Estoppel in Property Law

• Publication year: 2021

77 Nebraska L. Rev. 756. Estoppel in Property Law

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Stewart E. Sterk*

Estoppel in Property Law

TABLE OF CONTENTS

I. Introduction .......................................... 756
II. Land Transfers ........................................ 759
A. Inadequate Writings ................................ 760
B. Oral "Agreements" .................................. 764
III. Servitudes by Estoppel ................................ 769
A. Representations by Sellers or Developers ........... 769
B. Representations by Neighbors ....................... 776
C. The Restatement .................................... 784
IV. Termination of Servitudes ............................. 784
V. Boundary Disputes...................................... 788
A. Estoppel Against a True Owner....................... 788
1. By the True Owner's Representations ............. 788
2. By Physical Barriers and Improvements Without
Representations ................................. 791
B. Estoppel to Claim Adverse Possession ............... 793
VI. Landlord-Tenant Law ................................... 795
A. Lease Renewal ...................................... 795
1. Leases Which Include Option to Renew or
Purchase ........................................ 795
2. Leases Which Do Not Include Renewal
Options ......................................... 797
B. Estoppel by Acceptance of Rent ..................... 799
C. Estoppel to Evict for Late Payment After Prior
Acceptance of Late Rent Payments ................... 802
VII. Conclusion ............................................ 802

I. INTRODUCTION

Since Samuel Williston and his advisors introduced Section 90 into the first Restatement of Contracts, the role of estoppel-particularly promissory estoppel-has generated continuing controversy among

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courts and contracts scholars.(fn1) Doctrinally, promissory estoppel serves two functions in contract law. First, promissory estoppel serves as a substitute for contract law's familiar requirement of "consideration." (fn2) Second, estoppel permits enforcement of contracts that do not satisfy the statute of frauds.(fn3)

In addition, estoppel plays an important role in property law. Because consideration is unnecessary to support transfers of real property, estoppel's principal role in property law is as a doctrinal alternative to the writing generally necessary for real property conveyances. Estoppel is important not only as a basis for upholding transfers of fee interests, but also as a foundation for creating (and terminating) servitude interests, for resolving boundary disputes, and for protecting leasehold interests against forfeiture. Indeed, estoppel's important role in property law long predates the rise of promissory estoppel as a basis for contract liability.

Much of the debate over promissory estoppel in current contract scholarship focuses on whether promissory estoppel liability is reliance-based or promise-based. That is, do courts enforce promises because they induce reliance, or is reliance important only as evidence that the promisor has communicated- by words or actions-an intent to be bound?(fn4) That question- critical in contract scholarship-is also

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important in property law. In several respects, however, estoppel doctrine is more complex in property law than in contract law. First, in property law the doctrine of estoppel frequently operates against a party who has made no express promise at all. That is, a party may be estopped by a course of conduct that involves no verbal representations; indeed, on rare occasions, silence alone may give rise to an estoppel. (fn5) Second, in property law the doctrine raises a question addressed with far less frequency in contract law: to what extent are successors-in-interest estopped by the actions of their predecessors? Suppose, for instance, a landlord's oral representations induce reliance in a tenant, or one neighbor's representations induce reliance in another. Neither the representation alone, the reliance alone, nor the two in combination, explain why a successor-in-interest to the original promisor should be estopped by the actions of a predecessor. Because obligations in property law frequently "run with the land" (or with an estate in land), courts must, with some frequency, reconcile the interests of the disappointed promisee with those of a subsequent purchaser who did not, herself, make the promise.

In this Article, I examine the use of estoppel principles in property law cases. My enterprise is descriptive, not normative. I have examined the use of the estoppel doctrine in several doctrinal areas: land transfers, creation of servitudes, termination of servitudes, boundary disputes, and landlord-tenant law. In so doing, I have focused on cases decided since 1960.

