Posted by Gale Burns on Fri, Apr 27, 2012 @ 09:42 AM
The Lawletter Vol 36 No 11
Matt McDavitt, Senior Attorney, National Legal Research Group
While a person's entry upon the land of another without consent ordinarily constitutes tortious trespass, there are exceptions to the rule, including privileged entry based on necessity. Factually, privileged entry might occur in a circumstance where a person's property or dependents (i.e., an animal or a child) enters or wanders onto the property of another and necessity dictates that for the parent or owner to retrieve his or her property or offspring, he or she must enter the lands of another. This so-called "privileged entry" exception appears in the Restatement (Second) of Torts:
(1) One is privileged to enter land in the possession of another, at a reasonable time and in a reasonable manner, for the purpose of removing a chattel to the immediate possession of which the actor is entitled, and which has come upon the land otherwise than with the actor's consent or by his tortious conduct or contributory negligence.
(2) The actor is subject to liability for any harm done in the exercise of the privilege stated in Subsection (1) to any legally protected interest of the possessor in the land or connected with it, except where the chattel is on the land through the tortious conduct or contributory negligence of the possessor.
Restatement (Second) of Torts § 198 (1965). Note that to invoke this privilege, (1) the owner's entry must be reasonable in time and manner, and (2) the property or dependent must not have come onto the land through the owner's tort, consent, or negligence. The official commentary to this Restatement section supplies the further guidance that, ordinarily, the owner must first seek permission to enter from the landowner, and only if this permission cannot be obtained, or asking proves futile (i.e., refusal), may the property owner enter under the privileged-entry exception. This Restatement formulation of the privileged-entry rule has been followed in several jurisdictions. See, e.g., State v. Oldack, 283 So. 2d 73 (Fla. Dist. Ct. App. 1973); State v. Logsdon, 160 Ohio App. 3d 517, 2005-Ohio-1875, 827 N.E.2d 869; Hartsock v. Bandhauer, 158 Ariz. 591, 764 P.2d 352 (Ct. App. 1988).
In Hoblyn v. Johnson, 2002 WY 152, 55 P.3d 1219 (Wyo. 2002), for instance, a teenage daughter was sent to live with her grandparents out of state while her father was being investigated for alleged physical abuse. The daughter wanted her horse, which was titled in her name, to accompany her to Nebraska, but her parents refused to release the animal from their possession in Wyoming. After involving the authorities to help her, the daughter employed an agent to enter her parents' land, identify her horse, and remove it to her possession. The parents sued, claiming, in part, trespass. The Wyoming Supreme Court, having quoted Restatement § 198, held that
once the parents refused the daughter's request for the return of her horse, she was privileged to enter their real property at a reasonable time and in a reasonable manner to take the horse. No reason exists why she could not accomplish the same through an agent.
Id. ¶ 33, 55 P.3d at 1229-30. Thus, the privileged-entry exception is also exercisable through an owner's agent.
Posted by Gale Burns on Thu, Feb 02, 2012 @ 12:11 PM
February 7, 2012
Steve Friedman, Senior Attorney, National Legal Research Group
The Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1692–1692p, is a federal consumer protection statute intended "to promote consumers' 'informed use of credit' by requiring 'meaningful disclosure of credit terms[.]'" Chase Bank USA v. McCoy, 131 S. Ct. 871, 874 (2011) (quoting 15 U.S.C. § 1601(a)). Pursuant to its authority under TILA, the Board of Governors of the Federal Reserve System has promulgated Regulation Z, codified as 12 C.F.R. part 226, "which requires credit card issuers to disclose certain information to consumers." Id. Among other things, TILA and its implementing Regulation Z give the consumer-borrower a remorse period in which to rescind a transaction.
Significantly, when the TILA notice is provided in writing, as opposed to electronically, Regulation Z requires that lenders "deliver two copies of the notice" and that such notice include "[t]he date the rescission period expires." 12 C.F.R. § 226.23(b)(1). Ordinarily, the rescission period is three business days, see 15 U.S.C. § 1635(a), but that period is extended to three years if the requisite notice of the right to cancel is not delivered to the borrower, see 12 C.F.R. § 226.23(a); see also 15 U.S.C. § 1635(f). This distinction proved critical in a recent case from the U.S. Court of Appeals for the Ninth Circuit.
In Balderas v. Countrywide Bank, No. 10-55064, 2011 WL 6824977 (9th Cir. filed Dec. 29, 2011), a Spanish-speaking couple alleged that they had been pressured by a bank and its representatives to enter into a mortgage loan that the bank knew they could not afford and on terms they did not agree to. Among other theories, the plaintiffs sought to rescind the entire transaction, alleging that they had been given defective copies of TILA's notice of right to cancel in that the notice did not include the date on which their right to rescind expired. However, the district court granted the bank's Rule 12(b)(6) motion to dismiss, because the court determined that the plaintiffs had been entitled under TILA to only a three-day rescission period, which had elapsed prior to the filing of their lawsuit. The court's decision was based upon a copy of a nondefective notice-of-right-to-cancel letter bearing the plaintiffs' signatures, attached as Exhibit 14 to the complaint, that included an acknowledgment that the plaintiffs had received two copies of said notice. Upon the plaintiffs' appeal, the Ninth Circuit reversed and remanded.
