Business Law (part 58)

I submit that an individual who breaks a law that conscience tells him is unjust, and who willingly accepts the penalty of imprisonment in order to arouse the conscience of the community over its injustice, is in reality expressing the highest respect for law.

Martin Luther King, Jr.

Nature of Real Property (part B)

 by

 Charles Lamson

Estates in Property

An estate is the nature and extent of interest that a person has in real or personal property. The estate that a person has in property may be:

1. A fee simple estate
2. A life estate

Fee Simple Estate

A fee simple estate is the largest and most complex right that one may possess in property. A fee simple owner of property, whether real or personal, has the right to possess the property forever. The owner of a fee simple estate may also sell, lease, or otherwise dispose of the property permanently or temporarily. At the death of such an owner, the property will pass to the persons provided for in the owner's will or, if no will exists, to the heirs at law.

A fee simple owner of land has the right to the surface of the land, the air above the land "all the way to heaven," and the subsoil beneath the surface all the way to the center of the earth. The courts have held, however, that the right to air above the land is not absolute. An individual cannot prevent an airplane from flying over the land unless it flies too low. It is possible for a person to own the surface of the land only and not the minerals, oil, gas, and other valuable property under the topsoil. A person may also own the soil but not the timber.

Life estate

One may have an estate in property by which the property is owned for a lifetime, known as a life estate. The person owning for the lifetime is called a life tenant. At the death of the life tenant, the title passes as directed by the original owner. The title may revert, or go back, to the grantor, the one who conveyed the life estate to the deceased. In this case, the interest of the grantor is called a reversion. Alternatively, the property may go to someone other than the grantor. Such an interest is called a remainder.

The life tenant has the exclusive right to use the property and may exclude the holder of the reversion or remainder during the life tenant's lifetime. However, while the life tenant has exclusive use of the property there is a duty on the life tenant to exercise ordinary care to preserve the property and commit no acts that would permanently harm the remainder interest.

Other Interests in Real Property

Although not classified as estates, other interests a person may have in real property exist. Two common ones are easements are easements and licenses.

An easement is a right to use land, such as a right-of-way across another's land or the use of another's driveway. An easement does not give an exclusive right to possession, but a right of permanent intermittent use. It is classified as an interest in land and created by deed or by adverse use for a period of time set by statute. An easement may be granted that is not transferable; that is, it can be used only by the specific person to whom it is granted. Another type of easement transfers to any subsequent owner of the real estate to which the easement is granted. Such an easement is said to "run with the land." 

A license is a right to do certain acts on the land but not a right to stay in possession of the land. It constitutes a personal right to use property for a specific purpose. A licensor normally may terminate a license at will.

Acquiring Real Property

Real property may be acquired in many of the same ways as personal property. However, some ways exist in which real property, but not personal property, can be acquired. These include accretion and adverse possession. 

Accretion

Accretion is the addition to land as a result of the gradual deposit by water of solids. It takes place most commonly when a stream, river, lake, or ocean constitutes the boundary line of property. If one's land extends to the low water mark of a navigable stream, title to some land may be acquired by the rivers shifting its flow. This occurs slowly by the deposit of silt. Also, the accretion may be the result of dredging or channeling of the river. If the silt and sand are thrown up on the riverbank, thereby increasing the acreage of the land contiguous to the river, the added acreage belongs to the owner of the contiguous land.

Adverse Possession

An individual may acquire title to real property by occupying the land owned by another for a period fixed by statute. This is known as adverse possession and basically means the original owner may no longer object to a trespass. The statutory period required varies from seven years in some states to 21 in others. Occupancy must be continuous, open, hostile, visible, actual, and exclusive. It must be apparent enough to give the owner notice of trespass. In colonial times this was known as "squatters rights." To get title by adverse possession, one had to get one step further than the "squatter" did; this meant the adverse possession had to continue for the statutory period.

Position for the statutory period then gave clear title to all the land one's color of title described. Color of title is a person's apparent title. It usually arises, but does not have to, from some defective document purporting to be a deed or will or even a gift. 

