STUDENT ANSWER 1: 1. Bob did not take the land subject to the power-line easement

The electric company holds an easement in-gross over the subject parcel of land. An easement in-gross is acquired by the holder of the easement for his own special use that is independent of his ownership or possession of another tract of land. The easement was created by an express written grant from Owen to the electric company. Although Owen and the electric company properly executed an easement in grant they failed to record the easement. The relevant statute is a notice statute, which gives priority to subsequent bona fide purchasers to take without notice of prior property conveyances. If a party is deemed to have constructive notice, inquire notice, or actual notice they will not take priority over prior purchasers. Constructive notice is provided by all recorded documents in the property’s chain of title. A purchaser has a duty to search the chain of title for any prior recorded interests. By searching the title records a purchase is put on constructive notice of any interests that have been previously recorded and their failure to search does not negate any imputed notice. However, when a party fails to properly record their interest in property the subsequent buyer has no notice from any records and may prevail. Inquiry notice requires a purchaser to further investigate and inquire into any third party’s possible interest in the property if facts exist that would make a reasonably prudent person suspicious of possible intervening interests. Lastly actual notice is where a purchaser actually knew of the prior interest.

Here, Bob has no constructive notice of the power-line easement. The easement was not recorded nor did any deed make mention of the electric company’s easement. Bob also does not have actual notice because he was unaware of the easement. A court may find that Bob has inquiry notice because the power lines are open and apparent and run across his land. However, power lines would not make a reasonably prudent person suspicious of any easements in the land therefore Bob is not put on inquiry notice.

Furthermore the relevant statute abolishes easements by prescription. Easements by prescription are created when one party uses part of another’s property for the statutory period without the owner’s permission. Here, the electric company had Owen’s permission to use the land and even after Owen sold the land there could be no created easement under the statute. Bob does not take the land subject to the power-line easement.

2. Bob does not take the land subject to the gas line easement

Similar to the power-line easement, the gas line is an easement in gross and expressly granted to the gas company in writing but was never properly recorded. Although Bob has no constructive notice of the easement, facts are present that should give him suspicion of a possible easement for the gas line. Because Bob helped dig the trenches on the land for the gas lines he is aware of their existence and should further inquire as to whether a third party holds an easement for the pipes. However, Bob will argue that he is entitled to protection under the relevant statute because of the Shelter Rule doctrine. The shelter rule provides protection for future grantees if their transferor was a bona fide purchaser and would have prevailed under the statute. Abe is a bona fide purchaser who would have prevailed over the gas company and did not take the property subject to the gas-line easement. Bob is therefore allowed to “take shelter” under Abe’s bona fide purchaser status even though he had notice of the gas lines.

3. Bob may not obtain damages from Owen based on breach of covenant against encumbrances

Bob purchased his land from Abe and was given full covenant and warranty deed. A full warranty deed includes the present covenants of: seisin, encumbrances, and right to convey. Specifically the covenant against encumbrances covenants that no third person has any interest that would diminish the property’s value except as expressly stated in the deed. These present covenants are not intended to run with the land to future grantees. Such covenants are only made to the grantors immediate grantee where there is direct privity of contract. Bob would not be able to obtain damages from Owen for breach of the covenant against encumbrances. Bob would be able to assert a claim against Abe who conveyed the property to him with a full covenant and warranty deed.

STUDENT ANSWER 2: 1. The issue in the present case is whether Bob was s bona fide purchaser (BFP) of the property that gives him priority an unrecorded power-line company’s interest on the property.

An affirmative easement gives a privilege to a third party to affirmatively use another’s land for a specific purpose. An affirmative easement can be created when the owner of the land grants the use of their land to a third party in a signed writing. Normally, an easement consists of a dominant estate that is benefitted by an easement and a survient state that is burdened by the easement. However, an easement in gross is created when use benefits a person or company instead of a dominant estate. A subsequent buyer of a property that contains an easement takes the land, subject to the easement, unless they are a BFP.

