1. Agenda for 21st Class Admin stuff Name plates Handouts Slides
Community Property Handout
No class Friday 11/9
Next class is Monday 11/12
Assignment is due 11/12
Review of Mortgages
Co-ownership
Tenants in Common
Joint tenants with right of survivorship

2. Assignment for Next Class I
Review any questions we did not discuss in class today
Read Community Property handout
Questions to think about / Writing Assignments
Do you think the court reached the correct result in O’Brien v O’Brien as a matter of law, justice, and/or policy? (WG1, 2, 3 & 4)
New York is a common law (separate property) state. How do you think a case like O’Brien v O’Brien would be decided in a community property state? (WG5)
Suppose the parties in O’Brien v O’Brien had signed an agreement, before they married, which contained the following provision: “If husband and wife divorce without children, husband will pay wife $1000 per month. If husband and wife divorce after having children, husband will pay wife $1000 per month plus $500 per child under 18.” (WG6)
For the purposes of the problems on the next two slides, assume
The statutory share in a common law state is 50%.
A common law state considers property acquired during marriage to be marital property, regardless of the source and excludes from marital property only property owned before the marriage began.
A community property state considers income (e.g. rents or dividends) from separate property to be separate property.

3. Assignment for Next Class II
Questions to think about / Writing Assignments (continued)
Suppose that when Bill and Hillary marry they have no assets. They each work as lawyers and deposit their paychecks into a joint account. Hillary earns twice as much as Bill. When Bill receives a 25K bonus, he deposits it into a Vanguard account in his name only. He invests the money in a stock market mutual fund. Later, Hillary inherits 100K from her father, which she deposits in a Fidelity account in her name only. On December 31, 2018, there is 10K in their joint account, the Vanguard mutual fund in Bill’s name is worth 50K (as the result of 10K in dividends and 15K in capital appreciation), and the Fidelity mutual fund in Hillary’s name is worth 110K (as the result of 10K in dividends and no capital appreciation). Suppose, on December 31, 2018:
If Bill and Hillary divorce. How much do each get, if they live in a common law state? (WG7)
If Bill and Hillary divorce. How much do each get, if they live in a community property state?(WG1)
Bill dies leaving all his property by will to Monica. How much does Hillary get, if they live in a common law state? (WG2)
Bill dies leaving all his property by will to Monica. How much does Hillary get, if they live in a community property state?(WG3)

4. Assignment for Next Class III
Questions to think about / Writing Assignments (continued)
Suppose that when Donald and Ivana married, he had 100 million in assets, and she had 200K. During their marriage, they kept their assets separate and by the end of 2018, as a result of their investment decisions, Donald’s assets were worth 100 million and Ivana’s were worth 400K. Suppose that on December 31, 2018
If Donald and Ivana divorce. How much do each get, if they live in a common law state? For this and the next question, assume that Donald and Ivana signed a prenuptial agreement, but a court declared it invalid. (WG4)
If Donald and Ivana divorce on December 31. How much do each get, if they live in a community property state? (WG5)
Donald dies leaving all his property to Stephanie by will. How much does Ivana get if they live in a common law state? (WG6)
Donald dies leaving all his property to Stephanie by will. How much does Ivana get if they live in a community property state? (WG7)
Optional: Examples & Explanations Ch. 14

5. Review of Last Class I Recording Wild deeds don’t count
Provide no notice
Don’t even establish priority under pure race statutes
Other interests need to be recorded -- mortgages, easements, covenants
Invalid against subsequent purchasers
Even with notice (race statute)
Unless notice (race-notice statutes)
Mortgages
Give mortgagee priority over other creditors
Secured debt
Run with land
But ordinarily paid off at closing
Mortgagee can foreclose if mortgagor defaults
Other creditors and debtor can proceeds only if mortgagee paid in full
Equity of redemption – mortgagor can repay loan before foreclosure
Crystals & Mud
Rules versus standards
Law versus equity

6. Co-Ownership Future interests divide ownership over time
Co-ownership involves multiple parties each with current ownership
3 basic forms
Tenancy in common
Joint tenancy with right of survivorship
Community Property (next class)
Most common form of co-ownership
Default if grant/intent unclear
Joint tenancy with rights of survivorship disfavored
Shares can be unequal
If explicit in grant
Otherwise assumed to be equal
Shares are transferable, devisable, and inheritable