Initially, the appellate court recognized that the plaintiffs' signatures on the disclosure statement did not conclusively prove that it had been delivered to them as required by TILA. "[P]roviding someone a document long enough to sign it does not comply with 12 C.F.R. § 226.23(b)(1), which requires the lender to 'deliver' copies of the Notice of the Right to Rescind to the consumer." Id. at *3. By using the word "deliver," Regulation Z undoubtedly commands that the consumer be allowed to keep the notice. See also 12 C.F.R. § 226.17(a)(1) (the requisite written disclosures must be provided "in a form that the consumer may keep"). The court drove this point home by relating a couple of common-sense analogies: "When you have pizza delivered, you don't sign for it and let the deliveryman take it back to the restaurant. And when a newspaper boy delivers a paper, he doesn't show you the headlines and then return it to the printer." 2011 WL 6824977, at *3.
Furthermore, the appellate court noted that the plaintiffs' signed acknowledgment of receipt of the requisite notice was merely prima facie evidence of delivery. "Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof." 15 U.S.C. § 1635(c).[1] Admittedly, the presumption will certainly be helpful to the bank when the trier of fact is called upon to decide whether the plaintiffs received proper TILA notice, e.g., upon a motion for summary judgment. But such presumptions are inappropriate in the context of a Rule 12(b)(6) motion, wherein the plaintiffs' factual allegations must be accepted as true. And in this case, the plaintiffs sufficiently stated facts to support their plausible assertion that they had not received a properly prepared notice of right to cancel as required by TILA.
In sum, there are three important lessons to be learned from the Balderas case. First, on a substantive point, Regulation Z's "delivery" mandate means that the consumer-borrower must be allowed to keep a copy of the requisite notice of right to cancel; a mere visual inspection by the consumer is not sufficient. Second, a practical and strategic tip for plaintiff's counsel is that "it's unwise to use a complaint as an ersatz document production." 2011 WL 6824977, at *2. Absent Exhibit 14 attached to the complaint, the Balderases' written acknowledgment of the TILA disclosures would not have been in issue upon the bank's motion to dismiss. This last statement dovetails nicely into the third lesson learned from Balderas: While it is by no means a lesson introducing a groundbreaking legal principle, counsel must recognize the distinct standards of review applicable to motions to dismiss versus those for summary judgment, and that such differences are often dispositive.
[1]But see 15 U.S.C. § 1641(b) ("Except as provided in section 1635(c) of this title, in any action or proceeding by or against any subsequent assignee of the original creditor without knowledge to the contrary by the assignee when he acquires the obligation, written acknowledgment of receipt by a person to whom a statement is required to be given pursuant to this subchapter shall be conclusive proof of the delivery thereof[.]").
Posted by Gale Burns on Tue, Jan 17, 2012 @ 04:01 PM
The Lawletter Vol 36 No 6
Alistair Edwards, Senior Attorney, National Legal Research Group
For obvious reasons, one's decision to purchase or not to purchase a home may be impacted by the knowledge that there was a previous murder or suicide (or a combination of both) at the home. Does the seller have a duty to disclose this sort of information to a potential purchaser? Does the failure to disclose this information before the sale is accomplished amount to an actionable fraud or a negligent misrepresentation on the part of the seller?
Recently, in Milliken v. Jacono, 2011 PA Super 254, 2011 WL 5936768, a Pennsylvania court suggested that a home seller may be required to disclose to a potential purchaser that the house had been the site of a murder-suicide involving the home's prior owners. First, the court considered whether there was a duty to disclose this information under Pennsylvania's Real Estate Seller Disclosure Law ("RESDL"), 68 Pa. Cons. Stat. §§ 7301–7315. The RESDL requires that a seller of residential real estate disclose to a buyer any material defect with the property. See 68 Pa. Cons. Stat. § 7303. The court indicated that the murder-suicide history would constitute a material defect under the RESDL if it were to have a significant adverse impact on the value of the property. The court went on to hold that there was a genuine issue of material fact on the issue of a material defect under the RESDL, thereby precluding the defendant seller's and real estate agents' motion for summary judgment on the purchaser's claim for a RESDL violation.
Likewise, the court also held that there were genuine issues of material fact as to the purchaser's claims for fraud and negligent misrepresentation (as well as the Unfair Trade Practices and Consumer Protection Law claim). As with the RESDL claim, the court held that there were factual disputes concerning whether the murder‑suicide incident was a material defect. With respect to the fraud claim, the court commented:
Whether a fact is material in the context of a fraud claim hinges on whether the transaction would have been consummated if the other party knew of the fact. See Skurnowicz v. Lucci, 798 A.2d 788, 793 (Pa.Super.2002). Here, Buyer has alleged that had she known of the murder suicide, she would not have purchased the property. R. at 268a. Based on the foregoing, we conclude that whether Sellers and Agents failed to disclose a material fact was a question for the jury. See Alloway v. Martin, 434 Pa.Super. 518, 644 A.2d 201, 204 (Pa.Super.1994) (stating that "fraud is a question of fact for the trier‑of‑fact to decide"). Accordingly, we conclude that the trial court erred in granting Sellers and Agents summary judgment on Buyer's fraud claim.