INTERNET RESOURCES FOR BUSINESS LAW

Name	Resources	Links
U.S. Department of Housing and Urban Development (HUD)	HUD provides information on real property and the planning issues for both consumers and businesses. HUD also provides information on the Fair Housing Act and the Civil Rights Act.	hud.gov
HUD USER	HUD USER, PD&R's information source for Housing and Community Development researchers and policymakers, provides federal government reports and information on housing policy and programs, building technology, economic development, urban planning, and other housing related topics.	huduser.org
Legal Information Institute (LII) Land-Use Law Materials	LII provides an overview of land-use law, links to statutes, federal and state judicial court decisions, and other materials.	law.cornell.edu/topics/land_use.html
American Bar Association's (ABA) Section of Real Property, Probate and Trust Law	The ABA section of Real Property, Probate, and Trust Law provides news, information, and links to property.	abanet.org/rppt/home.html

*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, J.D., PGS. 501-504, 506*

end

Name

Resources

Links

U.S. Department of Housing and Urban Development (HUD)

HUD provides information on real property and the planning issues for both consumers and businesses. HUD also provides information on the Fair Housing Act and the Civil Rights Act.

hud.gov

HUD USER

HUD USER, PD&R's information source for Housing and Community Development researchers and policymakers, provides federal government reports and information on housing policy and programs, building technology, economic development, urban planning, and other housing related topics.

huduser.org

Legal Information Institute (LII) Land-Use Law Materials

LII provides an overview of land-use law, links to statutes, federal and state judicial court decisions, and other materials.

law.cornell.edu/topics/land_use.html

American Bar Association's (ABA) Section of Real Property, Probate and Trust Law

The ABA section of Real Property, Probate, and Trust Law provides news, information, and links to property.

abanet.org/rppt/home.html

The Restraint of Laissez-Faire Economics: Where Marxism Meets Business Law (1 - the podcast)

1st half: Das Kapital with Karl Marx
 2nd half: A discussion of business law with Charles Lamson
(click here to listen)

4/11/20 WEEKLY NEWS ROUNDUP POLITICAL ROUNDTABLE DISCUSSION (PART 2 - the podcast)

Click here.

Business Law (part 57)

Taste cannot be controlled by law.

Thomas Jefferson

Nature of Real Property (part A)

by

 Charles Lamson

Real property consists of land, including the actual soil, and all permanent attachments to the land, such as fences, walls, other additions and improvements, timber, and other growing things. It also includes minerals under the soil and the waters upon it.

Distinguishing Real Property

Through court interpretations we have accumulated a definite set of rules to guide us in identifying real property and distinguishing it from personal property. The most important of these rules pertains to the following specific items of property:

1. Vegetation---trees and perennial crops
2. Waters---rivers and streams
3. Fixtures

Trees and Perennial Crops

Vegetation may be real or personal property. Trees growing on the land, orchards, vineyards, and perennial crops, such as clovers, grasses, and others not planted annually and cultivated, are classified as real property until severed from the land. Annual crops and severed vegetation are personal property. When a person sells land, questions sometimes arise as to whether or not a particular item belongs to the land or constitutes personal property. The parties should agree before completing the sale just how to classify the item.

Rivers and Streams

If a nonnavigable river flows through property, the person who owns the property owns the river bed but not the water that flows over the bed. The water cannot be impounded or diverted to the property owner's own use in such a way as to deprive any neighbors of its use. If the river or the stream forms the boundary line, then the owner on each side of the river owns the land to the middle of the river bed.

In most states where navigable rivers form the boundary, the owner of the adjoining land owns the land only to the low water mark.

Fixtures

Personal property attached to land or a building that becomes a part of it is known as a fixture. To determine whether or not personal property has become real estate, one or more of the following questions may be asked by a court: 

1. How securely is it attached? If the personal property has become a part of the real estate and lost its identity, such as the boards or bricks making up a house wall, it constitutes a fixture. If it is so securely attached that it cannot be moved without damaging the real property to which it is attached, such as windows or stitches, then it also ceases to be personal property. 
2. What was the intention of the one installing the personal property? No matter what one's intention, the personal property becomes real property if it cannot be removed without damaging the property. But, if it is loosely attached and the person installing the fixture indicates the intention to make the fixture real property, then this intention controls. Refrigerators have been held to be real property when apartments were rented unfurnished but contained refrigerators. In determining intention, courts frequently consider the purpose of the attachment and who did the attaching. 
1. What is the purpose of attachment? The purpose for which the fixture is to be used may show the intention of the one annexing it. 
2. Who attached the item? If the owner of a building installs personal property to the building, this usually indicates the intention to make it a permanent addition to the real property. If a tenant makes the same improvements, the court presumes that the tenant intended to keep the fixture as personal property unless a contrary intention can be shown.

