I was surprised to find that I hadn't yet written about the topic of equitable servitudes here on the blog since it shows up with some frequency on the MBE.
Generally, these servitudes are created in a writing that satisfies the Statute of Frauds. The exception is for negative equitable servitudes which may be implied from a common scheme of development. So, if a developer subdivides land and some but not all of the deeds to the subdivisions contain negative equitable servitudes (servitudes that restrict the use of the land), all may be bound provided there was both a common scheme of development and notice was provided to those whom it is claim are bound by the servitude.
As to the common scheme of development, that will be found only if at the time that sales in the subdivision began the developer had a plan that all parcels would be subject to the same restriction. And as to notice, it may be actual or record notice but often on the MBE the notice is a type of inquiry notice whereby the neighborhood appears to conform to common restrictions.
Assume that someone is bound by an equitable servitude. The next issue is to determine whether that burden will run to the successors of the person bound. It will if the original parties that agreed to the servitude also agreed that the servitude would be enforceable by and against assignees. Also, the assignee of the promisor (the person who promised to be bound) must have notice of the servitude, and the servitude must touch and concern the land. To touch and concern the land requires that the servitude restricts the person burdened by the servitude in his/her use of the land.
For the benefit of the servitude to pass on to assignees of the original parties it is merely required that it was intended that the benefit would pass on and that the servitude touch and concern the benefited property.
As with all issues of equity, a court will not enforce an equitable servitude if the person seeking enforcement is violating a similar restriction on his/her own land (unclean hands) or if the benefited party acquiesced in the violation by the burdened party. Likewise, a court will not enforce an equitable servitude if the benefited party acted in such a way that a reasonable person would believe the servitude was abandoned or if the benefited party fails to bring suit against the violator within a reasonable time (laches). Lastly, the servitude will not be enforced if the neighborhood has changed so significantly that enforcement would be inequitable.
To terminate an equitable servitude requires any of the following: a written release from the benefit holder; merger of the benefited and the burdened land; or condemnation of the burdened property.
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Thursday, May 30, 2019
Friday, May 24, 2019
Creation of a Trust
A good place to begin in the study of Trusts is with the creation of a trust. It's also a straight-forward way to score a lot of points on an essay that tests this issue.
And so here are the elements, all of which should be addressed should this issue show up:
Capacity: First, you'll need a settlor (the person who creates the trust) with the capacity to create it. The capacity required is the same as the capacity required to create a will. Look out for things like undue influence, fraud, and duress. All of these will prevent a settlor from having the necessary capacity and without the capacity, no trust is created.
Intent: The settlor with capacity must intend to create a trust. Under most circumstances a writing is not required to prove intent but always keep in mind the Statute of Frauds when real property is involved. The settlor must intend that the trust take effect immediately and not at some future time. And, importantly, a settlor's expression of hope (rather than a direct instruction) that the property be used in a certain way is not evidence that a trust was intended. That's known as precatory language and such language cannot be used to create a trust.
Trustee: There's got to be a trustee. A trust, however, will not fail if the trustee dies, refuses to accept performance, or resigns. The court will appoint a successor unless it is clear the settlor intended the trust to continue only if that particular trustee served. The trustee must have enforceable obligations and anyone who has the capacity to acquire and hold property for his/her own benefit has the capacity to act as a trustee.
Beneficiaries: Beneficiaries enforce the trust and so without them there can be no trust (there are exceptions for both honorary and charitable trusts). Any person capable of taking or holding title to property can be a beneficiary of a private trust. Although notice to the beneficiary as to the existence of the trust is not required, acceptance is required and it may be express or implied. A beneficiary cannot be forced to accept an interest in the trust; rather, a beneficiary may disclaim the interest by filing a written instrument stating an intent to disclaim.
Trust Property: Where there is no trust property there can be no trust since without property there would be no obligations required by the trustee. The property must be existing property that the settlor has the power to convey. A future interest will suffice, but an interest not yet in existence will not.
Trust Purpose: There must be a valid trust purposes and a purpose will not be valid if it is illegal, contrary to public policy, impossible to achieve, or intended to defraud the settlor's creditors. If a condition attached to the trust violates public policy the trust might still be valid if the settlor has expressed an alternative desire. In such a case, the condition can be ignored.
And so here are the elements, all of which should be addressed should this issue show up:
Capacity: First, you'll need a settlor (the person who creates the trust) with the capacity to create it. The capacity required is the same as the capacity required to create a will. Look out for things like undue influence, fraud, and duress. All of these will prevent a settlor from having the necessary capacity and without the capacity, no trust is created.
Intent: The settlor with capacity must intend to create a trust. Under most circumstances a writing is not required to prove intent but always keep in mind the Statute of Frauds when real property is involved. The settlor must intend that the trust take effect immediately and not at some future time. And, importantly, a settlor's expression of hope (rather than a direct instruction) that the property be used in a certain way is not evidence that a trust was intended. That's known as precatory language and such language cannot be used to create a trust.
