A Constitutional Commitment to Access to Literacy: Bridging the Chasm Between Negative and Positive Rights

EVAN CAMINKER

Michigan Law dean emeritus Evan Caminker discusses a decision by the U.S. Court of Appeals for the Sixth Circuit, in which that court held that the Fourteenth Amendment’s Due Process Clause secures schoolchildren a fundamental right to a “basic minimum education” that “can plausibly impart literacy.” Caminker—one of the co-counsel for the plaintiffs in that case—explains why the decision is so remarkable and why the supposed dichotomy between positive and negative rights is not as stark as canonically claimed.

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Imamura v. General Electric Co.

Court: US Court of Appeals for the First Circuit

Docket: 19-1457

Opinion Date: April 24, 2020

Judge: Torruella

Areas of Law: Business Law, Civil Procedure, Personal Injury, Real Estate & Property Law

In this class action lawsuit stemming from the 2011 nuclear disaster at the Fukushima Daiichi Nuclear Power Plant (FNPP) in Japan, the First Circuit affirmed the judgment of the United States District Court for the District of Massachusetts dismissing Plaintiffs' suit under the doctrine of forum non conveniens, holding that the district court did not abuse its discretion in finding that an adequate alternative forum was available in Japan. Plaintiffs were individuals and business entities who suffered property damage and/or economic harm as a result of the FNPP disaster. Plaintiffs filed suit against General Electric Company (GE) alleging that GE negligently designed the FNPP's nuclear reactors and safety mechanisms, both of which were implicated in the explosions. Plaintiffs alleged that venue was proper in the District of Massachusetts because GE maintained its corporate headquarters and principal place of business in Boston, Massachusetts. The district court dismissed the suit under the doctrine of forum non conveniens, determining that an adequate alternative forum was available to Plaintiffs in Japan and that dismissal was in the private and public interest. The First Circuit affirmed, holding that Japan satisfied the forum availability requirement despite the jurisdictional idiosyncrasies presented in this case.

Consumer Financial Protection Bureau v. Klopp

Court: US Court of Appeals for the Fourth Circuit

Docket: 18-1694

Opinion Date: April 27, 2020

Judge: Richardson

Areas of Law: Banking, Professional Malpractice & Ethics, Real Estate & Property Law

The district court held defendant in contempt after finding him in violation of a consent order limiting his participation in the mortgage industry. The district court ordered the disgorgement of over half-a-million dollars of defendant's contemptuous earnings. The Fourth Circuit affirmed the district court's contempt decision, holding that the district court cited several proper reasons for holding defendant in contempt. However, the district court based its disgorgement sanction on an erroneous legal interpretation of the terms of the underlying consent order. Accordingly, the court vacated the disgorgement order and remanded for further proceedings.

Taylor v. J.P. Morgan Chase Bank, N.A.

Court: US Court of Appeals for the Seventh Circuit

Docket: 17-3019

Opinion Date: April 30, 2020

Judge: Scudder

Areas of Law: Banking, Contracts, Real Estate & Property Law

Taylor fell behind on his mortgage payments during the 2008 financial crisis and sought help under the Home Affordable Mortgage Program (HAMP), which allowed eligible homeowners to reduce their monthly mortgage payments to avoid foreclosure. The first step toward a permanent loan modification was for qualifying borrowers to enter into a Trial Period Plan (TPP, 12 U.S.C. 5219(a)(1)) with their lenders and make lower payments on a provisional basis. Taylor’s lender, Chase, sent him a proposed TPP agreement to be signed and returned to Chase to start the process. That agreement stated that the trial period would not begin until both parties signed the TPP and Chase returned to Taylor a copy bearing its signature. Taylor signed the proposed agreement, but Chase never did. Taylor’s loan was never modified. Taylor sued Chase. The district court granted Chase judgment on the pleadings. The breach of contract claim failed because Taylor failed to allege that Chase had signed and returned a copy of the TPP. The Seventh Circuit affirmed. Chase never pre-committed to sending Taylor a countersigned copy of the TPP; it expressly reserved the right not to The return of the signed copy was a condition precedent to contract formation. Taylor alleged no actions by Chase from which it could be reasonably inferred that Chase intended to proceed with the trial modification absent a countersignature.

