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Property Visual Aids. Professor Crump, 2006. FUNDAMENTALS. Course Plan. Intro: Anatomy of Real Estate Trans; Economic 1A. Lease regulation 1B. Leases: the agreement 2. Intellectual propty: copyrt, trademk, patent, secret 3. Real estate ownership 4. Real estate transactns

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property visual aids

Property Visual Aids

Professor Crump, 2006

course plan
Course Plan

Intro: Anatomy of Real Estate Trans; Economic

1A. Lease regulation

1B. Leases: the agreement

2. Intellectual propty: copyrt, trademk, patent, secret

3. Real estate ownership

4. Real estate transactns

  • agreemt/sale
  • finance-transfer docs
  • title
  • closing; remedies

5. Gov’t actions; taking

6. Land use: laws, servitudes

7. Possessory & future int’s

8. Complex transactions

a very different subject
“A Very Different Subject”

1. Traditional parts:

a. subject-matter cov’g

b. cases, statutes, notes (most)–notes are useful

2. Non-traditional:

a. lawyering strategy problems

b. transaction (anatomy) book

c. methods for policy analysis

d. life as a transactional lawyer: satisfaction?

a very different kind of course
“A very different kind of course”

Most law school courses deal solely with this context:

This course, however, includes this context, by definition:

What will the differences be? 1. “Policy” questions?

2. Customary kinds of transactions?

3. Private negotiations and ordering?

4. “Private” property?

5. Cases . . . or, documents?

6. A “deal-oriented” course? (Can “deals” be taught?)

special methods in this course
Special Methods in This Course
  • Calling on you–sequence
  • “Anatomy” book–transactional papers, in sequence
  • Handout of overhead projector transparencies
  • Internet video reviews
    • 3 of them; periodically
    • noted in syllabus
    • keyed to transp. Handout
    • can be used as preview
  • Syllabus: differential reading
  • Problems: simulations
  • Practice xam; sample ans; confs
  • Exam preview (later)
the lawyering strateg problems an overview
The Lawyering Strateg Problems: An Overview

Ch. No.Subject Matter

2A Analyze copyrt agreemt

3A Analyze land sale agreemt

3B Prepare deed

4A Argumt: land agreemt

4B Renegotiate land agreemt

5A Deed boundaries

5B Mortgage foreclosure

6A Analyzing title

6B Curing title

7A Takings; subdivision regs

10A Zoning request

11A Easement dispute

11B Easement conveyance

13A Commercial lease negotiatn

Competencies: documt prep, documt analysis, negotiation, counseling, dispute resolution (litigation)

road map for real estate transaction
road map for real estate transaction

1. Brokerage

6. Fulfillment of Title Preconditions

2. Negotiations

7. Preparation of the Core Documents:Note, Deed, and Mortgage [or Deed of Trust]

3. “Earnest Money Contract” or “Agreement of Purchase and Sale”

8. Preparation of Ancillary Documents

4. Fulfilling Financing Preconditions

9. Closing: Execution of the Documents

5. Fulfillment of Inspection Preconditions

10. Title Insurance, Funding, Recording, Delivery, Possession



1. brokers

2. licensing

3. reqmt of writing

4. exclusivity?

5. MLS

6. entitlmt/commiss

7. consumer legisln

8. broker tasks

9. agent of both?


The Earnest Money Agreement

1. blueprint

2. emotional event

3. reqmt of writing

4. finance contngncy

5. good & indefeasible?

6. exceptns/seller

7. risk/loss

8. furniture/fixtures

9. delivery/poss’n

10. equitable title/record


The Terms of Financing

1. fixed-rate

2. ARM

3. ROM/balloon

4. GPM

5. why non-fixed?

6. regulation

7. caps


The Financing Process

1. loan commitment

2. RESPA: g.f. est.

3. “points”

4. usury

5. fed preemption

6. engineering rept

7. other inspections


The Deed

1. deed: elements

2. conveyance

3. general warranty

4. exceptions

5. acknowledgement, recording

6. corp resolution

7. fee simple absolute

8. “baron sole”

9. express vendor’s lien


The Promissory Note

1. negot’bl instrument

2. ARM & cap

3. “limited paymt” note

4. prepayment right

5. default; acceleratn

6. anti-waver

7. personal liability?


The Mortgage(“Deed of Trust”)


Buyer Lender

A deed/trust is literally a “conveyance in trust,” but not really; it’s really a privately foreclosable mortgage, and the “trustee” isn’t one.



note & deed/trust


Terms of the Deed of Trust Mortgage

1. uniform covenants

2. judicial sale mtg

3. pvt sale: D/T

4. foreclosure delay

5. which better?

6. equity redemptn

7. escrow: taxes/ins.

8. mortg ins. (PMI)

9. phys integrity

10. foreclosure proced

11. trustee & subst.

12. deficiency?


The Due on Sale Clause; The “Riders”

1. due-on-sale

2. borrower credit?

3. other concern?

4. due/sale controversy

5. “golden rule”

1. PUD rider

2. adjust/rate rider

3. self-destruct rider

4. forms & riders


The Title Assurance Process

1. trace to sovereign?

2. adverse possession

3. “driveway easement”

4. examiner’s method

5. marketable–legislatn

6. marketable, record, good

7. recording system

8. taxes, judgments

9. variations; attys


Title Insurance

1. insurance: function

2. what’s insured

3. contract?representatn?

4. boundary agrmt: curing

5. cure by affidavit

6. modified policy



1. function of closing

2. escrow usage

3. escrow disadvantages

4. borrower’s undertakings

5. voluntary disclosures

6. required disclosures

7. Reg Z statement

8. disclosure cost/benefit

9. closing instructions


Subdivision & Homeowner’s Ass’n

1. deed restrictions

2. force of restrictions

3. lapse

4. zoning compared

5. homeowners assn

6. powers/duties

7. maintenance fee

8. officers/directors


Resale; Tax Issues

1. assumption instrumts

2. assumption v. subject-to

3. lender’s consent

4. terms for consent

5. alternative: new note

6. estoppel letter

7. other docs

1. deductibility

2. recognition

3. capital gain

4. ord, nec bus exp

economic policy a summary of this coverage
Economic Policy: A Summary of This Coverage

I. The Market System and Its Efficiencies

A. The Allocative Effect of the MarketSupply & Demand; the Invisible HandContrasting Central ControlEquilibrium Price & Quantity: No Waste

B. The Signaling Effect of PricesSupply or Demand Curve Change; PriceEffect of Blockages: Shortage

C. Marginal Cost etc.Efficient Use of Factors of ProductionMarginal Cost, M. Productivity, M. Revenue

D. Production EfficienciesFactor Use; Innovation; Quantity; Investment

E. Distributional EfficienciesPareto OptimalityKaldor-Hicks Efficiency

F. The Coase Theorem: Efficiency of Pvt Barg

economic policy a summary of this coverage cont d
Economic Policy: A Summary of This Coverage cont’d

II. Imperfections Justifying Intervention in Markets

A. Equality as a Value, Traded vs. Efficiency

B. Industry Structure: Monoply, Oligopoly, Restrictn

C. Overcompetition and Distressed Firms

D. Public Goods, Hybrids, Free Riders, Tragedy/Commons

E. Socioeconomics: the Failures of “Homo Economicus”

F. Externalities Types of Responses: Ignore; Use the Law Efficiency of Negligence Law: Cost Internalization Actual and Exemplary Damages: Economic Functions

G. Incommensurability, Uncertainty, Irrationality

H. Information Asymmetries

I. NOT: “Bargaining Power” (but Lawyers Use It)

III. Deontology as an Alternative to Consequentialist Economics

law economics
law & economics–

the allocative effect of the market

  • supply and demand
  • comparison to central planning
  • the invisible hand
  • equilibrium

figure 2: where supply & demand cross is the equilibrium price






signaling; controls; misallocation

signaling effect of prices:demand or supply curve shifts; equil price changes; and equil quantity follows

price controls: shortages

figure 3: equilibrium price is higherthan controlled price; demand exceeds supply; shortages result.



controlled price




consumer sovereignty one cheers
consumer sovereigntyone & ½ cheers?


