Property Class Notes 3/30/04


Concurrent ownership


A lot of the cases on future interests involved concurrent ownership too.  So far, we have seen a lot of ways of dividing up title to land.  One obvious way is to divide it up geographically.  Another is to divide it up by time.  But now we’re going to divide it up just in title.  This isn’t the most difficult thing we’ll do, but it is in some sense the most “metaphysical”.  Two people own the same thing, and also have the right to possess the same thing at the same time.  When we talk about co-tenants, all of the owners have the right to possess at the same time…but that’s physically impossible!  This “metaphysical” concept lends itself to litigation.


There are four main forms of concurrent ownership:


1.     Partnership (we can find out about this in Business Associations) – This is the principal way that we would have co-ownership in a business setting.

2.     Tenancy in common – The modern presumption is in favor of this form.  “To A and B” makes A and B tenants in common.  This reverses an earlier presumption in favor of the joint tenancy.  The tenants own undivided shares: none of them have the right to any particular part of the property.  All of them have the right to possess the whole.  Their shares are freely alienable.

3.     Joint tenancy – This differs from the tenancy in common in many respects.  This is like the tenancy in common in that both parties have the right to possess the whole thing all the time.  But it differs from a tenancy in common in that you must use specific language in order to create it (the presumption is against it).  It also differs in that there are four “unities” that must exist in order for joint tenancy to exist: (1) time, (2) title, (3) interest, and (4) possession.  The interest must be acquired at the same time from the same instrument, they both must have the right to possess the whole, and in addition, the joint tenancy must be proportionate (like each of eight people must have an eighth interest in the tenancy).  If you have all this and use the right language, then you get the most important attribute of the joint tenancy, which is the right of survivorship.  When one of the joint tenants dies, the other becomes the owner of the entire property by operation of law before the decedent tenant’s will can take effect.

4.     Tenancy by the entirety – This is recognized in maybe 20-25 states.  It is no longer recognized in Ohio, though it was recognized until 1986.  There is a fifth “unity” required for this one: the parties must be husband and wife.  For this tenancy to come into being and continue to exist, the parties must be married.  If you have a tenancy by the entirety, it is much like the joint tenancy in that there is a right of survivorship (when the husband dies, the wife becomes the owner of the whole property).  It is better than the joint tenancy, at least in theory, in that the property that is held in tenancy by the entireties is not liable for the debts of just one of the spouses.  What’s the policy here?  It may be to promote marriage and families by protecting one spouse from the debts incurred by the other spouse.


Chosar Corporation v. Owens


Here we have about 90 heirs who are all co-tenants of a 61 acre tract in Virginia.  85% of the tenants enter into a lease transferring to Chosar the rights to mine the coal.  The coal is a couple hundred feet deep and the company seems to have to go through an adjoining tract of land to get at the coal.  So Chosar gets the right to mine this property and they also purchase the right to haul the coal through another tract.


Why are the 15% complaining?  Maybe it’s the price Chosar is paying (8%) versus the subleased right to mine for 14%.  In any case, the 85% are free to transfer their interests, but only their interests.  Chosar is now a tenant in common, at least as far as the mineral rights go, with the 15%.  What can Chosar do with the coal?  Not much…they can’t mine the coal without the consent of 100%.  They’re just a tenant in common!  They have the right to possess the whole, but they don’t have the right to commit waste.  We have seen this before in cases where there was communally owned property.  Recall life tenants and remaindermen.  In Woodrick v. Wood, the court says that the right to possess does not carry with it the right to commit waste.  In the present case, the court says that removing a portion of the property without the permission of the co-tenants constitutes waste.


We have this law of waste for the same reason that we had it in estates and future interests.  There is an incentive to screw over your co-tenants.  The law steps in to prevent some co-tenants from consuming as much as they can in as short a time as possible.


The co-tenant who is deprived of their right to possession has two possible claims: they could ask for an accounting, or ask for damages based on their “ouster”.  In the case of an accounting, each co-tenant would get a share of the proceeds actually received by the other co-tenants.  If they sue for damages for ouster, they are entitled to the fair market value of the property.  For example, maybe the fair market rental value of the coal rights was higher than what was actually paid.  This is an important remedy for recovering for what has happened in the past.  But how do you prevent this from happening in the future?


Let’s say a brother and sister inherit 40 acres of land jointly, but they can’t get along.  What do you do?  You can get a judge to partition the land!  You can split the tenancy in common into shares, thereby getting rid of the “common pool” problem by converting communal property into separately owned property.  That assumes that the property can be split more or less evenly.  But what if you inherit a house instead of 40 acres?  It would be like a “War of the Roses”-type situation.  You could sell the house and split the money if you want.  You have it appraised, you establish a minimum value, you auction it off, and you divide the proceeds.