LN Management, LLC Series 5664 Divot V. JPMorgan Chase Bank N.A.

Court: US Court of Appeals for the Ninth Circuit

Docket: 18-15402

Opinion Date: April 24, 2020

Judge: Boggs

Areas of Law: Civil Procedure, Real Estate & Property Law, Trusts & Estates

In 2003, Dansker obtained an $83,000 home loan to purchase Las Vegas real estate. In 2009, Dansker died. No probate proceedings were instituted. In 2011, the neighborhood HOA began foreclosure proceedings and sold the property to LN. The priority lien-holder was Fannie Mae and the Federal Housing Finance Agency. The district court held that LN had not identified any legal representative of Dansker’s estate, and since no such person was identified and joined, complete diversity existed. The district court dismissed and denied a motion to substitute Dansker’s daughter. The Ninth Circuit vacated. Diversity did exist at the time of removal. The trial judge did not abuse his discretion by denying a motion to substitute, so diversity jurisdiction continued to exist. The lawsuit was against Chase and Dansker. Dansker, being dead, had no legal existence, and, therefore, was not a citizen of any state. Jurisdiction exists where the federal entity is not the record beneficiary on the deed of trust but can prove its property interest through admissible evidence. The Federal Foreclosure Bar, which provides that FHFA's property shall not be subject to foreclosure without FHFA's consent, applies and is fatal to LN’s case on the merits.

Everheart et al. v. Rucker Place, LLC et al.

Court: Supreme Court of Alabama

Dockets: 1190092, 1190116, 1190110, 1190102

Opinion Date: April 24, 2020

Judge: Sellers

Areas of Law: Business Law, Civil Procedure, Personal Injury, Real Estate & Property Law

Tamikia Everheart; Cardell Coachman, by and through his mother and next friend Johnitia Coachman; Michael Coleman, as administrator of the estate of Diane McGlown; Mary Weatherspoon; and Elizabeth McElroy, as administratrix of the estate of Jakobie Johnson (collectively, "plaintiffs"), filed four separate of summary judgments entered in their separate cases by the Jefferson Circuit Court in favor of Rucker Place, LLC, and Savoie Catering, LLC. While attending a Christmas party in December 2015 at the residence of Bruce McKee and Dale McKee, Jason Bewley consumed alcohol. Later, he was driving while allegedly intoxicated and was involved in an accident with a vehicle occupied by five individuals. As a result of the accident, two of those individuals were injured and the other three were killed. The plaintiffs filed four separate actions against Bewley, alleging negligence and wantonness in the operation of his vehicle. The plaintiffs also asserted dram-shop claims against Dale McKee; the estate of Bruce McKee, who died shortly after the Christmas party; Savoie Catering, LLC, which had catered the McKees' party and had served guests alcohol that had been provided by the McKees; and Rucker Place, LLC, which operates a catering business with connections to Savoie, but which claims it had no involvement with the McKees' party. The Alabama Supreme Court affirmed the trial court's judgments based on the conclusion that plaintiffs did not demonstrate that Reg. 20-X-6- .02(4) applied to the circumstances involved in their cases. The Court expressed no opinion as to whether plaintiffs presented evidence sufficient to establish a joint venture between Savoie and Rucker Place.

