Texas courts allow fraud claims in real estate transactions despite a non-reliance clause

Posted on May 4th, 2011 by Joseph William Singer.
Categories: Leaseholds, Real estate transactions, Statute of frauds.

The states disagree about whether parties to real estate transactions can sue each other for fraud when the contract of sale contains a “non-reliance clause” stating that neither party is relying on any representations made by the other party that are not included in the written contract. Some states allow such claims on the ground that “fraud vitiates consent” and such clauses do not amount to agreements to be defrauded. But other states hold that such clauses immunize the contracting parties from claims of fraud based on oral statements made prior to the deal. The Texas Supreme Court has waffled on this issue, first holding that contracts can be avoided on the ground of fraudulent inducement, Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990), and then ruling that the sophisticated parties are free to bargain around this rule by non-reliance clauses, Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997). See also Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008). However, the court clarified in Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 2011 Tex. LEXIS 291 (Tex. 2010), that  a non-reliance clause in a real estate contract will not immunize a real estate seller from liability for fraud if it contains a “standard merger clause” which recites that no representations were made other than those in the contract. Only if the clause states that the buyer is not relying on oral statements made by the seller would the buyer be foreclosed from suing for damages for fraud or to rescind the agreement because of fraud. Another way to waive the right to sue for fraud is to do so directly by a clear statement waiving the right to sue for fraudulent inducement.

In this case, the court allowed tenants to rescind a restaurant lease and recover damages when the landlord lied about the condition of the premises which were afflicted with persistent sewer gas odor.

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Supreme Court holds that Congress did not authorize damages judgments against state or municipal officials for violations of RLUIPA

Posted on May 4th, 2011 by Joseph William Singer.
Categories: Fair Housing Act, Zoning.

The Supreme Court ruled in Sossamon v. Texas, 2011 U.S. LEXIS 3187 (U.S. 2011), that Congress did not waive the sovereign immunity of the United States when it passed the Religious Land Use and Institutionalized Persons Act (RLUIPA). This means that the only relief available against federal officials for violating the statutorily protected religious freedom rights of federal prisoners is prospective injunctive relief; no damages can be awarded for federal violations of the act. A similar result would apply to land owners whose land use rights are violated by federal officials. The case, however, was not against federal office but state prison officials in a state that accepted federal money to fund its prisons. The precise holding in the case was that prisoners cannot sue such states for damages when those states deprive inmates in state prisons of religious free exercise rights. A similar result could be expected for claims for damages against states and municipalities; such relief appears now to be foreclosed. Of course, states are free to waive their sovereign immunity by clear legislation if they wish to do so.

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Massachusetts Supreme Judicial Court requires lawyers for the lender to be present and active at real estate closings

Posted on April 26th, 2011 by Joseph William Singer.
Categories: Mortgages.

In answer to two certified questions from the First Circuit the Massachusetts high court has ruled that Massachusetts law requires the presence and substantive participation by a lawyer on behalf of the mortgage lender but that routine title examination does not constitute the unauthorized practice of law. The case is Real Estate Bar Assn for Mass. Inc. (REBA) v. National Real Estate Information Services (NREIS), 2011 Mass. LEXIS 244 (Mass. 2011).

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No foreclosure if notice does not include the name of the lender

Posted on April 25th, 2011 by Joseph William Singer.
Categories: Mortgages, Statute of frauds.

A New Jersey trial court has interpreted a state statute, N.J. Stat.. §2A:50-56,  to require mortgage foreclosure notices to include the name of the lender (the current holder of the mortgage) as well as contact information. Because a notice included only the name of the mortgage servicer, the court dismissed the foreclosure complaint. read article

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Tenant allowed to keep emotional support dog

Posted on April 25th, 2011 by Joseph William Singer.
Categories: Fair Housing Act, Leaseholds.

A tenant with AIDS and related illnesses won $25,000 in emotional distress damages from his landlord for refusing to make an exception to a no-pets policy to allow the tenant to live with his emotional support dog. The Massachusetts Commission Against Discrimination made the award and ordered the landlord to allow the dog as a reasonable accommodation to his disability which included depression and anxiety. The landlord was also fined $5,000. read article

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Banks charged with failing to maintain foreclosed properties

Posted on April 15th, 2011 by Joseph William Singer.
Categories: Mortgages, Nuisance, Zoning.

