REAL ESTATE LAW PRACTICE “KEYPOINTS”

(May, 2001)

 

By Steven B. Bashaw

Steven B.  Bashaw, P.C.

Suite 1012

1301West 22nd Street

Oak Brook, Illinois  60523

Tel.: (630) 472-9990

Fax.: (630) 472-9993

e-mail:  sbashaw@bashawlaw.com

(Copyright 2001 - All Rights Reserved)

 

 

(EDITOR’S NOTE: Each month I get a good number of telephone calls inquiring about issues and cases discussed in the current and prior month’s articles. It is heartening to know that so much of what we cover actually are "keypoints" to real estate practitioners, but sometimes I am not available, or you, like me, find time to think about pending cases at the oddest hours. In those events, you will find these "Keypoints", archived by month with brief topic discussions, on my website, (www.bashawlaw.com), as my "thanks" for your support and encouragement. Please logon to the website, feel free to browse, read, copy the materials and e-mail us there. As an "added bonus" to those of you who have trouble opening the attachments you receive from me, if you go to my website, and then to the "Publications" section, where you will be able to download the Microsoft Word Viewer. This will solve all of your problems! We also have the Microsoft PowerPoint Viewer and the Adobe Acrobat Reader download links for your convenience and future use.

 

In addition to encouragement from the Illinois State Bar Association’s Real Estate Section Council, and the Illinois Institute of Continuing Legal Education, it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law Keypoints. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area. Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below. This month, Dick Bales has some interesting thoughts on the Butera case as well as easements by implication which compliment the keypoints nicely.)

 

1. TITLE INSURANCE COVERAGE; SUCCESSORS BY OPERATION OF LAW, PURCHASE AND DISTRIBUTEES:

It never ceases to amaze me that certain topics and issues just seem to spontaneously generate and then become "hot areas" in the law. Last month, a conversation with Richard Spicuzza of DiMonte & Lizak over the seemingly harsh result in a title/trust case out of Maryland lead me to present Gebhardt Family Investment, L.L.C. v. Nations Title Insurance of New York , as and illustration, (and warning), of the position a title company is able to take denying coverage following conveyance from the insured to a trust for estate planning purposes. Dick Bales even agreed to write a "Keypoint" from his point of view in the title industry explaining to all of us why this case represents an appropriate result. This month, the First District gives us a case even more representative of Illinois transactions, (a land trust rather than an investment trust is involved).

The Buteras in Butera v. ATGF, Inc., were brothers, Joseph and Paul, who originally held title to real estate in a land trust, Chicago Title and Trust Company, Trust No. 51843. Joseph, Paul and Giovanni were the beneficiaries when the trust was created in 1968. After Giovanni assigned his interest to Paul and Joseph in 1974, ATGF issued a title policy naming the land trustee as the insured in 1986. In 1993, the land trustee conveyed title by trustee’s deed to an Illinois Corporation, Joe and Paul, Inc., of which Joseph and Paul were the only shareholders. A few years thereafter, in 1995, Joe and Paul, Inc. conveyed by warranty deed to Joseph and Paul, and the corporate entity was subsequently dissolved. In 1997, the Buteras learned that the 1978 real estate taxes were an outstanding lien on the property; despite the fact that in the 1986 ATGF policy insured the land trustee over all taxes prior to 1985. They filed this action against ATGF for Declaratory Judgment that they, Joseph and Paul Butera, were insured under the policy of title insurance issued in 1986. ATGF denied coverage noting the policy language that defined "insured" as those who are named (the land trustee) or those who succeed by "operation of law" as distinguished from those who "purchase". In a decision which has some great title insurance law language, the First District affirmed the trial court’s ruling in favor of ATG.

Title insurance policies are subject to the same rules of construction as other insurance policies, in accordance with the common understanding of the words used, but with ambiguities in favor of the insured inasmuch as the policy is drafted by the insurer. Here the Buteras did not succeed to their interest "by operation of law" because the plain meaning of this phrase denotes those who acquire property rights without the necessity of a conveyance by deed. The Court held that this interpretation was consistent with title insurance cases from New Jersey and Delaware, Historic Smithville Development Co. v. Chelese Title and Pioneer National Title v. Child, which had dealt with the same policy language, as well Illinois public policy allowing insurers to place limitations on title policy insureds to a certain, foreseeable group of individuals. The Court rejected the Buteras’ contention that they were insured pointing to the policy limitation which made a distinction between those who purchase real estate rather than succeeded to it by operation of law. Then, finding the term "purchase" to be ambiguous, and adopting ATG’s interpretation of purchase as any acquisition of title by the voluntary act of the parties, the Court rejected the Buteras’ argument that "purchase" required payment of valuable consideration. The Buteras were not "successors" or "distributees", either. The title obtained by the corporation from the land trustee was a voluntary conveyance, as was the conveyance from the corporation to the individuals. The corporation was never a named insured. The Court refused to consider whether the Buteras had an estate or interest in the property as beneficiaries of the named insured land trust. Accordingly, there was no coverage available to the brothers Butera.