Carmel Development Co., Inc. v. Anderson

Court: California Courts of Appeal

Docket: H041005(Sixth Appellate District)

Opinion Date: April 30, 2020

Judge: Adrienne M. Grover

Areas of Law: Construction Law, Real Estate & Property Law

Carmel provided design and construction work for a luxury subdivision, Monterra, in Monterey County for more than 10 years under an oral contract with property owner Mills, the principal of Monterra LLC. Carmel recorded a mechanic’s lien and a site improvement lien against certain lots in Monterra after being informed that Monterra LLC would be unable to continue paying for the work. Carmel sued several of Monterra LLC’s investors with property interests in unsold lots in the development and Monterra LLC, alleging breach of contract and foreclosure of the mechanic’s and site improvement liens. Monterra stipulated to liability before trial; the investor defendants contested liability in a lengthy bench trial. The court of appeal reversed. Carmel applied the payments it received from Monterra LLC to debt that was not subject to liens, in effect increasing the amounts of the Water Lien and Site Improvement Lien. It was improper to allocate a water infrastructure lien only to certain benefited lots; the liens could not accrue contractual interest greater than the reasonable value of the improvements. The trial court applied an incorrect rate to calculate prejudgment interest. The court remanded with instructions to remove contractual interest from both liens, reapportion the water infrastructure lien, and recalculate prejudgment interest.

Huang v. Wells Fargo Bank, N.A.

Court: California Courts of Appeal

Docket: A152074(First Appellate District)

Opinion Date: April 29, 2020

Judge: Peter J. Siggins

Areas of Law: Banking, Civil Procedure, Real Estate & Property Law

In 2000, the Fasslers obtained a Wells Fargo (WF) home equity line of credit (HELOC), secured by a deed of trust (DOT). In 2003, they secured a $530,000 World Savings home loan, then obtained another WF HELOC. In 2004, they refinanced, using a $682,500 Countrywide Loan (secured by a DOT) to pay off World Savings and eliminate the HELOC balances. WF never issued any reconveyance of its DOTs. In 2005-2008, the Fasslers drew upon both HELOCs; as of 2016, the outstanding balances totaled over $224,000. In 2007, they refinanced the Countrywide Loan with a $1 million WaMu loan They defaulted. WaMu foreclosed. In 2008, LaSalle obtained title at a nonjudicial foreclosure auction. The following month, WF recorded a notice of default and election to sell under its DOT. The Huangs purchased the property from LaSalle in February 2009. In August 2009, WF recorded its notice of trustee’s sale. The Huangs received the notice when it was posted on their door. The Huangs' suit to quiet title was rejected as time-barred because, more than three years before they filed suit, they were aware of a recorded notice of trustee’s sale. The court of appeal reversed, finding that the notice of sale did not disturb or otherwise interfere with the Huangs’ possession sufficiently to start the running of the limitations period. After receiving the notice of sale, the Huangs provided it to their title insurer. The trustee’s sale did not take place as scheduled; the Huangs heard nothing substantive about the matter for years, while they continuously lived in the home.

Moore v. Teed

Court: California Courts of Appeal

Docket: A153523(First Appellate District)

Opinion Date: April 24, 2020

Judge: Sanchez

Areas of Law: Construction Law, Contracts, Personal Injury, Real Estate & Property Law

Teed promoted himself online as a real estate agent with “over 25 years of experience as a building contractor” with “an extensive background in historic restorations.” Moore believed that Teed was a general contractor. Moore toured homes that Teed had renovated and retained Teed as his agent. Moore bought a large San Francisco fixer-upper house for $4.8 million. The home was built in 1912 and was last updated in the 1950s. Moore borrowed significantly. Teed received a commission from the sale. Teed was not a licensed contractor; his team of contractors gutted large parts of the house and excavated the lot but the foundation was defective. After Moore became aware of the defects, he halted all work and engaged consultants, who concluded, despite Teed's strong resistance, that the foundation had to be torn out and replaced. Teed’s structural engineer agreed and privately apologized to Moore. Moore had paid about $265,000 of the $900,000 promised cost for Teed’s renovations. A jury awarded Moore his out-of-pocket expenses for replacing the foundation and benefit-of-the-bargain damages for the additional cost he incurred in obtaining the promised renovations. Conceding liability, Teed challenged the award. The court of appeal affirmed that benefit-of-the-bargain damages are available to fully compensate a plaintiff for all the detriment proximately caused by a fraudulent fiduciary’s actions and the award of statutory attorney fees and costs based on the jury’s special verdict finding that Teed violated the Contractors’ State License Law.