1. housing voucherssupport? oppositn?

2. taxicab fare; apt. safety:reg or competition?

3. rent control: effects?

4. the efficiency of enforcing contracts

5. nuisance law, balancing benefits of conduct vs. harm caused, uses an economic test. Why?


marginal cost, productivity, revenue

marginal cost:1 more unit

m cost curve–figure 4. U-shaped.

factors of production

marginal productiv:tends to equal marginal cost

marginal revenue:tends to equal marginal cost

efficiency mix of factors


1. how much spend to renovate a rental apartment property?

2. how decide what renovation ideas to spend it on?

3. litigation: economically, how would an efficient lawyer make decisions about using discovery, doing research, etc?

4. efficient breach of contract (with payments of damages: why?)

productn efficiency
productn efficiency
  • mix of factors of prod
  • innovation
  • production volume
  • investment (present/future)distribution efficiency
  • marginal utility
  • Pareto-optimalityno trade improvessatisfaction not “equal”
  • Kaldor-H efficiencytot gains/winners exceed tot lossesPareto-superior if compensate

1. Pareto-optimalityfrom market: Why?

2. factory’s 100-lb effluent; citizens prefer 50; $100,000cost, $500,000benefit: K-Hefficiency for $100,000 cost to be imposed (should citizens pay it?)

3. revisiting efficient breach of K, with damages: K-H efficiency, why?

efficiency v equality
efficiency v. equality
  • mkt = efficiency, but not distrib equality
  • tolerable inequality?
  • gross inequality?

wealth redistribution:

inconsistent w/efficiency


1. H Chavez’s Venezuela

2. scarce necessities

3. in-kind or unrestricted?

4. price (rent) controls/tax & transfer?

5. erad poverty/reduce billionrs?

6. the paradox: equality by redistribution inconsistent w/efficiency, BUT–at some point, is it needed for efficiency?


structural imperfections


  • evil? rational?
  • restrict output, same motives


  • few enuf/indiv
  • strategic behavior
  • prod different’n
  • barriers/entry


  • regulation
  • antitrust

1. patents: a legal “monopoly?” What motivation; what patent standards?

2. professional team wants a smaller arena?

3.-4. historical cost regulation: effect on price signaling f’n? lag politics, undercap, noninnovatn→brownouts; why?

5. prudent cost reg v. used & useful: higher return

6. should conscious parallelism in prices be an antitrust violatn?

7. antitrust & politics

distressed firms and overcompetition
distressed firms and overcompetition


1. antitrust: should govt oppose merger if 2nd largest acquires 5th largest (which is distressed)?

2. let’s start a band! $$! OR: entertainmt law firm!

3. lender, bus plan, market analysis: competition


public goods

  • public goods
  • hybrid goods
  • free riders
  • tragedy of the commons


1. public housing and advocates of vouchers

2. trade secret law: efficient?

3. patent grant justification: free riders?

4. deed restrictions: hybrid goods? tragedy of the commons?

5. Fiss, Against Settlement, because doesn’t contrib to precedent bank. Efficient?

  • homo economicus
  • Thaler’s experiment
  • max price/beer brought from[exp resort][cheap grocer]


1. 2 property sellers: same m u/money, same opp/for fraud; one does, one no. Can econ predict?

2. what factors make non-fraudulent seller?




  • pollution
  • accidents, etc.[positive ext]


  • ignore
  • pvt negotiatn
  • prohib activity
  • perform stds
  • cost-internlzn:
  • taxes, permits,
  • subsidies, dmgs

negligence & externalities

L Hand’s Formula: it’s negligence, if B ‹ PL, meaning if the safety burden is less than probable loss–

figure 5: efficient point (due care) is where P x L curve (probable loss) crosses B curve (cost of safety). Why?

market system motivates cost reduction; tort system, as a corrective, motivates socially desired level of safety.


1. nuisance law (balancing) revisited: balances value of conduct v. harm; how similar to Hand’s formula?

2. negl std for person w/disability efficient?

3. Easterbrook: airline safetyincrease →increased autos; less safety(!)

4. building codes can decrease safety (how?)effect of rent control on safety?

5. ADA requires specific (and costly) building stds for the disabled. evaluate efficiency?

accident claims efficiency
accident claims,efficiency
  • compens dmgs:deterrence?compensatn?
  • punitive dmgs?gap-fillers?overkill?


1. Stachura case:compens & pun & “additional,” illegal

2. dmgs for breach of propty sale K: usually, no recovery for “speculative” items (appreciation since breach; distress). Inefficient; why?

3. Smith v. Wadefn of punitives; gross neg? intent?

4. punitive dmgs for real estate fraud: efficient?

incommensurability shadow markets
incommensurability; shadow markets

irrationality of enforcemt

uncertainty of future factors


1. eminent domain:value of a strip to widen road

2. should em domain, then, use hist cost

transaction costs


1. property sale closing cost reduction: efficiency of regulating uniform disclosures, controlling max costs for some items?

2. litigation as a transaction cost: efficiency of lowering by reducing discovery?

3. title insurance with an exception for adverse possessors: usually chosen by buyers.why?

4. real estate class actns: efficiency?

5. zoning laws; large transaction costs. why?

coase theorem
Coase Theorem

railroad → sparks;2 possible legal rules:railroad liable, orfarmers absorb loss

if trans costs = 0, it’s immaterial to efficiency which rule; parties will negotiate efficient agreement

  • argumt for pvt barg
  • wealth effects remain
  • is Coase meaningless?

The Great Divide in Ethics

Teleology = nature & purpose




Bentham, Mill

Deontology = non-purposive(not cost/benefit)


imitation principle

categorical impertv


Both Theories Are Imperfect

1. Utilitarianism & slavery–slave owners wd like. But Kantianism opposes;why?

2. Utilitarianism & vulnerable minorities: how treat ADA, confiscation of amusemt park?

3. Kant: conflicting categorical imperatives?(performance of promise illegal?)

4. Kant: must you tell truth to terrorist (neighbor in closet?)or: contract bankrupts promisor w/negligible benefit?

consequentialism v deontology
consequentialism v. deontology
  • pun dmgs seen as mkt corrective, vs as retributive, proportional justice
  • “zero tolerance”: the Advil problem?death p, drunk drivers?
  • synthesis?
  • diff ways of same thing?


1. which is best, to evaluate the law–usually conseq; deontol at “borders”?

2. BMW v. Gore: reprehens, ratio, comparables–deontol measures of pun dm?what role for conseq?

3. efficient breach/K: conseq?deontol?

some other moral theories and issues
some other moral theories and issues:
  • the “rule utilitarian” and “limited deontologist”
  • indeterminancy

a. trolley problem only way save 6 is divert, killing 1

b. invol org donor: only way save 6 is harvest his organs

  • pervasive indeterminism: Westermark’s relativism
  • process theory

a. as a response to indeterminancy

b. emphasizes procedure, debate, justification

  • social moral theory


1. for a market in transplantable organs, what analytical method would be used by: (1)Kantians? (2) utilitarians? (3) rule utilitarians? (4) moral relativists? (5) process theorists? (6) social moral theorists?

2. deontology seems to dominate this kind of issue (refusal to consider cost/benefit). Why? What consequences?

lease regulation
lease regulation

1. quiet enjoyment

a. wrongful conduct

b. attributable to landlord

c. omissions?

d. constructive eviction: notice, cure, surrender

e. contrast habitability

2. Pfeifle v. Tanabe

a. entry & use, noise, dirt, fumes, electric, bldg. codes

b. written notice req’d?

c. problems cured?

d. waiver? (prompt?)

e. cumulative effect?

3. notes: 1. “substantial” interference, 2. attribution/landlord, 3. quit: reasonably prompt, or waiver? 4. tenant’s dilemma, 5. tenant’s remedies, 6. statutory modificatn

habitability meaning
habitability: meaning?