When banks foreclose on property and then purchase the property at the foreclosure sale, they become the new owners of the property. They would like to resell the property as soon as possible. But in a recession, that is not always possible and when banks retain title to those foreclosed properties, they are subject to local law regulations to maintain the property and ensure that it does not become dilapidated. But many banks have been failing in that regard. They are in the business of financing the sale of property not in managing it. That has prompted the City of Boston to impose more than $80,000 in fines on Wells Fargo & Co and Bank of America for allowing many vacant properties in their possession ‘to fall into disrepair and blight neighborhoods.” Megan Woolhouse, Banks high on list of delinquent property owners, Boston Globe, Apr. 15, 2011.

Bank officials deny they own some of the properties, sometimes on the ground that they are merely the loan servicer or the trustee for securitized mortgages. This illustrates a problem with the securitization process and the practice of not recording the name of the bank that actually “owns” the mortgage. The city is using public records to contact the owner of record; if that institution is not the one who is the real owner, the fault lies not in the city but the failure of the banks to follow the requirements of the state recording laws which are designed to allow public identification of those with property interests in each parcel of real estate in the city.

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Alabama judge denies foreclosure of securitized mortgage for failure to comply with the formalities of loan transfers

Posted on April 6th, 2011 by Joseph William Singer.
Categories: Mortgages, Real estate transactions.

An Alabama judge refused to allow a trustee to foreclose on a mortgage that had been made part of a securitized package of loans because there was no signed endorsement on the note (the contract creating the original loan) when the mortgage was transferred to the trust that held the securitized mortgages. Because the parties did not strictly adhere to the writing requirement in the state version of the UCC (Uniform Commercial Code) — a particularized version of the statute of frauds — the transfer of the mortgage never occurred and the trustee has no power to foreclose. Nor did the trustee have the rights of a “holder” of the note under the UCC because it did not acquire the note in a manner that complied with the rules in its foundational documents. In effect the party bringing the foreclosure action could not show that it had acquired the right to foreclose through properly executed documents evidencing the transfers of the mortgage from the original lender down the chain of title. see article

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Owner may not cut down a tree straddling boundary line without neighbor’s consent

Posted on March 20th, 2011 by Joseph William Singer.
Categories: Nuisance, Trespass.

In Young v. Ledford, 37 So. 3d 832 (Ala. Ct. Civ. App. 2009), an Alabama court held that an owner could not remove the half of a tree that sat on his property without killing it and that the owner could not destroy the entire tree without the neighbor’s consent. The landowner claimed that the tree was dangerous and might fall on the owner’s house and the court noted that it is possible an exception might be granted in such cases of boundary trees when they constitute a nuisance.

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Bank not liable for fraud when it loaned money it knew the borrower could not repay

Posted on March 20th, 2011 by Joseph William Singer.
Categories: Consumer protection, Mortgages.

In Perlas v. GMAC Mortgage, 113 Cal. Rptr. 3d 790 (Ct. App. 2010), a bank made $417,000 worth of loans to borrowers with a gross income of only $50,000. Although that income was inadequate to make the mortgage payments, and the bank found that the borrower “qualified” for the loan, the court held that the bank did not engage in fraud. Qualification, the judge noted, does not imply affordability and the bank had no duty to the borrower to disclose the fact that the borrowers could not afford to make the loan payments. Contract this case with Commonwealth v. Fremont, 897 N.E.2d 548 (Mass. 2008) which held that granting such a loan might constitute an “unfair” practice in violation of the state consumer protection statute.

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Hawaii approves civil unions

Posted on February 24th, 2011 by Joseph William Singer.
Categories: Marital property, Sexual orientation.

On February 23, 2011, Governor Neil Abercrombie signed a bill allowing same sex couples to enter civil unions with same rights and privileges under state law as married couples. read article

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Native Alaskan family awarded $4.9 million in damages for trespass

Posted on February 17th, 2011 by Joseph William Singer.
Categories: Trespass, Tribal property.

A federal judge awarded the Oenga family of Barrow, Alaska $4.9 million dollars in damages against the United States because the Bureau of Indian Affairs (BIA) authorized BP oil company to cross the Oenga’s property to obtain access to 3 of BP’s oil fields when the family had only granted permission for access to one of those fields. Judge Awards Alaskan family $5M (U.S. News, Feb. 9, 2001)

While the case is, in some sense, an ordinary trespass case, it is complicated by the fact that the BIA has legally-enforceable fiduciary obligations to protect the property rights of Native Alaskans. The Oengas are Inupiats (Eskimos).