Kahawaiolaa v. Hawaiian Sun Investments, Inc.

Court: Supreme Court of Hawaii

Docket: SCWC-17-0000317

Opinion Date: April 30, 2020

Judge: Mark E. Recktenwald

Areas of Law: Contracts, Landlord - Tenant, Real Estate & Property Law

In this commercial landlord-tenant dispute the Supreme Court affirmed in part and vacated in part the judgment of the intermediate court of appeals (ICA) vacating the circuit court's judgment finding that Tenant was not entitled to damages and that Tenant's claims for equitable relief were moot, holding that the ICA erred in two of its holdings. Landlords performed a self-help eviction after Tenant allegedly breached the lease. Tenant filed this complaint alleging violations of Haw. Rev. Stat. 654-1, 480-2, 480-13, and 480-13.5, and intentional infliction of emotional distress and requesting injunctive relief and damages. The circuit court concluded that Tenant was not entitled to damages because two of the breaches were material and that Tenant's equitable relief claims, including a claim for replevin seeking access to his personal property, were moot. The ICA vacated the circuit court's judgment. The Supreme Court vacated the ICA's judgment in part, holding that the ICA (1) correctly found that the breaches were not material; (2) should not have analyzed the merits of the replevin claim because Tenant had already retrieved his personal property at the time of trial; and (3) misapplied the law of equitable relief because all the equitable claims were moot.

Maryland Reclamation Associates, Inc. v. Harford County, Maryland

Court: Maryland Court of Appeals

Docket: 52/19

Opinion Date: April 24, 2020

Judge: Booth

Areas of Law: Government & Administrative Law, Real Estate & Property Law

The Court of Appeals held that, under exhaustion of administrative remedies jurisprudence, a landowner may not withhold a claim alleging an unconstitutional taking arising from the application of a zoning regulation from the administrative agency's consideration and present the claim to a jury in a separate action invoking the court's original jurisdiction. This appeal arose out of litigation between Maryland Reclamation Associates, Inc. (MRA) and Harford County, Maryland (the County) in connection with MRA's efforts to construct and operate a rubble landfill on property located in Harford County. Earlier litigation concluded with a 2010 Supreme Court opinion upholding all the factual determinations and legal conclusions of the Harford County Board of Appeals (the Board). After losing on each substantive claim, MRA filed a separate inverse condemnation case alleging an unconstitutional taking. The jury found that MRA's inability to operate a rubble landfill was a regulatory taking and awarded MRA damages. The court of special appeals concluded that the takings claim was barred by the statute of limitations. The Court of Appeals affirmed but on other grounds, holding that MRA's takings claim should b dismissed based on MRA's failure to raise this constitutional issue in any administrative proceeding.

Flying T Ranch, LLC v. Catlin Ranch, LP

Court: Montana Supreme Court

Citation: 2020 MT 99

Opinion Date: April 28, 2020

Judge: Gustafson

Areas of Law: Real Estate & Property Law

In this property dispute, the Supreme Court reversed the decision of the district court granting Defendant's motion to stay proceedings without holding a hearing on Plaintiff's motion for a preliminary injunction, holding that the district court abused its discretion by staying proceedings and denying Plaintiff's motion for preliminary injunction without a hearing. Plaintiff filed suit against Title Insurer seeking damages for breach of contract and bad faith. In a separate suit, Plaintiff sued Defendant seeking a declaration that Moss Agate Road was either a county road, public highway, or that the public enjoys a prescriptive easement across Moss Agate. Plaintiff filed a motion for a temporary restraining order and preliminary injunction seeking to enjoin Defendant from interfering with Plaintiff's access to its property over Moss Agate. Defendant then filed a motion to stay proceedings. Without holding a hearing, the district court stayed proceedings in Plaintiff's case against Defendant pending the resolution of Plaintiff's case against Title Insurer. The Supreme Court reversed, holding that because the bad faith case did not cover all the issues in the instant matter, the district court manifestly abused its discretion by denying Plaintiff's motion for preliminary injunction without holding a hearing.