Multiple Ownership

One person can own property, or more than one person can own property. When more than one person owns land, each person has the right to use and possess it. The most common ways real property can be owned by more than one person include:

1. Tenancy in common
2. Joint tenancy
3. Tenancy by the entirety
4. Community property

Tenancy in Common

A tenancy in common occurs when two or more persons own property and when one dies that owner's interest in the property passes to a person named in the deceased's will or, if no will exists, to the deceased's heirs. In this type of ownership, the other owner or owners have no automatic right to the deceased's share of the property. Each owner determines who gets the share of the property at his or her death. A tenant in common has the right not only to determine who becomes the owner of the fractional share upon death but also to convey the property while alive. The property may be given away or sold. The new owner then becomes a tenant in common with the remaining owner or owners.

The owners of property held as a tenancy in common each own an undivided fractional share of the property. For example, if two people equally own a piece of land, each tenant owns an undivided one-half interest in the land. Three people who own land equally each own an undivided one-third interest in the land. This means they do not own a specific portion of the land, but own a one-third interest in the entire piece of land. They thus have an interest in the entire property, but only to the extent of their percentage interest.

The property does not have to be owned equally. Two people could own a piece of property as tenants in common, and one could own a one-third interest and the other could own a two-thirds interest. 

When more than one person takes title to property, the law presumes they hold the property as tenants in common. Thus when the type of ownership is not clearly spelled out, it will be held a tenancy in common.

Joint Tenancy

A joint tenancy exists when two or more persons own property and upon the death of one, the remaining owners own the entire property free of any interest of the deceased. This means that a joint owner does not have the power to determine who owns the property at death. The remaining joint owner or owners automatically own the entire property. This automatic ownership of the entire property by the surviving owners is called the right of survivorship.

As in the case of a tenancy in common, each joint owner owns an undivided interest in the property. No joint owner owns a specific portion of the property.

The law does not favor the creation of a joint tenancy so there must be a clear intention to create one. The language normally used conveys the property "to X and Y as joint tenants with right of survivorship." 

A joint tenancy can be destroyed by one joint tenant selling or giving that tenant's interest to another person. The new owner becomes a tenant in common of the interest conveyed. If there are three or more joint tenants and one sells his or her interest, the new owner is a tenant in common and the remaining, original joint tenants remain joint tenants as between themselves.

A joint tenancy can also be destroyed by one joint tenant suing for a division of the property, called a suit for partition. Any joint tenant may sue for partition.

Because a joint tenant's interest in the property disappears at the joint tenant's death, a joint tenant cannot dispose of such an interest by will. If a joint tenant purports to dispose of an interest and jointly held property by will, the wheel has no effect with regard to such property.

Tenancy by the Entirety

Similar to a joint tenancy, a tenancy by the entirety can exist only between a husband and wife. At the death of one, the other becomes the sole owner of the property. Almost half the states recognize this form of ownership. This type of tenancy is popular with married couples because most want the survivor to have title to the property and to get it without any court proceedings. Many couples also like this type of ownership because the creditors of just the husband or just the wife cannot claim the property. To you have a claim against the property, a creditor must be a creditor of both spouses.

A joint tenancy differs in other ways from a tenancy by the entirety. In the case of property held as a tenancy by the entirety, neither the husband nor the wife alone may sell or otherwise dispose of it. Both parties must join in any conveyance of the property. A divorce changes the husband and wife from tenants by the entirety to tenants in common with respect to the property.

Community Property

Nine states, mostly in the west, recognize a form of ownership called community property. Community property is a type of ownership reserved for married couples, such that both spouses own a separate and equal share of the property no matter how titled. In these states, unless the parties agree it shall be separate property, property acquired by a husband and wife during their marriage constitutes community property. This is normally important if a couple divorces. In that case, each owns one half of the property acquired during the marriage. Property owned by one spouse prior to the marriage normally is that spouses separate property and not community property. 