2011 WL 5936768, at *6.
It is important to consider that the above decision was based purely on Pennsylvania law. Other state courts have also had an opportunity to consider the issue of a seller's (or real estate agent's) duty to disclose the type of information involved in
Milliken.
See, e.g.,
Reed v. King, 145 Cal. App. 3d 261, 193 Cal. Rptr. 130 (1983) (purchaser stated a cause of action against vendor and real estate agent for vendor's failure to disclose that house was site of a multiple murder). Moreover, other States may have enacted disclosure laws that expressly require a seller to disclose this type of information.
Posted by Gale Burns on Fri, Oct 21, 2011 @ 02:24 PM
October 25, 2011
Steve Friedman, Senior Attorney, National Legal Research Group
Congress enacted the Real Estate Settlement Procedures Act ("RESPA") of 1974, 12 U.S.C. §§ 2601-2617, in response to the need for significant reforms in the residential real estate settlement process. See RESPACReal Estate Settlement Procedures Act Home Page (last visited Oct. 12, 2011) ("[RESPA] insures that consumers throughout the nation are provided with more helpful information about the cost of the mortgage settlement and protected from unnecessarily high settlement charges caused by certain abusive practices.").
Indeed, the legislation expressly states that it is intended to, among other things, eliminate "kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services." 12 U.S.C. § 2601(b)(2). To that end, § 8(b) of RESPA provides as follows: "No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed." Id. § 2607(b).
The U.S. Department of Housing and Urban Development, the federal agency responsible for enforcing RESPA, has asserted that four types of overcharging schemes are prohibited by § 8(b):
1. Fee splitting, where two or more persons split a fee, any portion of which is unearned;
2. Mark-ups, where a service provider charges the borrower for services performed by a third party in excess of the cost of the services to the service provider but keeps the excess itself [without providing any additional goods or services];
3. Undivided unearned fees, where a service provider charges the borrower a fee for which no correlative service is performed; and
4. Overcharges, where a service provider charges the borrower for services actually performed but in excess of the service's reasonable value.
Freeman v. Quicken Loans, 626 F.3d 799, 802 (5th Cir. 2010) (citing RESPA Statement of Policy 2001-1, 66 Fed. Reg. 53,052 (Oct. 18, 2001)).
All U.S. Courts of Appeals that have addressed the issue agree that § 8(b) plainly prohibits the first and fourth types of schemes, fee splitting and overcharges. See id. (citing cases). However:
The circuits disagree on the remaining two types of fees: mark‑ups and undivided unearned fees. The Fourth, Seventh, and Eighth Circuits have each held that RESPA § 8 is exclusively an anti‑kickback provision. [See Boulware v. Crossland Mortg., 291 F.3d 261 (4th Cir. 2002); Krzalic v. Republic Title, 314 F.3d 875 (7th Cir. 2002); Haug v. Bank of Am., 317 F.3d 832 (8th Cir. 2003).] Accordingly, RESPA ' 8(b) requires two culpable parties, a giver and a receiver of the unlawful fee, rendering mark‑ups by a sole services provider not actionable. The Second, Third, and Eleventh Circuits have rejected the two‑party requirement and held that RESPA § 8(b) prohibits mark‑ups. [See Kruse v. Wells Fargo Home Mortg., 383 F.3d 49 (2d Cir. 204); Santiago v. GMAC Mortg. Group, 417 F.3d 384 (3d Cir. 2005); Sosa v. Chase Manhattan Mortgage Corp., 348 F.3d 979 (11th Cir. 2003).] Only the Second Circuit has explicitly addressed whether RESPA § 8(b) prohibits a sole provider's undivided unearned charges and found that it did. Cohen v. JP Morgan Chase & Co., 498 F.3d 111 (2d Cir. 2007). Presumably, the three circuits that require two culpable actors would not find undivided unearned charges actionable.
Id. at 802-03 (footnotes bracketed as citations).
In Freeman, a three-judge panel of the Fifth Circuit joined the fray regarding § 8(b). In relevant part, Chief Judge Jones and Judge Elrod held that RESPA § 8(b) does not cover undivided fees of a sole provider, thus reaching the opposite conclusion than did the Second Circuit in Cohen v. JP Morgan Chase & Co., 498 F.3d 111 (2d Cir. 2007). In reaching that conclusion, the majority opinion in Freeman set forth four reasons: (1) the language of RESPA § 8(b) is unambiguous and does not cover the undivided fees of a sole provider, see 626 F.3d at 803; (2) RESPA § 8(b) must be read in conjunction with its companion provision, RESPA § 8(a), which requires two culpable actors, see id.; (3) the statutory phrase "any portion, split or percentage" necessarily requires that two parties share something, see id. at 803-04; and (4) when viewed as a whole, "RESPA is an anti-kickback statute, not an anti-price gouging statute," id. at 804.
Although HUD's 2001 Policy Statement suggests a different outcome, when the statute at issue is plain and unambiguous, as was concluded in Freeman, the HUD 2001 Policy Statement is not entitled to Chevrondeference.1 See id. at 805. And even if the agency interpretation is entitled to the lesser Skidmoredeference,2 the HUD 2001 Policy Statement is nevertheless unpersuasive because it "is perfunctory and conclusory," without any "concrete reasoning for its conclusion." Id. at 806.