Polonsky v. Town of Bedford

Court: New Hampshire Supreme Court

Docket: 2019-0339

Opinion Date: April 24, 2020

Judge: Donovan

Areas of Law: Government & Administrative Law, Real Estate & Property Law, Zoning, Planning & Land Use

Defendant Town of Bedford appealed a superior court order: (1) ruling that the statutory scheme governing a municipality’s obligations to compensate a former owner of property that the municipality acquired by the execution of a tax deed violated Part I, Article 12 of the New Hampshire Constitution; and (2) awarding plaintiff Richard Polonsky equitable relief. In 2008, plaintiff inherited property in Bedford. Plaintiff failed to pay his real estate taxes in 2008, 2009, and 2010. Consequently, tax liens were imposed on the property for each of those years. When plaintiff failed to redeem the property by paying the amount of the liens plus interest, the town tax collector issued a tax deed conveying the property to the Town on May 31, 2011. The Town did not take any action regarding the property until 2013, when it contacted plaintiff by telephone to advise him of the amount of back taxes, interest, costs, and penalties required to repurchase the property, and of the Town’s intention to sell the property by auction if he chose not to repurchase it. Plaintiff offered to pay back taxes but requested that the Town waive the additional charges, citing ongoing medical problems that began in 2009. The Town Council voted to reject plaintiff’s offer and began the sale process. Six months later, the Town formally noticed plaintiff of its intent to sell the property. Although plaintiff did not respond to the notice, the Town did not sell the property. In April 2015, plaintiff received another notice of the Town’s intent to sell the property, informing him of his right to repurchase. Plaintiff again offered to pay the amount of back taxes and interest, but requested that the Town waive the penalties. The Town rejected the offer. Through counsel, plaintiff twice requested for reconsideration. Then plaintiff filed suit, alleging, in part, that the Town’s intent to keep excess proceeds from an eventual sale of the property violated his “right to the equity in the subject property” under the state constitution. The New Hampshire Supreme Court affirmed the trial court, finding that RSA 80:89, VII extinguished a municipality’s duty to provide excess proceeds for the taking of his or her property by tax deed after three years from the date of the recording of the deed, without requiring that the municipality execute that duty; the statute’s three-year limitation upon the municipality’s duty to pay excess proceeds violated Part I, Article 12 of the New Hampshire Constitution. Because the Town acquired plaintiff’s property without providing compensation, the trial court did not err in awarding equitable relief to plaintiff.

Dunham v. Lake County Commission

Court: South Dakota Supreme Court

Citation: 2020 S.D. 23

Opinion Date: April 29, 2020

Judge: Jensen

Areas of Law: Government & Administrative Law, Real Estate & Property Law, Zoning, Planning & Land Use

The Supreme Court affirmed in part and reversed in part the judgment of the circuit court denying Karen Dunham's petition for writ of certiorari challenging the decision of the Lake County Board of Adjustment (Board) approving Hodne Homes, LLC's requests for a variance and conditional use permit (CUP), holding that the Board exceeded its authority in granting the variance but did not exceed its legal authority when it approved the CUP. Hodne Homes purchased a Lake County lot to build a facility to store and display boats. Hodne Homes sought the variance and CUP because the proposed facility exceeded the size and setback restrictions for the lot under the Lake County Zoning Ordinance. Dunham, an adjoining landowner, objected, but the Board granted both requests. The court of appeals denied Dunham's petition for writ of certiorari challenging the Board's decision. The Supreme Court reversed in part, holding (1) the Board exceeded its legal authority under the ordinance when it approved the variance; and (2) the Board did not exceed its authority under the ordinance when it approved the CUP, the Board's decision did not violate Dunham's due process rights, and the Board committed no procedural errors in its approval of the CUP.