An examination of case law in those areas suggests that estoppel doctrine performs several functions in property law. First, courts often invoke the estoppel doctrine to enforce promises or representa-

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tions. In these cases, reliance is important because it provides evidence of a promise, not because courts are independently concerned about reliance divorced from promise. When reliance provides strong corroboration of promise, courts enforce promises rather than limiting promisees to recovery of expenditures made in reliance on the promise. On the other hand, courts sometimes invoke estoppel in tort-like settings, holding, in effect, that the relationship between the parties, or the non-verbal acts of one of the parties, creates a duty to rescue a neighbor or a tenant from dire financial consequences.(fn6) This use of estoppel doctrine-to protect the interests of parties who rely on the non-verbal acts of another-is more controversial than use of estoppel doctrine to enforce express promises, but nevertheless represents a significant subcategory of estoppel cases.

Case law also suggests that successors-in-interest can be estopped by the actions of their predecessors-but only where the successor-in-interest had adequate opportunity to learn of the actions which gave rise to the estoppel.

II. LAND TRANSFERS

A landowner seeking to transfer an interest in land typically executes a deed and delivers it to a transferee. Unless the transfer is gratuitous, it will generally be preceded by a contract, executed by both buyer and seller, obligating seller to sell, and buyer to purchase, at the price stipulated in the contract. If the deed adequately describes the property and is properly executed by the transferor, no statute of frauds problem is likely to arise. Even if no deed has been executed, neither party may invoke the statute of frauds as a defense if a properly executed contract of sale includes all of the material terms of the agreement.(fn7) If a purchaser refuses to perform, the seller may obtain judgment for the purchase price; if the seller balks, the purchaser may obtain specific performance.

Estoppel doctrine becomes important if neither contract nor deed complies with the statute of frauds. Suppose, for instance, a writing memorializes a purported transfer, but the writing omits a material

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term, or the transferor's signature. If one party takes actions that make sense only on the assumption that the parties have made a deal, and if the other party, upon learning of those steps, takes no action to set the record straight, estoppel may prevent the recalcitrant party from invoking the supposed defect to avoid enforcement of the disputed deal.(fn8) Similarly, estoppel principles may operate to bind the parties even if there has been no writing at all.

A. Inadequate Writings

When one party to a land transfer transaction invokes estoppel to overcome a defective writing, the principal question confronting the court is whether the writing and the conduct of the parties, taken together establish an intent to be bound, or whether the parties had merely engaged in negotiations which had not yet culminated in a "deal." In general, if the written document is defective because it was not executed by the necessary parties, courts are more likely to treat the document as preliminary, and to insist on a great deal of reliance before validating the transfer. A written agreement does not provide strong evidence of an intent to be bound if one of the parties has not yet signed the agreement; indeed, failure to sign provides some evidence of an intent not to be bound. Hence, courts are reluctant to enforce unexecuted agreements absent exceptionally strong corroborating evidence of promise.

By contrast, if the document has been properly executed, but is missing a material term (such as a description of the property) courts are more likely to conclude that the parties had formed an intent to be bound. The very act of signing indicates an intent to be bound to something; the question is only the content of the agreement, not its existence. In this situation, courts are more willing to use the conduct of the parties to flesh out the missing term.

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Hoffman v. S. V. Company (fn9) illustrates the reluctance with which courts invoke estoppel principles to bind parties to the terms of unexecuted land sale contracts.(fn10) In Hoffman, negotiations between seller and purchasers led to a telephone conversation during which the parties reached an understanding that the purchasers would pay $90,000 for the property. The following day, January 22, purchasers sent seller a letter memorializing the conversation, and restating the agreement as "$90,000 payable at 30% down," with the remainder to be "paid pursuant to a five year installment note at 9 3/4% interest."(fn11) The letter also indicated that seller agreed to subordinate its note to a construction loan and that the city's approval of a subdivision was a condition precedent to the agreement. Purchasers sent a $5,000 check, which...