Whereas the majority opinion in Freeman rejected the Second Circuit's holding in Cohen, Judge Higginbotham wrote a dissenting opinion in which he argued in favor of the substantive portions of Judge Raggi's opinion in Cohen. See id. at 806-08 (Higginbotham, J., dissenting). The sole aspect of Cohen with which Judge Higginbotham disagreed was the Second Circuit's decision to give Chevron deference to the HUD 2001 Policy Statement. See id. at 807. In short, Judge Higginbotham found the statutory language to be ambiguous and reasoned that prohibiting such fees would strike at a core objective of RESPA: promoting the transparency of costs associated with settlement.
By way of appeal from the Freeman decision, the U.S. Supreme Court has recently granted certiorari on the issue of whether RESPA § 8(b) prohibits the acceptance of unearned fees only when those fees are divided between two or more parties, as in a kickback arrangement, or whether the provision also applies to unearned fees retained by a single defendant. See Freeman v. Quicken Loans, 626 F.3d 799, cert. granted, 79 U.S.L.W. 3494 and 80 U.S.L.W. 3015 (U.S. Oct. 11, 2011) (No. 10‑1042). Thus, the above-summarized circuit split will hopefully come to an end sometime in 2012.
1In Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984), the U.S. Supreme Court held that the courts cannot disturb an agency rule unless it is procedurally defective, arbitrary, or capricious in substance or manifestly contrary to the statute. See id. at 843-44.
2In Skidmore v. Swift & Co., 323 U.S. 134 (1944), the U.S. Supreme Court held that agencies' views are "entitled to respect" to the extent that they have "the power to persuade." Id. at 140.
Posted by Gale Burns on Wed, Jul 20, 2011 @ 08:17 AM
July 19, 2011
Steve Friedman, Senior Attorney, National Legal Research Group
In recent years, dubious mortgage practices and lax lending standards contributed to a housing bubble that eventually burst and thrust the economy into the worst economic downturn since the Great Depression; as a result, there have been a record number of foreclosures. Despite the time-sensitive nature of foreclosure proceedings and related litigation, foreclosing parties need to be careful about checking the land records and verifying that all interested parties have notice of the foreclosure proceedings.
The doctrine of merger provides that "[w]henever a greater and a less estate coincide and meet in one and the same person, without any intermediate estate, the less is immediately merged in the greater, and thus annihilated." 31 C.J.S. Estates § 153 (Westlaw database updated June 2011). Applying the merger doctrine to the mortgage context, when the mortgagee acquires legal title to the subject property by way of foreclosure, the mortgage lien merges with the legal title, and the lien is extinguished as a matter of law. See Citizens State Bank of New Castle v. Countrywide Home Loans, No. 76S03-1009-CV-515, 2011 WL 2566451, at *2 (Ind. June 29, 2011); Am. Family Mut. Ins. v. Welton, 926 F. Supp. 811, 816-17 (S.D. Ind. 1996).
Significantly, however, if a junior lienholder is not made a party to the foreclosure action, then neither the foreclosure nor a subsequent sale of the subject property can be enforced against such junior lienholder. See Citizens State Bank, 2011 WL 2566451, at *3, *5. Accordingly, when a foreclosing entity fails to include a junior lienholder in its foreclosure action, the junior liens remain attached to the property regardless of the foreclosure purchaser's knowledge or intent. See id. at *1, *4.
In an effort to deal with this potentially unfair scenario, "a number of jurisdictions advance the view that 'whether a merger has occurred depends on the intent of the parties, especially the one in whom the interests unite. If merger is against that party's best interest, it will not be deemed intended by the parties.'" Id. at *2 (quoting 1 Grant S. Nelson & Dale A. Whitman, Real Estate Finance Law § 6.15 (5th ed. 2007)); accord 55 Am. Jur. 2d Mortgages §§ 751, 1225 (Westlaw database updated May 2011). In other words, if there is no merger, then the foreclosing party's original lien remains intact and maintains its priority over all junior lienholders. See Citizens State Bank, 2011 WL 2566451, at *3.
Clearly, an express provision in a deed given in lieu of foreclosure that the deed shall not merge with the mortgage prevents such a merger. See 55 Am. Jur. 2d, supra, § 1226 (citing Riley v. S. Somers Dev., 644 N.Y.S.2d 784 (App. Div. 1996)). Yet such intent may be implied as well. See id. § 1225 (citing Edney v. Jensen, 216 N.W. 812 (Neb. 1927)).
Nevertheless, the foreclosing party cannot take advantage of the above-stated exception to the merger doctrine where it clearly, albeit implicitly, manifested its intent to merge its mortgage lien and legal title to the subject property by transferring fee simple title to the subject parcel, free from all encumbrances, to a third party. See, e.g., Citizens State Bank, 2011 WL 2566451, at *5 (citing Constr. Mach. of Ark. v. Roberts, 819 S.W.2d 268, 270 (Ark. 1991); Downstate Nat'l Bank v. Elmore, 587 N.E.2d 90, 94 (Ill. App. Ct. 1992); Thorp Consumer Disc. v. Hartigan, 683 N.E.2d 373, 377 n.3 (Ohio Ct. App. 1996)).
Consequently, if the foreclosure purchaser then conveys the property to a third party, claiming it to be free from all encumbrances, the foreclosure purchaser may be liable for breach of contract. See id. at *6.
