LAW 3330 Chapters 1-7

RP v. DP Differences

- Even though the commonly held characterization of property as real estate or personal property can result in different outcomes, in some cases, the courts may deem there is no distinction - Example: U.S. v. One 1989 Stratford Fairmont: Federal govt. seized 18 yo drug dealer Mark Stover's mobile home. Govt. argued home was subject to forfeiture under federal statute that allows govt. to obtain title to real property & vehicles that are used to commit or facilitate violations of federal drug laws. One section of this forfeiture statute applies to vehicles and another to real property. The trial court concluded that the mobile home was real property, observing, "It is unrealistic to view the wholly non-peripatetic mobile home as something other than 'real property' simply because the word 'mobile' is tacked on before the word 'home.'" The appellate court disagreed with the trial court's characterization of the mobile home as real estate but agreed that it was subject to forfeiture. "Recall that (squiggly s) 881(a)(4) covers vehicles used to 'facilitate the . . . Sale, receipt, possession, or concealment' of drugs and not just their 'transportation.' Potential movement is enough. Mobile home is a vehicle; mobile home is real property; either way, Stover's drug distribution center now belongs to the United States."

Notes on Disputes

- First: can be severed without material harm to the real estate - Second: Issues regarding things attached to the land that cause material harm when removed from the land, such as minerals or structures When the contract of sale calls for these articles to be severed by the seller, the contract is still a sale of goods governed by the Code. When the buyer is to sever these goods, however, the contract is treated as a sale of real estate, and real estate principles apply

Adaptation Examples/Notes

- Focuses on the question of whether an article is adapted to the use or purpose of the real estate - Fixtures could conceivably include implements on a farm or furniture in an apartment - Courts try to figure out whether articles are functionally tied to the real property as well as necessary or beneficial to the enjoyment of the property, like the furnace of a house, power equipment in a mill, and computer systems in bank buildings - Bank of America v. Los Angeles plaintiff bank brought suit seeking a refund of real estate taxes that had been levied on electronic computer systems installed in several buildings. Had been specifically designed for use as accounting centers (pg. 34)

Common Law

- From England, the principle of stare decisis, of abiding by previously decided cases; provides stability, predictability, but also flexibility - Distinguished from Civil (Roman) Law which decides cases based on a legal code

Davis v. Davis

- Is it ethical to sell human organs as property? - Are frozen embryos people or property?

Administrative Law

- Law created by administrative agencies: rules, regulations, orders, & decisions to carry out regulatory powers and duties of such agencies - Directly affects the rights & duties of individuals & their relationship to govt. authority - Admin. agencies created at federal, state, & local levels, & deal directly w/ citizens - Provide assistance & expertise in often highly technical areas - Agencies create laws by rule-making in the Federal Register

Statutory Law

- Laws enacted by legislative bodies (federal, state, or local) - Courts interpret statutes, but statutes prevail over conflicting judicial decisions

State Courts

- Lowest "trial" courts divided into courts of general and limited jurisdiction - Trial courts can appeal to intermediate appellate courts. No new trial, just the record - Highest court is usually the State Supreme Court

Res judicata

- Once a suit has been decided, the parties may not bring suit again regarding the same matter

The Trial

- Open Statements - Direct Examination; Cross-Examination - Motion for Directed Verdict - Motion for J-NOV - Jury Verdict

PP v. RP Importances

- PP can be depicted over a shorter time period than RP, so the value of depreciation deduction is substantially greater - Added tax and cash flow savings because PP depreciation is accelerated while RP normally applies in a straight-line approach - Example: For an asset that costs $100,000, the tax savings of classifying the property as PP rather than RP amounts to approximately $15,000 - Internal Revenue Service (IRS) employs its own test for determining whether a property is a fixture or not & how much it can be depreciated - Whiteco Industries v. Commissioner, the six Whiteco factors generally reflect the fixture tests discussed

Legal Procedure

- Plaintiff files a complaint - Defendant's Response may be a motion to dismiss, a motion for summary judgement, a counter-suit or an answer.

