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Principles Of Business Law - BOOK VII CHAPTER I
























































Sec. 1. Nature of. The term "real property " refers to land or
anything permanently attached thereto. For example, houses,
fences, and permanent improvements are real property. Upon
severance, however, such improvements become personal property.
Things such as trees, shrubbery, and perennials, which grow upon
the land and continue thereon from year to year, are regarded as
real property, and, so long as they remain attached to the land, are
considered part of the realty. However, upon severance, such as
cutting down trees, quarrying stone, removing gravel, and so forth,
such property is said to be personalty.
On the other hand, growing crops, such as wheat, corn, and other
fruits of labor, are said to be personal property, and a tenant, upon
leaving the real estate, has a right to such crops as he himself has
planted. However, until severed, growing crops remain part of the
realty and pass with it at time of sale.

Sec. 2. Fixtures. Fixtures personal property which has been
attached to realty may become a part of the real property or be of
such a character that they continue to be treated as personalty.
In reaching their decisions as to whether fixtures are real property
or personal property, the courts have considered four distinct fac-
tors: (1) the mode of annexation; (2) the intention of the person
who attaches the fixture; (3) the relationship between the fixture
and the use to be made of the real property; and (4) the relation-
ship existing between the parties engaged in the controversy.

The first of these factors throws very little light upon the prob-
lem except as it reflects the intention of the person who added the
fixture. It is the intention which becomes material. The inten-
tion of a tenant may be, and usually is, quite different from that
of the owner. The courts have been quite liberal in permitting
tenants to remove trade fixtures. The use to be made of a fixture
also becomes quite significant, particularly where the controversy
is between buyer and seller. In the case of a residence, storm win-
dows or screens may well be treated as real property even though
they are not attached to the residence at the time of sale. They
were built in most instances especially for the particular building
upon which they are used. However, if a tenant has storm win-
dows or screens installed, the problem becomes entirely different.
The court must of necessity consider the relationship of the parties
involved in the legal controversy.

Sec. 3. How title to real property is acquired. Title to real
property may be acquired in several different ways: (1) by original
entry, called title by occupancy; (2) by transfer through and with
the consent of the owner; (3) by transfer upon sale by a sheriff;
(4) by possession of a party under claim of title for the period of the
Statute of Limitations, usually twenty years, called adverse posses-
sion, or title by prescription, 2 (5) by will; (6) by descent, regulated
by statute; and (7) by accretion, as when a river or a lake creates
new land,

Sec. 4. Original entry, or title by occupancy. Except in those
portions of the United States where the original title to the land
was derived from grants which were issued by the King of England
and other sovereigns, who took possession of the land by conquest,
title to all the land in the United States was derived from the
United States government. Private individuals occupied such land
for the period of time prescribed by federal statute and met such
other conditions as were established by law, thus acquiring title by
patent from the federal government.

Sec. 5. Transfer with the consent of the owner. The title to
real property is most commonly transferred by the owner's execut-
ing a deed to his transferee. Deeds are formal instruments under
seal and may be "warranty deeds," "special warranty deeds," or
"quitclaim deeds." A warranty deed conveys the fee simple title
to the grantee, his heirs or assigns, and is so called because of the
covenants on the part of the grantor by which he warrants: (1)
that, at the time of the making of the deed, he has fee simple title
therein and right and power to convey the same; (2) that the prop-
erty is free from all encumbrances; (3) that his grantees, heirs, or
assigns will have the quiet and peaceful enjoyment thereof, and
that he will defend the title to the property against all persons who
may lawfully claim it. In most states it is not necessary that the
above warranties be written in the deed. Such a deed is substan-
tially as in the form shown on page 397.

The grantor, by his deed, may make warranties, other than those
enumerated above, with respect to the property transferred. Such
a deed is called a "special warranty deed."