Posted by Gale Burns on Fri, Apr 22, 2011 @ 04:10 PM
April 22, 2011
Alistair Edwards, Senior Attorney, National Legal Research Group
In 2008, Congress passed the Home Affordable Modification Program ("HAMP"), created under the Emergency Economic Stabilization Act of 2008 ("EESA"), 12 U.S.C. §§ 5201-5261. To participate in HAMP, companies that service mortgages not owned by a government-sponsored enterprise enter into a contract with Fannie Mae ("HAMP Contract"). HAMP's purpose is to provide eligible homeowners with permanent loan modifications to avoid foreclosures. In a typical HAMP Contract, the company agrees to review all eligible borrowers who apply for a loan modification under HAMP and to provide permanent loan modifications to eligible borrowers who meet the HAMP criteria.
Recently, the U.S. District Court for the Southern District of Florida held that no private right of action exists under HAMP. In Ozoria v. Deutsche Bank Trust Co. Ams., No. 10-24070-Civ, 2011 WL 1303270 (S.D. Fla. Mar. 31, 2011) (available on Westlaw only), the plaintiffs sued GMAC Mortgage, LLC ("GMACM"), their mortgage loan servicer, after they had twice applied for a permanent mortgage modification but GMACM had denied their applications both times. The plaintiffs, claiming to be third-party beneficiaries of the HAMP Contract, alleged that GMACM had breached the Contract when it wrongfully denied their applications for permanent HAMP mortgage loan modification and that it had breached the covenant of good faith and fair dealing when it denied their applications. In dismissing the plaintiffs' breach-of-contract claims (or third-party beneficiary claims) against GMACM, the court emphasized that there is no private right of action under HAMP. The court, pointing out that other courts have held likewise, commented:
Defendants argue that Plaintiffs' Complaint should be dismissed because it only concerns breaches of the HAMP Contract, and HAMP does not provide a private cause of action. Indeed, the courts that have been presented with similar cases have held that HAMP does not confer a private right of action. See, e.g., Nelson v. Bank ofAmerica, N.A., No. 10-00929, 2011 WL 545817, at *1 (M.D.Fla. Feb. 8, 2011); Zoher v. Chase Home Financing, No. 10-14135, 2010 WL 4064798, at *3 (S.D.Fla. Oct.15, 2010) (collecting cases). Neither the HAMP Guidelines nor the EESA expressly provide for a private right of action. Instead, Congress provided that Freddie Mac serve as the compliance officer for HAMP. See U.S. Dep't of Treasury, Supp'l Directive 2009-08, at 4 (Nov. 3, 2009). As the compliance officer, Freddie Mac must conduct "independent compliance assessments," including an "evaluation of borrower eligibility." Supp'l Directive 2009-01, at 25-26. By delegating sole compliance authority to Freddie Mac, and staying silent as to a right of action in district courts, Congress intended that a private right of action was not permitted. Cf. Thompson v. Thompson, 484 U.S. 174, 180, 108 S.Ct. 513, 98 L.Ed.2d 512 (1988) ("The intent of Congress remains the ultimate issue, however, and unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.").
Because there is no private right of action under HAMP, Counts I and II of the Plaintiffs' Complaint are dismissed with prejudice.
Id. at *2.
Posted by Gale Burns on Fri, Apr 08, 2011 @ 08:34 AM
April 12, 2011
Steve Friedman, Senior Attorney, National Legal Research Group
A prescriptive easement is analogous to adverse possession, the difference being that in a prescriptive easement claim, the claimant acquires only an easement rather than title to the land. See 28A C.J.S. Easements § 23 (Westlaw database updated Mar. 2011); Cumulus Broad. v. Shim, 226 S.W.3d 366, 378-79 (Tenn. 2007).
As with adverse possession, a party asserting a prescriptive easement must generally prove, by clear and convincing evidence, adverse use that is visible, open, and notorious, as well as continuous and uninterrupted for the statutory prescriptive period. See 28A C.J.S., supra, § 23; 25 Am. Jur. 2d Easements and Licenses § 39 (Westlaw database updated Nov. 2010); Hilley v. Lawrence, 972 A.2d 643, 651-52 (R.I. 2009); Shapiro Bros. v. Jones‑Festus Props., 205 S.W.3d 270, 274 (Mo. Ct. App. 2006).
The existence of prescriptive easements and the requisite elements to establish them have long been plainly set forth in the law; however, there is scant legal precedent regarding the acquisition of prescriptive easements by an identified class of persons as opposed to an individual or the public generally. See Flaherty v. Muther, 2011 ME 32, ¶¶ 80-83, 2011 WL 990308, at *16 (not yet released for publication).
Clearly, there is nothing inherent in the law to preclude a distinct class of persons from acquiring an easement by prescription. See Me. Rev. Stat. Ann. tit. 14, § 812 ("No person, class of persons or the public shall acquire a right-of-way or other easement through, in, upon or over the land of another by the adverse use and enjoyment thereof, unless it is continued uninterruptedly for 20 years." (emphasis added)); 17 William B. Stoebuck & John W. Weaver, Washington Practice: Real Estate § 2:7 (2d ed. 2004 & Supp. 2010) (recognizing that, under Washington law, an identifiable group of persons may establish a prescriptive easement to be used among themselves); e.g., Cordrey v. Dorey, Civ. Act. No. 1519‑S, 1996 WL 633293, at *4 (Del. Ch. Oct. 4, 1996) (unpublished) (concluding that several neighbors acquired the same prescriptive easement); Hunt v. Armstrong, No. 127173, 1989 WL 1183112, at *4 (Mass. Land Ct. Sept. 12, 1989) (same).