Judicial Decisions

- Primary source for determining how Constitution is interpreted & applied - Courts also interpret statutes & decide cases & controversies - Decisions can become precedent & guidance for other courts - Citations: information listing the volume and page where a decision may be found

Emblements

(synonym for fructus industriales) Crops produced by a tenant's labor to which the tenant is entitled; grown annually, not spontaneously, by labor & industry

Fructus Naturales

- (Special) Vegetation that grows naturally on property and not by the efforts of humans - things produced primarily by the powers of nature, such as trees and perennial bushes, are considered real property

Fructus Industriales

- (Special) Vegetation, such as crops, that grows on property by the efforts of humans - those fruits of fructus naturales (for example, harvested apples or blueberries) are considered personal property

Law

- A body of rules of action or conduct prescribed by controlling authority and having binding legal force - That which must be obeyed and followed by citizens subject to sanctions in a ______

Uniform Commercial Code (UCC)

- A code of law (adopted in its entirety by all states except Louisiana) that governs commercial transactions - Used when someone is selling or leasing tangible personal property - Made law of commercial transactions more uniform but variations in the Code also exist from state to state bc of differences in provisions - Revised periodically to reflect business & technological changes that have occurred since original drafting more than half of a century ago - Article 2 covers the sell of goods

Fixture

- A legal hybrid; a piece of personal property that has become affixed to real property in such a way that it becomes a part of the real property - UCC's definition: Goods are "fixtures" when they become so related to particular real estate that an interest in them arises under real estate law

Concluding Stages of Legal Procedure

- Appeal(s) - Writ of Execution - Garnishment

Legal Property Disputes

- Arises when a person agrees to sell real estate without realizing that certain articles in the home might legally be considered fixtures If the articles are fixtures, the general rule is that they pass to the buyer - Major problem in these cases is determining whether the article is a fixture - Intention: to plan for, design, or expect a certain result - Courts adopted the three fixture tests which emphasize on the intention portion - "Unless" is important exception of a general rule: the exception applies when the parties include provisions in their purchase contract that determine whether personal property and fixtrues remain with the sellers or pass to the buyer

Rules governing trade, agricultural, & domestic fixtures have been qualifed in a number of ways:

- Article annexed must fall within one of the tenants' fixture categories - Tenant must be able to remove the fixture w/o causing substantial injury to the premises Gordon v. Cohn - Tenant must remove the articles before turning over possession of the premises to the landlord. Rule is designed to protect the landlord, who often will have leased the premises for another tenant, & it is based on the assumption that the tenant has abandoned the articles by failing to remove them before leaving the premises Dutchman Manufacturing v. Reynolds

Fixture Examples

- Because Sierra enjoyed shooting billiards, installed $10,000 slate-covered pool table in basement of home. Legs of table screwed to the floor, & Sierra installed basement carpeting to match the felt on table. Sometime after table had been installed, Sierra signed contract to sell her house to Devon. Devon now claims that he purchased the pool table when he purchased Sierra's real estate. Sierra claims that she can take the table with her. Depends on whether table is considered a fixture - Teaff v. Hewitt: says it's hard to divide the line when you look at it with having a connecting link between the two divisions

Fructus Naturales & Industriales Notes

- Both have been important in resolving two legal issues - First: whether the law of real or personal property governs when there is a separate sale of something growing on the land (now covered by the UCC) - Second: question of whether things growing on the land pass with the real estate when it is sold - Most states have adopted a "severance" test: growing things whether fructus naturales or fructus industriales pass to the buyer with the real estate if they have not been severed at the time of sale

Three basic conflicts frequently occur when fixtures are used as collateral to secure a debt (Secured Party v. Other Creditors)

- Construction Mortgage - Subordinate

Intention Test Notes/Examples

- Controlling test of the fixture is the intention of the party who annexed the article to make it a permanent part of the real estate - To determine intention, courts look at actions, purpose, and relationships of the parties - Intention can be determined by the external facts - Example: Strain v. Green man installed chandeliers in his house & took chandeliers with him even when he moved out of the house & it had never been discussed. (pg. 34) - Most important when examining external facts in the courts is the relationship between the person who annexed the article and the real estate - Adamson v. Sims pg. 35

Private Law

- Deals w/ relationships between individuals, like contracts, property, & torts - Law of property regulates the ownership, employment, & disposition of property (including real property, tangible & intangible property)

Emblements Notes

- Describe the right of a tenant to remove, after the termination of a tenancy, the annual products of the land that have resulted from the tenant's own labor - To claim emblements, the tenant should prove: 1. Existence of a tenancy of uncertain duration 2. Termination of the tenancy by the act of God or by the act of the lessor 3. The fact that the crop was planted by the tenant before the tenancy ended - Manure is considered one of these

