What better way to test recording acts, covenants, and latent defects that a question about the Ghostbuters! See if you catch the Michael Jackson and Justice Scalia references.

You are a junior associate at the law firm of Gohs, Baz, & Ters LLC. Your senior partner asks you to prepare a memorandum of no more than 500 words about a case currently pending before the New York Supreme Court. This dispute involves competing claims to Redacre involving Gozer, Louis, Jeanine, and the heirs of Zul and Vigo. New York adheres to all common law property rules, as articulated in the Restatement (First) of Property. New York applies a Race Notice Recording Statute.

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On January 1, 2014, Gozer offered to sell Redacre to Louis for $100,000. Redacre, located in an area zoned for residential purposes, was a perfect spot for Louis to live. Before he acquired Redacre, Louis took a trip to the Records Hall to investigate the history of the property.

At the Records Hall, Louis retrieved the following records from the Grantee and Grantor indexes, starting his search with “Gozer” in the Grantee index:

Grantee Index

Grantee	Grantor	Property	Description	Date of Deed	Date Recorded
Gozer	Vigo	Redacre	General Warranty deed in Fee Simple	6/1/1977	6/15/1980
Vigo	Zul	Redacre	General Warranty deed in Fee Simple	1/1/1900	7/15/1900
Zul	Zul	Greenacre	Covenant to only use Greenacre for “commercial purposes”	1/1/1900	6/25/1900
Oscar	Zul	Whiteacre	Covenant to only use Whiteacre for “commercial purposes”	1/1/1900	6/18/1900
Oscar	Zul	Whiteacre	General Warranty Deed in Fee Simple	1/1/1900	6/18/1900
Zul	Zul	Blackacre	Subdivision of Blackacre into Whiteacre, Redacre, and Greenacre	1/1/1900	1/10/1900

 

Grantor Index

Grantor	Grantee	Property	Description	Date of Deed	Date Recorded
Zul	Zul	Blackacre	Subdivision of Blackacre into Whiteacre, Redacre, and Greenacre	1/1/1900	1/10/1900
Zul	Oscar	Whiteacre	General Warranty Deed in Fee Simple	1/1/1900	6/18/1900
Zul	Oscar	Whiteacre	Covenant to only use Whiteacre for commercial purposes	1/1/1900	6/18/1900
Zul	Zul	Greenacre	Covenant to only use Greenacre for “commercial purposes”	1/1/1900	6/25/1900
Zul	Vigo	Redacre	General Warranty deed in Fee Simple	1/1/1900	7/15/1900
Vigo	Gozer	Redacre	General Warranty deed in Fee Simple	6/1/1977	6/15/1980

In order to afford Redacre, Louis secures two mortgages. The first for $75,000 from City Bank. The second for $15,000 from Ecto Bank. Louis puts up the remaining $10,000 as a down payment from his savings.

Gozer offers Louis a general warranty deed, which provides that Louis takes Redacre “subject however, to all restrictions and covenants applying to this property.” After reviewing the records, Louis asks Gozer if there are any covenants on Redacre. Gozer replies, “No.” Without purchasing title insurance, Louis acquires Redacre on 2/1/14. Louis does not record his deed.

However, soon after Louis moves onto Redacre, things get thrilling. Out of nowhere, Louis hears an ominous voice bellow: “Darkness falls across the land. The midnight hour is close at hand. Creatures crawl in search of blood. For no mere mortal can resist the evil of the thriller.”

Instantly, the ghosts of Vigo and Zul appear. Louis screams, “Ah! The ghosts of property past! How Dickensian!” Both Zul and Vigo had long since died, but their spirits have haunted Redacre for years. While some ghosts remain in this world in order to perfect souls to enter the afterlife, these ghouls had a different goal–to perfect title to property.

First, the ghost of Zul hovers in front of Louis and shows him a covenant on Redacre, dated 1/1/1900. Zul is listed as the “covenantor” and Vigo is listed as the “covenantee.” The Covenant says Redacre may only be used for “commercial purposes.” Louis asks Zul and Vigo if they ever recorded the covenant. They both shake their heads no. “There is no data, only Zul,” the ghost replies. Louis says, “How was I supposed to know about that covenant!” Zul again shakes his head.

Second, the ghost of Vigo holds up a document, dated 1/1/50, signed by Vigo. The document states that “the owner of Redacre shall never remove the ghosts that haunt this land.” Louis asks if the document was ever recorded. Vigo shakes his head no, but explains that the ghosts have lived peacefully on the land since then. Louis said he had no knowledge of such an arrangement.

Third, Vigo holds up another deed, indicating that Gozer sold Redacre to Jeanine on 7/11/77. Louis looks at the deed closely, and it indicates that the grantee was “Jeanine,” but the grantor was listed as “Goser.” The deed indicates it was recorded on 7/15/1979.

