Defeasible Estates

Defeasible Estates

A defeasible estate is created when a grantor transfers land conditionally.

Present interests – Fee Simple, Fee Tail, Life Estate – grantor can also setup different conditions to setup different present interests or future interests.

A fee simple absolute lasts forever. Defeasible lasts definitely, but can be forever dependant upon conditions/requirements.

Fee Simple determinable: a fee simple so limited that it will end automatically when a stated event happens. Will have durational language “To ‘A’ so long as they use the land as a farm.” Has possibility of revertor – if condition is violated, by operation of law, ownership of interest automatically reverts to future interest. A fee simple determinable always has possibility of reverter always back to the grantor (or heirs).

A Fee Simple Subject to Condition Subsequent: a fee simple that does not automatically terminate but may be cut short or divested at the transferor’s election when a stated condition happens. A Fee Simple Subject to Condition Subsequent grants Right of Entry or Power of Termination to future interest. Not durational language (default Defeasible Estate). A Fee Simple Subject to Condition Subsequent has a grantor as the future interest.

Fee Simple Subject to Executory Limitation – Executory Interest – works like a possability of revertor – condition is violated ownership automatically transfers. The owner of future interest is another transferee.

Shifting and Springing – a springing fee simple subject to executory interest is an interest that springs from grantors estate a shifting executory interest is defeasing from another transferee.

Condition vs Covenant – Condition violation results in forfeiture, Covenant violation results in damages of injunction.

Cali no longer recognizes FSD – but most states do.

Right of Transfer – conditions created by grantor will transfer. Interest will not change.

When you do tranfer a defesable interest you can only transfer what you own — you cannot remove conditions.

Conditions can be bought – you can buy power of reversion or power to transfer.

Analyze defeasible intersts:

1.Classify interests.  Present/Future

2. Will court enforce the condition ? If condition is unenforceable, cross it out and start over.

3. Has condition been violated

4. What is the current state of the title and ownership

Mountain Brow Lodge No. 82, Order of Odd Fellows v. Toscano

Possible unreasonable restraint on alienation

Parties: Appellant is the alleged grantee of a title to real property which it acquired 4/6/50 by gift deed from decedents, the Toscanos. Appellees are administrators and trustees of the estates of the grantors

Cause of action/remedy sought: The following is a cause of action to quiet title on a piece of property (court order)

Procedural History: Trial court rendered judgment in favor of respondents.

Facts: Respondents maintain the language created a fee simple subject to a condition subsequent and is valid and enforceable. Appellant claims the restricted language amounts to an absolute restraint on its power of alienation and is void. They add since the purpose for which the land must be used is not precisely defined, it may be used by appellant for any purpose and hence the restriction is not on the land use but who uses it (reversion clause only takes place if land is sold or transferred).

Issue(s): Under property law (of equity), does the language of a deed describe the creation of a fee simple when it reads, “Said property is restricted for the use & benefit of the second party, only; and in the event the same fails to be used by the second party or in the event of a sale or transfer by the second party of all or any part of said lot, the same is to revert to the first parties herein, their successors, heirs or assigns.”?

Holding: Yes. The grantor cannot place a restraint on alienation because it is an essential stick in the bundle, however a restriction on the use of the land is NOT a restraint on alienation even if that is its effect; Lodge 82 may sell their land to whomever they like, but only they can use it; distinction by the way, is restriction on land use and alienation.

Court’s Rationale/Reasoning: A clause which prohibits appellant from selling or transferring the land under penalty of forfeiture is an absolute restraint against alienation and is void (common law). So, court first looks to the language of the deed to ascertain if there is a void clause. They determine the language of the common law does not permit alienation, but as long as there is language in a deed which exercises the power to demand how the land is used, that part of the deed is okay.

So, did the use condition create a defeasible fee as respondents maintain or is it also a restraint against alienation, which is what appellant alleges. This is a fraternal lodge, of which the decedent was an active member until his death. The term “use” as to applied to real property could mean a “right which a person has to use or enjoy the property of another according to his necessities.” The court puts these thoughts together and decides the deed says it is to be used for fraternal purposes only, that the land was conveyed upon this condition.

Thus, the Habendum clause portion which referred to the land use, when construed as a whole and in light of the surrounding circumstances, created a fee subject to a condition subsequent with title to revert back to the grantors, their successors or assigns if the land ceases to be used for lodge purposes. So, in order to avoid even more confusion, the court rewrote part of the clause to read “subject to the condition that said property is restricted for the use and benefit of the second party only;…” the penalty is the land reverts back to Toscano heirs.

Rule: The object in construing a deed is to ascertain the intention of the grantor from the words which have been employed and from surrounding circumstances.

Dicta: Appellant does argue the restriction could be merely upon who uses it, and not how. But CA courts have upheld the validity of restrictions on land use in deeds, even though they hamper alienability. However, if carried out to its conclusion, the restrictions on how the land is used may indeed become a restriction on who uses the land.

Dissents: The entire Habendum clause which purports to restrict the fee simple conveyed is invalid as a restraint upon alienation (transferring title). If we are to have realism in the law, the effect of language must be judged accordingly to what it does. I would hold the property free from restrictions.

Some courts will not enforce a restiction that materially affects marketability adversely . They will also consider a condition’s duration, nature or efficacy .

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