My friend Dick Bales, discusses this case from his title insurance prospective and offers us a number of "what if" considerations, but this case clearly indicates the importance of the "Hill Street Blues" adage, ("Be careful out there"), to those of us handling mesne conveyances of real estate from a title insurance point of view. My suggestion? Get title insurance (update, endorsement, or new policy), at each transfer.

 

2. TITLE INSURANCE COVERAGE; FROM THE TITLE INSURANCE COMPANY PERSPECTIVE:

How ironic! Last month we discussed title company coverage for post-policy conveyances; this month the first district case Butera v. Attorneys' Title Guaranty Fund, Inc., No. 1-99-1387, shows up on our doorstep--or at least on our computer screen.

In 1986 ATG issued its title policy insuring Chicago Title and Trust Company, as trustee under trust number 51843. Joseph and Paul Butera were the sole beneficiaries of that trust at that time. In 1993 the trustee conveyed the land to Joe and Paul, Inc. In 1995 Joe and Paul, Inc. conveyed the land to Joseph and Paul Butera. Joseph and Paul were the only shareholders of Joe and Paul, Inc. This corporation dissolved about one month later. In 1997 First American Title Insurance Company told the Buteras that 1978 back taxes in the amount of $14,378 were due and owing. The Buteras, contending that ATG should pay these taxes, filed an action for declaratory judgment, seeking a declaration that the Buteras were the "insureds" under the ATG policy and that ATG was liable for the taxes. On cross motions for summary judgment the circuit court granted summary judgment in favor of ATG and the Buteras appealed.

On appeal the Buteras raised two issues: one, whether the Buteras, as beneficiaries of a land trust that is the named insured of an owners title policy is also an insured after conveying the property to a corporation for no consideration and then again conveying the property for no consideration to the corporation's sole shareholders, the beneficiaries individually; and two, whether the beneficiaries of a land trust retain an estate or interest in the land for continued policy coverage after these two conveyances of the property. The appellate court affirmed the finding of the circuit court.

The Buteras argued that they were the "insureds" under the policy because they were successors in interest by operation of law. They contended that because "purchase" denoted a transfer only for valuable consideration, "by operation of law" encompassed every method of acquiring property that was not for valuable consideration. ATG argued that "purchase" covered any acquisition of title by the voluntary act of the parties.

The Buteras also claimed to be "distributees" when they received the property as sole shareholders upon the dissolution of Joe and Paul, Inc. and therefore were policy insureds. The New Jersey Superior Court agreed with this analysis in Historic Smithville Development Co. v. Chelsea Title & Guaranty Co., 184 N.J. Super. 282, 445 A.2d 1174 (1981), aff'd in part and rev'd on other grounds, 190 N.J. Super. 567, 464 A.2d 1177 (1983). ATG conceded that the ruling in this case would resolve the matter if the only conveyance was from Joe and Paul, Inc. to the Buteras individually. But the first conveyance from the trust to Joe and Paul, Inc. was not a distribution.

ATG argued that successors "by operation of law" are those parties who acquire enforceable property rights without the necessity of a conveyance by deed, as opposed to a conventional transaction where paper title changes hands. The title policy defines "insured" as including heirs, devisees, and corporate successors. These entities are all successors of the insured because they take the property not FROM the insured but THROUGH the insured by operation of law.

The appellate court agreed, finding that Joe and Paul, Inc. was not a successor to the interest of the trust by operation of law. The corporation was a stranger to the property with no preexisting relationship to the trust when the named insured trustee deeded the property to it. The court also stated that because the trust relinquished its interest in the real estate when the trustee deeded the property to Joe and Paul, Inc., it did not have to address the question as to whether or not the Buteras possessed an estate or interest in the property as beneficiaries of the trust.

It seems to me that this case has tremendous significance for the real estate practitioner. Change the facts slightly: In 1993 Joe and Paul Butera purchase property and are the named insureds in an owners title policy that is subject to no other taxes except for 1993 taxes. In 1995 they convey the land into a personal trust. Their attorney does not order an "additional insured" endorsement from the title insurance company that insured the 1993 purchase. In 1997 another title company informs the Buteras that they owe 1978 back taxes. This case suggests that the original title company would have no legal obligation to pay those back taxes.

Or does it? What if the Buteras conveyed the property into their personal trust via a warranty deed and not a quit claim deed? Does this change anything? Paragraph two of the Conditions and Stipulations of the 1992 owners policy states that "coverage of this policy shall continue in force as of Date of Policy in favor of an insured only so long as the insured... shall have liability by reason of covenants of warranty made by the insured in any transfer or conveyance of the estate or interest." Does this mean that real estate practitioners should simply have their clients execute warranty deeds instead of quit claim deeds when they convey land into personal trusts? Should attorneys stop obtaining title company "additional insured" endorsements for their clients' title policies?