1. Javins v. First National

a. allegation: 1500 violations

b. agricultural tenant v. urban dweller

c. inferring the warranty: analogy to sales warranties, cultural change, contract aspect, codes

d. rent withholding

2. notes: 1. are housing codes an appropriate test? 2. vagueness, 3. effect of rent withholding: tenant’s power

3. Dick case: broken sewer, mold; minimal standard

4. Metz v. Duenas: pretext

5. notes: 1. meaning of habitability? 2. running (hot) water? 3. nonwaivability,4. rent withholding v. abatement, self-help, restitution? 5. misuse: the dishwasher hypothet

6. law & economics: is scarcity an appropriate argument for raising supply cost?

7. Central Bank v. Mika

8. A & G Pinzon case

security deposits garcia v thong
security deposits:Garcia v. Thong


2. § 47-8-18:

a. wear/tear excluded

b. itemization required

c. 30 day deadline, last addr

d. forfeiture if not

3. no exceptn for entire detention

4. notes: 1. legal aid advice, 2. back rent different, 3. URLTA

damages duty to mitigate
damages–duty to mitigate?

1. Austin Hill (Tx): yes, duty.

a. majority rule

b. contractual aspect, econ efficiency, reduces deterioratn, penalties disfavored, not a “personal” obligation

2. Stonehedge (Pa): no duty.established law, simplicity, legislature, unfair burden on nonbreaching party, tenant can mitigate

3. notes: moral & econ argumts

eviction etc
eviction etc.

A. self-help

1. common law: necessary force

2. limited modern use/force

3. lockout: Spinks case

4. case for/against self-help

5. modern lockout remedy

6. landlord’s lien

B. special eviction procedures

1. “summary proceedings”; “FE&D”; etc.

2. short notice-to-cure

3. suit/service

4. expedited answer/trial

5. one-issue trial(?)

6. rent independence justified?

7. constitutional

C. are they really “expedited”?

1. technical aspects: Metz v. Duenas

2. defenses or c’claims: habitability

3. contrary cases

D. rules in our State

eviction continued
eviction continued
  • lockout remedy[Tx: yes, but must post where key]
  • summary eviction[does it work?]
  • Tx: FE & D Stat—holdover, etc.justice courts3-day noticewrit/possession
rent control related issues
rent control & related issues

1. Pennell v. San Jose

a. majority: tenant hardship premature

b. Scalia: policy against (“off-budget”)

2. notes: 1. consensus about effects, 2. monopoly/shortage argument, 3. “economic rent,” 4. administrative & ancillary [Danekas case]

4. notes: 1. prohibition even if tenant agrees; 2. vacancy/decontrol; 3. benefits long-term gentry @ expense of short-term poor?

6. affordable housing

leaseholds tenancy types
leaseholds: tenancy types

1. tenancy types

a. estate for years (“fixed”)

b. periodic (renewable)

c. at will

d. at sufferance

e. statutory

[f. trespass]

2. Miller & Desatnik v. Bullock

a. tenant dies during tenancy; mother occupies, subterfuge

b. under each tenancy type, what result?

c. actual result: periodic, terminated: she’s a trespasser

d. if not by death, notice given

3. notes: 1. what if mother was roommate? or, assignment? 2. tenancy types, 3. statutory tenancies

common law leases
common law leases

1. lease = conveyance (land conveyed, as is)

2. [ejectment remedy]

3. [lease = chattel real]

4. [conveyance or contract?]

a. what difference?

b. example: independence of rent

5. [comparison to modern]

a. common law: tenant as agricultural

b. modern: tenant as urban dweller

6. [lease, license, etc.?]

7. [statute of frauds]

8. [recording acts]

transfer landlord s consent
transfer: landlord’s consent

1. types of arrangements

a. no restriction

b. consent, reasonableness

c. consent, absolute

2. Kendall v. Earnest Pestana

a. “silent” consent clause

b. majority rule: absolute

c. Calif.: reasonableness

d. reasoning: restraint/alienation, lease as contract, lessor’s only interest is tenant quality(?)

3. California legislation: protects majority rule, earlier transactions

4. Trinity v. Metrocrest: different result (TX)

5. law & economics: is Cal. S.Ct. wrong?

a. is tenant quality only interest?

b. stable K enforcement

c. market pricing

d. Coase Theorem

e. arguments supporting Cal. rule

transfer assignment v sublease
transfer: assignment v. sublease

1. assignmt is of entire remaining lease

2. sublease: sublessor retains part

3. right to re-enter upon breach

a. majority rule: does not covert to sublease

b. Texas rule: does convert

4. what effects?

a. consent clauses

b. restoration; loss

c. other consequences

transfer subordination attornment
transfer: subordination & attornment

1. interest priority: senior & junior

2. lease after mortgage (or, mortgage after lease?)

3. subordination

4. subordination agreements

5. why does it matter?

6. attornment: account to new person

7. “SNDA” clauses

8. multiple overlapping interests: commercial planning & disputes

9. Miscione v. Barton Devel.

a. the SNDA clause--subordination, nondisturbance, attornment

b. lessee’s need for clarity

c. key to the case: new landlord didn’t give required written assurance

d. majority thinks that’s ok; dissent, no.

10. notes: 1.-2. majority v. dissent, 3. negotiation strategies, 4. strategies after foreclosure, 5. multiple overlapping interests

delivery of possession keydata v united states
delivery of possession:Keydata v. United States

1. holdover; landlord didn’t deliver poss’n

2. tenant (US) terminates

3. American rule: conveyance only

4. English rule: deliver possession

5. policy reasons

6. acquiescence/estoppel claims

7. notes: 1. English rule adoption

use occupation operation going dark okla plaza v wal mart
use/occupation/operation--“going dark”:Okla Plaza v. Wal-Mart

1. no “continuous operations” clause (dismissal on that claim)

2. “use” clause, “abandonment” clause

3. ct implies continuous operations clause from use & abandonment clauses, plus policy arguments

4. policy arguments: why?

5. BUT then: district court remands bankruptcy decision; why?

6. notes: 1. opposing strategies about going dark, 2. negotiations for lease, 3. operations, use, abandonment clauses--Wal-Mart’s argument? 4. Okla Plaza’s argument? 5. damages only--or injunction, too?

7. “use restriction” clauses; cases

premises quality
premises quality

1. during tenancy: Wesson v. Leone

a. covenant inferred from lease language

b. rent-covenant dependency

2. notes: 1. distinguishing implied “quiet enjoyment,” 2. where’s the alleged “lease promise”? (3) non-independence

3. restoration upon termination(?): lease provisions

premises quality cont d
premises quality cont’d

1. premises liability: negligence duty

a. Cramer case: no duty

b. Doe v. Dominion: opposite

c. the economic argument

2. non-delegable duty: statutes

rent etc clauses
rent etc. clauses

1. “gross” or fixed

2. triple-net (taxes, insurance, maint.): multiple meanings

3. escalators: fixed, indexed

4. percentage

5. multiple combinations

6. United States v. McLaren

a. Stark & anti-kickback

b. inflated-lease claim

c. govt expert considered fixed only

d. McLaren expert, triple-net included; adjustment

e. other factors: escalation, negotiations

7. notes: 1. FMV and appraisers, 2. was gov’t expert right? triple-net and risk-shifting, 3. overall lease negotiations, 4. why use triple-net? 5. or escalators?

8. percentage rents: policies

problem 12a carr mertz lease
Problem 12A: Carr-Mertz Lease

A. customary clauses

1. rent, use etc., remedies/terminatn: more complex

2. additional: SNDA, consent, possession, etc.

B. problem: incomplete terms

1. rent clause; price? type?

2. rent increases?

3. assignment/sublease?

4. restoration/environmental?

5. use, operation, abandon?

C. assignments

1. negotiate completion

2. prepare status letter

3. explain and discuss

constitution how read it
Constitution: how read it?

