, the testator and his son were involved in a car accident. The testator died immediately. The son died six days later, leaving a will that bequeathed his entire estate to his wife. The jurisdiction has the following statute: "If a devisee, including a devisee of a class gift, who is a grandparent or a lineal descendant of a grandparent of the testator is dead at the time of execution of the will or fails to survive the testator, the issue of such deceased devisee shall take the deceased's share under the will." Who owns the land? A The daughter's child owns all of the land in fee simple. B The son's wife owns all of the land in fee simple. C The daughter's child and the son's wife each own an undivided one-half interest in the land. D The daughter's child and the son's wife each own one-half of the land.

The daughter's child and the son's wife each own an undivided one-half interest in the land. At common law, if a will beneficiary died before the testator, the gift to the beneficiary was void. However, this jurisdiction has an anti-lapse statute, which saves the gift for the predeceasing beneficiary's descendants if the beneficiary herself is a descendant of the testator. Here, when the daughter died, her one-half interest in the land passed to her child under the anti-lapse statute. When the son died, his one-half interest in the land, to which he was entitled on the father's death when the father's will took effect, passed through the son's estate (not the anti-lapse statute) to his wife. Moreover, a conveyance to two or more persons is presumed to create a tenancy in common rather than a joint tenancy unless an intention to create a right of survivorship is clearly expressed. Each co-tenant has the right to possess all portions of the property; no co-tenant has the right to exclusive possession of any part. Therefore, the daughter's child and the son's wife each own an undivided one-half interest in the land as tenants in common. (A) and (B) are wrong because neither the child nor the wife owns all of the land in fee simple. (D) is wrong because the child and the wife each own an undivided one-half interest, which is a one-half interest as to the entire tract, as opposed to one-half of the land, which would be all interest in a one-half part of the tract.

A landowner owned a large piece of property containing an inn and a bakery. She entered into a contract to sell the property to a purchaser for $1 million. The contract was recorded. The purchaser gave the landowner $200,000 as earnest money. The closing date was set for September 10, two months after the signing of the contract. On August 10, an arsonist set fire to the inn, which burned to the ground. On September 10, the landowner appeared at the closing and tendered the deed to the property. The buyer refused to tender the remaining $800,000 of the purchase price and demanded the return of his earnest money. The landowner sued the buyer for specific performance of the contract. The buyer countersued for the return of his earnest money. Both parties stipulate that the value of the property without the inn is $600,000, that insurance on the property had lapsed, and that the common law, unmodified by statute, applies. What is the most likely result at trial? A The landowner will not prevail on the issue of specific performance, but will be allowed to keep the earnest money. B The landowner will not prevail on the issue of specific performance and will be ordered to return the earnest money. C The landowner will prevail on the issue of specific performance, but the price will be abated to $600,000. D The landowner will prevail on the issue of specific performance for the full contract price.

The landowner will succeed in her suit for specific performance at the full contract price. Where property subject to a contract for sale is destroyed without the fault of either party before the date set for closing, the rule in the absence of a statute is that the risk of loss is on the buyer. Thus, the buyer must pay the contract price despite a loss due to fire, unless the contract provides otherwise. Here, the inn was destroyed by fire after the landowner and the buyer entered into their contract for the sale of the property, but before the closing date. The contract apparently was silent regarding the risk of loss and there is no applicable statute. Thus, under the common law rule, the risk of loss is on the buyer. As a result, the landowner is entitled to receive specific performance of the contract, meaning that the buyer must pay the full contract price. (A) and (B) are incorrect because they conclude that the landowner is not entitled to specific performance. As explained above, the landowner is entitled to specific performance because the risk of loss is on the buyer. (B) is also incorrect because it states that the landowner must refund the earnest money. The landowner is entitled to the full contract price; thus, there is no reason for her to return the earnest money. (C) is incorrect because it allows the buyer to tender less than the full contract price. With the buyer bearing the risk of loss, he must pay the $1 million contract price despite the decrease in the property's value due to the fire.