To be a BFP, a person needs to act in good faith in acquiring the property, pay consideration for the property, and they cannot have had notice of a prior interest in the property (state statute here). Notice can be either actual notice (the deed mentioned the prior interest), constructive notice (the interest was recorded in the chain of title), or inquiry notice (where the facts surrounding the land would rise to a suspicion that a reasonably prudent person would inquire into). Under the “Shelter Doctrine” (SD), BFP status can be transferred to a third party, even when that third party paid no consideration or had notice of a prior unrecorded interest.

The power-line easement is an affirmative easement by grant (signed writing and allowing the power-line company to use the land for a specific purpose). This is a gross easement because there is no dominant estate, the easement benefits the power company. The power-line company did not record the easement. Bob alone probably cannot be considered to be a BFP. He did act in good faith and paid consideration from the title, but he would most likely be seen as being on inquiry notice of the power-line easement. Since he worked on the gas-line easement and this easement was not mentioned on the deed, it would give rise to a suspicion to inquire about any easements that also may not be mentioned on the deed.

However, under the SD, if Abe, the owner who sold the property to Bob, was a BFP, then that BFP status can be transferred to Bob. Abe will be considered to have BFP status and that status will transfer to Bob. Abe paid full value for the land, had no actual, constructive, or inquiry notice of the easement, and the facts do not give reason to believe that he acted in bad faith in purchasing the property. Therefore, when Abe sold the property to Bob, Abe transferred his BFP status to Bob and Bob did not take the land subject to the power-line easement even though he may have had inquiry notice of the unrecorded power-line easement.

The power-line company may raise the issue of caveat emptor, that is the theory that the “buyer beware” when buying property and the power lines were easily discoverable by a reasonable inspection. However, this will not be a strong case to make by the power-line company because caveat emptor is used for inquiry into structural defects on the property.

2.

The analysis here is almost identical to question (1). The issue remains to be whether Bob is considered a BFP of the property that gives him priority over the gas-line company’s interest in the property.

The gas-line easement is an affirmative easement by grant that represents an easement in gross (see question one). This easement was also not recorded. Bob will not be considered a BFP of the land. While he paid consideration and was a good faith purchaser, he had actual notice of the gas-line because he helped in its construction.

However, the SD would be likely to transfer the BFP status of Abe to Bob again in this situation. Abe was a BFP when he purchased the property (see question one). The BFP status transferred to Bob when he purchased the property. The fact that Bob had actual notice of the gas company’s easement does not destroy the BFP status because the SD allows the transfer of the BFP status even when the subsequent purchaser had notice of the prior unrecorded interest. Therefore, Bob did not take the land subject tot the gas-line easement.

3.

The covenant against encumbrances is a guarantee that no third party has an interest in the land other than what is stated in the deed. This covenant is a present covenant; therefore, they do not run with the land. Only parties in direct privity of contract can sue for the breach of this covenant.