Possibly not. It seems to me that the whole idea of warranting title is to provide assurances to a purchaser for value. I do not believe that a warranty deed can be used to shield the estate planner from the holding of this case and others like it, such as the Gebhardt case discussed last month.

So when the attorney for the Buteras heard about the back taxes, should he have instructed his clients to convey the land back to the trust? Would that resurrect the protections of the title policy? I don't believe so. Paragraph 2 of the Conditions and Stipulations provides that title policy coverage shall continue, "only so long as the insured retains an estate or interest in the land." It seems to me that once the estate or interest is conveyed, coverage does not merely slumber, it ceases.

 

Dick Bales, Chicago Title Insurance Company, Wheaton

 

3. EQUAL PROTECTION & SLUM LORD SIGN PROGRAMS:

The Mayor of the City of Kankakee read a newspaper article about the Syracuse, New York program to battle slum lords that included placing signs on the front lawns of properties decrying the condition of the premises and their owners, and decided to implement a similar plan. As a result, a three foot by five foot sign was placed on the parkway in front of 805 S. Third Street, Kankakee that stated:

"SLUM PROPERTY! THE OWNER OF THIS PROPERTY: ERNEST ALBIERO…IS IN VIOLATION OF CITY CODE AND CHOOSES NOT TO BRING THIS PROPERTY INTO COMPLIANCE THEREBY SIGNIFICANTLY CONTRIBUTING TO THE BLIGHT IN THIS NEIGHBORHOOD."

Mr. Albiero brought an action against the City of Kankaee, Mayor Donald Green, and other agents of the City for violation of his right of equal protection of the law in Albiero v. City of Kankakee, (7th Cir., April 5, 2001), Case No. 00-1693.  Mr. Albiero owned several rental properties in Kankakee, and had been a plaintiff in a number of prior law suits against the City of Kankakee and had "tangled with the various Kankakee city officials a number of times over various issues such as inspections, permits, repairs, etc." (All of which appear to have been dismissed; indicating that Mr. Albiero may have been acting pro se or without effective counsel.) The City of Kankakee program at issue here employed four factors leading to the placement of signs: (1) the property appeared dilapidated and not in compliance with local codes based upon exterior appearance, (2) repeated citations for code violations had been issued, (3) repeated complaints had been received from neighbors, and (4) the property clearly had a deleterious effect upon the neighborhood. Based upon these criterion, the Asst. Chief of the City Fire Department and the Code Enforcement Officer of Kankakee submitted 15 properties to the Mayor for the sign program. Mr. Albeiro’s property had a history of code violations, notices, citations, and complaints over a period of two years and was one of five properties selected. Following a litany of notices, letters and code violation citations, his sign was posted on July 11, 1997. By August 20, 1997, the City had erected 14 signs on different property, and by the following October, the City had put up between 19 and 22 signs. Mr. Albiero’s sign was removed in December, 1998, following an inspection of the property. The trial court granted the City’s motion to dismiss the defamation count, and then granted summary judgment on the count alleging selective prosecution and malicious retaliation under Section 1983. (For those of you who are a little sympathetic to Mr. Albiero’s position, a prior decision in the Seventh Circuit, Esmail v. Macrane, (7th Cir., 1995), 53 F.3d 176, was discussed and presents a far better factual scenario than the current case.) Based on the standard for Summary Judgment, the Court noted that Albiero failed to demonstrate that the City was treating him differently that those individuals who are otherwise identical under the circumstances, (i.e., other slum lords), or that there was differential treatment that was motivated by "totally illegitimate animus". . There was no evidence that the City "single-out" Mr. Albiero, or that its actions were a spiteful effort to retaliate for the prior litigation. There were twenty other landlords who received the slum lord signs, and there was no evidence that Mr. Albiero’s property was in any better condition that the other properties targeted. The underlying program had a rational and reasonable basis for determining its focal points, and Mr. Albiero simply did not meet the burden pleading that he was denied equal protection as among other slum lords.

 

4. TAX DEEDS AND BANKRUPTCY; A MATTER OF TIMING

In Herman Hood, d/b/a G&H Investments v. Richard Hall , (5th Dist., Apri8l 17, 2001), http://www.state.il.us/court/Opinions/AppellateCourt/2001/5thDistrict/April/Html/5990733.htm, the interplay between the issuance of tax deeds and the automatic stay of bankruptcy was presented once again…with a result perhaps different that you might have thought, and acknowledgement that there are decisions contrary…but a good explanation provided nonetheless.