Louis, thinks to himself—”Who are you going to call?” Then it hits him: “The Ghostbusters!” The Ghostbusters work in a very peculiar line of business—capturing and storing ghosts. The quartet drive around the streets of Manhattan searching for ghosts, isolating them with special “proton packs,” capturing them in portable “traps,” and then storing the ghosts in a special “containment unit” at their headquarters. Louis shouts to the spirits that he is calling the Ghostbusters who will eliminate them. The ghost of Vigo warns him that his heir will enforce the document prohibiting the removal of ghosts. Louis ignores him.

Soon, the Ghostbusters arrive. They isolate the spirits, trap them, and store them in their special containment unit. But left behind on the floor are the three documents: (1) the 1/1/1900 covenant between Zul and Vigo, (2) the document signed by Vigo on 1/1/1950, (3) and the deed from “Goser” to Jeanine on 7/11/1917. Louis shoves all three in a drawer.

The next day, the Ghostbusters send Louis the bill. Louis, who was broke, is unable to pay it.

Louis calls Gozer, and complains that the house was haunted. Louis demands that he refund the purchase price, and pay the bill to remove the ghosts. Gozer said the ghosts were “Not my problem.”

Gozer thought back to the time he purchased Redacre, and recalled that Vigo told him not to remove the ghosts. Gozer thought Vigo was crazy, and wanted to buy the property, so he said, “Sure. I’ll leave the spirits alone. I ain’t afraid of no ghosts.” Gozer didn’t believe such urban legends.

Gozer, who kept a copy of the key to Redacre, sneaks in and finds the three documents from the ghosts. Realizing that they may benefit him, on 10/1/14, Gozer brings all three documents to the records office. As the clerk is about to record the three documents about Redacre, he remembers that a week earlier Jeanine brought in a deed about Redacre, dated 7/11/1977 and originally recorded on 7/15/1979. Jeanine had asked the clerk to change the spelling on her deed of the grantor from “Goser” to “Gozer.” The clerk makes the change, and records Jeanine’s revised deed first. A few minutes later, the clerk records the three documents brought in by Gozer. Moments later, Louis storms into the Records Office, and frantically asks the clerk to record his deed from Gozer right away. The clerk does so, as the last act of the day before closing the records office.

After Louis fails to make payments on either of his mortgages, or the bill to the Ghostbusters, City Bank moves to foreclose Redacre. City Bank gives Louis one-week notice, and advertises the sale at the records hall. Louis begs for another week, telling the bank that he will soon get a lot of money from Gozer, who sold him a haunted house. The bank was not interested in delaying the sale. At the foreclosure sale, a manager from City Bank was the only bidder present. He places the only bid of $80,000, and acquires title to Redacre. One week later, City Bank sells Redacre back to Gozer for $79,000.

Like some ghoul in a late-night horror movie that repeatedly sits up in its grave and shuffles abroad, after being repeatedly killed and buried, this massive property dispute begins its legal battle from the beyond.

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1. Louis sues Gozer for failing to disclose the fact that Redacre was haunted. Gozer counterclaims that he had no knowledge that Redacre was haunted. As a matter of policy, discuss the validity of the doctrine of caveat emptor in this case. Specifically, address the strongest arguments in favor of Louis, and the strongest arguments in favor of Gozer.

2. Louis files suit against Gozer for giving him an unmarketable title. Please address (1) whether the title was marketable, (2) what present or future covenants were violated (if any), (3) should either Louis or Gozer have been on notice about any restrictions on the land, and (4) what is the significance of the clause that provides “subject however, to all restrictions and covenants applying to this property.”
3. (a) The heir of Zul—who still owns Greenacre—files for an injunction to stop Louis from living in the house on Redacre. The heir is seeking to enforce the 1900 covenant limiting the use of Redacre to commercial purposes. Please address (1) whether Louis is bound by this covenant, (2) and if so, what are his strongest defenses to the suit.
   (b) The heir of Vigo files a suit against Louis seeking damages for removing the ghosts in violation of the 1950 document. Please address (1) how the court should treat this document, (2) whether Louis is bound by it, and (3) if so, what are his strongest defenses to the suit.

4. Jeanine files a suit to quiet title on Redacre, claiming she acquired Redacre on 7/11/77 from Gozer. Louis counters that he had no notice of this deed. Under New York’s Race Notice recording statute, who will prevail?

 

5. Ecto Bank files a suit against Louis for a deficiency judgment. Louis counterclaims that the foreclosure sale by City Bank was not valid, and seeks to set aside the foreclosure sale. Address (1) the strongest arguments in favor of Ecto Bank for receiving a deficiency judgment, (2) the strongest arguments in favor of City Bank that the sale was valid, and (3) the strongest argument in favor of Louis that the foreclosure sale should be set aside.