Annexation Test Examples/Notes

- Requires that property be annexed to the real estate - Courts do not agree with as to what constitutes annexation which leads to constructive annexation: "just as if" the property is annexed bc of the relationship between the personal property and the real estate, even when the personal property is not actually annexed to the real estate - Property under constructive annexation includes: window solar screens, storm doors and windows that have been fitted for a house but are not in place, & devices like garage door openers and television antenna dials - Also applies to cases where machinery is installed in industrial plants in such a way as to be considered a fixture - Assembled industrial plant doctrine: a doctrine that provides that plant machinery, even though it is not actually annexed, is constructively annexed onto real property - Unattached machinery is even considered to be a fixture if it is essential to the operation of the plant - Example: Snedeker v. Warring the court ruled that a three- or four-ton statue that was not cemented or clamped to the floor would be considered a fixture because "a thing may be as firmly affixed to the land by gravitation as by clamps or cement." - When thinking about whether personal property should be constructively annexed to real property is to consider what one would see in a typical moving van - Courts also decided that a fixture will not become personal property if it was severed from the real estate for purposes of repair or severed by an act of God - Example: Pennsylvania case, storm demolished a building, and a dispute arose over the right to the ruins of the building. Court decided that even though the ruins had been detached from the real estate, "the act of God... shall prejudice no one." Court decided that the property was still classified as real, not personal, unless owner had caused the severance

The Case of Owner v. Secured Party

- Security Agreement - Purchase Money Security Interest (PMSI) - Perfection of the Security Interest - Fixture Filing - Financing Statement

Jurisdiction

- The authority of a court to hear a case, decide facts, apply the law, & enter judgement

Federal Courts

- U.S. District court is the "trial" court. Can hear cases involving federal law, diversity jurisdiction, & federal crime cases - Thirteen circuits in U.S. Courts of Appeal - U.S. Supreme Court hears only selected cases - Diversity of citizenship involves parties from different states

Disputes Arising in Fixture Financing

- When fixtures are used as collateral to secure a loan, special problems may arise for those involved in the financing arrangements

Severance Examples

- When standing timber and valuable minerals in the ground are removed from the land thus becoming movable in nature - Ex parte Brown: court resolved an issue relating to an intentional misclassification of property by a wife attempting to gain an unfair financial advantage over her husband during their divorce proceedings

Disputes Arising in the Transfer of Property Attached to Real Estate

-When fixtures are sold separately from real estate - Fixture may be severed from the real estate and then sold - Landowner may sell articles affixed to real estate before severance

Three basic conflicts when used as collateral:

1) Attachment of the Security Interest: a lender (mortgagee) makes a mortgage loan on a house; the property manager (mortgagor) later installs appliances, air conditioning, and other fixtures on the property. This is called the case of Mortgagor v. Mortgagee 2) Security Interest: Property owner borrows money to purchase and install kitchen cabinets or other fixtures in her home, and her fixtures are used as collateral. This is called the case of Owner v. Secured Party 3) Purchase Money Security Interest (PMSI): where both the mortgage lender and the secured party claim an interest in the fixtures. This is called the case of Secured Party v. Other Creditors.

Injunction

A court order prohibiting someone from doing something, or commanding someone to undo a wrong or injury

Requests for Admission

A discovery tool used to gain admission to certain facts relating to the trail

Financing Statement

A document filed in the public record to give notice to third parties of the secured party's security interest

Annexation Test

A key fixture test that is met when PP is in fact annexed, fixed, or fastened onto the real property

Statute of Frauds

A law that disallows any suit or action involving certain classes of contracts, such as those concerning interests in land, unless the agreement is evidenced by a note or memorandum in writing sighed by the party to be charged or his authorized agent

Construction Mortgage

A mortgage used to finance the construction or improvement of real property

Judgement notwithstanding the Verdict (J-NOV)

A motion made to the judge in which the losing party requests that a jury's verdict be overruled because it is contrary to the weight of the evidence

Mediation

A neutral 3rd party encourages the parties to settle

Action

A proceeding in a court of law by which one seeks a remedy for an alleged wrong

Purchase Money Security Interest (PMSI)