Richard Hall argued that the issuance of the tax deed was stayed by the filing of his bankruptcy, and therefore the deed void as issued in violation of 11 U.S.C. Section 362. Herman Hood purchased at the tax sale in 1995, and received a certificate of purchase at that time. The redemption period on the tax sale was to expire on July 10, 1998. On June 19, 1997, Hall filed a bankruptcy petition, which was converted to a Chapter 7 on March 3, 1998, and on October 5, 1998, he was discharged. On March 23, 1998, Hood filed a petition for tax deed in the Circuit Court alleging the redemption date expired on July 10, 1998. On July 20, 1998, the deed was issued. Almost a year later, on July 8, 1999, Hall filed a motion to vacate the tax deed alleging the issuance of the deed violated the automatic stay. The trial court denied the motion to vacate, and the Fifth District affirmed, drawing an important distinction in the timing of all of this that should not go unnoted.

The automatic stay provision of the Bankruptcy Code does not toll the running of the statutory period of redemption provided by Illinois law, it only provides a stay that prohibits any affirmative actions against the debtor. Accordingly, the expiration of the redemption period automatically divested the owner of his interest in the property, and is not an affirmative act proscribed by the automatic stay. Here, like in the case of In re Tabor Enterprises, (Bankr. N.D. Ohio, 1986), 65 BR 42, (a case interpreting Illinois tax deed law), the expiration of the redemption period automatically divested the owner of the their property interest, and no affirmative action was required of the tax purchaser within the meaning of the Bankruptcy Code. All of the legally significant acts necessary to convert the certificate of sale into a tax deed took place automatically, (rather than requiring an affirmative step by the tax buyer), and there was no violation of the stay. The Court distinguished In re County Collector, (1997) 291 Ill.App.2d 588 on the basis that the bankruptcy petition was filed prior to the sale and therefore the conduct sale was an affirmative act in violation of the stay. A similar rationale produced a similar result in In re Jackson, (Bankr. N.D. Ill., 1994), 176 B.R. 156, but this opinion noted that "We recognize that there are decisions that hold contrary to Tabor Enterprises, Inc. and Jackson, (see In re Bequtee, (Bankr. S.D. Il. 1995), 184 B.R. 327; In re Stewart, (Bankr. C.D. Il. 1996) 190 B.R. 846); however we find the reasoning of Tabor Enterprises, Inc. and Jackson to be more persuasive."

 

5. HOME OWNERS ASSOCIATIONS; THE COST OF LITIGATION:

John Bishof was an attorney, and he and his wife and owned a lot in the Forest Glen subdivision in Oak Brook, Illinois. Prior to 1996, the annual assessment charged by the homeowners association was $127.50. This figure was based on a calculation of multiplying the minimum lot size of 15,000 square fee by $0.085. (The Association did not have accurate lot sizes prior to 1996, so they used the minimum allowable lot size under the local zoning ordinance, and the $0.085 was the maximum annual rate of assessment as defined in the Declaration.) In 1996, however, the Association Board advised each owner that while the prior Boards had used the smallest lot size allowable under the zoning ordinances as their multiplier, this Board was going to use the actual lot size in order to increase the assessment to fund the cost of landscaping. Bishof objected and refused to pay the increase. The Association sued to foreclose for nonpayment, recover late fees, costs, and attorneys fees. Bishop argued on appeal that there was an ambiguity in the Declaration in that there were provisions which stated that the Board of Directors was to determine the regular assessment by a 2/3 vote of its members, while a separate contradictory provision stated that: "In the event the Membership shall consider…the levying of regular assessments larger than the previous year’s regular assessment, …such matter or matters shall be adopted at a Membership meeting at which a quorum is present upon the affirmative vote of two-thirds (2/3) of the entire Membership, except as provided by (the declaration provision providing for Board determination).". This apparent contradiction, he argued made the increase invalid. The trial court adopted the Association’s interpretation that the declaration provision for a membership vote was simply an alternative method of arriving at the assessment, and not an ambiguity or contradiction. The Second District agreed. Not seeing an ambiguity, the Court simply looked to the ordinary meaning of the words employed and stated "we will not arrive at a construction that runs contrary to the plain and ordinary meaning of the language used." The Declaration was not ambiguous, but simply provided that if the Board increased assessment by a vote of 2/3 of its members, then the increase need not be adopted by a vote of the entire membership.