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Another court refuses to allow a bank to foreclose when it cannot produce authenticated proof of the assignments of the mortgage that give it a right to foreclose

Posted on February 11th, 2011 by Joseph William Singer.
Categories: Mortgages, Statute of frauds.

In the case of Wells Fargo Bank, N.A. v. Ford, 2011 N.J. Super. LEXIS 13 (N.J. Super. Ct. App. Div. 2011), the court remanded to allow the bank to provide proof that it had a right to foreclose through authenticated writings proving that it was assigned the mortgage and note by the prior holder of the mortgage and that it had the right to foreclose at the time the foreclosure action was brought.

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No taking of property without just compensation when property of an innocent owner is damaged from a lawful police search

Posted on February 11th, 2011 by Joseph William Singer.
Categories: Takings.

In conformity with the rule prevailing in most states, a New Jersey trial court held that an innocent owner whose property was damaged as a result of a lawful police search has no right to compensation under the takings clause. Simmons v. Loose, 2011 N.J. Super. LEXIS 16 (2011).

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Illinois approves civil unions for same sex couples

Posted on February 8th, 2011 by Joseph William Singer.
Categories: Antidiscrimination law, Marital property, Sexual orientation.

Illinois joins the states like California and New Jersey that have authorized civil unions for same sex couples. read article Monica Davey,Civil Unions Advance in Illinois, N.Y. Times (Dec. 1, 2010).

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A New Jersey trial judge allows foreclosure to proceed even though the bank cannot produce the mortgage note

Posted on February 3rd, 2011 by Joseph William Singer.
Categories: Mortgages, Statute of frauds.

A bank lost the mortgage note and thus could not pass it along when it assigned the mortgage to the Bank of America, preventing the Bank of America from producing the note to prove that it had the right to foreclose on the property. The loan in question had been securitized and transferred from the original mortgagee, Washington Mutual Bank, to LaSalle Bank (the holder of the securitized and pooled loans) which was then acquired by Bank of America. Because Bank of America could show evidence of the assignment (but not written proof of the original mortgage), the trial court allowed it to foreclose on the ground that the mortgagor/homeowner would otherwise be unjustly enriched. In effect, the court used equitable principles to create an exception to the applicable statute of frauds which requiring a writing for the mortgage to be enforceable via foreclosure. The case is Bank of America, N.A. v. Alvarado, (N. J. Ch. Ct. 2011). See Mary Pat Gallagher, Judge Finds Equity Allows Foreclosure to Proceed Though Mortgage Note Lost, 203 N.J. L.J. 1 (Jan 24, 2011).

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Invalid foreclosure cannot be cured by quiet title action

Posted on February 2nd, 2011 by Joseph William Singer.
Categories: Mortgages, Real estate transactions, Title issues.

In the case of Bevilacqua v. Rodriguez, 2010 WL 3351481 (Mass. Land Ct. 2010), the court held that parties cannot cure an invalid foreclosure by a quiet title action.The bank that brought the foreclosure action had no proof at the time of the foreclosure that it owned the mortgage (the right to foreclose) because it had no written assignment from the prior mortgagee. For that reason, the foreclosure was invalid under the rule adopted by the Supreme Judicial Court of the Commonwealth of Massachusetts in U.S. Bank National Ass’n v. Ibañez, 458 Mass. 637 (2011). Ibañez held that foreclosures are invalid if the mortgagee bringing the foreclosure action cannot (at the time the foreclosure action) produce a written document proving that it was assigned the benefit of the mortgage from the prior mortgage holder. Thus when the bank sought a declaratory judgment that the foreclosure was valid, the court rejected its claim. That meant that a subsequent purchase of the property by a third party did not convey good title to the third party. Bevilacqua restates the Ibañez rule but goes further and holds that the third party cannot bring a quiet title action to seek a judgment that it has title to the property. Because it has a quitclaim deed from a seller who has no valid title, it cannot legitimately argue a basis for a quiet title action, leaving title with the party who held it prior to the invalid foreclosure.

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Vested right to mine protected despite change in local zoning law

Posted on January 26th, 2011 by Joseph William Singer.
Categories: Takings, Zoning.