A security interest taken by a lender or retained by a seller to secure all or part of the price of goods purchased by the borrower

3) Purchase Money Security Interest (PMSI)

A security interest taken by a lender or retained by a seller to secure all or part of the price of goods purchased by the borrower - There are two situations where a PMSI could happen Example: a seller can finance the sale by accepting a deposit from the buyer on the goods being sold and expecting to receive the balance of the purchase price over time. The seller would retain the 8

Intention Test

A test for determining whether PP has become united with RP by examining the intent of the annex

Adaptation Test

A test for determining whether PP has become united with RP by its adaptation to the use & purpose of the RP

Specific Performance

A type of injunction ordering the defendant to perform a specific act

Bill of Sale

A written agreement in which one person transfers his interest in PP to another

Personal Property

All property, with the exception of real property, that can be owned - Main characteristic of personal property: movability - Chattel: old French word for cattle is synonym for personal property

Security Agreement

An agreement that creates a security interest

Settlements

An agreement to terminate all or part of a lawsuit as a result of the parties' voluntary resolution of the dispute

2) Security Interest

An interest in personal property or fixtures that secures payment or performance of an obligation - The Code defines security interest as "an interest in personal property or fixtures which secures payment or performance of an obligation." The lender's security interest gives the lender rights to certain property in the event that the borrower does not make her promised payment. A secured transaction can include the so-called conditional sale, in which the seller delivers goods to a buyer but retains title until payment has been received

Trade Fixtures

Articles placed in or attached to rented buildings by tenants to carry on the trade or business for which the tenants occupy the premises - "Those articles placed on the premises by the tenant to carry on the trade or business for which the tenant rents the premises" Consiglio v. Carey

Private Property

Belongs to an individual who has the exclusive right of disposition

re Marriage of Graham

Colorado Supreme Court finds such exchange value, or ability to sell property, is critical factor in deciding whether MBA degree is "property"

Types of Judicial Decisions

Common Law Jurisdiction Res judicata Equity Injunction Specific Performance The Role of Ethics in the Law

Agricultural Fixtures

Definition: Articles placed in or attached to farm buildings & land for purposes of farming - Following are agricultural fixtures: milling plant, cream separator, irrigation plant, platform scales, a wooden silo, a brooder house, a hay carrier, a manure carrier, a henhouse, a toolshed, & a maple sugar shed

Domestic Fixtures

Definition: Articles that tenants attach to a dwelling to render their occupation of the premises more comfortable or convenient - Include carpeting, screens, doors, windows, a toilet, washing machine, gas stove, oil burner, & bookshelves

In Legal Procedure, discovery may include:

Depositions Interrogatories Subpoenas Duces Tecum Requests for Admission

Special Tests

Developed to determine the two types of property vital to agriculture: 1) things growing on land, & 2) manure

Sources of Law

Different laws govern real & personal property

Interrogatories

Discovery device consisting of written questions generally submitted to one side of the lawsuit from the other

Subpoenas Duces Tecum

Discovery device where court commands production of specified documents or goods or allows the inspection of real property

Roberts v. Assessment Board of Review of the Town of New Windsor (Taxation Example)

Dispute over New York's real property tax law, which excludes personal property from taxation Homeowner installed above-ground swimming pool that cost about $5,000 - Pool not attached to real estate and could be disassembled in a few hours & reassembled in new location for less than $450 - Homeowner's taxes were increased because of the pool, & he filed suit to cancel the extra assessment - Court agreed with homeowner that pool had not become real estate & invalidated the assessment

Directed Verdict

Entry of a verdict by a trial judge, prior to allowing the jury to decide the case, when the party with the burden of proof fails to present a prima facie case

Disputes Arising in Fixture Financing Example

Example: Dawn obtained a loan to buy a car and pledged the vehicle to the lender as collateral. If Dawn does not make her payments, the lender will have the right to take ownership and possession of its collateral, the car. The lender can sell the car and use the proceeds of the sale to reduce Dawn's debt.

