«New York State Bar Examination Essay Questions QUESTION 1 Bob and Ann were married in 2000 in State X. In 2001, the couple moved to New York, and Bob ...»
Furthermore, in New York, a commission is generally considered earned by a broker when the broker procures a buyer who is "ready, willing and able" to purchase the seller's land. Generally, unless otherwise stated in a written contract, a closing is not necessary, especially if the reason the closing did not occur was the fault of the seller (e.g., the seller cannot convey marketable title). Generally, if the broker is hired to find a person who is "ready, willing and able" to purchase the land and the broker delivers a person who has those qualifications then the broker can demand his commission.
The courts look to the expectation of the parties and want to make sure the parties receive what they expected.
In this case, the agreement was oral and did not contain a clause concerning whether a closing was necessary. Assuming the broker was a licensed real estate broker, the broker may enforce the agreement and receive his commission because he delivered a buyer who was "ready, willing and able" and that was what he was expected to do.
Furthermore, if the buyer does not purchase the land, it will be because the seller failed to convey marketable title, which is not the fault of the broker.
Therefore, the broker can receive his commission even if the buyer rescinds the contract based on lack of marketable title.
ANSWER TO QUESTION 4
1. The issue presented is whether an express easement is extinguished by the merger of the dominant and servient tenements.
An easement is a legal interest in the property of another, allowing for access for a limited purpose or a right of way. There are two types of easement: appurtenant (which involves two pieces of land, a dominant and servient tenement) and gross (which involves access to only one piece of land). In New York, there are four ways to create an easement: express grant, implication, necessity, or prescription. An easement by grant is obtained through agreement of the parties. In order for subsequent takers to enforce the easement by grant, it must be in writing, intended to touch and concern the land, and there must be notice to subsequent property owners. An easement by implication arises when one owner subdivides a property into two parts, and it is reasonably apparent based on the prior use of the two parts that one preserved an easement over the other for an essential aspect of the use of the land. An easement by necessity is similar to that by implication, but requires a showing that the dominant's tenement's use of the easement is the only means of obtaining access to a public right of way. If any alternatively means of access arises, the easement by necessity is automatically extinguished. An easement by prescription is obtained in a similar fashion to adverse possession. The person claiming the easement must have made continuous use for 10 years, the use must have been open and notorious, and the use must have been hostile (i.e. without consent from the landowner). If all these elements are present, an easement by prescription will arise.
An easement appurtenant (i.e. one with both a dominant and servient tenement), will transfer along with any interests in the land as long as the purchaser is on notice of the easement's existence. An easement in gross is only transferred if it is for a commercial purpose. Notice can be implied through observation of the land, constructive based on records, or actual based on a term included in the deed. If, at any time, the dominant and servient tenements are merged into one through the purchase of both by the same owner, the easement is extinguished. Any attempt to rekindle it would require the creation of a new easement through one of the four methods above.
Here, Dan is attempting to claim a right to cross ServAcre. The original easement granted by Bob to Al had all the requirements for running with the land. It was appurtenant (involving a dominant and servient tenement), in writing, touched and concerned the land, and provided notice through the deeds. However, that easement was extinguished when Cal purchased ServAcre in 1996 after already having title to DomAcre. Once Cal took title to both properties, the original easement was destroyed.
Thus, for Dan to have an easement, it must have been created subsequent to 1996. There was no easement by grant at this time, as neither Dan's nor Ed's deeds made reference to any such right with any degree of specificity. There was also no easement by prescription, as Dan only used the path over ServAcre for 7 years, from 2001 to 2008, an insufficient amount of time to create an easement by prescription. Even had Dan not stopped his use, 10 years have not elapsed since he took title to the land in 2001, thus it is impossible for an easement by prescription to have arisen. DomAcre does not require access over ServAcre to reach a lawful right of way, so no easement by necessity can have arisen.
Dan's only possible argument is that when Cal re-divided DomAcre and ServAcre, an easement by implication was created. However, an easement by implication requires the claimed easement to be related to an essential aspect of the use of the dominant parcel that was immediately apparent to both parties, not merely a courtesy of access to a pond for launching a boat. Thus, Dan will likely fail to prove that he has a valid easement.
Without an easement, Dan will not be successful in claiming a right to cross ServAcre.
2. The second issue is whether a party may claim that he has received unmarketable title based on a neighbor's assertion of an easement onto the property.
Under the New York Real Property and Procedures Law (RPAPL), a seller has a duty to convey marketable title to a buyer. Marketable title is title that is free from any cloud or subject to any adverse claim. The buyer must not be made to "buy a lawsuit" along with her land. When a seller enters into a land contract without specifying what quality of deed may be conveyed, that contract is permissible, but the seller must
eventually transfer a deed making some (or no) warranties. There are 3 types of deeds:
quitclaim, warranty, and bargain and sale. In a quitclaim deed, the seller makes no warranties to the buyer. In a warranty deed, the seller offers six covenants to the buyer, assuring her, among other things, of the lack of encumbrances on the land and her right to claim it. In a bargain and sale deed, the seller only warranties that she has not transferred title to the land to anyone else and that she is unaware of any adverse claims to the property. If, during the pendency of a land sale contract, but before closing, a buyer learns that there is a cloud on the title of the land, a claim of adverse possession, a zoning violation, or any other issue that would render title unmarketable, she may withdraw from the contract without penalty.