Trustee: There's got to be a trustee. A trust, however, will not fail if the trustee dies, refuses to accept performance, or resigns. The court will appoint a successor unless it is clear the settlor intended the trust to continue only if that particular trustee served. The trustee must have enforceable obligations and anyone who has the capacity to acquire and hold property for his/her own benefit has the capacity to act as a trustee.
Beneficiaries: Beneficiaries enforce the trust and so without them there can be no trust (there are exceptions for both honorary and charitable trusts). Any person capable of taking or holding title to property can be a beneficiary of a private trust. Although notice to the beneficiary as to the existence of the trust is not required, acceptance is required and it may be express or implied. A beneficiary cannot be forced to accept an interest in the trust; rather, a beneficiary may disclaim the interest by filing a written instrument stating an intent to disclaim.
Trust Property: Where there is no trust property there can be no trust since without property there would be no obligations required by the trustee. The property must be existing property that the settlor has the power to convey. A future interest will suffice, but an interest not yet in existence will not.
Trust Purpose: There must be a valid trust purposes and a purpose will not be valid if it is illegal, contrary to public policy, impossible to achieve, or intended to defraud the settlor's creditors. If a condition attached to the trust violates public policy the trust might still be valid if the settlor has expressed an alternative desire. In such a case, the condition can be ignored.
Tuesday, May 14, 2019
Amount in Controversy
The required monetary amount for purposes of diversity jurisdiction is a straight-forward issue. Even so, there are many testable angles, and the MBE tests them all. It's worth knowing all of the following when preparing for Civil Procedure:
Actions brought in federal court under diversity must be in excess of $75,000, exclusive of interests and costs (more on this later). This amount in controversy is entirely determined by the plaintiff's good-faith allegation. In other words, the complaint can be dismissed on this basis only if it appears that there is no legal possibility of a recovery exceeding $75,000. And the fact that $75,000 is not ultimately recovered is not dispositive on whether the claim was in good faith.
In determining what should be included in the claim of $75,000, interest and costs are excluded. But it should be noted that interest that constitutes a part of the claim is included. Interest excluded is interest payable by virtue of a delay in payment. Also included are attorneys' fees that are recoverable by contract or by statute as are punitive damages claims permitted under state substantive law.
Importantly, for purposes of satisfying the jurisdictional amount a plaintiff may aggregate all claims against a single defendant. This is entirely different than a plaintiff attempting to aggregate claims against multiple defendants; in those instances, aggregation is allowable only if defendants are jointly liable to plaintiff. If instead there are several plaintiffs, aggregation is allowable only if the plaintiffs attempting to aggregate are seeking to enforce a single right in which they have a common or undivided interest. It's unlikely that multiple plaintiffs can aggregate.
It'll also be important to understand how supplemental jurisdiction can affect the required jurisdictional amount. Claims that do not meet the $75,000 requirement may still invoke jurisdiction if there is at least one claim that does meet the requirement and if the claims that do not meet the requirement arise from the same "common nucleus of fact" as the claim that satisfies the requirement.
Actions brought in federal court under diversity must be in excess of $75,000, exclusive of interests and costs (more on this later). This amount in controversy is entirely determined by the plaintiff's good-faith allegation. In other words, the complaint can be dismissed on this basis only if it appears that there is no legal possibility of a recovery exceeding $75,000. And the fact that $75,000 is not ultimately recovered is not dispositive on whether the claim was in good faith.
In determining what should be included in the claim of $75,000, interest and costs are excluded. But it should be noted that interest that constitutes a part of the claim is included. Interest excluded is interest payable by virtue of a delay in payment. Also included are attorneys' fees that are recoverable by contract or by statute as are punitive damages claims permitted under state substantive law.
Importantly, for purposes of satisfying the jurisdictional amount a plaintiff may aggregate all claims against a single defendant. This is entirely different than a plaintiff attempting to aggregate claims against multiple defendants; in those instances, aggregation is allowable only if defendants are jointly liable to plaintiff. If instead there are several plaintiffs, aggregation is allowable only if the plaintiffs attempting to aggregate are seeking to enforce a single right in which they have a common or undivided interest. It's unlikely that multiple plaintiffs can aggregate.
It'll also be important to understand how supplemental jurisdiction can affect the required jurisdictional amount. Claims that do not meet the $75,000 requirement may still invoke jurisdiction if there is at least one claim that does meet the requirement and if the claims that do not meet the requirement arise from the same "common nucleus of fact" as the claim that satisfies the requirement.
Wednesday, May 8, 2019
Anti-Lapse Statutes
In the most recent post I outlined the concept of ademption, an area in the subject of Wills that is also seen on the MBE. Another area that creeps its way onto the test is anti-lapse statutes. The concept is straightforward, but you should know it well:
As a review, ademption occurs when a testator leaves property to a beneficiary in a will but at the time that the testator dies that property is no longer in the estate. Situations will also arise when a testator leaves property to a beneficiary in the will and at the time that the testator dies the beneficiary is no longer alive. How should this be addressed?
The general rule is that the gift lapses. But nearly all states have anti-lapse statutes that operate to save the gift if the predeceasing beneficiary was in a specified degree of relationship to the testator. States vary but often the beneficiary will need to be a descendant of the testator, a grandparent of the testator, or a descendant of the testator's grandparents. In addition, it'll be necessary that the beneficiary leaves descendants who survive the testator.