There may be circumstances under which the grantor would not
wish to make warranties with respect to the title, and under such
conditions he may execute a quitclaim deed. Such a deed merely
transfers his existing legal and equitable rights in the premises de-
pierce et al. v. Cherry Valley Farms, Inc., 1945, (Ohio App.) 63 N.E.(2) 46;
p. 811.




County J bb>:


Clerk of the Circuit Court and Ex-officio Recorder
within and for the County and State aforesaid, do
hereby certify that the within and foregoing in-
strument of writing was filed for record on the
day of ,
A. D. 19. . ., at o'clock M,
and duly recorded in volume of
Deeds, on page and examined.


THE GRANTORS, George Wilson and Grace Wilson, his wife, of the City
of Danville, in the County of Vermilion, and State of Illinois, for and in
consideration of one dollar and other good and valuable consideration in
hand paid, CONVEY AND WARRANT to John Moore, of the City of Urbana,
County of Champaign, and State of Illinois, the following described Real
Estate, to wit:

Lot Five (5) of Block Six (6) of J. R. Jones' second addition to the
City of Danville, situated in the County of Vermilion, in the State of
Illinois, hereby releasing and waiving all rights under and by virtue of
the Homestead Exemption laws of this State.

Dated this 3rd day of July, A.D. 19. ..
Signed, Sealed, and Delivered in Presence of

Andrew Smith

Marie Smith George Wilson (Seal)

Grace Wilson (Seal)

State of Illinois
Vermilion County

I, Laura Black, a notary public, in and for said County, in the State
aforesaid, do hereby certify that George Wilson and Grace Wilson, his
wife, personally known to me to be the same persons whose names are
subscribed to the foregoing instrument, as having executed the same, ap-
peared before me this day in person and acknowledged that they signed,
sealed, and delivered the said instrument as their free and voluntary act,
for the uses and purposes therein set forth, including the release and
waiver of the right of homestead.

Given under my hand and notarial seal this 3rd day of July, A. D. 19 . .

Laura Black,
Notary Public.

scribed in the deed to the grantee. A quitclaim deed would be used
under circumstances where an heir, owning an undivided interest
in real property, wished to make a conveyance of his rights in the
land, or where the interest of a person in land is questionable, and,
to clear the title, he gives a quitclaim deed. In the latter case, if
he had title he has parted with it, and if he had none no injury has
been done to him by the execution of the deed. The following is
the usual form of a quitclaim deed :

Statutory Form

THE GRANTOR, George Wilson of the City of Urbana, in the County of
Champaign, and State of Illinois, for and in consideration of One and
no/100 Dollars CONVEYS AND QUITCLAIMS TO John Moore, of the City of
Urbana, County of Champaign, and State of Illinois, all interest in the
following described Real Estate, to wit:

Lot Five (5) of Block Six (6) of J. R. Jones' Second Addition to the
City of Urbana, situated in the County of Champaign, in the State of
Illinois, hereby releasing and waiving all rights under and by virtue of
the Homestead Exemption laws of this State.

Dated this 3rd day of July, A. D. 19 ...
Signed, Sealed, and Delivered in Presence of

George Wilson (Seal)




State of Illinois 1

I, Charles Walker, a notary public, in and for said County, in the State
aforesaid, do hereby certify that George Wilson, personally known to me
to be the same person whose name is subscribed to the foregoing instru-
ment, as having executed the same, appeared before me this day in per-
son and acknowledged that he signed, sealed, and delivered the said in-
strument as his free and voluntary act, for the uses and purposes therein
set forth, including the release and waiver of the right of homestead.
Given under my hand and notarial seal this 3rd day of July, A. D. 19. ..

Charles Walker,
Notary Public.

Sec. 6. Covenants and conditions. Quite often the grantor
places restrictions upon the use which may be made of the land con-
veyed. He may, for instance, provide that it shall be used exclu-
sively for residential purposes and that the style and cost of the
residence meet certain specifications. These restrictions are so
inserted in the deed as to act as covenants or promises on the part
of the grantee to observe them, and are said to run with the land.
Even though the grantee fails to include them in a subsequent deed
made by him, the new owner is nevertheless subject to them. They
remain indefinitely as restrictions against the use of the land.