The New York Court of Appeals affirmed the usual rule that an owner may have a “vested right” to engage in activity on land if the owner invests substantially in reliance on existing law even if the use has not commenced before the zoning law is changed to prohibit the previously lawful use. In this case, Glacial Aggregates LLC v. Town of Yorkshire, 924 N.E. 2d 127 (N.Y. 2010), the owner had invested $500,000 in mitigation measures to secure a mining permit and had received the permit; when the town amended its zoning law to classify mining as a use needing a special permit and then refused to issue the permit, the Court of Appeals had little trouble in finding the $500,000 investment, when coupled with the permit grant, to be sufficient to give the owner a vested right to engage in the mining activity. The case is interesting because no mining had yet occurred and all expenditures were undertaken to get the permit itself; in the usual case, a vested right is not found until the owner begins investing in creating the use–for example by beginning to build a structure. Here the initial expenditures were both necessary and expected and of such a magnitude that the new prohibitory law could not be imposed retroactively.

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Court finds credit card interest rate above 18% to be unconscionable

Posted on January 26th, 2011 by Joseph William Singer.
Categories: Mortgages.

A trial judge in Massachusetts has ruled in Citibank (South Dakota) v. DeCristoforo, (Mass. Super. Ct. 2011), 39 Mass. Lawyers Weekly 1 (Jan. 19, 2011), that a South Dakota based credit card company’s interest rates above 18 percent charged to a defaulting credit card borrower in Massachusetts were unconscionable. The judge applied Massachusetts common law to protect the borrower from interest rates deemed to be onerous even though the bank that issued the credit card was located in another state whose law would have allowed the interest rate. The contract presumably contained a choice-of-law clause for South Dakota law and if such a clause were in the contract, the judge overrode it in deciding to apply Massachusetts law to protect a Massachusetts domiciliary. The case is of interest because it may be used as precedent in subprime mortgage case involving borrowing from out-of-state banks.

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No compensation when city takes private sewer system

Posted on January 26th, 2011 by Joseph William Singer.
Categories: Takings.

A court in Massachusetts has held that no compensation is due when a city takes a private sewer system. North Adams Apartments, L.P. v. City of North Adams, 2011 Mass. App. LEXIS 41 (App. Ct. 2011). The court held that the transfer of title from the private owner to the city caused the owner no pecuniary loss; indeed, it benefited the owner by transferring maintenance obligations from the owner to the city. The court also noted that developers frequently created sewer hook-ups and then voluntarily (and without compensation) sought to transfer title to the municipality. Although one might think that loss of control of the sewer connections would constitute a property loss, the court’s factual finding was that there was no reduction in fair market value of the property and no economic value to the land owner in retaining ownership of the sewer connections.

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Private road act authorizing an easement by necessity across neighboring land deemed a taking of property and a violation of the public use requirement

Posted on January 14th, 2011 by Joseph William Singer.
Categories: Servitudes, Takings.

The Pennsylvania Supreme Court ruled, in In re Opening Private Road ex rel. O’Reilly, 5 A.3d 246 (Pa. 2010), that a statute authorizing an owner to construct a road across neighboring property to get to a public road effected an unconstitutional taking of property. Read minority opinion. The court distinguished the common law doctrine of easement by necessity that grants owners rights of way by necessity over remaining land of a common grantor, finding that doctrine to be constitutional. The court further ruled that such a taking was for a private purpose unless the predominant beneficiary of the taking would be the public.

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New Jersey Supreme Court may stop all foreclosures in the state

Posted on December 21st, 2010 by Joseph William Singer.
Categories: Mortgages, Statute of frauds.

The Supreme Court of New Jersey has issued an order setting a hearing for January 19, 2011, asking all mortgage loan servicers in the state to explain why the state should not stop all foreclosures for irregularities. A lower court judge had issued a more limited administrative order involving loan servicers who had filed more than 200 foreclosure actions in 2010. The Supreme Court is concerned about recent disclosure of serious flaws in recent foreclosures, especially since most foreclosures in the state are uncontested.

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United States supports the U.N. Declaration on the Rights of Indigenous Peoples

Posted on December 17th, 2010 by Joseph William Singer.
Categories: Tribal property.

