Essential Property Concepts and Theories

Doug Sayranian, Property Spring 2011 Prof.
Kelly
What is Property? Essentialist: Blackstone Commentaries on the Laws of England, Book 1 Chapter 18 Of Corporations: There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property; or that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe. And yet there are very few, that will give themselves the trouble to consider the original and foundation of this right. Bundle of Rights: Collection of rights with content that varies according to context and policy. Trespass to Land: Jacque v. Steenberg Homes, Inc. (Wis. 1997) (1) Essentialist: INTENTIONAL [voluntary] INTRU.S.TION [momentary or permanent] that deprives another person of possession of land; Strict Liability, there is no scienter requirement; the law infers HARM in every trespass in order to give practical meaning to an owners Right to Exclude. Adams v. Cleveland-Cliffs Iron Company (Mich. 1999) (938): Directness (and to some extent, tangibility) knew or reasonably should have known would result in a physical invasion of the land (knowledge of substantial certainty). Trespass vs. Nuisance: Trespass (Invasion, Interference with the Right to Exclude): Hinman v. Pacific Air Transport (9th Cir. 1936) (9) RULE 3: Defendant (invader) has the entitlement with property rule protection. Bundle of Rights: There is no property right to airspace except so far as one may actually use it; Rejection of the ad coelum rule as impracticable. The essence and origin of the legal right of property is dominion; the air, like the sea, is incapable of private ownership except in so far as one may actually use it. (reverts to the public domain) Transaction Cost Problem, Assembly: prohibitively expensive. If others use of airspace constitutes actual interference with possession or the beneficial use of the land (HARM), there would be a compensable trespass, even though actual harm is not a traditional requirement for trespass. United States v. Causby (U.S. 1946) Federal government control over Navigable Airspace not a taking unless the flights come so low as to destroy the use and enjoyment of the surface area and improvements. Private Nuisance (Nontrespassory Invasion, Interference with the Use and Enjoyment): Hendricks v. Stalnaker (W. Va. 1989) (23) "[A]nything which annoys or disturbs the free use of one's property, or which renders its ordinary use or physical occupation uncomfortable A nuisance is anything which interferes with the rights of a citizen, either in person, property, the enjoyment of his property, or his comfort A condition is a nuisance when it clearly appears that enjoyment of property is materially lessened, and physical comfort of persons in their homes is materially interfered with thereby. SIGNIFICANT HARM resulting from a SUBSTANTIAL and UNREASONABLE Interference with the Use and Enjoyment of anothers property. Includes [intentional (knew/should have known of interference) + unreasonable (balance harm v. social value) (if competing uses are both reasonable, then balance landowner interests)] [unintentional negligent or reckless] [result in abnormally dangerous conditions or activities in an inappropriate place]. Gravity of Harm factors (RST 827): o Extent of harm o Character of harm o Social value that the law attaches to the type of use or enjoyment invaded o Suitability of the particular use or enjoyment invaded to the character of the locality o Burden on the person harmed of avoiding the harm Social Value/Utility of the Conduct factors (RST 828): o Social value that the law attaches to the primary purpose of the conduct o Suitability of the conduct to the character of the locality o Impracticability of preventing or avoiding the invasion
Doug Sayranian, Property Spring 2011 Prof. Kelly