A landowner conveyed his land to his wife, son, and daughter "as joint tenants with right of survivorship." The daughter then conveyed her interest to a friend. The wife subsequently executed a will devising her interest to the daughter. Then the son mortgaged his interest to a lender, who promptly and properly recorded the mortgage. The wife died, then the daughter's friend died, leaving a will that bequeathed her entire estate to the daughter. The daughter and the son survived. If the jurisdiction follows the title theory, who owns what interest in the land? A The lender owns the fee simple. B The lender and the daughter own unequal shares as tenants in common. C The son and the daughter own unequal shares as tenants in common. D The son and the daughter own equal shares as joint tenants.

The lender and the daughter own unequal shares as tenants in common. Creation of a joint tenancy requires four unities: (i) time (interests must vest at the same time); (ii) title (interests must be acquired by the same instrument); (iii) interest (interests must be of the same type and duration); and (iv) possession (interests must give identical rights to enjoyment). When property is held in joint tenancy by three or more joint tenants, a conveyance by one of them destroys the joint tenancy only as to the conveyor's interest. The other joint tenants continue to hold in joint tenancy as between themselves, while the grantee holds her interest as a tenant in common with them, because she does not share the unities of time or title with the joint tenants (i.e., her interest vested at a different time and was acquired by a different instrument). Here, the wife, the son, and the daughter owned the property as joint tenants. When the daughter conveyed her interest to the friend, the joint tenancy was severed as to the daughter's interest. At that point, the wife and the son each held one-third interests as joint tenants because, as between themselves, the four unities were preserved. The friend did not share the unities of time or title with the wife and the son. Thus, the friend took a one-third interest as a tenant in common rather than as a joint tenant. Because this jurisdiction follows the title theory, the son's mortgage also severed the joint tenancy. The minority of states following the title theory regard a mortgage as an actual transfer of title to the property. Thus, a mortgage by one joint tenant transfers the legal title of the joint tenant to the mortgagee (the lender). This action destroys the unity of title and severs the joint tenancy. On the other hand, in a lien theory state (majority), a mortgage is considered a lien on title--one joint tenant's execution of a mortgage on his interest does not, by itself, sever a joint tenancy until default and foreclosure proceedings have been completed. Here, when the son executed the mortgage, title was transferred to the lender, severing the joint tenancy again. At that point, the wife, the lender, and the friend each held one-third interests as tenants in common because each interest was acquired at a different time and by a different title. An interest in a tenancy in common is freely alienable by inter vivos and testamentary transfer, is inheritable, and is subject to claims of the tenant's creditors. The only "unity" involved is possession: Each tenant is entitled to possession of the whole estate. Thus, when the wife died, her interest passed under her will to the daughter. Likewise, when the friend died, her interest passed to the daughter. Thus, the lender holds a one-third interest as a tenant in common with the daughter, who holds the remaining two-thirds interest. (A) is incorrect because the daughter also has an interest in the property (see above). When one joint tenant dies, the right of survivorship operates to free the property of her interest; the surviving joint tenants retain an undivided right in the property. Although a will is inoperative as to joint tenancy property because the decedent's rights in the property evaporate at the instant of death, a will may effectively dispose of an interest held in a tenancy in common, as discussed above. Here, although the wife executed her will while the property was still held in joint tenancy, a will is ambulatory (effective only at death), and at her death the wife held her interest as a tenant in common. Thus, it passed to the daughter under the will. (C) and (D) are incorrect because, as explained above, the son has no interest.

the tenancy was two years, and rent was payable in monthly installments at the beginning of each month. At the end of the second year, there had been no discussions between the tenant and the owner regarding renewal or termination. The tenant did not vacate the premises at the end of the term; instead, she sent a check for the next month's rent to the owner. The owner cashed the check and then informed the tenant that he was holding her to a new tenancy and a rent increase of 10%. What is the status of the tenancy that the owner created? A A month-to-month tenancy for the original rent amount. B A year-to-year tenancy for the original rent amount. C A month-to-month tenancy for the increased rent amount. D A tenancy at will, terminable at any time, for the increased rent amount.