For example, assume that the testator leaves property in his will to his grandfather. His grandfather is not alive when the testator dies and as per the general rule the gift left by the testator to his grandfather would lapse. But because the grandfather is in a degree of relationship often contemplated by anti-lapse statutes, instead of the gift lapsing the next step is to determine whether the grandfather has any living descendants. If so, then rather than the gift lapsing, the gift will pass to the grandfather's descendant(s).
Anti-lapse statutes apply unless there is a contrary provision in the will. In other words, if a testator states in a will that the gift should go to "x" only if "x" survives the testator, then any anti-lapse statute should be ignored. That gift will lapse if "x" is not alive when the testator dies.
As a review, ademption occurs when a testator leaves property to a beneficiary in a will but at the time that the testator dies that property is no longer in the estate. Situations will also arise when a testator leaves property to a beneficiary in the will and at the time that the testator dies the beneficiary is no longer alive. How should this be addressed?
The general rule is that the gift lapses. But nearly all states have anti-lapse statutes that operate to save the gift if the predeceasing beneficiary was in a specified degree of relationship to the testator. States vary but often the beneficiary will need to be a descendant of the testator, a grandparent of the testator, or a descendant of the testator's grandparents. In addition, it'll be necessary that the beneficiary leaves descendants who survive the testator.
For example, assume that the testator leaves property in his will to his grandfather. His grandfather is not alive when the testator dies and as per the general rule the gift left by the testator to his grandfather would lapse. But because the grandfather is in a degree of relationship often contemplated by anti-lapse statutes, instead of the gift lapsing the next step is to determine whether the grandfather has any living descendants. If so, then rather than the gift lapsing, the gift will pass to the grandfather's descendant(s).
Anti-lapse statutes apply unless there is a contrary provision in the will. In other words, if a testator states in a will that the gift should go to "x" only if "x" survives the testator, then any anti-lapse statute should be ignored. That gift will lapse if "x" is not alive when the testator dies.
Thursday, May 2, 2019
Ademption
Wills is a very heavily tested subject on the MEE, the essay portion of the Uniform Bar Exam. And, although far more limited, it also shows up (in Property questions) on the MBE. One topic that appears on the MBE is ademption.
Ademption is implicated when a testator leaves property in a will but the property is no longer in the testator's estate at the time of death. What to do in such a situation?
First is to note that ademption only applies to specific gifts in a will. A specific gift is a gift that can only be satisfied by receipt of the specific property described in the will. If such a gift is no longer in the testator's estate at the time of death, the gift is adeemed and the beneficiary who was supposed to receive the gift receives nothing. If, however, some of the gift remains (for example, a tract of land is left to the beneficiary and some of the land is sold prior to the testator's death), then the beneficiary will receive whatever remains.
Also tested are gifts that are not adeemed. For example, a general gift is a gift in a will of a specific dollar amount. If testator leaves a dollar amount to a beneficiary in a will and there is not enough cash in the estate at the time of death to satisfy that gift, that general gift of cash is not adeemed; rather, the gift will be satisfied by selling other assets.
There are a few additional important points to keep in mind: assume a specific gift of land is no longer in the estate at the time of testator's death. Although the gift is adeemed, the beneficiary of that gift may be entitled to proceeds from the sale of that land if the land sale contract was executory at the time testator died. The beneficiary may also be entitled to casualty insurance proceeds for loss of personal property that was left to the beneficiary in a will if the proceeds are paid after the testator's death. Lastly, a condemnation award (if land is condemned after testator dies) may go to the beneficiary in the will who was supposed to receive the condemned land as a specific gift.
Ademption is implicated when a testator leaves property in a will but the property is no longer in the testator's estate at the time of death. What to do in such a situation?
First is to note that ademption only applies to specific gifts in a will. A specific gift is a gift that can only be satisfied by receipt of the specific property described in the will. If such a gift is no longer in the testator's estate at the time of death, the gift is adeemed and the beneficiary who was supposed to receive the gift receives nothing. If, however, some of the gift remains (for example, a tract of land is left to the beneficiary and some of the land is sold prior to the testator's death), then the beneficiary will receive whatever remains.
Also tested are gifts that are not adeemed. For example, a general gift is a gift in a will of a specific dollar amount. If testator leaves a dollar amount to a beneficiary in a will and there is not enough cash in the estate at the time of death to satisfy that gift, that general gift of cash is not adeemed; rather, the gift will be satisfied by selling other assets.
There are a few additional important points to keep in mind: assume a specific gift of land is no longer in the estate at the time of testator's death. Although the gift is adeemed, the beneficiary of that gift may be entitled to proceeds from the sale of that land if the land sale contract was executory at the time testator died. The beneficiary may also be entitled to casualty insurance proceeds for loss of personal property that was left to the beneficiary in a will if the proceeds are paid after the testator's death. Lastly, a condemnation award (if land is condemned after testator dies) may go to the beneficiary in the will who was supposed to receive the condemned land as a specific gift.
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