Yet "[t]he law does not favor prescriptive easements, and a party claiming the existence of one must show the elements by clear and convincing evidence." 28A C.J.S., supra, § 23; accord 25 Am. Jur. 2d, supra, § 39 (same); Hilley, 972 A.2d at 651-52; Shapiro Bros., 205 S.W.3d at 274. So it should come as no surprise, then, that each and every person within the identified group or class must prove all of the requisite elements of the claim for a prescriptive easement.
Consequently, one person in the class cannot rely upon or otherwise impute to himself or herself another class member's use. See, e.g., Flaherty, 2011 ME 32, ¶¶ 84-85, 2011 WL 990308, at *17 (as a matter of first impression, adverse use of alleged prescriptive easement by only a few neighbors did not inure to benefit of other similarly situated neighbors who, although named parties in the lawsuit, did not in fact use the alleged easement); Cordrey, 1996 WL 633293, at *4 ("Because [the claimants] presented their [prescriptive easement] claim largely in terms of their own personal use, the evidence is insufficient to support a finding that easement rights exist in a broader class of persons.").
Of course, as suggested above, upon sufficient evidence that a broader group of persons did in fact adversely use the asserted easement and otherwise satisfied the requisites of a prescriptive easement, then a correspondingly broader prescriptive easement can be established. See Cordrey, 1996 WL 633293, at *4.
Moreover, each person in the group or class must on his or her own accord satisfy the requirements of uninterrupted and continuous use for the prescriptive period. See, e.g., id. ("Mr. Charles Purnell's use was from 1964 to 1991; Mrs. Colebourn's use was from 1948 to 1981; [and] Mr. Cordrey's use was from the 1950s to 1970s."). The doctrine of tacking successive prescriptive periods together to establish continuous use may apply to concurrent users within a class. See, e.g., id. ("Mr. Wagner's use (from 1983 to 1988) may be 'tacked on' to the use of his predecessor in title . . . who purchased their lot in the 1930s and used the disputed area . . . until they sold their land to Mr. Wagner."). However, a prerequisite to tacking-on in the group context is privity of title. See Flaherty, 2011 ME 32, ¶ 81, 2011 WL 990308, at *16; see, e.g., id. ¶ 82, 2011 WL 990308, at *16-17 ("[U]se by three householdsCone for twenty years, one for ten years, and one for one yearCis [not] sufficient to establish a prescriptive easement for a class of nineteen households [which are not in privity].").
Finally, at least some states' formulations of the prima facie case for prescriptive easement include an element of exclusivity. See, e.g., Cumulus Broad., 226 S.W.3d at 379; Clark v. Heirs & Devisees of Dwyer, 2007 MT 237, ¶ 25, 170 P.3d 927, 932; State v. Beeson, 232 S.W.3d 265, 274-75 (Tex. App. 2007). On its face, such an element would seem to be an impediment to the acquisition of prescriptive rights by a group of persons. However, this element merely highlights the distinction between adverse possession and prescriptive easement.
In the former case the possession must be exclusive, since two persons (not joint owners) cannot at the same time possess the same parcel of land, unless the right of one is subordinate to that of the other. In the latter case both parties may exercise the right to use a single way; each user being independent of the other and exercised as of right. That the user must be exclusive is true only in the limited sense that the right shall not depend for its enjoyment upon a similar right in others; it must be exclusive as against the community at large.
Phillips v. Bonadies, 136 A. 684, 686 (Conn. 1927). Consequently, "two or more persons may independently acquire an easement by prescription to use the same road or way, and the easement may be acquired in common with the true owner." Cordrey, 1996 WL 633293, at *4 (citing Marta v. Trincia, 22 A.2d 519, 520 (Del. Ch. 1941)).
Posted by Gale Burns on Thu, Mar 17, 2011 @ 10:35 AM
February 15, 2011
Charlene Hicks, Senior Attorney, National Legal Research Group
In recent months, embattled homeowners striving to fend off mortgage foreclosures have increasingly turned to the courts for relief. This has resulted in an emerging body of law involving the validity of the underlying loans. Because virtually all mortgages are assigned by the original lender soon after execution, questions concerning the validity of the assignment often arise. Thus, one particular avenue in which homeowners have enjoyed particular success in defending against foreclosure proceedings involves contesting the current noteholder's standing to maintain a foreclosure action.
This point is well illustrated in Wells Fargo Bank, N.A. v. Ford, No. A‑3627‑06T1, 2011 WL 250561 (N.J. Super. Ct. App. Div. Jan. 28, 2011), a case recently decided by the Superior Court of New Jersey, Appellate Division. In that case, Sandra Ford executed a negotiable note on March 6, 2005 to secure repayment of $403,750 she had borrowed from Argent Mortgage Company and a mortgage on her New Jersey home, a transaction in connection with which Ford was alleging that Argent had engaged in fraudulent and predatory acts.