1. “To promote the Progress”

2. of “Science & useful Arts”

3. for “limited Times”

4. to “Authors & Inventors”

5. the “exclusive Right”

6. to “Writings & Discoveries”


1. Reading the Constitution: it’s different

2. a. idea without an invention

b. trivially simple invention

c. the “updated” Shakespeare

3. statute versus Constitution

copyright statute how read it
copyright statute: how read it?

1. original works

2. of authorship

3. fixed in tangible medium

4. communicable

5. list of 8 types

6. not an idea, process, . . . or discovery


1. originality: “updated” Shakespeare?

2. originality: Shakespeare in Spanish?

3. copyright is automatic

4. tangible medium: “idea” for Shakespeare in Spanish?

oddzon v oman
OddzOn v. Oman

1. Background: Koosh; Copyright Register; this suit

2. Holding: refusal upheld

3. The originality issue

a. familiar shape? [this isn’t the issue; why?]

b. originality?

c. deference to Register?

4. the functionality issue (why not functional aspects)?


1. adding originality: colored pattern & copyright? But not helpful?

2. Koosh patentable as “invention”?

3. non-artistic creation: directory

a. Supreme Court: no copyright

b. correct decision--or wrong?

c. if commentary added?


types of IP we’ll study

1. Copyrightsexpression, fixed medium, original [registration], categories

2. Trademarksdistinctiveness, priority, use, nonconfusion, commerce [registration]

3. Patentsnovelty, utility, nonobviousness

4. Trade secretssubstantially secret, bus use, ec value

5. [other types]

trademarks unfair competition lanham act
Trademarks & Unfair Competition:Lanham Act
  • [There are other sections that create a broad protection against “unfair competition.”]
  • § 1127: registrable unless (1) “resembles” registered mark so (2) “likelihood of confusion”
  • [registration is not required]
  • § 1114: infringement & remedies
  • § 1127: trademark--any (1) “device” (2) “used [by or intended]” (3) “in commerce” (4) “to ID, distinguish, & indicate source” of goods/services.
  • Notes:

1. a. name on your law firm b. green-handled hammer c. red fire equipment d. “General Motors” on tools

2. registration: not required; advantages

trademark qualitex co v jacobson
Trademark: Qualitex Co. v. Jacobson

1. Background: Qualitex’s green-gold pads; registered; Jacobson used similar colors; Qualitex suit under § 1114--registered mark; likelihood of confusion [potential damages & injunction]. Also, unfair competition.

2. Holding: for Qualitex. Color alone OK.

3. Reasoning: a. color is a “device.” b. admittedly, it isn’t alone enough, like (1) fanciful, (2) arbitrary, or (3) suggestive symbols. “Weaker” marks include (4) suggestive and (5) generic (not usable as T’mark). c. but: can indicate source (red bolt head & pink insulation examples) if d. secondary meaning, and e. not functional (light bulb shape; red fire equip examples). f. court rejects arguments about uncertainty, limited supply, old statute, no need.

notes after jacobson
Notes after Jacobson

1. when color alone? (device, ID source, secondary meaning, not functional.)

2. functionality: why excluded? (red fire-fighting equipment)

3. likelihood of confusion: what meaning? (a) side-by-side, ability to distinguish or (b) easy distinguishability alone? (Jacobson adopts close-but-different color OR Jacobson adopts orange paisley)


1. Secondary meaning; why not required here?

2. hierarchy of mark (or dress) strength: “Apple” Computers; “Coppertone,” “Nice N’ Soft,” “Bathroom Tissue

patent limits anderson s black rock
Patent Limits: Anderson’s Black-Rock

1. background: patent issued for combined heater, spreader, shaper; spreader-shaper combination well known, heater well known

2. held: patent invalid

3. reasoning: statutes--novelty, utility, nonobviousness. Combination must produce synergy over prior art. Commercial success not enough. Nonobviousness std is constitutional.


1. 3 requirements; what’s missing?

2. expense, delay, risk of patent application

3. judging obviousness: hindsight

patent grant united states v adams
Patent Grant: United States v. Adams

1. background: patent issued for magnesium, CuCl, & water battery. Each element known, but combination filled need. Useful, unexpected.

2. held: patent valid.

3. reasoning: prior art must be examined. Differences from prior art are important. So are unexpected results, etc. Novelty, utility, nonobviousness are present


  • Was Adams’ battery really nonobvious? (Novel or different, yes, but nonobvious?)
  • Combination patent: ALL patents!
  • Distinguishing Adams from Anderson’s Black-Rock: 3 well known ingredients in each, commercial success, etc.
  • Expert doubts, results, need, comm’l success: do these count?
  • What is “nonobviousness”? Is it arbitrary?
  • The “claims” in a patent

a. claims are the heart of the patent

b. exact words used to determine infringement

c. note focus on claims in Adams

d. strategy: (1) multiple claims; (2) broadest claims possible—but not so broad as to threaten novelty, utility, nonobviousness

utsa uniform trade secrets act bp chemicals v jiangsu sopo
“UTSA”: Uniform Trade Secrets Act--BP Chemicals v. Jiangsu Sopo

1. background: “real” issue is personal jurisdiction, which requires connection between elements of claim & act in U.S. For that, must explore claim. Sopo, a foreign sovereign entity, worked with SPECO to obtain BP secret methods from BP licensees & then disseminated them to American contractors.

2. Held: claim elements exist in U.S.; therefore, jurisdiction exists.

3. Reasoning: a foreign sovereign is subject to suit in the U.S. for a claim “based on commercial activity” in the U.S. A “trade secret,” under UTSA, is (1) information, w/ (2) economic value, (3) not generally known, and (4) with secrecy reasonably maintained. Misappropriation, under UTSA, is defined & includes dissemination.


1. Secrets v. patents: why didn’t BP patent all secrets?

2. Subjects: customer lists, prospects, customer specs?

3. “Reverse engineering”: what difference, trade secrets v. patents?

property transfer agreementsthe “six elements” approach (a method of analysis devised by this professor)

I. Parties

II. Preconditions

III. Obligations: Other Party

IV. Obligations: ClienT

V. Breach & Remedies

VI. Termination

[Other considerations]

  • What do these mean?
  • Why study?
  • Property Law is PRIVATE LAW. Most of lawyer’s efforts concernAGREEMENTS and other DOCUMENTS.
  • (This course is different!)

the “six elements”

I. PartiesCan they perform? Do we have all we need? Are they financially responsible?

II. PreconditionsWhat has to happen before the other party is obligated? On the other side, is the client protected from obligations that shouldn’t exist?

III. Obligations: Other PartyWhat does the agreement say, and how specifically, about what the other party must do? Do these obligations fit the client’s expectations, as written?

IV. Obligations: Client’sWhat does the client have to do? Is it specifically limited, or can it be read to require more than the client expects to do?

V. Breach and RemediesIf the other party performs in a way we don’t like, can we clearly prove breach? And what relief can we get? On the other side, can the other party possibly claim breach after sound performance by our client, or obtain ruinous remedies?

VI. TerminationCan we tell when and why the other party’s and the client’s obligations end? What happens then?

WHY THIS SYSTEM IS NEEDED: It’s what’s NOT expressed that really matters, and you won’t notice what’s not there if you don’t look at it systematically.

problem 2a arthur publis copyright assignment pub agreemt
Problem 2A: Arthur-Publis Copyright Assignment & Pub. Agreemt

1. Novice writer; small informal publisher

2. Badly written agreement

3. What makes a bad agreemt?

a. provisions give plenty to other party, nothing to you or your client

b. ambiguity in important matters

c. lacks desirable flexibility


Why This Course Is Different:Property (“Private”) Property

1. Property law is PRIVATE LAW.

2. Property law is DOCUMENTS.

3. AGREEMENTS form much of the law.

4. If you WRITE it, a court (almost always) will ENFORCE IT.

  • It becomes the LAW.
  • CUSTOMARY language and structure are important.
    • understood among DIVERGENT PARTIES. A suspicious buyer or seller on the other side more likely can trust it.
    • the EXPERIENCE factor: a document that has been through thousands of transactions (or for that matter, even a few) is more likely to reflect experience about risks than one you scribble on a legal pad or type out on a laptop with no experience.
intellectual property rosenthal s four issues
Intellectual Property: Rosenthal’s “Four Issues”

1. creation?