Most of these covenants are inserted for the benefit of surround-
ing property and may be enforced by the owners of such property.
This is particularly true where the owner of land which is being
divided into a subdivision inserts similar restrictions in each deed.
The owner of any lot which is subject to the restrictions is permitted
to enforce the restrictions against the other lot owners located in
the same subdivision. Only occasionally is a covenant inserted for
the personal benefit of the grantor.

Deeds containing a condition subsequent are sometimes given to
the grantee. Such deeds provide that the title reverts to the
grantor in case the condition occurs. A deed to a church, by way of
gift, often provides that the property must continue to be used for
church purposes or title will revert to the original owner. If the
provision for reversion is not included, it becomes difficult to dis-
tinguish between a covenant and a condition. In case of doubt, the
courts tend to treat these provisions as covenants rather than as

Sec. 7. Execution of deeds. The statutes of the various states
provide the necessary formal requirements for the execution and
delivery of deeds. A deed must be signed, sealed, acknowledged,
and delivered. A deed is not effective until it is delivered to the
grantee : that is, placed entirely out of the control of the grantor.
This delivery usually occurs by the handing of the instrument to
the grantee or his agents. Where property is purchased on install-
ment contract, and occasionally in other cases, the deed is placed in


the hands of a third party, to be delivered by him to the grantee
upon the happening of some event, usually the final payment by
the grantee. Such delivery to a third party is called delivery in es-
crow and takes control over the deed entirely out of the hands of
the grantor. Only if the conditions are not satisfied is the escrow
agent at liberty to return the deed to the grantor.

Sec. 8. Recording of deeds. In order that the owner of real
estate may notify all persons that he has title to the property, the
statutes of the various states provide that deeds shall be recorded in
the recording office of the county in which the land is located.
Failure of a new owner to record the deed makes it possible for the
former owner to convey and pass good title to the property to an
innocent third party, although he has no right to do so and would
be liable to his first grantee in such a case.

Sec. 9. Abstracts of title. Every deed, mortgage, judgment,
lien, or estate proceeding which affects the title to real estate, is re-
quired by statute to be filed and recorded in the recording office of
the county within which the real estate lies. In order for an owner
to know the history and nature of the title to be obtained by him,
title companies examine such records and prepare abstracts of the
record. A purchaser of real estate should demand such abstract of
title and have it examined in order to determine whether there are
any existing claims against the property, or any outstanding inter-
ests that might in any way affect his title. The abstract of title
must be supplemented from time to time, in order to show the
chain, so that all court proceedings, such as foreclosures, partitions,
transfers by deed, and probate proceedings, may be shown. Title
companies are organized for the purpose of preparing such ab-
stracts, and, after their preparation, examination of them should be
made by a competent attorney before a purchaser accepts the title
from the grantor.

Sec. 10. Title by descent or will. Each state provides by stat-
ute for the disposition to be made of the property of a deceased per-
son who leaves no will. It is customary to allow the surviving
spouse and children to share in the estate in proportion of one third
and two thirds respectively, this being true whether there is one or
several children. For the details of the statute of descent, refer-
ence must be made to the law of the particular state involved.
Personal property usually descends in accordance with the law of
the state in which the deceased resided at the time of his death,
whereas real property normally descends according to the law of
the state in which it is situated.

With two exceptions, the deceased may, by will, distribute his
property as he desires. He may leave all of it to one child at the ex-


pense of the others or he may leave it all to some charitable institu-
tion and make no provision for his children or relatives. In such
cases, exactly what the testator had in mind must be clear from the
provisions of the will. Naturally, a person may not make disposi-
tion of his property until provision has been made for the payment
of his debts, and, second, the law of many states provides that the
deceased must make some provision for the surviving spouse. The
law generally stipulates that the survivor must be left with at least
one third of the net estate.