Bush v. Lone Oak Club, LLC

Court: Supreme Court of Texas

Docket: 18-0264

Opinion Date: April 24, 2020

Judge: Busby

Areas of Law: Government & Administrative Law, Real Estate & Property Law

In this title dispute between the State and a private landowner over portions of the submerged bed of Lone Oak Bayou the Supreme Court reversed the trial court's summary judgment in favor of the landowner, holding that there were factual disputes to be resolved, precluding summary judgment. Lone Oak Bayou was a navigable body of water located near the Gulf of Mexico. The landowner's predecessor bought land from the State that included the Bayou's bed. Later, the Legislature passed a statute (the Small Bill) validating conveyances that included the beds of "watercourses or navigable streams." The Commissioner of the General Land Office argued that the Small Bill did not validate the landowner's title to the Bayou's bed because the tide enters the Bayou and the statute conveyed only submerged beds underlying non-tidally influenced streams. The trial court granted summary judgment for the Landowner. The court of appeals affirmed. The Supreme Court reversed, holding that there were factual disputes to be resolved regarding whether the Bayou is a navigable stream within the scope of the statutory conveyance.

Credit Suisse AG v. Claymore Holdings, LLC

Court: Supreme Court of Texas

Docket: 18-0403

Opinion Date: April 24, 2020

Judge: Blacklock

Areas of Law: Contracts, Real Estate & Property Law

In this case arising from an inflated appraisal of certain property and governed by New York law, the Supreme Court reversed in part the court of appeals' decision affirming the jtrial court's judgment awarding Claymore Holdings $211 million in equitable relief, holding that there was no valid basis in New York law for this large award of equitable monetary relief. The subject property was a real estate project. Claymore loaned the project $250 million and took the real estate as collateral. After the borrower defaulted and the collateral's value declined, Claymore sued Credit Suisse, which helped arrange the transaction, alleging that Credit Suisse fraudulently inflated the appraisal of the real estate, inducing Claymore to make the loan, and that the faulty appraisal amounted to a breach of contract. A jury found for Claymore on the fraudulent inducement claim and awarded $40 million. The court found Credit Suisse liable for breach of contract and other theories but concluded that Claymore's damages on all claims could not be calculated with reasonable certainty. The court then awarded Claymore $211 million in equitable relief. The Supreme Court remanded the case, holding that the jury's $40 million fraud verdict must stand but that the court's award of $211 million in equitable relief must not.

Federal Home Loan Mortgage Corp. v. Zepeda

Court: Supreme Court of Texas

Docket: 19-0712

Opinion Date: April 24, 2020

Judge: Nathan L. Hecht

Areas of Law: Constitutional Law, Real Estate & Property Law

The Supreme Court accepted a question certified to it by the United States Court of Appeals for the Fifth Circuit and answered that a lender is entitled to equitable subrogation where it failed to correct a curable constitutional defect in the loan documents under Tex. Const. art. XVI, 50. Sylvia Zepeda obtained a loan from CIT Group and later refinanced her debt with a loan from Embrace Home Loans, Inc., using her homestead as collateral. Zepeda subsequently notified Embrace that the loan documents did not comply with section 50 because Embrace had not signed a form acknowledging the homestead's fair market value. Embrace subsequently sold the loan to Freddie Mac. When Freddie Mac did not respond to Zepeda's notification of the constitutional defect, Zepeda sued to quiet title, arguing that Freddie Mac did not possess a valid lien on her property. The federal district court concluded that Freddie Mac was not entitled to equitable subrogation because it was negligent in failing to cure the constitutional defect in the loan documents. The Supreme Court disagreed, holding that, under Texas law, a lender who discharges a prior, valid lien on the borrower's homestead property is entitled to subrogation, even if the lender failed to correct a curable defect in the loan documents.