Here, Buyer has a pending land sale agreement with Ed/Broker. During the pendency of this agreement, Buyer has learned that Dan has a colorable claim to an easement over the property. If it were held to be valid, and easement would burden Buyer's interest in ServAcre. However, the easement would not render title to ServAcre unmarketable, because Buyer would hold valid title in ServAcre whether there is an easement over it or not. Thus, Buyer may not cancel the purchase contract based solely on a concern about Dan's easement.
3. The final issue is whether an oral agreement to pay a commission to a licensed real estate broker is enforceable under the Statute of Frauds.
The statute of frauds is a statutory provision that requires certain contract to be in writing in order to be enforceable in a court of law. These contracts include 1. contracts related to marriage, 2. service contracts incapable of performance in a year from their making, 3. contracts transferring an interest in land, 4. an executor's promise to answer for the debts of an estate, 5. an agreement to sell goods for more than $500 or lease goods for more than $1000, or a suretyship (a promise to answer for the debts of another). New York also requires a promise to pay a commission be in writing, unless that commission is payable to a licensed attorney or real estate broker. When a contract for a broker to find a purchaser does not specify that a closing is required to obtain the commission, that term will not be imputed into the agreement. Instead, the broker fulfills her obligations by producing an able and willing buyer for the seller.
Here, Broker is attempting to enforce an oral agreement between her and Ed for Ed to pay a 5% commission upon location of a purchaser for ServAcre. This contract is not governed by the statute of frauds, because New York does not require such agreements to be in writing if the promise is made to a licensed real estate broker. Broker is such a licensed broker. A closing also need not occur in order for Broker to be paid.
She has fulfilled her obligations under the contract by producing a ready, willing, and able buyer in the person of Buyer. The fact that the contract could be affected by Dan's claim of an easement is irrelevant. Broker has performed all of her obligations under the contract and is thus entitled to a performance by Ed, i.e. payment of the 5% commission on the sale of ServAcre.
ANSWER TO QUESTION 5
1. The issue is whether a shareholder of a close corporation has a right to inspect the corporation's books and records to determine whether a buy-out price offered to him is fair and reasonable.
Under the New York Business Corporations Law (BCL), a shareholder has a right, upon five days written demand, to inspect the shareholder meeting minutes and a list of all record shareholders. The corporation may require the shareholder to first furnish an affidavit that his interest is not other than in the best interests of the corporation. If the shareholder refuses to provide this affidavit, the corporation may deny the requested records. A shareholder also has a right, under the BCL upon two days written demand, to obtain a list of all directors and officers. A further right exists to obtain all profit and loss statements, balance sheets and other public financial disclosures of the corporation via regular mail. Finally, a shareholder has a common law right of inspection at a reasonable time and at a proper place, for a proper purpose. The Court of Appeals of New York has specifically held that a desire to learn the names of shareholders to solicit a proxy challenge is, indeed, a proper purpose for inspection under the BCL, but a desire to investigate whether shareholder assets are being mismanaged is not a proper purpose.
Rather, the Court of Appeals has stated, the latter is more appropriately redressed by way of a shareholder's derivative suit.
Here, Smith does have a right under the BCL to inspect the shareholder meeting minutes and a list of all shareholders of Omega. Smith also has a right to inspect a list of the directors, useless here since he knows who they are. Smith also has a right to obtain all financial statements of Omega, which might be useful to him to determine whether $35/share is a reasonable price for his shares. Finally, Smith may exercise his common law right of inspection and demand corporate books and records at a proper place and for a proper purpose. Determining whether one's shares are worth what the managing shareholders in a close corporation claim they are worth would likely be upheld as a proper purpose by the court, because the remedy is designed to avoid oppression of minority shareholders. Even though Smith's desire to inspect for purposes of valuating his shares runs dangerously close to the improper purpose of investigating whether shareholder assets are being mismanaged, the court is likely to uphold Smith's right to inspect, at the very least, the financial statements of Omega so as to allow him to make a reasonably-informed judgment as to whether to accept the board's offer for his shares.
The aim of the court in this situation is one of preventing the cashing out of Smith, a minority shareholder, unfairly by the dominant managing shareholders who, together, own 90% of Omega. Accordingly, Smith will be entitled to inspect the books and records of Omega to determine the value of his shares, most likely under his common law right of inspection but perhaps also under the BCL.
2. The issue is whether a suit to compel payment of a dividend is a personal claim, suited for individual action, or a corporate claim suited for a derivative action in which demand upon the board must be made.
Under the BCL, when a shareholder seeks to enforce a claim of the corporation against the directors, the shareholder must first make demand upon the board to sue.
Claims of the corporation often involve directors' breach of their fiduciary duties of care and loyalty. These breaches are claims in the corporation's right because the harm is, in actuality, suffered by the corporation. Personal claims, however, are not those of the corporation but, rather, of individual shareholders and are not suited for a derivative action. Accordingly, no demand need be made in a personal claim, but personal claims will not be permitted against directors for failure to declare a dividend. Rather, the failure to declare a dividend will only be subject to a derivative action, and even then it is only a proper subject for a derivative action when the directors engaged in some sort of mismanagement or breach of duty, with the harm flowing to the corporation, in connection with the failure to declare a dividend. Pursuant to the BCL, shareholders have no enforceable "right" to dividends until the board makes an official declaration of the dividend. Declarations of distributions are entirely within the board's discretion, and a court will not order the board to make a distribution unless it finds that the failure to declare was motivated by bad faith or a dishonest purpose. Accordingly, in the vast majority of situations, shareholders will not have a claim against the directors to require them to declare a dividend.