The owner can hold the tenant to a year-to-year tenancy for the original amount. When a tenant continues in possession after the termination of her right to possession, the landlord has two choices of action: He may treat the hold-over tenant as a trespasser and evict her under an unlawful detainer statute, or he may, in his sole discretion, bind the tenant to a new periodic tenancy, in which case the terms and conditions of the expired tenancy apply to the new tenancy. Unless a residential lease is involved, a year-to-year tenancy results from holding over if the original lease term was for a year or more. The new tenancy has the same terms as the original tenancy unless the landlord notified the tenant before termination of the original tenancy that occupancy after termination will be at an increased rent. Here, the original lease was a commercial lease for a two-year term, so the owner's decision to hold the tenant to a new tenancy makes it a year-to-year tenancy. However, because the owner did not notify the tenant of the rent increase prior to the end of the term, the new tenancy is at the original amount of rent. (A) is wrong because the lease here is not a residential lease; thus, the periodic tenancy created is a year-to-year tenancy rather than a month-to-month tenancy. (C) is wrong for the same reason that (A) is wrong and also because the new tenancy is at the original amount of rent, as discussed above. (D) is wrong because when a landlord elects to bind a hold-over tenant to a new tenancy, it will be a periodic tenancy rather than a tenancy at will.

An uncle executed a warranty deed granting a parcel of land to his nephew. The uncle placed the deed in his bedroom closet and told his friend to get the deed and give it to the nephew if the nephew survived the uncle. Several years later, the uncle conveyed the land by quitclaim deed to a purchaser for $20,000. The uncle told the purchaser about the earlier deed to the nephew, and he told the purchaser that he planned to tear it up, but the uncle never did so. The purchaser properly recorded her deed. The uncle died the following year, leaving the nephew as his sole surviving heir. The friend thereupon delivered the uncle's deed to the nephew, which was the first time the nephew knew of the deed. A statute of the jurisdiction in which the land is located provides: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice whose conveyance is first recorded according to law." Was the deed from the uncle to the purchaser effective? A Yes, as a conveyance of title when delivered. B Yes, on recordation, to cut off the nephew's interest in the property. C No, as against the nephew, because the purchaser knew of the deed from the uncle to the nephew when she became a grantee. D No, as against the nephew, because the purchaser took by quitclaim deed and thus stands in the shoes of the uncle.