Why can’t we partition in this case?  There is a statute that is interpreted to say that property located where this property is cannot be partitioned.  This isn’t a positive mandate of a statute; it’s a “negative implication”.  What we’re left with is a situation where the mineral rights to this land will simply not be developed.  The parties are in deadlock, and there is no escape.  This is a very unusual situation.  If we agree that mining coal or majority rule is a good thing, you’ll never be able to accomplish those purposes as long as there is one holdout.  And there is always an incentive to be the holdout.  If 89 tenants agree and one holds out, that last one is in an excellent bargaining position.


Braunstein agrees that mining the coal is waste.  But the main problem he sees here is that you can’t partition.


What about the trespass claim?  Did the majority or the dissent have the better argument here?  The majority simply states that this is a trespass because it’s an exclusion of the non-consenting owners.  But the dissent argues that every co-tenant has the right to travel on its own property.  As a matter of law, no co-tenant may exclude another: that would constitute ouster.  And we all agree that mining will constitute waste without the consent of all the co-tenants (the usual solution here being partition).  But this goes further: the use of the subterranean tunnel is said to constitute ouster.  All the co-tenants have the right to possess, and this right is transferable!  So as long as the non-consenting co-tenants aren’t excluded, the consenting co-tenants are simply exercising the right to possession that all co-tenants have!


The horse farm problem


Ms. Lupton wants to provide for her nieces and nephews, but she also wants to keep horses on the farm.  Could she retain the possibility of reverter in the case that the property is no longer used as a horse farm?  Can the property be held in trust?  Can she prohibit the partition of the land?  You can limit the right to partition for some reasonable time for some reasonable purpose, but you can’t create an absolute ban on partition for all time.  We want property used in its most productive form.


What about the trust?  How long can you have a trust set up for?  You’re limited by the Rule Against Perpetuities.  The property must go somewhere after the nieces and nephews die.  You can’t tie it up as a horse farm forever!  At some point, someone will get the fee simple and the trust will end, or else the trust will violate the Rule Against Perpetuities.


What about in Ohio where you can use a trust to avoid the Rule Against Perpetuities forever?  Remember this?


O.R.C. § 2131.09 says if you create a trust with a trustee who can create a fee simple absolute in Ohio, then the Rule Against Perpetuities doesn’t apply.  Now it’s possible if you just create equitable interests and if the trustee or trust property is domiciled in Ohio and you comply with all the formalities of the statute, then you can set up a trust that will exist perpetually.  You can basically create a fee tail again!  Wacky!  What this statute does is address one problem: free alienability of land.  We have solved that problem because the trustee must be empowered to convey a fee simple absolute.  That’s fine.  But what the statute doesn’t address in a way Braunstein likes is dead hand control.  If it’s your property, you can now tie it up essentially forever.


How does this old lady know what a productive use of the land will be in 90 years?  Maybe she could give the possibility of reverter to some kind of charitable organization that shares her goals.


But most co-tenancies can be partitioned easily and are not a good way to make sure land is used a certain way into the future.


Let’s say a wife acquired interest in some property before she got married.  Can she transfer that interest to herself and her husband?  No!  There is no unity of time or title!  She acquired the property at a different time and with a different instrument.  But all she needs to do is convey the interest to a “straw”, like your attorney or something, and then have them transfer it back to you.  The need for this has been eliminated by statute in some states, but this is still the safest way to create joint tenancy.


The main attribute of joint tenancy is the right of survivorship.  What does severance mean in this context?  What do we mean by severing the joint tenancy?  We’re talking about “cutting off” the right of survivorship, which converts the joint tenancy into a tenancy in common.  How do you sever a joint tenancy?  You can sell your interest.


For example, start with this gift: “To A and B as joint tenants with right of survivorship.”  A conveys her interest to C.  B dies, leaving all his property to D.  Who owns what interests?  When A conveys her interest to C, the right of survivorship is severed, and this becomes a tenancy in common between B and C.  They are not joint tenants because unities of time and tenant are missing.  Now B dies and leaves everything to his wife, D.  Now there is a tenancy in common between C and D.  However, what if we got rid of the sale from A to C?  Who would own what?  A would have everything and D would have nothing.  The right of survivorship becomes effective before the will of B becomes effective.  When B dies, A becomes the sole owner of the property.


Here’s another example: “To A, B, and C as joint tenants with right of survivorship.”  A conveys her interest to D.  What is the status of the title?  D is a tenant in common with B and C, but as between B and C, they are still joint tenants.  So if B dies, D and C are tenants in common, with D holding 1/3 of the interest and C holding 2/3 of the interest (the part that was originally C’s plus the part that belonged to B).


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