Daily Development for Wednesday, July 2, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
The Reporter for the two (note, two) following cases was Professor John Orth of the University of North Carolina Law School.
JOINT TENANCY; SEVERANCE: Conveyance by two of three joint tenants from themselves as joint tenants to themselves as joint tenants severed the joint tenancy with the third joint tenant.
Sathoff v. Sutterer, 869 N.E.2d 354 (Ill. App. 2007)
Grantor conveyed property to a married couple and a third party "as joint tenants with right of survivorship." Thereafter, the married couple conveyed their interest "from themselves as joint tenants to themselves as joint tenants." The husband died, then the wife died. The third party filed an action against the executor of the wife's estate to quiet title in herself in the entire estate and for a declaratory judgment that the married couple's conveyance had not severed the joint tenancy. The circuit court granted the executor's motion to dismiss the complaint, and the court of appeals affirmed. In short, the joint tenancy had been severed, and the third party obtained a cotenancy interest.
Understanding the issue in this case requires a quick review of first-year Property law. The creation and continuance of a common law joint tenancy, which included a so-called "right of survivorship," required that the interests of the joint owners share four unities: time, title, interest, and possession. That is, their interests must commence at the same time, derive from the same title, be of the same quality, and give the same undivided right of possession. As a necessary consequence, a conveyance by a sole owner to himself and another did not at common law result in a joint tenancy, even if it was intended to have that effect. To create a joint tenancy in such a case required the use of a so-called "straw-party conveyance," that is, a conveyance from the sole owner to a third party (the straw man), who then re-conveyed to the two as joint tenants. This requirement has been eliminated by statute in most states, including Illinois, but the plaintiff in the present case argued t
hat the language of the statute did not cover the case of two of three joint tenants conveying from themselves as joint tenants to themselves as joint tenants. As a matter of statutory construction, this was unpersuasive, and in any event the court indicated that it would give the statute a liberal construction. (It is a nice question whether the statute was needed at all in this case. Even at common law, the grantors here had all the unities to begin with.)
In a few states another nice question could arise concerning the grant to the married couple. At common law all such grants were presumed to be in tenancy by the entirety unless a contrary intention is expressed in the conveyance, and a few states continue the presumption as a matter of common law or by statute. Was the indication that the three held "as joint tenants with right of survivorship" enough to rebut the presumption? Or could it be interpreted to mean that the married grantees held their interest in tenancy by the entirety with the third grantee "as joint tenants with right of survivorship"? If the couple took in tenancy by the entirety, another question could arise: whether they took one share or two; that is, whether among the three, the married pair as a unit took one-half or they together took two-thirds? There is authority, most of it old, that in such cases they took one-half.
Reporter’s Comment: The case illustrates the perils of the joint tenancy. As the court reminds us: "An undisputable right of each joint tenant is the power to convey his or her separate estate without the knowledge or consent of the other joint tenant and thereby to sever the joint tenancy, transforming it into a tenancy in common and extinguishing the right of survivorship." (356) By self-conveyance, one (or in this case, two) of the joint tenants can continue the concurrent ownership but eliminate the "winner take all" feature. Was the plaintiff in this case taken by surprise? And did that explain the motive for pursuing the lawsuit?
JOINT TENANCIES; SEVERANCE: A joint tenancy may be severed by to oneself if that is the grantor’s intent.
Estate of Johnson, 739 N.W.2d 493 (Iowa 2007)
Husband and wife held property as joint tenants with right of survivorship. When the wife became seriously ill, the family prevailed upon her in her hospital room to execute a power of attorney allowing them to retitle the property in the husband’s sole name. This they attempted by having the husband and the wife’s attorney-in-fact convey from themselves as joint tenants to him alone.
Confounding the family’s expectations, the husband predeceased the wife. The wife (or those acting on her behalf) alleged that she was incompetent at the time she executed the power of attorney and claimed the property by right of survivorship. The trial court agreed that the power of attorney was invalid, but held that the effect of the husband’s participation in the grant from the couple as joint tenants to him as sole owner had the effect of severing the joint estate, converting it into a tenancy in common. The Iowa Supreme Court reversed on the issue of severance, holding that the deed was void and therefore the wife became sole owner on her husband’s death.
The Supreme Court used the case as the occasion to announce Iowa’s abandonment of the time-hallowed requirement of the four unities (of time, title, interest, and possession) to create and maintain a joint tenancy. Henceforth, the state would join others in following an “intent-based approach” for recognizing the existence of a joint tenancy. The problem in this case, of course, was determining intent. It was argued on behalf of the husband’s estate that his intent to terminate the joint tenancy was clear and although without the wife’s joinder he could not transfer the entire estate to himself, his action in executing the deed was effective to convert the joint tenancy into a tenancy in common. While accepting that a conveyance from himself as joint tenant to himself as tenant in common – impossible at common law under the rule of the four unities – would have been effective under the new intent test, the court held that the husband’s intent in this case, as gathered from the
deed, was not simply to sever his interest from his wife’s, but to secure the entire estate for himself.
Intention alone is not enough. The court held that there must be “an instrument effectuating the intent.” (499) In this case, the deed relied upon as evidencing the intent to sever was void, and a void conveyance cannot be evidence of intent. Of course, the discarded four-unities test would have produced the same result in this case.
Reporter’s Comment: I assume the court does not intend to carry its “intent-based approach” so far that the intent to sever if unequivocally expressed in a will would eliminate the right of survivorship. Perhaps the court addressed this by saying that its new rule required, in place of the formal requirement of the four unities, a formal requirement that there be “some action or instrument sufficient to corroborate and give effect to that intent.”
Editor’s Comment: The fundamental problem, in the editor’s view, is the use of a granting instrument that creates a form of property ownership that can be altered significantly by the secret act of only one of the owners. What makes matters worse is the fact that such instruments often are used by unsophisticated parties who hardly can appreciate the risks. One wonder if, in such circumstances, one attorney can fairly represent the interests of both grantees or, for that matter, the grantees and grantor, since in each case there seems to be a fundamental risk that the granting intent can be frustrated. To the extent that the grantees or grantor have a choice of a different granting device (and in fact they usually do), shouldn’t there be a careful explanation of this by counsel and also a recommendation that the parties have independent counsel? Is that ever done? The editor doubts it very much. The joint tenancy deed seems imbedded in the “informal law” practices of many ju
risdictions, and there is little concern given to the danger of unilateral manipulation of expectations.
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