The purchaser's deed was effective to convey title from the uncle to the purchaser immediately on delivery. A quitclaim deed transfers whatever right, title, or interest in the property the grantor has. Thus, when the purchaser took by quitclaim deed, she acquired the uncle's interest in the land. Because the deed from the uncle to the nephew was never validly delivered, the conveyance is ineffective and the uncle was the sole owner of the property. If a grantor executes a deed but fails to deliver it during his lifetime, no conveyance of title has occurred. "Delivery" refers to the grantor's intent; it is satisfied by words or conduct showing that the grantor intended that the deed have a present operative effect--i.e., that title pass immediately and irrevocably, even though the right of possessing the land may be postponed until some future time. To make an effective delivery, the grantor must relinquish control. Here, the uncle clearly did not intend to relinquish the land because he executed the deed but retained it, and merely told his friend to deliver it at his death to his nephew, provided that the nephew was still alive. Thus, because the uncle did not intend to relinquish control of the land until his death, there was no valid delivery of the deed. Note that the deed did not convey a future interest to the nephew. To convey a future interest (i.e., a present interest in the property, but where possession is postponed until some future time), there must also be a present intent to convey an interest. Here, the uncle showed no intent to presently convey an interest because he retained the deed. Generally, in cases where the grantor has retained the deed, the condition that title will not pass until the grantor's death must be contained in the language of the deed itself for a future interest to be conveyed. Therefore, the purchaser took full title to the land. (B) is wrong because recordation of the purchaser's deed is irrelevant. The nephew never had an interest that could be cut off (see above). Thus, the purchaser prevails because she acquired valid title from the uncle, rather than because of any priority in recording. Had the purchaser not recorded her deed, she would still have prevailed. (C) is wrong because it is irrelevant that the purchaser knew of the earlier deed to the nephew. The earlier deed to the nephew was not a valid conveyance of the property because there was no delivery. Because no interest passed to the nephew, the purchaser's notice of the deed is meaningless. (D) is wrong because the fact that the conveyance was by quitclaim deed is not important; the purchaser is the full owner of the land. This choice implies that the purchaser's quitclaim deed is somehow ineffective against the nephew's warranty deed, but the fact that the purchaser took by quitclaim does not in any way lessen her interest in the land. A quitclaim deed effectively conveys all interest in the property the grantor has. In this case, the uncle had a fee simple absolute, and so that is what passed to the purchaser under the deed. The nephew's warranty deed was never delivered, and thus it was worthless.

A rancher entered into a written contract to buy a farm from a farmer for $100,000. The contract stipulated for closing on September 30. In addition, the contract contained the following provision: "The taxes shall be prorated as agreed to by the parties at a later date." Upon the signing of the contract, the rancher gave the farmer a check for $10,000 as a down payment. On September 28, the rancher notified the farmer that he would not be able to close on the farm until October 2, because the closing on his current home, the proceeds from which were to be applied to his purchase of the farm, was unavoidably delayed due to his buyer's illness. Meanwhile, the farmer had difficulty finding a home she liked as well as the farm. She decided that she would rather not sell the farm and wished to avoid the contract with the rancher. On October 2, the rancher showed up at the closing with the $90,000 to tender to the farmer. The farmer did not show up. The rancher sues for specific performance. In whose favor will the court most likely rule? A The farmer, because the tax provision is an essential term of the contract, and it is not specific enough to satisfy the Statute of Frauds. B The farmer, because the rancher materially breached by not tendering performance on September 30. C The rancher, because of the operation of the doctrine of equitable conversion. D The rancher, because time was not of the essence.

The rancher will prevail because there is no evidence that time was of the essence. In general, courts presume that time is not of the essence in real estate contracts. Thus, the closing date stated in the contract is not absolutely binding in equity, and a party, even though late in tendering his own performance, can still enforce the contract if he tenders within a reasonable time. (One to two months is usually considered reasonable.) Time will be considered of the essence only if: (i) the contract so states, (ii) the circumstances indicate it was the parties' intention, or (iii) one party gives the other notice that he desires to make time of the essence. The contract in this case made no mention that time was of the essence. The facts do not indicate any circumstances, such as rapidly fluctuating prices or the need for the money to close another critical transaction, that would indicate that the rancher and the farmer intended time to be of the essence. The farmer did not give the rancher reasonable notice before September 30 that she wanted to make time of the essence. Thus, the court will not find that time is of the essence here. Because time is not of the essence, the rancher is not in material breach and is entitled to specific performance. (A) is wrong because the Statute of Frauds is not violated here. Contracts for the sale of land must be in writing to be enforceable. The essential terms for purposes of the Statute of Frauds are: the description of the property, the identification of the parties, and the price. The tax provision is not an essential term. It is an incidental matter, which need not appear in writing or even be agreed upon. (B) is wrong because, as discussed above, the rancher is not in material breach. Time was not of the essence, so the fact that the rancher did not tender his performance on September 30 did not constitute a breach of the land sale contract. (C) is wrong because the doctrine of equitable conversion will not affect the rights of the parties in this situation. The doctrine of equitable conversion holds that once an enforceable contract of sale is signed, the purchaser's interest is real property, and the seller's interest (the right to proceeds) is personal property. This is important with respect to which party bears the risk of loss if the property is damaged before the date set for closing or if one of the parties dies prior to closing. It has no effect in situations like this one where the question in issue is the enforceability of the contract itself.