2. protected?

3. prevented?

4. pitfalls?

[compare to the “Five Questions”]

patents defining infringement
Patents: Defining Infringement

1. the claims control, compared to device–“literal” infringement

2. doctrine of equivalents: most alleged infringements exhibit small differences

3. pros. history estoppel: Pat. Off. challenges as overbroad; applicant narrows (rather than appeal); then, estopped from claiming abandoned item as “equivalent”

4. Adams-based example: applicant specifies water; infringer uses another liquid; applicant claims “equivalent.” (But what if applicant gave up the word liquid in response to rejection & substituted water; “estoppel”?)

5. equivalents expands patent; BUT: prosecution hist estoppel limits equivalents

infringement equivalents estoppel festo corp v fmc
Infringement, Equivalents & Estoppel: Festo Corp. v. FMC

1. patent rejected; amended to cover only devices w/pair of 2 sealing rings; defendant’s device had only 1 sealing ring.

2. P argues: infringemt by equivalents

3. D argues: pros hist estoppel

4. Held; even if there is pros hist, abandoned item can be equivalent if:

a. infringing equiv was “unforeseeable”;

b. reason for amendmt was “tangential” to equivalent; or

c. some other reason for not describing equivalent

festo case continued
Festo case, continued:

5. policy underlying equivalents

6. resulting uncertainty

7. to prevail, what must Festo show?

Infringements of Other IP types

copyright: substantial similarity

trademark: likelihood/confusion

trade secret: types of misappropriation

Notes: (1) who’ll win?; (2) copyright infringemt; (3) the “similar Supermen” problem; (4) trademark infringement (Huggies v. Dougies)

problems about patents trademarks copyrights and trade secrets
Problems about Patents, Trademarks, Copyrights, and Trade Secrets

1. “Valcom”: computer prog; base inputs lead to mkt valuations; used known algorithms/commands combined by programmer; sold printout to investor customers; how protect?

2. Wrestler, “The Hammer”--steel-like plastic helmet & gloves, distinctive gait & speech; how stop imitation/neg publicity, get paid when pictured; Note: “right of publicity” (not studied, but appears in Ch. 8 if interested)

legal analysis the logic
Legal Analysis: The Logic
  • Syllogism (Deductive)First Premise “All emeralds are green.”

Second Premise “This object is an emerald.”

Conclusion “This object is green.”

  • Analogy (Inductive)
  • Generalization (Inductive)

Here’s the key! Law school analysis is heavily deductive (syllogistic).

1. PRINCIPLES (all) (First Premise)

2. FACTS (all) (Second Premise)

3. CONCLUSION (this comes last!)

conversion trespass
Conversion; trespass

1. Forms of action; conversion & trespass

2. Are intangibles propty?

3. Subject to conversion?

a. early rule: no

b. later: if merged in doc

c. later: broad

4. Policies against–

a. strict liability?

b. cost-benefit? (economic test)

property interest creation gift devise descent transfer
property interest creation: gift, devise, descent, transfer

1. gift: a. donative intent, b. delivery, c. acceptance

Brewer v. Brewer: trial court erred in applying presumption of gift among spouses where transfer was one day before marriage; delivery & acceptance present, but intent to be tried. Notes:

a. formal requirements: why?

b. burden (heavy) on donee: why? Presumptions: why?

2. devise (bequest if personal prop) or descent (intestate)

3. transfer by conveyance: “equitable” title

property interest creation cont d transfer
property interest creation cont’d: transfer

3. PurchaseProblem 3A: Pravelka-Damani

a. residence sale for $380,000 by Pravelkas to Damanis

b. assignment very similar to previous problem (2A)

c. six elements: parties, preconditions, buyer’s obligations, seller’s obligations, breach & remedies, termination

d. again, a terrible agreement

e. some examples: financing contemplated, but no precondition that buyer be able to obtain it (literally, K seems to require buyer pay cash then); no seller obligation to provide warranties or quality assurance (and no inspection conditioned; etc.)

f. again, issues w/all 6 elements

g. issue isn’t case law or statutes

h. objective; to teach you to analyze a private agreement not just for conformity to the law, but as creating private law for the parties

property interest creation cont d adverse possession
property interest creation cont’d:adverse possession

4. adverse possession: a. actual & open, b. exclusive, c. continuous (tacking), d. hostile (or non-permissive claim of right), e. time period (state statute of limitations)

(1) Totman v. Malloy: landowners assumed creek = boundary; BUT: surveysshowed creek on Malloy’s record propty. Use by Totman &predecessors: open, exclusive, for required period (What evidenceshows? Why 20 years?) The issue: “hostility.” Held, no presumption ofpermissive use within family (Why?)

(2) Notes: 1. What’s “open” enough? 2. Why permissive occupationinsufficient? 3. what if landowner repudiates permission? 4. practicaleffect of permissiveness presumptn? 5. “tacking”?

Not considered:

[5. discovery and occupation

[6. “patent” (grant) from sovereign

[7. other means: a. accretion v. avulsion, b. capture v. correlative rights]

decotiis steele the skills of the lawyering process
Decotiis & Steele, The Skills of the Lawyering Process

1. “capabilities”: which?

2. reading, writing, case analysis, research? NO(!?)

3. skilled generalists, here; contrast other practitioners

4. strategies that matter: client relations, negotiation, document preparation, learning, courthouse activities, management

5. teaching documt prep: start w/legal pad?

Notes: 1. existing form: good practice? 2. law-intensiveness of practice v. school? 3. lawyers = bad managers? 4. relevance of school to the observed skills? 5. update?

possessory estates
possessory estates:

1. fee simple absolute“O to A & heirs”

2. life estate“O to A for life”

[3. others: later]

future interests:

4. Remainder“[O to A for life] and then to B & heirs”


1. “to Grantee & heirs”

2. “to Grantee & heirs”; heirs claim a remainder

3. “to Grantee in FSA”

4. “to Grantee for life, then to Grantee’s son & his heirs”

5. “to Grantee for life”; no further gift

tenancy in common
tenancy in common

1. creation: “O to A & B & heirs” (or “O to A & B in fee as tenants in common”)

2. rights: (a) convey (your interest only); (b) use (but not waste); (c) not be excluded; (d) partition only by agreement or legal process

chinn v chinn tenancy in common creation characteristics
Chinn v. Chinn: tenancy in common: creation; characteristics


1. rights and duties: agreeing cotenants had “right”; other’s objection “not relevant”: why?

2. accounting: must employ “good faith to make it profitable” and account. objecting cotenant had reasonable argument! why?

  • TIC: useful, but messy. why?

a. many cotenants

b. don’t know/trust well

5. a family disaster

6. partition suit: division, sale

j ten rt survivorship
j. ten rt. survivorship

1. creation: “as jt’s w/ rt/ survivorship and not tenants in common”

2. (if not abolished in the State)

3. statutory forms; TOD statutes

4. [historic “4 unities”: time, title, poss’n, interest]

5. doesn’t pass by will or inheritance

6. severance

7. presumption against

estate of mitchell
Estate of Mitchell

1. took title “as joint tenants.” (meaning? presumption?)

2. dissolution suit, TRO

3. Robert’s severance declaration

4. what’s a joint tenancy?

5. how to sever?

6. community property: a. presumption of community, b. death before severance/divorce, c. after divorce: cotenancy, unless awarded , d. effect on passage at death

7. effect of TRO: a. absolute right to sever? NO, BUT: b. avoids violating TRO? YES, because not “transfer”: Robert successful


1. parties’ strategies; severance: what effect?

2. Robert’s severance: dirty trick, or what law expected?

3. what if K not to sever?

problem 3c pravelka damani deed
Problem 3C: Pravelka-Damani Deed

1. the assignment; the previous problem

2. tenancy in common: what language?

