Author name: jsinger

Court finds credit card interest rate above 18% to be unconscionable

/ 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.

Vested right to mine protected despite change in local zoning law

/ 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 …

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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

/ 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.

New Jersey Supreme Court may stop all foreclosures in the state

/ 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.

$3.4 billion settlement in Cobell litigation involving federal mismanagement of individual tribal trust lands

/ Tribal Property

In the late  19th century, the United States took lands from American Indian nations and transferred them to individual tribal members. Those lands were often managed by the federal government through the Bureau of Indian Affairs (BIA) which would arrange to lease the lands for grazing and mining purposes. The U.S. was supposed to pay the royalties to the Indian owners but often did not do so and over time many records were lost. Twenty years of litigation has ended with a settlement by which the US will pay $1.4 billion to class members (roughly $1000 per person) and in addition establish a $2 billion fund for the voluntary buy-back and consolidation of fractionated land interests. Read Interior Department press release. Here is the Turtletalk report on the settlement.

US Supreme Court takes cert in tribal tax foreclosure case

/ 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, …

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No standing to foreclose without proof of physical possession of the note at the time the foreclosure claim was brought

/ 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 required 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).

Increasing regulation of transfer fee covenants

/ Estates and 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 …

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

/ 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 …

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Banks stop foreclosures because of flaws in proof of standing

/ 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 …

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