QUESTION I

(Suggested time: Case #1 - 60 minutes, Case #2 - 45 minutes, total one hour 45 minutes)

You work as a law clerk for the firm of Lepper, Lipper and Lapper. The firm's real estate partner has undertaken the representation of two clients. She has provided you with a factual summary of each case and has asked you to develop and assess theories upon which your client could sue certain potential defendants. Your discussion should include anticipated defenses and an evaluation of the likelihood of success against each defendant.

CASE #1

Your client, Rita Jones ("Jones"), purchased a residence from Leonard and Mary Bowski, (the "Bowskis"). The Bowskis' real estate agent was Barbara Beach ("Beach"), an associate of Greater Western Realty ("Western"). In the purchase and sale of the property, Jones' offer was presented by Michael Williams ("Williams"), a real estate agent associated with Everyday Realty ("Everyday").

The Bowskis listed their home for sale with Beach. According to an advertising flyer, the home was originally listed for $1,850,000. Because of a soft market, the listing price was subsequently reduced to $1,250,000, and then to $1,050,000. The property was listed in the Multiple Listing Service and the description in the Multiple Listing Service indicated that the house was approximately "5,500 square feet." At the bottom of the listing in bold letters was stated: "Information deemed reliable but not guaranteed." The brochure for the property gave an elaborate description of the property, but did not contain any information regarding square footage.

Beach claims that she had obtained information from the Bowskis' daughter that the house was 5,500 square feet. The daughter's statement of square footage was based on architectural plans used to construct the house. Beach relied on the information provided to her by the daughter because the Bowskis did not speak fluent English. Neither Jones nor the agents asked for or reviewed the architectural plans prior to closing.

The architectural plans, prepared by the architectural firm of Cox and Cox, indicate the house to be 5,411 square feet. The Bowskis' daughter claims that she told Beach that the architectural plans indicated a square footage of 5,411 square feet.

Your client Jones was looking for a bargain in distress property. She initiated contact with Williams who was a friend of a friend. She had previously bid on two properties which were in foreclosure. Her bid was rejected in both cases as too low. In both transactions Jones was represented by Williams. Her bids were based on a price per square foot after having obtained comparable sales information.

When Jones visited the property for the first time, she picked up the brochure which did not mention square footage and a copy of the listing which indicated "approximately 5,500 square feet" as the square footage of the home. Williams obtained a computerized property profile from American Title Company. The property profile gave information on tax assessment and property characteristics and indicated "5,500 square feet" as the square footage of the home. The property profile included a notation: "The accuracy of the above information is deemed reliable but is not guaranteed."

On June 16, 1996, Jones made a written offer of $925,000 subject to obtaining a loan for eighty percent of the purchase price from an institutional lender. The offer in the form of a printed Real Estate Purchase Agreement and Receipt for Deposit ("Purchase Agreement") was prepared by Williams. Paragraph 18F of the Purchase Agreement stated:

The written offer was presented to the Bowskis at a meeting at which they, Jones, Beach, and Williams were present. At the meeting the Bowskis indicated that $925,000 was too low. Jones then said that the most she could pay was $180 per square foot. Jones then multiplied $180 times 5,500 square feet and came up with a price of $990,000. The Bowskis agreed to this figure and a written counteroffer was executed. Neither the offer nor the counteroffer contained any provisions representing that the property was 5,500 square feet or conditioning the sale upon verification of the square footage.

During escrow, Jones obtained a termite report and had the house inspected by a professional house inspection company, Home Inspections, Inc. The inspection company did not nor were they requested to verify the square footage of the house.

During the contingency period, Jones was suffering from buyer's remorse. She was wondering whether or not she was paying too much. Williams provided her with a list of comparable properties which showed the selling prices of comparable sales as well as estimated square footage for each house. Jones calculated the selling price per square of these sales to be $180 to $23 5 per square foot.

During the escrow period, Jones applied for a loan with Bank of Greed (the "Bank"). The Bank hired an appraiser who determined that the value of the property was $1,110,000 and estimated the square footage at 4,691. Jones did not ask for or receive a copy of the appraisal prior to closing.

The sale closed on July 30, 1996 with a loan from the Bank. Jones purchased a standard title insurance policy from the American Title Company.

About one year after the closing, Jones determined that the market had recovered and housing prices had risen substantially. Jones thought that her house was now worth $250 per square foot or $1,375,000, based on 5,500 square feet. Jones decided to sell the property. She interviewed realtors for listing it. One of these realtors, John Parks, told her after touring the house: "No way is this house 5,500 square feet." Jones then obtained measurements from two real estate appraisers. One appraiser measured the house at 4,688 square feet and the other appraiser at 4,710 square feet.

Jones wants to sue everyone:

1. The seller: Leonard and Mary Bowski

2. The listing agent: Barbara Beach and Greater Western Realty

3. The cooperating agent: Michael Williams and Everyday Realty

4. The architectural firm: Cox and Cox

5. The title company: American Title Company

6. The inspection company: Home Inspections, Inc.

7. The lender: Bank of Greed

Before starting to write your memorandum please reread Section 6 of the instructions as well as the first paragraph of this Question.

CASE #2

Background

Megan Kanka's body was found in a park near her New Jersey house. She had been raped and murdered by her next door neighbor who had twice been convicted of child molestation. No one in Megan's neighborhood had been aware of the neighbor's past history of violent sexual acts against children. The incident led to the adoption of a community notification statute in New Jersey, the amendment of a federal statute, and the enactment of the community notification statutes in other states. All sex offender notification laws whether state or federal have been commonly referred to as "Megan's Laws."