More instructively, the trial court’s award of $6,107.00 in attorney’s fees for the Association was affirmed based on the clear language of the declaration and with the admonishment that:

"Since Defendant John S. Bishof, Jr., is a lawyer and represented himself and his wife, they many not have incurred legal fees in litigating this $60 dispute over the assessment of a one-half acre lot in Oak Brook. But they knowingly took the risk that their arguments, which, incidentally we have found to be without merit, would fail and this $60 dispute would result in liability for several thousand dollars of legal fees." Forest Glen Community Homeowners Association v. Bishof, (2nd Dist, April 17, 2001), http://www.state.il.us/court/Opinions/AppellateCourt/2001/2ndDistrict/April/Html/2991346.htm

 

6. EMINENT DOMAIN; PUBLIC TAKING AND PRIVATE USE:

We have been following the case of Southwestern Illinois Development Authority v. National City Enviornmental, L.L.C. over the last two years. (This is the condemnation case in which the SWIDA used its quick take power to condemn real property owned by National City and used as a metal recycling center adjacent to the Gateway International Motorsports Corporation. Gateway needed more parking to expand, and SWIDA had advertised that in exchange for fees and expenses it would condemn land at the request of private developers to advance a favorable climate for new jobs, foster civic pride, and develop entertainment and sports venues. As part of the "quick take", SWIDA conveyed the property to Gateway, and National City appealed seeking to enjoin the taking for use as a parking lot as a "private" rather than "public" purpose.) Numerous articles and analysis of the case decision in the Fifth District, Southwestern Illinois Development Authority v. National City Environmental, L.L.C., (5th Dist, April 29, 1999), 304 Ill.App.3d 542, 238 Ill.Dec. 99, 710 N.E.2d 896, http://www.state.il.us/court/Opinions/AppellateCourt/1999/5thDistrict/April/HTML/5980263.htm, emphasize the fact that this is an unique example of the Appellate Court limiting the power of eminent domain by finding the conveyance to increase the raceway’s profitability to be was a taking for "private use" rather than a "public purpose".

On April 19, 2001, however, the Illinois Supreme Court reversed the Fifth District and remanded the case to the Appellate Court stating "We agree with the circuit court that the Authority properly exercised its power of eminent domain. The taking of the Property is for a public use, not a private purpose. The appellate court believed otherwise, and, in light of its holding decided not to address other issues it had determined were property raised in this interlocutory appeal. We reverse the judgment of the appellate court and remand this cause to that court for further proceedings consistent with this opinion." , Southwestern Illinois Development Authority v. National City Environmental, L.L.C., (Il.S.Ct., April 19, 2001), http://www.state.il.us/court/Opinions/SupremeCourt/2002/April/Opinions/Html/87809.htm.

Justice Freeman’s opinion for the Court systematically reviewed the powers and purpose granted to the Authority by the legislature to promote economic development and elimination of blight. Noting that the role of the judiciary in condemnation cases is "an extremely narrow one" based on the United States Supreme Court decisions, and that" condemnation for a public purpose is not transformed into condemnation for a private use merely because the condemning body transfers title, use or possession of the property to a private party to carry out the public purpose involved.", Justice Freeman concludes with the U.S. Supreme Court’s statement that ‘In short, the Court has made clear that it will not substitute its judgment for a legislature’s judgment as to what constitutes a public use unless the use be palpably without reasonable foundation’. The evidence at the trial was reviewed in detail and found to support the Authority’s use of it s power in furtherance of a public purpose which was not an abuse of the discretion granted by the legislature, and therefore judicial intervention was not warranted.

The dissents written by Justice Harrison and Kilbride, with concurrence by Justice Thomas, speak eloquently of our forefathers and their struggle against governmental tyranny, concluding that the taking in this case "carries ‘the right of eminent domain to an alarming and dangerous extent" due to the fact that the taking which transferred the private property to another private person for a profit does not satisfy the ‘public purpose’ mandate limiting the right of eminent domain.

Is it possible that we will see this case one more time??… in the United States Supreme Court Reports?

 

7. EASEMENTS REVIEW FROM THE ISBA TRANSACTIONAL LAW DISCUSSION SITE:

As many of you know, the ISBA sponsors a number of discussion groups on its website. The purpose of these groups is to provide a venue for the exchange of ideas among members of the ISBA on specific areas of the law such as family law, commercial, estate planning, and, of course, real estate. The real estate discussion is grouped with estate planning and transactional lawyers on the "Transactional Law" site, (www.isba.org/Discussions), Occasionally a question/answer is posed to the group (more frequently, a number of questions and answers come forth on the same topic) which is especially useful and not to be simply "deleted" from the e-mail folder. Just one such exchange occurred this last month between Theresa O’Brien, (a frequent "questioner"), and Dick Bales, (a frequent "respondent") on the topic of easements which seemed particularly worthwhile to me:

 

From: Therese L. O'Brien

> Sent: Friday, April 13, 2001 1:08:22 PM

> To: ISBA Transactional Law

> Subject: [isba-transactional] Easement Question

>

I have a situation much like a 1st year property exam question:

Lot owner 1 owns 5 acres containing a gravel road. Lot owner 2 (5 acres) uses gravel road to access property pursuant to a recorded easement. Lot owner 3 (10 acres to the N.) uses gravel road pursuant to a "verbal" agreement between Lot owner 1 and Lot owner 3.

Lot owner 3 dies. Estate sells 10 acres to developer. Developer's trucks are using gravel road without authorization.