7. Rights of Co-Tenants Same for tenants in common and joint tenants
Co-owners can allocate rights and responsibilities by contract
But default rules set out below
Each co-tenant
Entitled to all rights of ownership in entire parcel
Entitled to possess and use property
Without payment to other
As long as do not “oust” other co-tenants
Share rents in proportion to shares
Can mortgage her share
Can be compel to contribute to common expenses
Taxes, mortgage interest, mortgage principal paid on schedule
Unless paid by co-tenant using property exclusively, in which case can only get contribution for amounts above fair market value
No contribution for repairs, improvements, but
Can offset in accounting for profits
Can get reimbursement upon accounting or sale

8. Rights of Co-Tenants II
If one co-tenant collects rents or other profits
Must share
But can subtract expenses (including repairs and some improvements) in accounting
Upon sale
Repairs and value of improvements taken into account
Partition
Each co-tenant can request end of co-tenancy
Partition in kind
Division of parcel into subparts of equal value
Or unequal division with payment (owelty) to equalize shares
Partition by sale

9. Martin v Martin Garis & Peggy Martin own 1/8th interest in land
Conveyed to Garis by father, Charles Martin
Charles & Mary Martin own life-estate in 7/8th interest in land
Remainder to Garis & Peggy
Charles improved property and developed 4-lots for mobile homes
Garis & Peggy moved their mobile home to one of those lots
Garis & Peggy filed suit for accounting of 1/8th portion of rents from mobile home lots
District court granted accounting, but required Garis and Peggy to pay “reasonable rent”
Q: How much would Charles & Mary have to pay Garis and Peggy?
Appellate court: no requirement to pay rent
Rent would be proper if ouster, but ouster must be claim of exclusive use of whole property
Do you think the court reached the right outcome in Martin v Martin as a matter of justice and policy?

10. Joint Tenancy with Right of Survivorship I
When one tenant dies, the other gets his/her share
Unlike tenancy in common, where if one tenant dies, her share goes to her heirs or devisees
Creation
Creation requires 4 unities
Time, title (same document or adverse possession), interest (equal), possession
“to A and B as joint tenants with right of survivorship”
Usually sufficient
“to A and B as joint tenants, not as tenants in common”
“to A and B as joint tenants” or “to A and B jointly”
Sometimes sufficient
If not joint tenants, then tenants in common
Severance
Any co-tenant can “sever” the joint tenancy
Which turns the tenancy into tenancy in common
Some actions also sever the joint tenancy

11. Joint Tenancy with Right of Survivorship II
Actions that automatically sever
Conveyance of interest to someone else
Conveyance to self as tenant in common
In most states
Secret severance?
Why create?
Avoids probate

12. Harms v Sprague William and John Harms owned property as joint tenants
John Harms mortgaged his interest to help Sprague, a friend
John Harms died, leaving everything to Sprague
William Harms brought quiet title action against Sprague and creditor
[In full version of case, but not in edited version]
Court held
Mortgaging property did not sever joint tenancy
Mortgage is lien, not conveyance of title in IL
In title states, result might be different
Nor would judgment lien
Foreclosure, however, would
When John Harms died, William Harms became sole owner
Mortgagee gets nothing
Do you think the court reached the right outcome in Harms v Sprague as a matter of justice and policy?
If you were loaning money in Illinois in 1985 to someone who offered her interest in jointly owned property as collateral, what could you do to protect yourself?

13. Questions on Co-Ownership
Son and daughter are joint tenants with right of survivorship in Blackacre. Son defaults on a debt, and the creditor obtained a judgment, which, according to statutes in the jurisdiction, is “a lien on the real property then owned” by the debtor. Six months later, the son died. Is the creditor entitled to enforce its judgment lien against Blackacre?
Landowner borrowed 1,000,000 from lender and executed a valid mortgage on Blackacre. Two years later, landowner conveyed Blackacre to a developer with a deed that states that the conveyance was subject to the mortgage and that the developer assumed the obligations of the mortgage as part of the purchase. Developer defaulted on the loan. The property was sold at a foreclosure sale, which netted $900,000. Who is primarily responsible for the remaining $100,000? What if that person cannot pay? A and B are tenants in common in an apartment. A leases the apartment to C. B is homeless and wants to move in. Can she?
Brother and sister owned a farm as tenants in common. Brother farmed the land and paid all applicable taxes. When Brother died, his son inherited his share and took over operation of the farm. The son failed to pay real estate taxes on the farm, and the government held a tax sale. The sister purchased the property at the tax sale for a price equal to the back taxes, interest, penalties and fees. Does the sister have sole ownership of the farm? Does the son have any rights?