Bob may not obtain damages from Owen based on a breach of this covenant. While this covenant was obviously breached, Owen and Bob are not in direct privity of contract. That is, Bob bought the land from Abe. Bob may be allowed to recover the difference between what he paid for the land and what the actual value of the encumbered land from Abe, but not from Owen. STUDENT ANSWER 3: The first issue is whether Bob took the land subject to the power-line easement, that was first granted by Owen to the electric company in 1960. An easement is the right to use another’s property for a specific purpose. Most easements consist of a servient estate, which is the land burdened by the easement and the land over which the easement runs, and the dominant estate, which is the land benefitted by the easement. Easements may be made by prescription, implication, strict necessity, or by a grant. Furthermore, an easement appurtenant is an easement that benefits the dominant estate, and runs with the and whenever the land is conveyed. Finally, an easement may be terminated in a variety of ways, such as by their express terms, written release, merger of the dominant and servient estates, prescription, estoppel, condemnation, and abandonment. The relevant statute states that “a conveyance of real property is not valid against any subsequent purchaser who, without notice, purchases said real property in good faith and for valuable consideration,” making it a notice recording statute jurisdiction. A notice statute gives priority to subsequent bona fide good faith purchaser over a prior unrecorded interest, provided that at the time of taking the second instrument, the bona fide purchaser has no notice of the earlier interests. There are three types of notice: constructive notice, inquiry notice, or actual notice. Constructive notice arises through the recording system. A purchaser is placed on constructive notice of all information that is properly recorded on the public land records whether he sees it or not. Inquiry notice exists when knowledge is imputed to a buyer from facts and circumstances suggesting the existence of a prior conveyance. Inquiry notice may arise from the possibility of a visual inspection of the property, and exists when someone other than the record owner is in possession or use of the property. Actual notice occurs when written or oral notice is given. Here, Owen granted the power-line easement over the land to an electric company by a properly executed written instrument, making it an easement by grant. However, this easement was never recorded and the electric company erected power lines over the land and erected supporting lines on the land. In 1970, Owen conveyed this land to Abe by a full covenant and warranty deed that made no mention of the easement. Abe paid full value for the land and had no actual knowledge of the easement. In 1995, when Abe conveyed the land to Bob for full value, delivered a deed which contained no mention of the easements. Although Bob had no actual notice of the power line easement, he had inquiry notice of its existence over the property. Bob had not visited the property, but if he had, he would have noticed the power lines overhead and the supporting lines on the land. This reasonable inspection would have caused him to inquire about the possible easement that did in fact exist. A failure to make a reasonable inquiry is negligence and will defeat a bona fide purchaser status. Therefore, because Bob had inquiry notice of the power line easement, he no longer is deemed a bona fide purchaser and his land is subject to the power-line easement. The next issue is whether Bob took the land subject to the gas line easement that Owen first granted to a gas company by a properly executed written instrument in 1961. As stated above, Bob will not take the land subject to the easement if he was a bona fide purchaser without notice of the easement. (See rule for easements, recordings statutes, and notice above). In the case at bar, the underground gasline easement was an easement by grant because it was put into writing. Here, when Bob took the land from Abe, he took it again by the deed without mention of the easement. However, in this instance, Bob knew of the underground gas line because he had helped dig the trenches on the land. Therefore, Bob had actual notice of the easement on the land and would defeat himself of bona fide purchaser status. However, under the shelter doctrine, a subsequent bonafide purchaser with a superior interest over a prior unrecorded interest, may transfer that bonafide purchaser status to future grantees who otherwise would not qualify as bonafide purchasers. Under this doctrine, Bob would be considered a future grantee. His interest in the property will prevail over the gas-line easement even though he took the property with actual notice because Abe was a bonafide purchaser and can transfer this status to Bob. Therefore, under the shelter doctrine, Bob became a bona fide purchaser, and because he paid for the property in full value and good faith, Bob did not take the land subject to the gas-line easement subject to the reading of the relevant statute. The next issue is whether Bob took either of the lands subject to the easements, if he will be able to obtain damages from Owen based upon the breach of a covenant against encumbrances. A full warranty deed is the most complete deed because it contains the covenants of season, covenants against encumbrances, covenants of the right to convey, covenants of further assurance, covenants of quiet enjoyment, and covenants of warranty. Covenants against warranties are covenants that no third person has any interest that would diminish the property’s value, except as expressly stated in the deed. A seller is liable in a general warranty deed for any encumbrance on the property, whether incurred by her or a predecessor in the chain of title. A covenant against encumbrances is a present covenant and are made only to the grantor’s immediate grantee and are not intended to run with the land to future grantees. If a present covenant is breached, if ever, it is done when the deed is delivered and that is when the Statute of Limitations begins to run. Here, every time this type of covenant was conveyed, that grantor promised only that there were no encumbrances on the property when he handed over the property to the grantee. Owen conveyed the land to Abe by a full covenant and warranty deed in 1970. When he did so, he promised that there were no encumbrances on the land, which was breached at the time of its delivery because of his notice of the encumbrances. Furthermore, when Abe conveyed the same land by a full covenant and warranty deed to Bob in 1995, he had inquiry notice of the encumbrances and therefore breached the covenant when he delivered this deed to Bob. However, because this is a present covenant, Owen would never have been able to promise against future encumbrances to Bob when he first conveyed the land. Therefore, Bob may not obtain damages from Owen.