What options does lot owner #1 have? The gravel road seems to be an easement by necessity until the developer puts a road in. Can lot owner 1 have trucks stopped? Can he get compensation? Can he force developer to put road in immediately?

Any advice appreciated.

Therese O'Brien

 

> ----------

> From: Bales, Dick

> Sent: Friday, April 13, 2001 1:35:36 PM

> To: ISBA Transactional Law

> Subject: [isba-transactional] RE: Easement Question

>

I recently did some research on the creation of easements by operation of law. See below; perhaps it might be helpful.

A. Implied Easement--If a landowner of a tract of land uses one part of his land to benefit another part, and this use is such that if the parts were owned by different people, the use would constitute an easement, then, upon a conveyance of one of the parts, an implied easement, or easement by implication is created. See Limestone Development Corp. v. The Village of Lemont and K.A. Steel Chemicals, Inc., 284 Ill.App.3d 848 (1996).

1. The situation must indicate an implied intent by the parties to create an easement, even though the easement is not formally created by an instrument. See 45 Ill.Bar.J. 689 (1957).

2. Example: Jones, who owns lots 1 and 2, may have always used a dirt road located on lot 2 to get to his house on lot 1. If Jones sold lot 2 to Smith, a court might infer that an implied easement has been retained over lot 2 for ingress and egress, particularly if this was the only way in which Jones could get to and from his property.

B. There are several elements of an implied easement.

1. The prior use by the one landowner must have been obvious and "long continued." The reason for this is that the facts must indicate that the parties to the deed theoretically intended the present use of the land to continue, even after a portion of the land was sold. See Granite Properties Ltd. Partnership v. Manns, 117 Ill.2d 425 (1987).

2. The Limestone Development Corp. case states that a party seeking an implied easement must establish by clear and convincing evidence that at the time of the severance of title, the easement was in existence and was intended to be permanent.

3. It is not necessary that the easement be necessary for the enjoyment and use of the land; it is sufficient if the easement is highly convenient and beneficial to the dominant estate. See Flower v. Valentine, 135 Il..App.3d 1034 (1985); Seiber v. Lee, 158 Ill.App.3d 361 (1987).

4. The ownership of the two tracts must have been in one ownership when the use commenced, and then, separated hereafter, so that one person owns the burdened tract and the other person owns the benefited tract.

a. Consider the facts of Legendre v. Harris, 125 Ill.App.2d 76 (1979), where the court stated that "when an owner of two adjoining lots built a portion of his garage over the boundary line between the lots and subsequently transferred one of the lots, his grantees took that lot subject to or benefited by easement by necessary implication in favor of the encroaching garage."

C. Easement by Necessity--When the owner of land sells a portion of said land, so that what is left has no access to a dedicated road except over the owner's remaining land, or except over the land of a stranger, an easement by necessity is created over the remaining land of the seller. See Granite Properties Ltd. V. Manns, 117 Ill.2d 425 (1987); Luthy v. Keehner, 90 Ill.App.3d 127 (1980); 45 Ill.Bar J. 689 (1957); 12 Ill.L.Rev. 294 (1917);

Canali v. Satre, 688 N.E.2d 351.

1. With an easement by necessity, the easement must be necessary, and it must be shown that at some time in the past the two tracts of land were owned by the same person. See Granite Properties Ltd. Partnership v. Manns, 117 Ill.2d 425 (1987).

a. But Illinois courts have found easement by necessity to exist under circumstances short of "absolute necessity" where there was no reasonable alternative access to the conveyed land. See Rextroat v. Thorell, 89 Ill.2d 221, cert. denied, 459 U.S. 837 (1982); see also 10 ALR4th 447.

D. An implied easement (also known as an easement by implication) is very similar to an easement by necessity. But, there are a few subtle differences:

1. With an implied easement, there is a prior use of the land. The easement is being used prior to the severance of the tract. This is not the case with an easement by necessity.

a. In fact, this is the major difference between the two easements. With an implied easement, there is a prior use of the land, a type of "easement" (sometimes called a "quasi-easement," since you cannot have an easement over property you own in fee simple).

b. With an easement by necessity, there is no prior use of the land prior to the severance of the tract.

2. With an easement by necessity, the owner of the burdened tract has the right to locate the easement, provided that the location of the easement is reasonably convenient. With an implied easement, the easement is over the area that was originally being used.

3. But with both an easement by necessity and an easement by implication, there was at one time one ownership of two tracts that has subsequently been severed. See Deisenroth v. Dodge, 7 Ill.2d 340 (1955).

4. An easement by necessity ends when that element of necessity is no longer a factor. An implied easement, however, may continue forever, even after any element of necessity disappears.

E. Prescriptive Easement--This is sometimes called an easement by prescription. This easement is created when someone uses someone else's land in an adverse manner for a prescriptive period of at least twenty years. The use of the land must not be permissive; it must be adverse to the rights of the true owner. See Page v. Bloom, 223 Ill.App.3d 18 (1991); McRaven v. Charles, 7 Ill.App.3d 55 (1972).