14. Marital Property I 2 different legal regimes
Community property states (Cal, other western and southwestern states)
Common law states (separate property)
Community property states
Most property is “community property”
“separate property” is owned by one spouse
Assets owned by spouse before marriage
Inheritances, gifts, devises
Even if acquired during marraige
In some states, income from separate property
E.g. dividends from stock owned before marriage
Assets must be kept separate
Otherwise subject to complicated tracing rules
On death or divorce, split of community property
Each spouse can dispose of property by will

15. Marital Property II – Common Law
All property acquired in marriage (some states)
All property acquired in marriage, except gifts, inheritances, and devises (some states)
All property (some states)
Separate property
Anything not marital property
On divorce
“equitable distribution” of marital property
Take into account income and property at time of marriage & divorce, duration of marriage, age & health, occupation & skills, special needs, contributions of each during marriage…
Trend toward equal distribution
On death
Property belongs to spouse who acquired it
If neither spouse had assets prior to marriage or any inheritances and only husband worked, he owns everything acquired during marriage
Spouse has elective share = her choice of
Amount left to her in will
Statutory share (usually 1/3 or ½ of his assets)

16. Pre-Marital Agreements
Parties may sign agreements that alter disposition on divorce or death
Especially common for 2nd marriages where one or both spouse has high net worth
Traditionally not enforceable
Modern trend
Enforced as long as
Not unconscionable when made and/or
Complaining spouse received full financial disclosure and/or
Complaining spouse received notice of waiver of rights
California
Spouse must have had 7 days to review it
Spouse must have been represented by a separate attorney
Cannot affect child support

17. Other Mortgage Questions
Prof. Rasmussen owns two parcels, 1 & 2 Eastfield Rd. Bank1 has mortgage on 1 Eastfield Rd for 500K, Bank 2 has mortgage on 2 Eastfield Rd. for 500K. Prof. Rasmussen defaults on the loan to Bank 1. Instead of foreclosing on 1 Eastfield Rd., Bank1 gets a judgment lien, which, according to statute in the jurisdiction, gives it a lien on all of Prof. Rasmussen’s property. Creditor 1 then foreclosed on both its mortgage and the judgment lien. The sale of 1 Eastfield raised 400K and the sale of 2 Eastfied raised 700K. How much does each creditor get? How much does Prof. Rasmussen get?
Prof. Barnett owns 1 Crest Rd, which he financed with a mortgage for 1m from WaMu that was never recorded. Prof. Barnett sold the property for 2m to Prof. Rose and moved to Peru. Prof. Barnett then stopped paying monthly payments on the mortgage. WaMu then petitioned the court to foreclose on 1 Crest Rd. Can it do so?

18. Questions on Mortgage Brokers
Consider the way home mortgages are often sold. A bank contracts with a mortgage broker. A mortgage broker is an independent businessperson, not an employee of the bank. The mortgage broker solicits customers and, when a customer wants a loan, helps the customer fill out the relevant paperwork and sends the paperwork to the bank for approval of the loan.
a) The contract with the mortgage broker might specify that the mortgage broker gets a fixed salary – perhaps $3000 per month. What problems might occur under such a contract? Would the bank be wise to offer such a contract?
b) The contract with the mortgage broker might specify that the mortgage broker gets a percentage of the value of all loans approved. For example, the mortgage broker might get 0.5% of the value of each loan, which would be $2500 on a $500,000 loan. What problems might occur under such a contract? Would the bank be wise to offer such a contract?
c) What macro-economic problems might occur if most loans were negotiated through contacts such as those described in (b)?
d) Can you think of a better contract between the bank and the mortgage broker?