3. the deed form

a. elements (look at form)

b. how to complete it

4. detailed instructions

a. conforming gender, singular/plural

b. consideration: why?

c. property description, careful: why?

d. habendum & warranty: to H & W heirs; defend against all; why?

e. all exceptions to title

f. taxes

g. acknowledgement; why?

5. EVERY remaining encumbrance

a. MUST be an express exception! Why?

b. But not those that will be removed at closing. Why?

6. what if joint tenancy desired?

7. function of the title report

security interests
Security Interests

1. What are they?

2. Other names: “lien,” “mortgage,” “deed of trust”

3. Relation to “ownership”

4. Creation

5. Perfection (relevance of recording)

6. Priority (insolvency)commercial law, bankruptcy, etc.

7. Thought Problem

  • mortgage on one JT interest: usually unwise. why?
  • mortgage on TC: less risky. why?
marital property historical
marital property: historical

1. Historic common law:unity; dower/curtesy

2. Married Women’s Acts

3. Uniform Dissolutn of Marriage Act

4. Equitable Dist.


6. Meanwhile: community prop–continental system

community property
community property

Estate of Mitchell shows:

1. divisible on divorce

2. characterization important

3. passage on death too

4. community presumption

5. protections of community

additional points:

1. which States? (southwestern rim)

2. separate: gift, devise, descent; inception/title; partition

3. differences among States

4. what’s community?

5. the presumption; commingling

6. homestead

notes on community property
notes on community property

1. mixed-up bank acct: W premarital acct check → earnings acct; check → 100 shares. 5 yr, 10 x value; who gets it?

H: commingling. W: inception/ title, tracing. What if commun funds used on part/debt? (reimbursement).

2. H prefers characterizing as community, not reimbursemt. Why?

3. medical degree as “prop”?

career as “prop?”

a. the dumpor-dumpee scenario

b. the professional-as-wage-slave scenario

notes on community continued
notes on community (continued)

5. valuation (very important to property lawyers)

a. capitalizatn/earnings

b. multiple/earnings

c. market value

d. hist. cost (book val)

e. replacement cost

6. should difficulty of valuation mean it’s not prop? (Graham case)

is earning capacity property
Is earning capacity “property”?

1. Graham = most states (Tx.)

2. NJ: “reimbursement alimony,” based on “contributions”

3. how value spousal “contributions”?

4. business goodwill is divisible. Should “pers goodwill” be?

5. refusal to characterize human labor as “propty”?

6. N.Y. approach, based on its D.R. statute: prof degree is prop; so is career

common law states difference
[common law States; difference]

UMPA–[not read]:

1. marital, individual, “mixed”

2. mixed equals marital unless traced

3. broad power/agreements

4. managemt: titling, etc.

5. creditors: presumption marital

6. survivorship

7. reimbursement

EXCEPT DETAILS, this is commun prop system!

road map for real estate transaction114
road map for real estate transaction

1. Brokerage

6. Fulfillment of Title Preconditions

2. Negotiations

7. Preparation of the Core Documents:Note, Deed, and Mortgage [or Deed of Trust]

3. “Earnest Money Contract” or “Agreement of Purchase and Sale”

8. Preparation of Ancillary Documents

4. Fulfilling Financing Preconditions

9. Closing: Execution of the Documents

5. Fulfillment of Inspection Preconditions

10. Title Insurance, Funding, Recording, Delivery, Possession

getting in the mood why be careful about agreements
getting in the mood--why be careful about agreements?

1. Asimov, Foundation

    • meaningless rhetoric
    • promises don’t mean what you want them to
    • what isn’t said matters
    • how to analyze

2. McElroy, Ross and Me

    • enthusiasm seems to promise results & prompts “victim’s” investment; then, pull the rug out
    • changing the deal
    • refusing to make reasonable agreements
    • killing the deal arbitrarily
    • accusations & hardball
    • exploitation of vague or half-way deals
    • Nonperformance
    • false accusations of nonperformance
    • aggressive interpretation of the deal
  • People do these things: a. because they are sloppy, b. because of wishful thinking, c. because of strategy

3. Professor Stark’s approach

4. Is litigation a good remedy?


1. roles of brokers

2. the brokerage agreement

a. exclusive v. nonexclusive

b. ready, willing & able

c. liability concerns

3. terms: duration, post-term sales, Statute of Frauds

4. terminology

Frady v. May: the transaction; the financing condition; the two contracts; 1st failed, 2d closed; the parties’ strategy;

Statute/Frauds prevents recovery except under written K

Court salvages recovery: how?


(1) “cheat the broker” cases

(2) requirement of a writing

(3) closed under 1st or 2nd K?

(4) passage of equitable title--meaning?

(5) what if buyer defaults--seller still owe?

extra contractual liability
extra-contractual liability
  • tension: prospective defendant wants to limit liability to K. fairness, predictability, risk. prospective plf wants open non-contractual liability. fairness, expectation, risk.

Hoffman v. Connall

1. Boundary problem: a typical problem; survey. Seller held liable; no appeal.

2. Broker adopts seller’s representations that reasonably seem true. (Broker must.)

3. Three approaches: (a) warranty (strict) liability, (b) negligence liability, (c) no duty to buyer.

4. Court adopts (b). why?not negligent here; why?


1. seller’s liability here (what if honest mistake)?

2. broker lost by winning

3. broker’s liability reduct’n

4. strict liab, negligence, no liab?

5. Tx. approach, Miller v. Keyser–strict liability. Why? (DPTA)

brokerage agreement
brokerage agreement

1. exclusive right to sell--why?

2. ready, willing, able--why?

3. limitation of liability–how, why?

4. sales after term (if “procuring cause”)

agreements to negotiate letters of intent understanding
“agreements to negotiate”;“letters of intent/understanding”:

1. is there such a thing?

2. damages: certainty

a. importance of damages

b. liquidated

c. proof--hard


1. enforceability?

2. usefulness--why?

3. danger--why?

4. “status” letters--why?

5. suggested 2-part form (to avoid K--why?)

6. how to do it if you do want K--why?

negotiating techniques
Negotiating techniques
  • firm, fair offer
  • THE negot method:

- unreas 1st

- conceal point

- pretend reas

• other techniques

- merits

- blame client

- reverse psych

- agenda

- drafter

- barg chip

- time

- collateral cons

- whipsaw

- focal points

- clubbiness

- physicalities

- mediator

- feigned emotion

- test/strength

negotiation continued
Negotiation continued


1. ethics? (what about, agree, repudiate, & raise?)

2. importance of negotiation?

3. importance of the merits?


1. “out-of-pocket medical only”

2. “give me your best shot”

3. “client is unreasonable”

4. “tell me what’s fair”

5. “doesn’t want to cash out”

requisites of the property transfer agreement the writing requirement
Requisites of the property transfer agreement: the writing requirement

1. Statute of Frauds (Oregon example)

2. Meyer v. Kesterson: payment terms left blank, no legal (surveyable) description. held: cash sale enforceable; non-surveyable description sufficient if owner owns only 1 tract that fits, aided by extrinsic ev. with “ascertainable objective facts.”


1. loose v. strict cases

2. other terms--price?

3. kinds of documents covered

problem 4a wilson v prairie
Problem 4A: Wilson v. Prairie

1. the set of pleadings

a. Complaintexhibit A (the “agreement”)

b. answer (and counterclaim)

c. motion to dismiss

d. setting of hearing

2. Statute of Frauds

3. roles assigned

4. types of arguments (based on Meyer v. Kesterson)

5. standard: assume all in petition true; if, under law, no way plaintiff can win, dismissal

6. how to argue motion

a. introduce selves

b. legal standard

c. GET TO POINT--no “learned counsel,” etc.

d. explain why, if as to intelligent lawyer

conditions precedent preconditions
conditions precedent/preconditions
  • inspection conditionsAllen v. Cedar Real Estate

a. K: subject to purchaser’s “approval” of environmental; “satisfaction” std.

b. condition not met, but purch claims K enforceable

c. condition precedent

d. seller’s responsibility to pay, under law; BUT--no K!