1. Essentially, a prescriptive easement is the easement equivalent of adverse possession. The use must be adverse, uninterrupted, exclusive, continuous, and under a claim of right. See Petersen v. Corrubia, 21 Ill.2d 525 (1961).

2. For example: Independent Tube Corp. had an easement to use a railroad spur track. However, it had no legal right to use the drainage ditches that ran along each side of the spur track. Nonetheless, the corporation used the drainage ditches openly and continuously and without interruption for thirty years. When Ross and Kathryn Radke sued to terminate the easement and quiet the title to the land, Independent Tube Corporation counter-sued. The court ruled that Independent Tube Corporation had an express easement to use the spur track and an easement by prescription to use the drainage ditches. See Independent Tube Corp. V. Ross and Kathryn Radke, No. 3-97-0987 (1998).

3. The use of the land must be continuous. An occasional act of trespass is not sufficient. See Leonard v. Pearce, 348 Ill. 518 (1932).

4. The use of the land must be with the knowledge of the landowner, but without his permission. It must be adverse to the rights of the true owner. See Ruck v. Midwest Hunting and Fishing Club, 104 Ill.App.2d 185 (1968).

5. The use of the land must be exclusive. This does not mean that no one else could use the land except for the easement claimant. Rather, "exclusive" means only that the claimant's right to use the land does not depend on someone else's right to use it. Thus, in Ritter v. Janson, 80 Ill.App.2d 169 (1967), the fact that claimant was not the only person to use a passageway did not prevent him from obtaining an easement by prescription.

6. The use of the land must be continuous; it must last for the full 20 years, and not be interrupted by the owner of the land burdened by this potential easement. See Roller v. Logan Landfill, Inc., 16 Ill.App.3d 1046 (1974).

7. It must appear that the use of the land is as a claim of right, that you are using it as if you have the right to use it, and not as a mere privilege, i.e., not as if someone were letting you use the land. See Light v. Steward, 128 Ill.App.3d 587 (1984).

a. This claim of right does not have to be well-founded; it need only be a claim of right. See Leesch v. Krause, 393 Ill. 124 (1946).

8. The use of the land must be "open and notorious." Thus, one cannot obtain a prescriptive easement when the use is invisible to the owner of the servient estate, such as a subsurface sewer or drain line. See Murtha v. O'Heron, 178 Ill.App. 347 (1913).

 

8. PRESCRIPTIVE EASEMENTS; ACQUIENCE AND MISTAKE:

In Sparling v. Fon Du Lac Township, (3rd Dist., March 6, 2001), Peggy Sparling brought an action for ejectment to force the township and bridge commission to remove a drainage pipe encroaching onto her property. Sparling purchased the property in 1995. At some time prior to 1983, the township obtained an express easement for the drainage pipe over a ten foot wide strip of land; five feet of which was on the Sparling property and five feet of which was on the adjoining lot. In 1983, however, the township mistakenly moved the drainage pipe two to three feet outside of the easement and onto the unencumbered portion of what was later to become Sparling’s property. Prior to Sparling’s purchase, her predecessor, Gerald Gray, sent a letter to the township advising them of the encroachment and requesting they remove the pipe. Following her purchase in 1996, Sparling also wrote requesting the township remove the pipe. The township admitted receipt of these letters.

As their affirmative defense to Sparling’s 1999 ejectment action, the township asserted that they had established a prescriptive easement pursuant to the Illinois Highway Code, (605 ILCS 5/2—202; which also includes "drainage structures", and provides for a 15 year statutory period for obtaining a prescriptive easement, while retaining the other common law elements of adversity, exclusivity, continuous and under a claim of right inconsistent with that of the owner). The trial court ruled the defendants did not occupy Sparling’s property under a claim of right because the encroachment was the result of the mistaken location of the pipe outside of the easement. The Third District opinion rejects this reasoning, but affirmed nonetheless.

Noting that the statute changed the time period within which a "highway" might be established by prescription, but not doing away with the other elements of a prescriptive easement, the Court pointed out that a "use must be adverse, under claim of right, continuous and uninterrupted, with the knowledge of and without the consent of the owner of the estate." in order to establish a prescriptive easement. The "acquiescence" of the fee owner, (i.e. knowledge without consent), was destroyed in this case when Sparling and her predecessor put the township on notice that they objected to the encroachment in 1995 and 1996; within the 15 year period. The concurring opinion by Justice Breslin clarifies that the acquiescence of the fee owner necessary to establish an easement by prescription is distinct from adverse possession, which does not require the element of acquiescence, and further states that the "use by mistake is not sufficient adverse or under claim of right to establish a public way by prescription" under the statute. The township’s "mistaken belief that [they were] positioning the pipe within the easement is the basis upon which Peggy Sparling should prevail."