A landowner owned a large tract of land containing numerous coal mines. To finance the renovation of some of the buildings on the land, the landowner obtained a $50,000 mortgage from a bank. Shortly thereafter, the landowner conveyed the surface of the land to his sister and the mineral rights to a utility company. The bank recorded its mortgage the next day; the day after that, the utility company recorded its deed; the following day, the sister recorded her deed. None of the parties dealing with the landowner had any knowledge of the others at the time of their transactions. The jurisdiction in which the land is located has the following statute: "No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded." If the sister brings an action to quiet title to the land, what would be the most likely result? A The sister would have only a reversionary interest. B The bank's mortgage would be valid and superior simply because it was first in time. C The sister would be deemed the owner in fee simple absolute and subject only to the payment of the mortgage held by the bank. D The sister would have a fee simple interest subject to the mineral rights of the utility company and the mortgage held by the bank.

The sister's fee simple ownership of the land would be subject to the bank's mortgage interest and the utility company's mineral interest. Under a race-notice statute, which the jurisdiction in this question has, a subsequent bona fide purchaser (i.e., one who takes for value and without notice) is protected only if she records before the prior grantee. Notice is measured at the time of the conveyance, not at the time of recording. The rationale of this type of statute is that the best evidence of which interest was created first is to determine who recorded first. As an inducement to record promptly, race-notice statutes impose on the bona fide purchaser the additional requirement that she record first. Because the bank was the first to receive a conveyance, the bank could not be held to have knowledge of any other conveyance, and when the bank recorded its conveyance first, the bank won out over the sister and the utility company under the statute. The utility company owns the mineral interest in coal on the land because it recorded before the sister. (A) is incorrect because the sister has a present ownership interest in the land, but it is subject to the bank's mortgage and the utility company's mineral interest. (B) is incorrect because the jurisdiction has a race-notice statute. Thus, the bank's interest is superior only if it is first in time and without notice of all other interests. (C) is incorrect because, as discussed above, the sister does not have a fee simple absolute; the utility company owns the mineral interest.

A grantor executed and delivered a deed to his son conveying his land as follows: "To my son for life, but if my son dies survived by his spouse and children, then to my son's spouse for life, with the remainder in fee simple to my son's children." A year later, the son died survived by his spouse and two offspring, a girl and a boy. The boy died intestate two days after the son, leaving one child as his only heir. The common law Rule Against Perpetuities is unmodified in the jurisdiction. What are the respective interests of the spouse, the girl, and the child in the land? A The spouse has a life estate, the girl has an absolutely vested remainder, and the child has nothing. B The spouse has fee simple ownership of the land, and the girl and the child have nothing. C The spouse has a life estate, and the girl and the child have absolutely vested remainders. D The spouse has a life estate, and the girl has a vested remainder subject to open.

The spouse has a life estate, the girl has an absolutely vested remainder, and the child, by intestate succession, will inherit the boy's absolutely vested remainder. The remainder to the son's children was vested subject to open upon the birth of his first child. Because the son cannot have any more children after his death, all members of the class are ascertained at that time and the remainder becomes indefeasibly vested. Because the grant was to the son's "children" rather than "issue" or "descendants," there is no unborn child problem. (A) is wrong because the boy's vested remainder is inheritable by the child. (B) is wrong because the spouse has only a life estate--not a fee simple absolute--and the girl and the child have absolutely vested remainders. (D) is wrong because the class gift in the limitation "with the remainder in fee simple to my son's children" closes on the son's death; no children thereafter can be born to him, which precludes the remainder's being "subject to open."