*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, J.D., PGS.496-501*

end

Business Law (part 56)

If we desire respect for the law, we must first make the law respectable.

Louis D. Brandeis

Bankruptcy (part B)

by

 Charles Lamson

 Reclamations

Frequently at the time the court discharges debts, the debtor has possession of property owned by others. This property takes the form of consigned or bailed goods, or property held as security for a loan. The true owner of the property is not technically a creditor of the debtor in bankruptcy. The owner should file a reclamation claim for the specific property so that it may be returned. 

A person in possession of a check drawn by the debtor may or may not be able to get it paid depending on the circumstances. If the check is an uncertified check, the holder is a mere creditor of the debtor and cannot have it cashed. This occurs because the check is not an assignment of the money on deposit, and the creditor merely holds the unpaid claim the debtor intended the check to discharge. If the check has been certified, the creditor has the obligation of the drawee bank on the check, which may be asserted in preference to proceeding upon the claim against the drawer of the check.

Types of Claims

Claims of a debtor in bankruptcy may be classified as fully secured claims, partially secured claims, and unsecured claims.

Fully secured creditors may have their claims satisfied in full from the proceeds of the assets that were used for security. If these assets sell for more than enough to satisfy the secured debt, the remainder of the proceeds must be surrendered to the trustee in bankruptcy of the debtor.

Partially secured creditors have a lien on some assets but not enough to satisfy the debts in full. The proceeds of the security held by a partially secured creditor are used to pay that claim and, to the extent any portion of a debt remains unpaid, the creditor has a claim as an unsecured creditor for the balance.

Unsecured claims are those for which creditors have no lien on specific assets.

Priority of Claims

The claim with the highest priority is that for the administrative expenses of the bankruptcy proceedings (such as filing fees paid by creditors and involuntary proceedings and expenses of creditors and recovering property transferred or concealed by the debtor). Additional priority claims include debts incurred after the filing of an involuntary petition and before an order of relief or appointment of a trustee; wage claims not exceeding $2,000 for anyone wage-earner, provided the wages where earned not more than three months prior to bankruptcy proceedings; fringe benefits for employees; claims by individuals who have deposited money with the debtor for undelivered personal, family, or household goods; and tax claims.

Discharge of Indebtedness

If the debtor cooperates fully with the court and the trustee in bankruptcy and meets all other requirements for discharge of indebtedness, the discharge will be granted. To be discharged, the debtor must not hide any assets or attempt to wrongfully transfer them out of the reach of creditors. A discharge voids any liability of the debtor on discharged debt and prevents any actions for collection of such debts. 

Debts Not Discharged

Certain obligations cannot be avoided by bankruptcy. The most important of these claims include:

1. Claims for alimony and child support
2. All taxes incurred within three years
3. Debts owed by reason of embezzlement
4. Deaths due on a judgment for international injury to others, such as the judgment obtained for assault and battery
5. Wages earned within 3 months of the bankruptcy proceedings
6. Debts incurred by means of fraud
7. Educational loans

Under some circumstances, bankruptcy does not discharge certain debts, but the list above includes the most common ones.

Nonliquidation Plans

The bankruptcy laws provide special arrangements that do not result in liquidation and distribution of the debtor's assets. These are business reorganization and Chapter 13 plans.

Business Reorganization

Bankruptcy proceedings under Chapter 7 result in the liquidation and distribution of the assets of an enterprise. Under Chapter 11, the Bankruptcy Code provides a special rehabilitation system designed for businesses so that they may be reorganized rather than liquidated. Although designed for businesses the language of Chapter 11 allows individuals not engaged in business to request relief.

Reorganization proceedings may be voluntary or involuntary. Normally the debtor will be allowed to continue to run the business; however, a disinterested trustee may be appointed to run the business in cases of mismanagement or in the interest of creditors. The debtor running its business has the first right, for 120 days, to propose a rehabilitation plan indicating how much and how creditors will be paid. The court will confirm a plan that does not discriminate; is fair, equitable, and feasible; has been proposed and accepted in good faith; and all the payments made or proposed are found to be reasonable.

