Friday, September 11, 2009

Unclean Hands Defeat Equitable Reformation of Deed

A recent case handed down in Indiana demonstrates that equitable property doctrines are still alive and well in the common law: Hardy v. Hardy, 910 N.E.2d 851 (Ind. Ct. App. 2009).

Father owned 80 acres of farmland in Cass County, Indiana.  In 2004, Father faced methamphetamine charges in Oklahoma and Indiana, and the possibility of prison time, hefty fines, and the attachment of his land. With the intent of making himself judgment proof and to protect his land from forfeiture, Father transferred 70 of his acres to his Son and Daughter, as joint tenants with rights of survivorship via a warranty deed.  Daughter was 17 at the time and was not informed of the transfer. 

Father, from prison, instructed Son to lease the farmland and the proceeds were deposited in an account for Father's benefit.  Daughter's name was forged on the three leases.  Daughter learned that she was an owner of the land in 2005 when Son asked her to sign a quitclaim deed (without consideration) giving sole title to two acres to Son and his wife so that they could build a home.  Daughter began asking questions of Father and Son about the nature of her interest in the land.  Her questions went unanswered, so in 2008 she filed a complaint requesting partition and sale of the land, an accounting from Son, and an award of any credits owed to her.

Son answered by asking the court to “reform the deed to reflect the intent of the parties including [Father] and [to] impose a constructive trust to protect the interests of Father, Son, and Daughter.”  Son also moved for Father to join as a real party in interest, which the court granted.  Father claimed that he intended to deed the land to Son and Daughter subject to a life estate.  The trial court found that any mistake by Father in the original conveyance was a unilateral mistake of law and granted Daughter's petitions.  Father and Son appealed, claiming that the decision was clearly erroneous. 

The Indiana Court of Appeals was not persuaded by Father's claim that he intended to reserve a life estate for himself, noting that the trial record clearly established that Father's intent was to "place his property beyond the reach of his creditors-specifically, to evade government efforts to seize or lien his land."  Retaining any ownership interest in the land would have defeated that purpose. 

Father's attempt to appeal to equity was equally unsuccessful.  The Court of Appeals noted the old maxims that "whomever seeks equity must do equity" and "one who comes into equity must come with clean hands."  Finding that Father's actions were hardly equitable or clean, the appellate court found that the trial court decision was not clearly erroneous.

I'm a fan of equity, and it is is nice to see that the old rules are still getting some action.

Tanya Marsh

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September 11, 2009 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, September 7, 2009

Sometimes Fences Make Bad Neighbors

There was an interesting story in the New York Times a few days ago about a dispute between two neighboring landowners and the town of Westport, Connecticut over a stone wall.  Albert and Susan Hancock built the wall in 2005 around their home, replacing an earlier wall on approximately the same line.  They did not obtain a permit.  Jeffrey and Elizabeth Lillien, neighbors of the Hancocks, filed a complaint with the town to stop the construction citing a number of concerns, including possible wetlands issues and interference with sight lines. 

The legal issues are murky, but the story is interesting because of the sheer amount of money involved.  Westport is a wealthy community, where the median home price is $970,000.  The Hancocks spent $170,000 constructing the wall and have, to date, spent $150,000 on legal fees defending it, plus $50,000 on inspections and related costs.  The Lilliens and the town of Westport have also incurred significant expenses.  The Lilliens ' attorney told the Times that he has 30 property cases pending, including one in which a woman's vegetable garden was bulldozed by a neighbor.

This case is surely an anomaly in terms of cost, but it still highlights one reason that so few property disputes (particularly among homeowners) reach the appellate courts -- high litigation costs.  It also begs the question about how those in less favorable economic circumstances handle such disputes.  Both the Hancocks and the Lilliens believe that they are justified in enforcing their respective property rights.  In this case, they both have the resources to, in their own minds at least, fight the good fight.  But fundamental issues about social justice are raised in the more common case, where only one, or neither party, has such resources.

Tanya Marsh

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September 7, 2009 in Recent Cases | Permalink | Comments (3) | TrackBack (0)

Lehavi on the Standards of Property

Amnon Lehavi (Interdisciplinary Center Herzliyah - Radzyner School of Law) has posted The Standards of Property on SSRN.  Here's the abstract:

Much scholarly attention has been paid recently to the optimal design of legal norms as constituting either clear-cut “rules” or open-ended “standards.” The reemergence of formalist thought across schools and ideologies calling to reinforce a more rule-based regime in various legal fields has been increasingly challenging the substantive, contextual jurisprudence that had largely dominated the twentieth century.

The study of legal standards versus rules in property law remains, however, quite limited, focusing mainly on specific aspects such as the remedy-based property rule/liability rule discourse, the debate whether the right to exclude represents the inherent “core” of property rights, and the renewed interest in the structural numerus clausus principle. This Article offers an innovative, comprehensive analysis of the ways in which legal standards operate in property law. It identifies the distinctive manner in which the chief justifications for standards, i.e. incompleteness of rights and enhancement of substantive value-based design and interpretation of norms, play out in property law. Cutting across conventional public law / private law distinctions, by referring to various standards such as “trade usage,” “custom,” “reasonableness,” “abuse of rights,” or “public use,” the Article shows that legal standards hinge prominently on the institutional mechanisms by which such norms are crafted and enforced, and identifies the conditions under which property standards may outperform hard-edged rules.

Considering the unique trait of property rights as implicating numerous and often indefinite interest holders, and hence the need for broad-based coordination in designing the content of property legal standards over time, the Article looks at the ways in which such standards can be filled with content by either bottom-up norms such as group-based customs, values, and understandings, or rather by top-down bodies such as courts.

In essence, in order for property legal standards to work effectively, bottom-up and top-down decisionmaking institutions, working exclusively or conjointly, must systemically guide actors through the often inevitable incompleteness of rights and the dynamic nature of value-based norm-setting, without bringing property to the brink of excessive instability and insecurity that have led to the backlash of new formalism.

Ben Barros

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September 7, 2009 in Property Theory, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)