On March 11, 2005, Argent assigned the mortgage and note to Wells Fargo Bank, N.A. Ford defaulted on the loan, and, in July 2006, Wells Fargo instituted foreclosure proceedings. After various proceedings in the lower courts, Wells Fargo was granted summary judgment, and a final judgment of foreclosure was entered. The appellate division granted a stay on a scheduled sheriff's sale of the property pending the outcome of Ford's appeal.
Holding that Wells Fargo had "failed to establish its standing to pursue this foreclosure action," the appellate division reversed the trial court's order of summary judgment in Wells Fargo's favor and remanded the case to the lower court. Id. at *3. In reaching this decision, the appellate division noted that in order to have a right to foreclose on a mortgage, the party seeking to foreclose "must own or control the underlying debt." Id. (internal quotation marks omitted). Ford's debt was evidenced by a negotiable note made payable to Argent. This note had originally been owned and controlled by Argent. Thus, the case turned upon the question as to "whether Wells Fargo established that it subsequently acquired ownership or control of the note from Argent." Id.
Because the note Ford signed was a negotiable instrument, "the answer to this question is governed by Article III of the Uniform Commercial Code (UCC)[.]" Id. Under the 2002 version of U.C.C. § 3-301, three categories of persons are entitled to enforce a negotiable instrument: (1) the holder of the instrument; (2) a nonholder in possession of the instrument who has the rights of the holder; and (3) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to § 3-309 or § 3-418(d). Wells Fargo did not fall into any of these three classifications. Id. at *3-5.
To begin with, although Wells Fargo argued that it was the "holder" of Ford's note within the meaning of the first classification, U.C.C. § 3-201(a) expressly provides that a person other than the one to whom a negotiable instrument is made payable may become a "holder" only if a "negotiation" of the instrument is made. The U.C.C. further specifies that "negotiation" requires both the transfer of possession of the instrument and its indorsement by the holder. U.C.C. § 3-201(b). Wells Fargo was unable to provide any evidence that the note had been properly indorsed by Argent. Wells Fargo Bank, 2011 WL 250561, at *3. As a result, Wells Fargo was not a "holder" within the first category of persons entitled to enforce a negotiable instrument. Id.
Wells Fargo also did not fall within the third category. Id. at *4. Section 3-309 concerns the enforcement of instruments which have been lost, destroyed, or stolen. Section 3-418(d), in turn, focuses on situations in which an instrument has been paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance. Neither of those circumstances was involved in the Wells Fargo Bank case. Id.
Finally, under the circumstances, Wells Fargo could not be classified within the second category of persons entitled to enforce a negotiable instrument under U.C.C. § 3-301. Id. To support its right of foreclosure, Wells Fargo submitted a certification by attorney Josh Baxley, which stated that Wells Fargo "is still the holder and owner of the said Note/Bond and mortgage," with a copy of the mortgage and note attached to the certification. Id. In addition, "Wells Fargo submitted a document that purported to be an assignment of the mortgage, which stated that it was an assignment of 'the described Mortgage, together with certain note(s) described therein with all interest, all liens, and any rights due or to become due thereon.'" Id. The court found that if these documents had been properly authenticated, they might have been sufficient to establish that Wells Fargo did, in fact, fall within the second category of persons entitled to enforce an instrument. Id. Baxley's certification, however, was not properly authenticated, because it did not allege that he had personal knowledge that Wells Fargo was the holder and owner of the note, nor did it indicate how he had obtained this alleged knowledge. Id. In addition, the purported assignment of the mortgage "was not authenticated in any manner; it was simply attached to a reply brief." Id. at *5. The document should not have been considered in evidence "unless it was authenticated by an affidavit or certification based on personal knowledge." Id.
Because Wells Fargo did not fall within any of the three classes of persons entitled to enforce a negotiable instrument under U.C.C. § 3-301, the appellate division concluded that Wells Fargo had not established its standing to pursue the foreclosure action by competent evidence. Id. Hence, the court reversed the grant of summary judgment and remanded the case to the trial court. Id.
Although in dicta, the appellate division then went on to provide some "guidance for the trial court in the event Wells Fargo is able to establish its standing on remand." Id. In this respect, the court noted that even if Wells Fargo were to produce an indorsed copy of the note from Argent on remand, it would not necessarily follow that Wells Fargo would become a "holder in due course" under U.C.C. § 3-203. Id. Only a holder in due course could avoid any defenses Ford would have to a claim by Argent to enforce the note. Id. To be classified as a holder in due course, Wells Fargo could not have known of Ford's defenses against Argent. Id. This, in turn, would mandate that the indorsement have occurred near the date the original note was executed. Id.
As Wells Fargo Bank demonstrates, courts will not allow an assignee of a mortgage note to foreclose upon the property unless the assignee is able to show that it falls into one of the three categories of persons entitled to enforce a negotiable instrument under U.C.C. § 3-301. In most cases, the original mortgage note is payable to a specific lender. For such a note to be validly negotiated, that lender must properly indorse the note either in blank or specially to the assignee. In addition, the indorsement should have been executed at or near the time the original note was executed. Moreover, in several states, the indorsement must also be affixed to the original note. Unless each of these requirements is satisfied, the assignee lacks standing to pursue a foreclosure action. See, e.g., In re Weisband, 427 B.R. 13, 18-21 (Bankr. D. Ariz. 2010); In re Willhelm, 407 B.R. 392, 402-03 (Bankr. D. Idaho 2009).