A will is effective only when it has been drawn by one of sufficient
mental capacity to realize fully the nature and effect of his act.
The law requires that the signature to the will be witnessed by at
least two, and in some states three, persons who are not interested
in the estate. In a few states, a will written entirely in the hand-
writing of the deceased is probated even if it has not been witnessed.
It should be understood that a will has no effect on the right of the
owner to dispose of property during his lifetime. A will takes ef-
fect only at death and only then if it has not been revoked by the
testator prior to his death.

Estate in Real Property

Sec. 11. Estates in fee simple. A person who owns the entire
estate in real property is said to be an owner in fee simple. The
title to real property may be divided that is, a person may possess
the right to own it for his life or for that of another. Such an estate
is called an estate for life. A person, by lease, may have the right
to the possession of real property for a term of years, but such prop-
erty is regarded as personal property, although in effect the lease
constitutes an interest in real property.

Sec. 12. Life estates. An owner of land may create, either by
will or by deed, a life estate therein. Such a life estate may be for
the life of the grantee or it may be created for the duration of the
life of some other designated person. Unless the instrument which
creates the life estate places limitations upon it, the interest can be
sold or mortgaged like any other interest in real estate. The buyer
or mortgagee takes into consideration the fact that he receives only
a life estate and that it may be terminated at any time by the death
of the person for whose life it was created. For full protection, the
mortgagee should carry insurance upon the life of the life tenant.

The life tenant is obligated to use reasonable care to maintain the
property in the condition in which it was received, ordinary wear
and tear excepted. It is his duty to repair, to pay taxes, and to pay
interest on any mortgage which may have been outstanding at the
time the life estate was created, out of the income received. The


life tenant has no right to make an unusual use of the property if
such a use tends to deplete the value of the property unless the
property was so used at the time the estate was created. For in-
stance, a life tenant would have no right to mine coal or to cut and
mill timber from land in which he held only a life estate unless those
operations were being conducted or contemplated at the time the
life estate was created.

Sec. 13. Remainders and reversions. After the termination
of a life estate, the remaining estate may be given to someone else,
or it may revert to the original owner or his heirs. If the estate is
to be given to someone else upon the termination of a life estate,
it is called an estate in remainder. If it is to revert back to the
original owner, it is called a reversion. If the original owner of the
estate is dead, the reversion comes back to his heirs. A remainder
or a reversionary interest may be sold, mortgaged, or otherwise dis-
posed of in the same manner as any other interest in real property.

Sec. 14. Dower and curtesy. At common law, a wife is en-
titled, upon the death of her husband, to a life estate in one-third
of any real property which her husband owned at the time of his
death. The common law provided that, if there was a child born
alive, upon the death of the wife the husband was entitled to a life
estate in the whole of the wife's property. This was known as

Curtesy has quite generally been abolished by statute, although
in some of the states the husband is given the right of dower in its
stead. Some of the states have also abolished dower, making some
other provision for the surviving wife or husband. A few of the
states are in the midst of a change. New York, for example, makes
dower available to a surviving wife in case the marriage took place
before 1930 but is limited to the real property which was acquired
by her husband prior to 1930. In those states where dower is
provided for, the husband cannot defeat the dower by conveying
his property prior to his death. A purchaser acquires good title
only if the wife joins in the deed, unless the statute makes some
other provision. Dower is now quite generally controlled by stat-
ute in those states where it is in use.

