Real Estate Transactions

Oral promise to convey land enforceable when promisee builds a home in reliance on the promise

/ Real Estate Transactions, Statute of Frauds

In a straight-forward application of the usual rule, the Maine Supreme Judicial Court recognized an exception to the statute of frauds by enforcing an oral promise to convey land when the promisee relied on the promise and built a house on the land. In this case, the promise was made by parents to their son and daughter. The daughter built a home on the land with the parents’ assistance and then asked for a deed to the land. When the parents refused, she sued them seeking a court order to them to transfer title to the land to her and the court granted her request. Harvey v. Dow, 11 A.3d 303 (Me. 2011).

Texas courts allow fraud claims in real estate transactions despite a non-reliance clause

/ Leaseholds, Real Estate Transactions, Statute of Frauds

The states disagree about whether parties to real estate transactions can sue each other for fraud when the contract of sale contains a “non-reliance clause” stating that neither party is relying on any representations made by the other party that are not included in the written contract. Some states allow such claims on the ground that “fraud vitiates consent” and such clauses do not amount to agreements to be defrauded. But other states hold that such clauses immunize the contracting parties from claims of fraud based on oral statements made prior to the deal. The Texas Supreme Court has waffled on this issue, first holding that contracts can be avoided on the ground of fraudulent inducement, Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990), and then ruling that the sophisticated parties are free to bargain around this rule by non-reliance clauses, Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 …

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Alabama judge denies foreclosure of securitized mortgage for failure to comply with the formalities of loan transfers

/ Mortgages, Real Estate Transactions

An Alabama judge refused to allow a trustee to foreclose on a mortgage that had been made part of a securitized package of loans because there was no signed endorsement on the note (the contract creating the original loan) when the mortgage was transferred to the trust that held the securitized mortgages. Because the parties did not strictly adhere to the writing requirement in the state version of the UCC (Uniform Commercial Code) — a particularized version of the statute of frauds — the transfer of the mortgage never occurred and the trustee has no power to foreclose. Nor did the trustee have the rights of a “holder” of the note under the UCC because it did not acquire the note in a manner that complied with the rules in its foundational documents. In effect the party bringing the foreclosure action could not show that it had acquired the right …

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Invalid foreclosure cannot be cured by quiet title action

/ Mortgages, Real Estate Transactions, Title Issues

In the case of Bevilacqua v. Rodriguez, 2010 WL 3351481 (Mass. Land Ct. 2010), the court held that parties cannot cure an invalid foreclosure by a quiet title action.The bank that brought the foreclosure action had no proof at the time of the foreclosure that it owned the mortgage (the right to foreclose) because it had no written assignment from the prior mortgagee. For that reason, the foreclosure was invalid under the rule adopted by the Supreme Judicial Court of the Commonwealth of Massachusetts in U.S. Bank National Ass’n v. Ibañez, 458 Mass. 637 (2011). Ibañez held that foreclosures are invalid if the mortgagee bringing the foreclosure action cannot (at the time the foreclosure action) produce a written document proving that it was assigned the benefit of the mortgage from the prior mortgage holder. Thus when the bank sought a declaratory judgment that the foreclosure was valid, the court rejected its claim. …

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