The court can impose a reorganization plan even if a class of creditors objects to the plan. This is called a cram down. A cram down cannot be imposed if dissenting unsecured creditors are not paid in full or the holder of a claim with less priority received some property on account of a claim or interest. If no acceptable plan of reorganization can be worked out, the business may have to be liquidated under Chapter 7.

Chapter 13 Plans

If the debtor is an individual, a Chapter 13 may be worked out. This chapter attempts to achieve for an individual the same advantages that Chapter 11 gives to businesses. An individual with a regular income, except a stock or commodity broker, who has unsecured debts of less than $100,000 and secured debts of less than $350,000 may in good faith file a petition under Chapter 13. This chapter is completely voluntary for the debtor. However, a majority of creditors can impose a settlement plan upon a dissenting minority. The debtor is as fully released from debts as under Chapter 7 of the Bankruptcy Code. These arrangements help prevent the hardship of an immediate liquidation of all the debtor's assets and give the debtor the opportunity to develop a plan for the full or partial payment of debts over an extended period. These plans benefit the creditors because they are likely, in the long run, to receive a greater percentage of the money owed them. The plan may not pay unsecured creditors less than the amount they would receive under a Chapter 7 liquidation. 

INTERNET RESOURCES FOR BUSINESS LAW

Name	Resources	Links
Legal Information Institute (LII)---Bankruptcy Law Materials	The Legal Information Institute (LII), maintained by Cornell Law School, provides an overview of bankruptcy law, including the Federal Bankruptcy Code, rules in the Code of Federal Regulators (CFR), state and federal court decisions, and state civil codes.	law.cornel.edu/topics/bankruptcy.html
11 USC Chapter 13---Adjustment of Debts of an Individual with Regular Income	LII provides Chapter 13, Adjustment of Debts of an Individual with Regular Income.	law.cornell.edu/uscode/11/ch13.html
ABI World (American Bankruptcy Institute)	ABI World provides daily bankruptcy headlines, legislative news, and materials from the National Bankruptcy Review Commission (NBRC).	abiworld.org
Internet Bankruptcy Library	Internet Bankruptcy Library, maintained by Bankruptcy Creditors Service, Inc., provides bankruptcy data, news, and information.	bankrupt.com

National Association of Consumer Bankruptcy Attorneys (NACBA)	NACBA, a national organization of more than 600 attorneys, provides consumer bankruptcy information.	nacba.com
11 USC chapter 11---Reorganization	LII provides a hypertext and searchable version of chapter 11, Reorganization, of the U.S. Code.	law.cornell.edu/uscode/11/ch11.html
Bankruptcy Alternatives	Bankruptcy Alternatives, maintained by Mary Brenner, Attorney at Law, provides questions and answers about alternatives to bankruptcy.	debtworkout.com

*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, PGS. 485-488, 491*

end

Name

Resources

Links

Legal Information Institute (LII)---Bankruptcy Law Materials

The Legal Information Institute (LII), maintained by Cornell Law School, provides an overview of bankruptcy law, including the Federal Bankruptcy Code, rules in the Code of Federal Regulators (CFR), state and federal court decisions, and state civil codes.

law.cornel.edu/topics/bankruptcy.html

11 USC Chapter 13---Adjustment of Debts of an Individual with Regular Income

LII provides Chapter 13, Adjustment of Debts of an Individual with Regular Income.

law.cornell.edu/uscode/11/ch13.html

ABI World (American Bankruptcy Institute)

ABI World provides daily bankruptcy headlines, legislative news, and materials from the National Bankruptcy Review Commission (NBRC).

abiworld.org

Internet Bankruptcy Library

Internet Bankruptcy Library, maintained by Bankruptcy Creditors Service, Inc., provides bankruptcy data, news, and information.

bankrupt.com

National Association of Consumer Bankruptcy Attorneys (NACBA)

NACBA, a national organization of more than 600 attorneys, provides consumer bankruptcy information.

nacba.com

11 USC chapter 11---Reorganization

LII provides a hypertext and searchable version of chapter 11, Reorganization, of the U.S. Code.

law.cornell.edu/uscode/11/ch11.html

Bankruptcy Alternatives

Bankruptcy Alternatives, maintained by Mary Brenner, Attorney at Law, provides questions and answers about alternatives to bankruptcy.

debtworkout.com