 

9. RESIDENTIAL REAL PROPERTY DISCLOSURE ACT; WAIVER:

The almost inevitable "Well, they closed so they must have waived" defense to the failure of a seller to provide a Residential Real Estate Disclosure Report was tried and failed in Curtis Investment Firm, Ltd. v. Schuch, (3rd Dist., April 2, 2001).  The Schuches entered into a contract with Curtis Investment for the sale of residential real estate. Approximately six weeks prior to the closing, Curtis Investment request the Schuchs provide them with a Residential Real Estate Disclosure Report. The Schuchs did not provide the report. The closing took place nonetheless, and afterwards, when Curtis Investment attempted to restore water service to the property, they discovered the Schuches had the water supply turned off at the street because the supply line between the curb and the house was damaged. Curtis repaired the water supply and internal plumbing as well and then sued the Schuches. Robert Schuch denied any knowledge of the problem during the trial, and argued that Curtis Investment had waived its rights to receive the disclosure report by closing. The trial court found that the Schuches knew of the defective water supply line, and that the buyer could not waive the right to receive the disclosure statement. On appeal, the Third District affirmed.

The legislature’s use of the word "shall" in Section 20 of the Residential Real Estate Disclosure Act is indicative that providing the report is mandatory and not "waivable" by the buyer. "We therefore hold that a buyer cannot waive the seller’s responsibility to disclose certain defects by signing a contract without receipt of a written disclosure statement." The Court was equally unimpressed by Schuches' argument that waiver was one of the intended "negotiated contingencies" referenced in the statute, and reiterated the mandatory nature of the disclosure. "Consequently, a seller cannot fail or refuse to provide a disclosure report with impunity."

Justice Holdridge dissented, stating that he believed the majority erred in finding the buyer cannot waive the seller’s obligation to provide the disclosure. A waiver may be implied when a party’s conduct is inconsistent with an intention to assert a right in a contract. The buyers requested the report, and the seller refused to deliver it over a six week period. When the sellers did not provide the report, Section 55 of the Act states that "If the seller fails or refuses to provide the disclosure document prior to the conveyance of the residential real property, the buyer shall have the right to terminate the contract." Accordingly, not having elected their remedy to terminate the contract, the dissent argues, their conduct indicated an intention to waive the right to receive the report.

 

10. EASEMENT BY NECESSITY; EXTRINSIC EVIDENCE AND THE NECESSITY OF UTILITIES:

In Smith v. Heissinger, (4th Dist, April 4, 2001), Michael Smith sought to impose an easement by necessity over his neighbor’s property for the purpose of providing utilities to his newly constructed home. The common grantor of the parties was John Homeier. Mr. Homeier first sold a tract of his land to Heissinger retaining a 25 foot right of way easement on the west side of the parcel without limiting the purpose of the right of way. Eight years later, Homeier sold another, adjacent parcel to Heissinger, and the deed provided an easement long the same west 25 feet, creating a right of way "for the sole purpose of ingress and egress for the benefit of [a third parcel] the [Smith property]". When Homeier conveyed to Smith, he assigned his interest in both easements. Smith then proceeded to build a home on the property purchase from Homeier, and in the process instructed Central Illinois Light Company to install electrical lines on the easement. Heissinger refused to allow the installation, and this suit followed requesting that the court declare the 25 foot easement include the right to place underground utilities and enjoin Heissinger from interfering with the installation.

The Defendant moved for summary judgment and objected to Plaintiff’s introduction of extrinsic evidence to prove the intent of the parties relating to the purpose and limitations of the right of way, stating the documents "speak for themselves". The trial court denied Defendant’s motions, heard the matter as a bench trial, allowing the extrinsic evidence to be introduced, and ruled in favor of Plaintiff on the basis of the doctrine of necessity. On appeal, the Fourth District agreed that the inconsistent language of the two grants of the easement (one without limitation on the right of way, and the second limiting the easement to ingress and egress) created an ambiguity with allowed the introduction of extrinsic evidence. The Court next turned to the elements of an easement by necessity; (1) ownership by a common grantor followed by a separation of title, (2) use of the easement before separation in an apparent, obvious, continuous, and manifestly permanent manner, and (3) necessity for the enjoyment of the property. Evidence of the element of "prior use" was not presented, and therefore the Plaintiff’s contention could be based only upon necessity to prevail. Holding that "a showing of absolute necessity is not required in Illinois", the Court cited various decisions holding a sewer line, water supply line, and catch basin to be sufficiently necessary for the beneficial enjoyment of a parcel to constitute an easement by necessity. Noting that all of the owners of other neighboring properties had denied Smith access for utilities, and testimony was received that without utilities the home was not habitable, the determination of the trial court that the Plaintiff had established a utility easement by necessity was affirmed as not against the manifest weight of the evidence.