2. financing conditionsFrady v. May

a. most land is financed

b. what if condition omitted?

c. usually more detailed

d. why a condition instead of pre-financing?

3. title conditions

a. why agree, if title unsure?

b. methods: “satisfactory” v. “usual” v. “permitted encumbrances”

c. the “free look” concern & how it arises

d. Texas custom: “good” title, plus insurance


1. what is an option?

2. document: term, extension, exercise, full agreement

3. either condition precedent or particular kind of K

4. Beale St. v. Miller: Calvin claims he made repeated attempts to pay but Miller prevented by saying wouldn’t accept. Held, no compliance by tender.

5. Notes

(1) Calvin’s waiver argument: didn’t Miller waive by saying wouldn’t accept?

(2) Statute/Frauds: what if parties orally agree to extend?

(3) strategies re: (a) term, (b) extension, (c) exercise, (d) payments: don’t say “six months” (Why?)

(4) full agreement included


1. three-way deal, with stakeholder

2. attys, title co’s, etc.

3. seller escrows; buyer escrows (earnest $)

Matter of Akivis--escrow to secure seller’s removal, held by atty; no standards in escrow K; held, escrowee has duty of reasonable inquiry, liable for breach


1. caught in the middle (as trustee!)

2. escrowee prefers agreement allowing action on party’s certification

3. earnest $ as escrow

real estate sales agreement
real estate sales agreement

1. “Can you give me big picture?”

2. yes--and no(!)

3. the six elements

4. competing objectives: a. obtain expected benefits, b. reduce/shift risk, c. reduce ambiguous obligations owed, d. clarify & increase obligations received

5. mutual objective: agreement

6. purchaser’s view

7. seller’s view

8. purchaser’s 3-time protection:a. time of agreement, b. period of pendency, c. closing

9. value of knowing traditional and customary solutions

10. universality

sample sales agreement
sample sales agreement

1. parties

2. property

3. price

4. financing

5. earnest $

6. title policy/ survey

7. condition, inspection

8. broker fees

9. closing

10. possession

11. special provisions

12. settlement expenses

13. prorations

14. casualty loss

15. default/remedies

16. mediation

17. attorney’s fees

18. escrow

19. representations (warranties)

20. [tax]

21. notices

22. merger, etc.

23. option

24. consult attorney

merger clauses and extra k liability
merger clauses and extra-K liability

1. the parol evidence rule

2. the policy basis for the rule

3. extent of the rule: inconsistency

4. merger clause: entire agreement

5. fraud: the dilemma

6. compromise solution to dilemma

the types of claims: 1. actual fraud, 2. nondisclosure fraud, 3. innocent misrepresentation (4. strict liab), 5. negligence, 6. consumer laws, 7. warranty, etc.

cases about disputes claims
Cases about Disputes & Claims

Woodlands Land v. Jenkins: actual fraud, note case

1. merger clause, but: “boilerplate,” not sophisticated, not used as dispute resolution

2. Tx. statutory fraud (§ 27.01(a))--a. false rep, b. real estate, c. purpose of inducing, d. reliance

[3. common law fraud: similar]

4. Tx. § 27.01(d)--nondisclosure, actual awareness (not here)

Stambovsky v. Ackley: nondisclosure of ghost reputation that seller created. Held: no damage claim, but equitable recission.

disclosure statutes: specify disclosures req’d, moderate liability

Amylot v. Luchini: erroneous disclosure = negligence liability, not strict liability

consumer legislatn: beyond fraud or warranty

problem 4b damani pravelka renegotiation
Problem 4B: Damani-Pravelka Renegotiation

1. the problem: inadequate agreement

2. how: use document analysis(6 elements), plus this chapter

3. status letter: format, terms

4. renegotiation assignment

a. use all possible negotiation techniques

b. explain them

c. give all offers/counteroffers

d. ethical issues

e. must reach agreement (but tell why you wouldn’t have, if not)

the lending market
The Lending Market

1. Real Estate LendersFNMA; secondary marketS&L crisis of the 1980'sprivate law, FNMA-driven

2. Loan Documentation

  • retail & secondary markets
  • result: negotiation, but uniform nationwide elements
  • public law: e.g., required disclosures; but mostly private law
  • flat-rate & adjustable loans
  • the “credit quartet”: rate, term, amortization, amount
  • core documents: note, deed, mortgage or deed of trust
  • other documents at closing
  • recording

Figure 1Real Estate Finance: A Simplified Diagram






note andmortgage/deed of trust

real estate promissory notes general principles
real estate promissory notes: general principles

(before discussing Moore case)

1. promise (contract) to pay

2. acceleration

3. relation to mortgage

4. deficiency judgments

5. legal limits on deficiency j’s

6. resale:

a. “assumption” (liability on note);

b. “subject to” debt (no liability, although can lose propty)

moore v bank midwest
Moore v. Bank Midwest

1. lenders: Gibraltar, which sold note to Midwest

2. original buyer-borrowers: Moores. Then:

a. “assumption” sale to HSA;

b. HSA’s “subject-to” sale to MGM.

c. “assumption” v. “subject-to”: meaning?

3. MGM abandoned property. But: who’s liable? not MGM! assumption v. subject-to

4. the deficiency statute in this State: limited by FMV, found by jury; prevents windfall

5. customary vs. negotiated provisions: here, “20% of outstanding principal balance,” individually negotiated

6. costs, etc. recoverable; atty fees

7. ambiguity is not desirable!


1. assumption v. subject-to

2. battle of the appraisers

3. what should deficiency statute say if bidding is vigorous?

sample promissory note the document
sample promissory note: the document

1. negotiable instrument (¶’s 1-3)

2. adjustable rate (¶ 4)

3. “caps” (¶ 4(D))

4. right to prepay (¶ 5) v. penalty

5. usury/illegality savings clause (¶ 6)

6. default & remedies (¶ 7): late fee, acceleration, recovery, costs

7. other provisions (¶ 8-10)

8. uniform secured note (¶ 11); relation to mortgage

promissory note ownership
promissory note ownership

1. the note is a contract–and also “property”named payee; or, “bearer”

2. sales of notes; markets

3. evidencing ownership after multiple transfers?: the problem

4. possession as establishing owner

5. the UCC

Cadle Co. v. Errato

1. possession = prima facie proof of

a. ownership

b. rest of case

c. [overcomes defenses–for value, w/out notice]

2. Here, only a copy is in evidence: why is this a problem?

3. Testimony: we bought note in transaction; “if assigned, I’d have been informed”–enough

promissory notes continued holder in due course
promissory notes continued:“holder in due course”

1. special status: overcomes even fraud by earlier holder

2. Why? Marketability!

3. reqmts: for value, good faith, w/out notice of defects, negotiable instrument (signed, unconditional, definite time, payee or bearer)

4. destroying HIDC status: a. “I agree to pay $100; /s/ maker” = no HIDC; why? b. including conditional promises

5. Wilson v. Toussie:

a. “predatory lending” claims

b. claims against original participants and also “current lenders” who bought notes

c. current lenders = HIDC. why?

d. what effect on claims vs. current lenders?

deed components
Deed Components

(see form in previous chapter)

deed descriptions
deed descriptions

1. plats v. metes-and-bounds

2. reference to other landmarks; reservations

3. rules of construction: ambiguities; conflicts

Ferriter v. Bartmess

1. ambiguous reservation

2. the “dance hall” is reserved (aren’t land titles fun)

3. conflict: a. deed says reservatn at SW corner but b. also locates it by road intersection that is not at SW corner!

4. rules/construction: a. liberal construction to effect intent; b. interpret grant favorably to grantee, reservation favorably to grantor; c. rights to center of road; d. avoid extrinsic evidence if unambiguous; e. if conflict, prefer definite & ascertained description

5. here, SW corner prevails--why? (definite & ascertained?)