Alternative Nuisance Doctrines: Invasion causing significant harm Enforcement of community determined normal uses of land Temporal priority Neighborliness Exclusion and Governance: Exclusion: Gatekeeper approach to land as a resource with the owner as the authority to accept or repel intrusions. Judges merely endorse or backstop the owner's authority. Variety of uses left to the discretion of the owner. (Jacque) Governance: Focus on the particular use of resources; rules about permitted/prohibited uses without regard to other attributes. Used often when particular uses are of heightened importance. What use is most important, as determined by courts, along some dimension? (Hendricks) Shift in the law from Exclusion to Governance as disputes grew larger and/or more complex/intense. The Coase Theorem: In a world without transaction costs, the market will result such that actors will seek to maximize the value of production by assessing the marginal benefit/marginal cost of their activities; this will lead to the greatest net social utility (wealth). Baseline entitlements are irrelevant. Courts should therefore try to resolve cases in the most efficient manner, recognizing entitlements in the case of incompatible uses in order to minimize transaction costs and provide guidance ex ante (parties will negotiate in the shadow of the law). Criticisms: Entitlements are relevant. People do not negotiate rationally (Jacque), holdouts, freeriders, imperfect knowledge, endowment effect (people overvalue what they own), assembly problems (Hinman): too many parties to negotiate with, bilateral monopoly (only one person with whom to negotiate), assumes awareness of the law. Resolving Property Disputes by Contract: A contractual solution may be more efficient than litigation (which is arguable a collective transaction cost). There are, however, some assembly problems (holdouts, free-riders, too many parties), and bilateral monopoly. Lesson: look forward to avoid assembly problems or cases of bilateral monopoly so Coasean bargaining possibilities exist. Property & Economic Development: De Soto: Without legal title and enforcement/recognition mechanisms, Third World property assets cannot be transformed into useful capital, i.e. representations of potential value. In the West, by contrast, every parcel of landis represented in a property document that is the visible sign of a vast hidden process that connects all of these assets to the rest of the economy. Thanks to this representational process, assets can lead to an invisible, parallel life alongside their material existence. They can be used as collateral for credit. The single most important source of funds for new business in the United States is a mortgage on the entrepreneurs house. These assets can also provide a link to the owners credit history, an accountable address for the collection of debt and taxes, the basis for the creation of reliable and universal public utilities, and a foundation for the creation of securities (like mortgage-backed bonds) that can then be rediscounted and sold in secondary markets. By this process the West injects life into assets and makes them generate capital. Criticisms: These efforts have been markedly ineffective. The land wouldnt be valuable, anywaywhats the capital worth of a slum? If the land becomes valuable, a company/government will kick the people out, anyway. Legal title/enforcement mechanisms are necessary, but not sufficient, for the development of a functioning capital economy.

Prof. Eleanor Brown (G.W. LS, Yale JD): Jamaican historical importance of sugar that is now more of a drain on the economy. The IMF and World Bank made privatization of the land used to cultivate sugar cane a condition of aid. Types of Landowners: 1. No Titles, No Interest in Acquiring Titles: Families were uninterested in titles (surprising), and were skeptical of the process; even if they had titles, the land wouldnt be that valuable, and the taxes/upkeep would be too burdensome. 2. Squatters, No Titles: residents close to mining operations (land there is valuable), attempts to use/used political pressure to get titles. 3. Moved to Urban Areas Expecting Rising Property Values after Rapid Urbanization and Development: e.g. shipping lanes bringing business to port cities. 4. Never Had Formal Title but have Historically Done Well Without Them: e.g. the British recognized the property value of the Caribbean and wanted to protect it. The British had to feed the slaves but didnt want to depend on imports from the U.S. or from mass farming on land that had high profitability from sugar cane. The British gave border parcels to the slaves provided they worked the plantationswhatever they grew on that land was theirs, and the land could pass their heirs. This created a historical, ancestral de facto title, essentially creating a property system. Comparison to De Soto: o Yes: Jamaicans movements akin to early American settlers. No: Political development of the broader system was greater in the United States, perhaps not so in Jamaica. There was also an administrative system that could put grant titles. o Objective reason not to want title? Lack of structure would have made it prohibitively expensive/difficult to maintain. o Necessary to have formality in conducting business (generally) in order to preserve economic development. Remedies: Injunctions vs. Damages: Traditional rule in England, equitable relief not available for a mere trespass. Repeated Trespasses: Baker v. Howard County Hunt (MD. Ct. App. 1936) (42) EQUITABLE RELIEF (Injunction) may be granted for REPEATED trespasses when the LEGAL REMEDY is INADEQUATE [e.g. intangible injury, damages insufficient, repeated prosecutions] and the plaintiff comes with CLEAN HANDS. Note: In this case, the Club had a duty to the Bakers to prevent further trespasses after a prior incident (dog bit Mrs. Baker and the Club sent a letter recognizing both the trespass and injury). Note: Demonstrates unwillingness (stubbornness) or impracticability of contract (other trespassers would not be bound by a contract). Note: might a punitive damage award (Jacque) serve this purpose? Building Encroachments: Pile v. Pedrick (Penn. 1895) (50) RULE 1: Plaintiff (landowner) has the entitlement with property rule protection. Essentialist, Bright-line, Categorical Rule: Defendants have no right at law or equity to occupy land that does not belong to them, even if only a slight or accidental (good faith) encroachment requiring an entire structure to be torn down. There is an absolute Right to Exclude. Knowledge of the encroachment, even if acquired after the structure is completed, makes the encroachment an continuously repeated intentional trespass, justifying the exception that equity will not enjoin a mere trespass, see Baker. Golden Press, Inc. v. Rylands (Co. 1951) RULE 2 (Majority rule for Good Faith violators): Plaintiff (landowner) has the entitlement with liability rule protection. RST: Where defendants encroachment is unintentional and slight, plaintiffs use not affected and his damage small and fairly compensable, while the cost of removal is so great as to cause grave hardship or otherwise make its removal unconscionable, mandatory injunction may be property denied and plaintiff relegated to compensation on damages. If the encroachment is deliberate (willful/intentional taking) Bad Faith, then equity may require restoration regardless of expense of removal as compared to the injury, Balance of the Equities.