Facts

John and Sharon Walker (the "Walkers") were thinking of selling their house. They received a letter from a community organization indicating that a registered sex offender was moving into their zip code area. The letter did not contain the name of the registered sex offender nor his address. The letter did provide a physical description and provided a "900" telephone number that members of the public could call and inquire as to whether a named individual was a registered sex offender. The physical description of the sex offender did not fit anyone that the Walkers had seen in their neighborhood.

The Walkers had two girls ages 7 and 9 and the letter upset them. They decided to put their house on the market immediately rather than wait until the spring as they originally planned. They listed the house with Paul Scuggs ("Scuggs") who was associated with Century 88 Realty ("Century"). Soon after listing their house for sale, Sharon Walker was promoted by her employer and the Walkers moved out of state.

Patty and David Ryan (the "Ryans") wanted to buy a new house. They had two children, a girl age 9 and a boy age 6. They first met Michelle Noble ("Noble"), a real estate agent associated with Green Realty ("Green Realty") at an open house. The Ryans liked Noble and they asked her if she would help them find a house. They told her that they needed an affordable house in a nice neighborhood, a safe neighborhood for their children. Noble showed them several houses including the now vacant house owned by the Walkers. The Ryans decided to make an offer on the Walkers' house. As the Walkers were out of state, negotiations were carried on via faxes and the parties eventually agreed to terms. 

During the contingency period, the Ryans with their children met Scuggs at the house. They asked Scuggs several questions about the physical characteristics of the property and they also asked him about the neighborhood. Was it a safe neighborhood? Was it a good neighborhood? Was it a good neighborhood to bring up their children? He assured them that it was. He told them he lived nearby and that it was a safe neighborhood for their children. 

Although both Scuggs and Noble lived in the community, neither lived in the same zip code as the Walkers' house. Neither had received nor knew about the letter regarding a registered sex offender nor had they otherwise heard about a registered sex offender moving into the neighborhood. The Walkers and the Ryans never met or talked. The Walkers did not know that the Ryans had children. State X's "Megan's Law" is silent on the issue as to whether a seller of a property has to notify a buyer as to the presence of a registered sex offender.

The Ryans purchased the Walkers house. They purchased a standard title insurance policy from National Title Company. Four months after the closing , an article appeared in the local paper giving the name, address, criminal history, and picture of the registered sex offender who had moved into the neighborhood. He lived one half block away from the Ryans' new house. The Ryans want to move. They fear for the safety of their children. They have tried unsuccessfully thus far to sell their house, which is now stigmatized because of the adverse publicity.

The Ryans want to sue:

2. The listing agent: Paul Scuggs and Century 88 Realty

3. The cooperating agent: Michelle Noble and Green Realty

4. Title Company: National Title Company

Before starting to write your memorandum, please reread Section 6 of the instructions as well as the first paragraph of this Question.

(Suggested time 45 minutes)

Joel Hardy ("Hardy") was a compulsive gambler. He frequented well known Las Vegas casinos where he was known as a high- roller. Unfortunately, he was also unlucky. On the night of August 16, 1998 Hardy was having a particularly long streak of bad luck. By 9:30 p.m. he had lost $100,000 and exhausted his line of credit at the casino.

Hardy then ran into an old friend Richard Stack ("Stack"). He told Stack that he was down on his luck, but that he felt a change in his luck was just around the corner. He told Stack that he owned a vacant piece of land called "Dubious Ranch" that was free and clear, and was worth $50,000.

Hardy told Stack that he would deed the land to him for $25,000. Stack arranged for $25,000 in credit for Hardy at the casino. Stack and Hardy agreed to meet at 8:00 a.m. the next day at Stack's attorney's office so that Hardy could deed "Dubious Ranch" to him.

It took Hardy about two hours to lose $25,000. He then ran into another old friend Dick Russell ("Russell"). He told Russell that he was really down on his luck, but that he felt a change in his luck was just around the corner. He told Russell that he owned a vacant piece of land called "Dubious

Ranch " that was free and clear and was worth $50,000. Hardy told Russell that he was willing to put up the property as security for a $25,000 loan. Russell arranged for $25,000 in credit for Hardy at the casino. Hardy and Russell agreed to meet at 8:30 a.m. the next day at Russell's attorney's office so that Hardy could execute a promissory note and a deed of trust. It took Hardy another three hours to lose $25,000. He went home early that morning thinking that a change in his luck was just around the corner.

At 8:00 a.m. as agreed Hardy executed and acknowledged a Quitclaim Deed to Dubious Ranch to Stack. Stack's attorney Jane Fish ("Fish") said that she would record the Deed. Hardy left the meeting saying that he had another meeting to attend. At 8:30 a.m. Hardy met Russell and his attorney, Julius French ("French"). Hardy executed a promissory note in the amount of $25,000 and executed and acknowledged a Deed of Trust secured by "Dubious Ranch." French said that he would record the Deed of Trust. At 8:45 a.m. French recorded Russell's Deed of Trust. Fish decided to get breakfast first and recorded Stack's Deed at 9:15 a.m. It turned out that Hardy did own "Dubious Ranch" free and clear, but it was only worth $25,000.

Discuss the respective rights, obligations, causes of action, and defenses that Hardy, Stack, Fish, Russell, and French have against each other.