2-3. The Shady Oaks ambiguousdescription (why is it ambiguous?) What the attorney in Shady Oaks advised doing: nothing(!)

problem 5a sketch plat
Problem 5A: sketch plat

1. the assignment–draw a sketch plat from metes & bounds. Harder than it looks, even if “mechanical.”

2. the point: you have to do this to: a. perceive ambiguities, b. see whether reality conforms to mental picture.

3. tendency to neglect the property description: to assign to most junior lawyer, etc.

4. purpose: how see ambiguities?how resolve?should we neglect the description?

deeds and warranties
deeds and warranties

1. Ohio: a. general warranty, b. limited warranty (also, “special” warranty)--only defects created by grantor, c. quitclaim

2. language: Ohio, other States, our State


1. grantor by SWD who never had title: no recovery on warranty

2. when use SWD?

3. what difference if grant by GWD?

4. suit under warranty is not the preferred method of protection!

5. quitclaim to the moon?

6. when use quitclaim?

7. conveyance w/out warranty

8. what if variance from prescribed or customary language? (wisdom?)

brown v lober
Brown v. Lober

1. general warranty contains 3 covenants: a. of seisin, b. against encumbrances, c. of quiet enjoyment

2. problem: seller sold without excepting 2/3 of minerals, which seller didn’t own.

3. suit on warranty fails, though. Why?

a. covenant of seisin was breached at conveyance (long ago); limitations has run.

b. covenant of quiet enjoyment requires ouster; none, here.


1. how should deed have been written? (write the exception!)

2. what if suit on covenant vs. encumbrances? (probably violated at time of conveyance)

3. up-chain warrantors are liable too–(but limits based on their consideration)

financing documents
financing documents
  • deed as a financing doc: title to mortgage depends on deed; lender usually drafts/approves deed
  • the straight mortgage

1. explicit conveyance to lender; mostly east of Mississippi

2. judicial foreclosure

3. New York approach: protect debtor to time of sale, much less after


Figure 3The Deed of Trust Mortgage



Lender note Buyer-Borrower

Deed of Trust


deed of trust mortgage
deed of trust mortgage

1. historical origin: used straw “trustee” to expedite

2. equity said: it’s still a mortgage

3. use today; “trustee” isn’t a trustee

4. regulation by law

5. trustee’s duties: notice, process, reasonable auctioneer

6. debtors remedies: wrongful foreclosure, injunction, set-aside

deed of trust mortgages dreyfuss v union bank
deed of trust mortgages:Dreyfuss v. Union Bank

1. multiple defaults, modifications, bankruptcies; 2 more properties added

2. foreclosure (at last): bank sequentially sold each property

3. how does the d/t work?

4. why did bank insist on additional security?

5. buyer-borrower’s argumt:

a. 2d & 3d foreclosures were collection of “deficiency” on a “note”

b. so, violated anti-deficiency statute

c. court rejects: why? (nature of a d/t!)


1. power of pvt sale

2. usually, lesser price received

3. tradeoff: private sale, no deficiency

4. bank’s prolonged workout: why?

5. giving a “deed in lieu”: why?

sample deed of trust big picture
sample deed of trust: big picture

1. reading documents; how?

2. fine print matters

3. is there a “big picture”? (yes & no)

4. the “other golden rule”

5. lender’s interest in valid security

6. lender’s interest in payment

7. lender’s interest in protecting

8. lender’s interest in foreclosure and remedies

9. lender’s interest in short duration: due-on-sale clause

10. rights provided to borrower

sample deed of trust notes
sample deed of trust: notes

1. is “conveyance” to trustee really a conveyance? what’s meant by the “power of sale”?

2. default: what remedies, with what requirements?

3. default other than nonpayment: what if borrower removes walls?

4. hazard insurance: why? what if borrower doesn’t obtain? what if destruction by fire?

5. other default: what if maintenance assessment unpaid, and association records lien?

6. foreclosure method? process?

7. substitute trustee: why?

8. other remedies by law (deficiency)

due-on-sale: notes

1. meaning of due-on-sale clause?

2. federal legislation about due-on-sale: in public interest?

the foreclosure process
the foreclosure process

1. Bank-Fund v. Vivado: earlier notice w/amount to cure, but this one, no; sale overturned. [hypertechnical? Vivado had actual notice & made no showing of ability/pay.]

2. Hoffman v. Ameriquest: notice to “Lester” Ave. rather than “Lister”; delivered nevertheless to Hoffman’s box; unclaimed.


1. how exacting must compliance be? Should debtor be required to show harm (i.e., ability & effort to pay)?

2. Mills v. Haggard: no notice to James (who’s dead), but to wife Louise; sale overturned.

3. other irregularities; inadequate price?

4. other processes; reasonable auctioneer

problem 5b damani pravelka foreclosure
Problem 5B: Damani-Pravelka Foreclosure

[1. notice of default & cure; notice of acceleration]

2. appointment of substitute t’ee

3. request to act

[4. notice of sale]

5. affidavit of notice & posting

6. (orally): conduct of the sale--various sub-steps

7. substitute trustee’s deed

equity of redemption
equity of redemption

1. comm l: mtg conveys seisin; absolute deed; repay by law day = defeasance of deed

2. common l vs. equity: competition; “no adequate remedy/law”

3. “equity of redemptn”: petition to set aside deed or reconvey, if mortg pd, even if not in conformty/mortg

4. uncertainty clouded lender’s title

5. equity responded: “strict” foreclosure (=foreclosure of equity/redemp)

6. lender’s effort to prevent equity of redemp; e.g., initial waiver

7. equity responded: “clogging” equity/redemp prohibited

8. today: foreclosure process set by law; instrument can’t avoid, if a mortg

equity of redemption emanuel v bankers trust
equity of redemption: Emanuel v. Bankers Trust

1. Florida’s equity of redemption

a. final judgment of foreclosure (not really “final”)

b. judgment sets date of sale

c. sale by auction

d. [objections; confirmation--not done here]

e. equity/redemp still exists, until

f. cutoff: certificate of sale creates “strict foreclosure”

2. here, judge extended 10 days (because no confirmation?)

3. Why? (trying to be “nice guy”?)

4. extension was illegal: statute is clear; strict foreclosure upon certif.


1. contrast foreclosure “when gavel falls”

2. Is the “gavel-falls” rule better?

wrongful foreclosure hwang v stearns
wrongful foreclosure:Hwang v. Stearns

1. notice posted → damage

2. not in default

a. Stearns evidently miscalculated debt (scary!)

b. arrears of taxes not considered–not in deed of trust; not in notice

3. ct decides std is strict liability, not negligence. why? (a “property” claim)


1. an “honest mistake” exception: should it exist?

2. deed of trust document should cover taxes; why?

liens arising by operation of law
liens arising by operation of law

1. “purchase money” or “vendor’s” lien—direct financing by lienholder (not a loan). Arises automatically.

Chrissikos v. Chrissikos: father paid, directly to seller, for home for son & daughter-in-law.

Notes: a careful real estate lawyer will want the vendor’s lien to be express on the face of the documents. (Why? Public record!)

[2. construction liens (“mechanics”; materialmen’s liens)]

[3. other types]

bad loan bargain or predatory lending
Bad Loan Bargain . . . or . . . Predatory Lending?

- Types

- Solutions (Are there good solutions?)

Possible Disaster:

  • Current loan practices may lead to inability to pay
  • Widespread “walk-aways”
  • Collapse
  • Solutions?
    • Private incentives
    • Regulation of mortg terms
    • Regulation making foreclosure harder (or easier)?
problem 5c pravelka damani assumption sale
Problem 5C: Pravelka-Damani Assumption Sale

1. complete the assumption deed (how differ from non-assumption?)

2. not the subject-to deed (why not?)

3. complete deed of trust to secure assumption: purchasers grant security interest to sellers. Why?

4. preparing the DTSA

5. due diligence w/lender:a. verify balance; b. and nondefault; c. and due on sale; d. obtain “estoppel letter”