President Barack Obama announced on December 16, 2010 that the United States would join more than 140 other countries in supporting the United Nations Declaration on the Rights of Indigenous Peoples. That Declaration supports the rights of indigenous peoples to protection of their property, cultures, and religious traditions, as well as guaranteeing self-determination. A detailed statement explaining U.S. support for the Declaration is available here.

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Google trespass on private road to photograph home garners $1 in damages

Posted on December 3rd, 2010 by Joseph William Singer.
Categories: Trespass.

A couple complained about the intrusion on their private road by a Google vehicle that photographed their home for Google Streetview. All claims for invasion of privacy and mental distress were dismissed but the trespass claim remained. The Third Circuit held, in Boring v. Google Inc., 362 Fed. Appx. 273 (3d Cir. 2010), that the owners were entitle to nominal damages but not punitive damages, creating a contrast with the well-known case of Jacque v. Steenberg Homes, Inc., 563 N.W.2d 154 (Wis. 1997), which awarded $100,000 in damages for a willful trespass. On remand from the Third Circuit, the trial court signed off on a settlement giving the Borings $1 in damages for trespass. read article

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US Supreme Court takes cert in tribal tax foreclosure case

Posted on December 3rd, 2010 by Joseph William Singer.
Categories: Tribal property.

In City of Sherrill v. Oneida Indian Nation of New York, 544 U.S. 197 (2005), the Supreme Court ruled that too much time had passed for the Oneida Indian Nation to assert sovereignty over land that was illegally taken from it by the state of New York in the early 19th century. Although the transfer of title from the tribe to the state violated the federal Trade and Intercourse Act, 25 U.S.C. §177, and thus was of no validity whatsoever and although no federal or state statute of limitations barred the tribe’s property claim against the state, the doctrine of laches was applied to deny the tribe sovereign powers over land it had repurchased from a non-Indian owner even though that land had been within its original reservation and those lands had never been taken by the United States – the only sovereign with the power to extinguish tribal title to the land. As a result, although the tribe had reunited title and possession by purchasing the land, the Supreme Court held the land to be subject to state property taxation.

When the tribe refused to pay property taxes on its land, two N.Y. counties brought tax foreclosure actions against the tribe and its lands. The Second Circuit ruled, in Oneida Indian Nation of New York v. Madison and Oneida County, 2010 WL 1659452, that the tribe’s sovereign immunity barred the lawsuit, making it impossible for the counties affirmatively to enforce their right to collect the taxes. The court did not mention an alternative ground for denying the foreclosure action: the Trade and Intercourse Act prohibits any transfer of title to tribal land without the consent of the United States. There is some doubt about whether the Act applies to land held in fee simple but the District Court in the Oneida case held that it did and was an alternative ground for denying the counties the power to proceed with the tax foreclosure case. See Oneida Indian Nation v. Oneida County, 432 F.Supp.2d 285, 292 (N.D.N.Y. 2006).

The Supreme Court took certiorari in the case, Madison County, N.Y. v. Oneida Indian Nation of New York, 2010 WL 2753782, 79 USLW 3062, 79 USLW 3220, 79 USLW 3226 (U.S. Oct 12, 2010), and federal Indian law specialists fear that the Court may choose an alternative ground to overrule the Court of Appeals decision. The Court may find the Oneida reservation to have been implicitly diminished even though no treaty or Act of Congress has formally taken those lands out of the reservation borders. In general, Congress must act explicitly to alter the borders of Indian country especially in a case like this in which Congress never ratified the arrangements by which New York took over Oneida lands.

On Nov 30, 2010, the Oneida Indian Nation wrote to the Supreme Court to announce that the tribe had formally waived sovereign immunity with regard to claims against it for unpaid property taxes. It did not waive other defenses it might have, especially its claims that the taxes were not authorized by state law.

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No standing to foreclose without proof of physical possession of the note at the time the foreclosure claim was brought

Posted on November 30th, 2010 by Joseph William Singer.
Categories: Mortgages.

A New Jersey trial court has held that a lender cannot bring a foreclosure action unless it can prove standing to sue. That requires proof that it owns the note and the mortgage giving it the power to foreclose on the property to pay off the debt evidenced by the note. Physical possession of the note is requried at the time the foreclosure action is filed; possession at the time of appeal was not sufficient to allow the foreclosure to go forward. Bank of New York v. Raftogianis, F-7356-09 (N.J. Super. Ct. Ch. Div. 2010).

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