Property Law Developments—Joseph William Singer

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.

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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.

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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.

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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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Increasing regulation of transfer fee covenants

Posted on November 24th, 2010 by Joseph William Singer.
Categories: Estates & future interests, Servitudes.

More and more states are passing statutes prohibiting “transfer fee covenants” which purport to require owners of property to pay a portion of the sales price (or a fixed amount) to the original developer whenever the property is sold. Such provisions were held to be unenforceable restraints on alienation in the 1852 New York Court of Appeals case De Peyster v. Michael, 6 N.Y. 467 (1852), a case that is apparently not well known to those peddling these covenants today. De Peyster involved a “quarter sale” clause that required one-fourth of the sale price to go to the heirs of the van Rensselaer family. The court found the arrangement to be a vestige of feudalism akin to quitrents paid to a lord and held that such property relationships had been outlawed in New York by both statute and common law. Recent statutes prohibiting transfer fee covenants (at least prospectively) were passed in Arizona, Minnesota and Utah. 2010 Ariz. Sess. Laws 40; 2010 Minn. Laws 371; Utah Code § 57-1-46.

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Court affirms that restrictive covenants are not enforceable if held in gross

Posted on October 11th, 2010 by Joseph William Singer.
Categories: Servitudes.

A Washington appeals court has affirmed the traditional rule that the benefit of a covenant cannot be held in gross. In Lakewood Racquet Club, Inc. v. Jensen, 232 P.3d 1147 (Wash. Ct. App. 2010), a donor sold 10 acres of land for use as a tennis, swimming, and squash club and prohibited the land from being used for residential purposes without the consent of the grantor or his heirs. But after all the grantor’s remaining land was sold and the grantor died, the owner of the servient estate sought to build single-family homes on the land. When the heirs of the grantor objected, the servient estate owner sued to have the covenant declared void. Although the trial court held for the heirs, enforcing the covenant, the appeals court reversed on the ground the land should be free for development unless restrictive covenants benefit nearby land. It is unclear whether the court would have come to the same conclusion if the restriction were intended to preserve land for environmental purposes and the benefit of the covenant were held by a nonprofit environmental trust.

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Banks stop foreclosures because of flaws in proof of standing

Posted on October 4th, 2010 by Joseph William Singer.
Categories: Mortgages, Statute of frauds.

Three large lenders, GMAC Mortgage, JPMorgan Chase, and Bank of America, have all suspended foreclosures because of irregularities in documents used to proof that they are entitled to foreclose. Various newspaper articles have talked about “technical” problems or “paperwork” problems but the real issue is that banks have obligations to prove they “own” the mortgage and have a right to foreclose, at least in states that require court proceedings for foreclosure. The problem is that many lenders did not keep accurate written records of all the assignments of these mortgages.

The statute of frauds in every state requires mortgages to be in writing and some states require them to be recorded. In lieu of providing a paper trail, some lenders have provided courts with affidavits that swear that the signing party has seen proof that the lender owns the mortgage and is entitled to foreclose. But some of the affiants now admit that they “signed” hundreds or thousands of affidavits a day, obviously with no knowledge of the underlying facts. If this is true, it is a fraud on the court and may have resulted in foreclosures when the bank was not legally entitled to foreclose. In addition, notaries often approved signed affidavits even though they did not witness the signatures as required by law.

Attorneys General in several states are now investigating these practices to see if they violate state consumer protection or property laws or if they are actionable violations of court rules. See article.

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Federal judge denies summary judgment in case alleging town interference in granting permits for housing for homeless persons

Posted on September 28th, 2010 by Joseph William Singer.
Categories: Fair Housing Act.

South Middlesex Opportunity Council, Inc. v. Town of Framingham, 2010 WL 3607481 (D. Mass. 2010).

In this case, Judge Douglas Woodlock allowed a suit to proceed against a town and individual members of the town meeting, the board of selectmen and the town planning board in both their individual and official capacities alleging that defendants violated the Fair Housing Act by blocking plaintiff non-profit organizations from obtaining necessary approvals to establish housing to provide residential treatment and support to homeless and at-risk families, some of which were undergoing substance abuse rehabilitation and some of which may have had criminal histories. The court found that the town had repeatedly delayed in issuing permits and created other procedural hurdles and that evidence supported the allegation that the town did so for discriminatory reasons. The court found evidence of discriminatory statements by individual defendants and evidence of disparate treatment of similarly situated projects by the town. The court found sufficient evidence that could justify a finding that the town interfered with the plaintiff’s housing project in violation of §3617 of the Fair Housing Act. Finally, the court found that the defendants’ proffered justifications for their conduct were sufficient to send the question to the jury of whether the town had legitimate nondiscriminatory reasons for its actions but that the town’s evidence was not sufficient to conclude decisively that the town acted for nondiscriminatory reasons. The court found some of the proffered justifications to be illegitimate and others to be pretextual.