Tenants' Fixtures

Fixtures installed on the property by a person renting real estate

Fixture Disputes

Four types: 1) Whether certain pieces of property are fixtures 2) Whether property that may be a fixture is sold separately 3) Whether a fixture serves as collateral to secure a loan 4) Whether a fixture is wrongfully or mistakenly affixed to another's real estate - Law of fixtures becomes important when two or more people claim ownership of the same article

U.S. Constitution

Has 51 (50 state, 1 U.S) - U.S. one is the supreme law of the land - 14th amendment guarantees "due process" before taking away life, liberty, or property - State ________ cannot impair rights granted under the 14th amendment - Generally, federal & state __________ work in harmony

Taxation

Important tax reasons for distinguishing between real and PP: - PP is generally not taxed; if it is, the tax is based on a different rate structure than that used for RP - Distinction between RP & PP is also important in determining depreciation deductions

Perfection of the Security Interest

In secured transactions law, the process whereby a security interest is protected, as far as the law permits against competing claims to the collateral, which usually requires the secured party to give public notice of the interest as by filing in the govt. office

Chapter 1

Introduction to the Legal System

Equity

Justice administered according to fairness, created to temper the strict rules of English common law

Statute of Frauds Examples & Notes

Kyra enters into contracts with Jillian to sell a 1976 Pinto for $400 & a tiny strip of land in Arizona for another $400. Must these contracts be in writing to be enforceable? Determined by Statute of Frauds: - Certain contracts must be written to be enforced UCC Section 2-201 states that only contracts for the sale of goods prices at $500 or more must be in writing - A few exceptions even when the exceeds $500: - When a party admits in court that an oral contract for more than $500 was made, the contract is enforceable - Only the defendant must sign the written contract since the plaintiff, by bringing the lawsuit, is acknowledging his willingness to be bound by the agreement - Any SOF that is applicable to real property: any contract for the sale of land or for an interest in land must be written - Kyra's contract for sale of the car can be oral, but contract for the sale of the land must be written

Real Property

Land & anything permanently attached to it - Also includes structures affixed to the land, property affixed to the structures (fixtures), & sometimes things growing on the land - Ownership of real property includes right to air space above the earth's surface & to soil & minerals below - To cite this rule: cujus est solum ejus est usque ad coelum et ad inferos "the owner of the soil owns also to the sky and to the depths" - Real property fixed & immovable

Substantive Law

Law which creates or defines rights

The Role of Ethics in the Law

Laws often represent the moral (ethical) consensus

Direct Examination

Lawyer questions his own witness

Property

Meaning of the term depends on the context - Property meaning things: real or personal, immovable or movable, corporate or incorporeal, visible or invisible, & tangible or intangible - Legal application: property describes the relationship between people & things

How are most real estate transactions resolved by?

Mediation or arbitration

Cross Examination

Other lawyer questions the witness the original lawyer called (not questioning his own witness)

Depositions

Pretrial device where one party orally questions other party or witness for the other party

Collateral

Property that is pledged as security for the satisfaction of a debt

Procedural Law

Provides a process for enforcing those rights (found in substantive law)

Form of Transfer

Requirements for transferring RP & PP differ: - Ownership of RP is normally transferred by a deed, which must meet certain formal requirements - An interest in PP can be transferred by a bill of sale (document similar to a form or deed) - Usually neither required nor customary - Certificates of title also used to transfer certain types of PP, like automobiles

Garnishment

Satisfaction of the debt from the losing party's property

Alternative Methods of Resolving Disputes

Settlements, Administrative Adjudication (Arbitration & Mediation)

Arbitration

Submission of the dispute to a neutral 3rd party for decision

Chapter 2

The Nature of Property

Fixture Filing

The filing of a financing statement in the real estate public record to perfect the security interest in a fixture

Public Law

The law that concerns the govt. or its relations w/ individuals. Ex: real estate licenses for realtors & brokers Purpose of _______: defines, regulates, & enforces rights in which the govt. (agency) is a party to the subject matter Primary sources: written citations, statues, & administrative law

Severance

The legal principle that defines the mechanical processes required to convert an item of RP into PP RP transformed into PP

Appeal(s)

The lower may appeal to the Appellate Court

1) Attachment of Security Interest

The process by which a secured party acquires a security interest in personal property or a fixture (process where a lender acquires a security interest in personal property or in a fixture)

Writ of Execution

The process of carrying out the judgement

Public Property

Those things owned by the public through a federal, state, or local govt. body

Fixture Tests

Three tests (Annexation, Adaptation, Intention) used by most American courts to determine whether PP has been transformed into a fixture