Posted by Gale Burns on Thu, Feb 10, 2011 @ 02:36 PM
The Lawletter Vol 34 No 6, August 6, 2010
Alistair Edwards, Senior Attorney, National Legal Research Group
In Murray v. City of Lawrenceburg, 925 N.E.2d 728 (Ind. 2010), the Supreme Court of Indiana recently held, among other things, that land being used as part of a docking site for a private riverboat casino had been taken by the City of Lawrenceburg and the Lawrenceburg Conservancy District for a public purpose or use. In Murray, the plaintiffs alleged that they were the owners of the land at issue, and they brought an action against the City and the Conservancy District to quiet title. The plaintiffs further alleged that in 1996 a quitclaim deed was recorded whereby a railroad company had attempted to deed the land at issue to the City. The court, opining for the first time that inverse condemnation was an exclusive remedy, held that the plaintiffs should have sued for inverse condemnation, not to quiet title—even though the City had a deed to the property and had never attempted to "take" the property. Accordingly, the plaintiffs were subject to the six-year statute of limitations applicable to an inverse condemnation action, which statute had expired prior to the plaintiffs' filing suit.
Among other arguments presented to the court, the plaintiffs asserted that inverse condemnation was inapplicable because any alleged taking was not for a public use. As alleged in the plaintiffs' complaint, the land at issue was part of a docking site for a riverboat casino operated by a private gaming company, which was leasing the land from the City. However, the court nevertheless held that the land had been taken for a public use. To support its conclusion, the court stated:
Plaintiffs also argue that inverse condemnation is inapplicable here because the taking was not for a public use. Defendants respond that providing public routes of access to a private business is a public use. Plaintiffs are correct that, if there were no public use, neither eminent domain nor inverse condemnation would apply. But we readily find a public use here. Whether a particular use is a public use is a question for the courts to determine. 11A Ind. L. Enc. Eminent Domain § 10, at 254 (2007). Specifically, in Indiana, the taking of private land to develop public access to private casinos has been held to be a public use. E.g., City of Hammond v. Marina Entm't Complex, Inc., 733 N.E.2d 958, 962 (Ind.Ct.App.2000). Other jurisdictions have also reached similar conclusions. See, e.g., Detroit v. Detroit Plaza Ltd. P'ship, 273 Mich.App. 260, 730 N.W.2d 523, 527 (2006); City of Atlantic City v. Cynwyd Inv., 148 N.J. 55, 689 A.2d 712, 713‑14 (1997).
Id. at 733. Apparently the court was under the impression that the land at issue, which was part of a docking site for a private riverboat casino, provided a public route of access to the casino. However, the court failed to elaborate in what way a docking site, or the land at issue, provided a public route of access (i.e., a roadway or pedestrian overpass) to the casino. It appears that the real purpose of the docking site was to moor the privately owned riverboat casino to the shore of the Ohio River, not to provide public access to the casino.
Posted by Gale Burns on Mon, Jan 10, 2011 @ 10:28 AM
November 19, 2010
Scott Meacham—Senior Attorney, National Legal Research Group
When a government acquires real property by eminent domain, the rules that establish how much the landowner is to be compensated are fairly well settled. However, when the land is already owned by the government and the only issue is the value of a third party's easement on the land, then matters can get complicated.
In City of Steamboat Springs v. Johnson, No. 09CA2520, 2010 WL 3035202 (Colo. App. Aug. 5, 2010) (not yet released for publication), the property at issue was a "greenbelt," a parcel of land on which nearby developers had promised not to build. The greenbelt was open to the public, but the express right to prevent its use for any nongreenbelt purposes was held by the owners of the ten lots that made up the adjoining subdivision.
Planning to build a highway in the undeveloped zone, the City of Steamboat Springs acquired title to the greenbelt property. Title alone, however, was not enough as long as the subdivision owners' easement remained outstanding. The City managed to acquire nine of the ten parcels in the subdivision, but one parcel, Lot 4, remained in private hands. Lot 4 was the site of the excavation business of Charles Johnson, and as long as Johnson retained the greenbelt easement, he would have the right to block the highway.
So the City began the condemnation of the easement owned by Johnson. When the trial court reached the question of valuation, it erroneously set its key reference point as the value of the land underlying the greenbelt itself. The court found that the entire encumbered greenbelt was worth $124,500, with the condemned portion valued at $36,000. While this basis for valuation might have been favorable to Johnson in theory, the trial court then reasoned that because Lot 4 made up only 3% of the subdivision, Johnson was entitled to no more than a similar fraction of the greenbelt's value, or about $1,200.
The state court of appeals overturned the very basis of the trial court's decision regarding the proper way to find the value of the easement. Since the easement was appurtenant to Lot 4, stated the court of appeals, it was Lot 4 that was being diminished by the condemnation. After all, the easement was not an easement in gross, a free-floating right held by Johnson as an individual; rather, it was a right held by Johnson (and any successor-in-interest) as the owner of Lot 4. Johnson's property interest in the greenbelt—his easement—was limited to what he acquired when he purchased Lot 4. Therefore, the appropriate measure of value for condemnation purposes was the difference in the value of Lot 4 before and after the loss of the easement in the greenbelt.