Following the summary judgment denial, the town settled with the plaintiffs for $1 million, although refusing to acknowledge any wrongdoing. Read article.

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New Massachusetts law protects rent-paying tenants from being evicted from foreclosed property

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

Assuming Governor Deval Patrick signs the law, the Massachusetts legislature just passed a statute called “An Act to Stabilize Neighborhoods” that protects tenants from being evicted from property after foreclosure as long as they are paying the rent. Tenants can be evicted if the property is being sold to a third party, but if the lender buys the property at foreclosure, it must continue renting to the tenant–and complying the landlord’s obligations under state law to provide habitable housing. The law also requires lenders to have at least one meeting with the defaulting borrower to try to work in good faith to negotiate a new arrangement; this must happen before the bank forecloses on the property. If the lender does not do this, it must wait an extra two months before beginning foreclosure proceedings.  The bill also criminalizes mortgage fraud. read article

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Federal Judge rejects DOMA’s denial of federal recognition of same-sex marriages valid in the states

Posted on July 26th, 2010 by Joseph William Singer.
Categories: Marital property, Sexual orientation.

Judge Joseph L. Tauro of the District Court of Massachusetts ruled that the federal Defense of Marriage Act (DOMA) violates the constitution by prohibiting the federal government from recognizing same-sex marriages that are valid under state law. In one opinion, he ruled that the law violates the Tenth Amendment by intruding on areas reserved to the states, noting that family law (including the law of marriage) has traditionally been regulated by state law and not federal law. Commonwealth v. U.S. Dept. of Health and Human Services, 2010 WL 2695668 (D. Mass. 2010).  In a separate opinion, he ruled that DOMA violates the equal protection clause because the government could not provide any rational basis for failing to recognize same-sex marriages. Gill v. Office of Personnel Management, 2010 WL 2695652 (D. Mass. 2010). read article

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Argentina & Iceland approve same-sex marriages

Posted on July 26th, 2010 by Joseph William Singer.
Categories: Marital property, Sexual orientation.

On July 15, 2010, the Argentine Senate voted to approve same-sex marriages, adding its voice to a similar bill approved in May by the lower house. Because President Cristina Fernandez de Kirchner supports the bill, it will become the law. The Parliament in Iceland unanimously approved a similar bill (by a vote of 49-0) on June 12. Argentina and Iceland join the Netherlands, Belgium, Spain, Canada, South Africa, Norway, Sweden, and Portugal in providing full marriage rights for same sex-couples in addition to the states of Massachusetts, Iowa, Connecticut, Vermont, New Hampshire and the District of Columbia, although these state-law based marriages are not recognized by the federal government in the United States because of federal Defense of Marriage Act. read article

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Florida beach renewal program not a taking; Supreme Court fails to resolve judicial takings issue

Posted on July 5th, 2010 by Joseph William Singer.
Categories: Takings.

In Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, 130 S.Ct. 483, 175 L.Ed.2d 305, 2009 U.S. LEXIS 7593, 2010 WL 2400086 (June 17, 2010), the Supreme Court held that the Florida Supreme Court did not effect an unconstitutional taking of property when it held that a state-funded beach renewal project did not take property rights in violation of the state constitution’s takings clause. The state had funded beach renewal projects to deposit new sand on eroded beaches; once that occurred, the statute set a fixed boundary between public rights in the restored lands and private property rights in the upland; that fixed line was placed where the mean-high tide line had been prior to the restoration project.

The Court unanimously held (8-0, with Justice Stevens not participating) that the Florida statutory program as interpreted by the Florida Supreme Court did not constitute a taking of of any property rights of littoral (beach-front) owners. Prior Florida case law affirmed the power of the state to fill in the seabed that it owned; it also provided for no change in the boundary between private property rights of littoral owners and public rights in the seabed when littoral land increased suddenly because of a natural event (called avulsion). Florida common law did allow the boundary to change if the mean high-water line shifted gradually by accretion (slow addition to littoral land by deposit of new natural material) or reliction (slow addition to littoral  land by natural receding of the water).

The Supreme Court held that the Florida beach replenishment program was merely an enactment of these principles. There was no precedent for the proposition that avulsion does not change the boundary line merely because the state was responsible for the avulsion through a publicly-administered beach restoration project. Nor did the statute take away littoral owners’ rights to accretion since any slow accretions to land created by avulsion would belong to the state as owner of the avulsive land.

Four Justices (Alito, Roberts, Scalia, Thomas) would have held that state courts can effect takings of property through interpretation of state common law or statutes while four Justices (Breyer, Ginsburg, Kennedy, and Sotomayor) found it unnecessary to reach that issue because under any version of a test that might be adopted, no such taking occurred in this case. Justice Scalia responded, in the plurality opinion, that one could not find that no taking occurred without identifying some test for what constitutes a judicial taking. Justice Kennedy wrote a separate opinion, joined by Justice Sotomayor, arguing that any judicial deprivations of property rights should be handled by the due process clause rather than the takings clause.

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