Sec. 15. Easements. An easement is a right, granted by
the grantor to the grantee, to use real property. For example, the
grantor may convey to the grantee a right of way over his land, the
right to erect a building which may shut off light or air, the right
to lay drain tile under the land, or the right to extend wires over the
land. If these rights of easement are reserved in the deed convey-
ing the property, they pass along with the property to the next
grantee and are burdens upon the land. Such easements may be


made separate and distinct, by contract, and are binding only to the
immediate parties to the agreement. If such right to use another's
land is given orally, it is not an easement but a license, and the
owner of the land may revoke it at any time ; whereas an easement
given by grant cannot be revoked or taken away except by deed, as
such a right of way is considered a right in real property. An ease-
ment, like title to property, may be acquired by adverse possession.

Sec. 16. Tenancies joint tenancy, and tenancy in common.
An estate in land may be owned by several persons. Such per-
sons may hold the real estate, either as tenants in common or as
joint tenants, according to the nature of the granting clause in the
deed by which the title is transferred. In a joint tenancy each per-
son owns an undivided interest in the real property. Upon the
death of any one of the owners, the remaining owners take the prop-
erty, and, upon the death of all the owners except one, the entire
property passes to such survivor, if the joint tenancy has not been
terminated by some act of the parties. 3 In tenancies in common,
however, upon the death of one of the several owners, the title to
his share passes to his heirs, and the heirs, therefore, become tenants
in common with the surviving tenants in common. A joint ten-
ancy can be created only by a specific statement in the granting
clause of the deed, which usually states that the grantees shall hold
title to said premises as joint tenants with the right of survivorship,
and not as tenants in common. In the absence of such clause,
grantees are tenants in common.

Sec. 17. Tenancy by entirety and community property. Some
states have provided by statute for tenancy by entirety, which is
essentially like joint tenancy, except that it cannot be terminated
without the consent of both parties and is available only between
husband and wife. Under joint tenancy, either co-owner can de-
stroy the joint tenancy by a sale and transfer of his interest, the
purchaser becoming a tenant in common with the other owner or
owners. Such is not possible if the ownership is one by entirety.

Several of the southwestern and western states have what is
known as community- property, having inherited it in part from
their French and Spanish ancestors. In these states, all property
acquired after marriage other than by devise, bequest, or from the
proceeds of noncommunity property, becomes the joint property of
husband and wife. Control of the property is vested primarily in
the husband and he is authorized, in most states, to sell or mortgage
it. The proceeds of the sale or mortgage in turn become commu-
nity property. Upon the death of one of the parties, title to at least
half of the community property passes to the survivor. In most

3 Van Antwerp v. Horan, et al,, 1945, 390 111. 449, 61 NE.(2) 358; p. 812.


of the states, the disposition of the remainder may be by will or
under the rules of descent.

Review Questions and Problems

1. How does real property differ from personal property? What is
the nature of growing crops?

2. Name five methods of acquiring title to real property.

3. What is the difference between a warranty and a quitclaim deed?
Name the three warranties implied from a warranty deed.

4. A plotted a certain ten acres of land into city lots. In the deed to
each lot he inserted a provision that no house should be constructed upon
the lot at a cost of less than $5,000. One of the grantees now proposes
to build a $4,000 house. May the other grantees enforce the restriction?

5. What is the meaning of delivery in escrow? When is it used?

6. If you desired to purchase some real estate, where would you go to
determine the state of the grantor 's title?

7. A lives in Illinois and owns property in South Dakota. Unknown
to A, B enters and takes possession of the property, pays taxes, and farms
it for a period of twenty -five years. Do these acts affect A's title?

8. A and B hold title to real estate as joint tenants. May A sell and
convey his one-half interest to C without obtaining B's consent? A dies
and his heirs contend they own his share. Is their contention correct?

9. A, the owner in fee simple of certain property, deeds a life estate
therein to his mother. What is the balance of the estate called? To
whom does it belong?

10. What is the difference between dower and curtesy?

11. Distinguish between an easement and a license.

12. A willed certain land to W for life with the remainder to W's
minor children. A died and sometime thereafter W leased the property
to X Coal Company, which stripped the land of coal and destroyed it
for other useful purposes. Have the children a good cause of action
against the coal company?

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