There is a presumption that men act in good faith and that they intend to do what they have the right to do.
Alternative: De Minimis: Classification of encroachment that would entitle the plaintiff only to nominal damages; issue of subjectivity. Might save from waste in litigation; prevent people from selling their injunctive judgments for greater amounts of money. Evidence: such bargaining does not occur. Criticisms: It might erode property rights, incent carelessness or push-the-limits building, comparative linedrawing problems. Property Rules and Liability Rules: Guido Calabresi & Douglas Melamed Property Rule Protection: The owner determines the value of the property independently and requires a voluntary transaction to remove the entitlement, i.e. a defendant cannot take without consent. This is absolute. Liability Rule Protection: The value is determined by another (courts, etc.) protects the owners right but allows a defendant to take and provide compensation after the fact. Cannot be transferred or destroyed by the parties themselves, Rule of Inalienability. Property Rule Rule 1: Pile (injunction) or Jacque (punitive damages) Liability Rule Rule 2: Golden Press (damages) Boomer (nuisance damages)
Plaintiff Entitlement
Defendant Entitlement
Rule 3: Hinman
Rule 4: Spur Industries, Inc. (very rare)
Note: Transaction Costs affect which system works best. IF transaction costs are LOW, then Property Rule protection results in the party that values the property the most bargaining for it, the entitlement ends up with the correct party. IF transaction costs are HIGH, the Liability Rule protection is best, because there is a transaction barrier to an efficient result; the Liability Rule will force the party with the entitlement (who values it less) to give it up for the Fair Market Value. Note: Liability rule assumes ability to assess Fair Market Value, disregards subjective value. It could lead to a might makes right system of property ownership. The Ex Ante / Ex Post Problem: Ex Ante: Analysis before a crucial event; determining fairness by policy concerns, focus on incentives and future conduct (aligns more closely with essentialist, categorical view). Works well with property rules (long term) by punishing encroachment. Ex Post: Analysis after a crucial event; focus on fairness and distributional concerns. May lead to a bilateral monopoly with a greater range of value, leading to the parties bargaining endlessly. Courts are drawn to ex post analysis because this is how cases are presented to them.

Original Acquisition Accession: Principle of Accession: Acquisition of property that is intimately connected with objects that are already owned property, e.g. fruit on trees, offspring of cattle, etc. Doctrine of Accession: Common law doctrine, someone mistakenly takes up a physical object that belongs to someone else and transforms it through labor into a fundamentally different object. Doctrine of Increase: General rules absent agreement to the contrary, offspring of cattle (the birth follows the belly) (partus sequitur ventrem). Elements: 1. Intent: a. Good Faith: May keep the object if labor significantly improves the item. b. Bad Faith: Improved item must revert back to original owner (categorical). 2. Transformation: prominent v. significant. 3. Factors Determining Significance/Prominence of Improvement: a. Significant multiplication of value of original product, e.g. wood into a piano. b. Significant value or important to the improver, e.g. beam in a house made from unintentionally taken wood. 4. If Title Goes to Improver: a. Improver must pay damages equivalent to the Fair Market Value of the raw material (pretransformation) to the original owner (Liability Rule for the Good Faith Improver). First Possession: First-In-Time: Intent to Control + Notice (physical demonstration of ownership) + Labor (creation of value, exploitation of resource, Lockean labor theory). Very context dependent. Wild Animals, Capture: Pierson v. Post (N.Y. 1805) Essentialist, Natural Law: [Justinian, Fleta & Bracton] Rule : Mere pursuit (closing in) is insufficient to give rise to a legal right to the animal (ferae naturae). Suggested that MAYBE Mortal Wounding + Continued Pursuit could be possession because it manifests an unequivocal intention of appropriating the animal to his individual use, has deprived him of his natural liberty, and brought him within his certain control. Encompassing and securing animals with nets or toils (traps) could also be sufficient. (exploitation of resource) Focus on ex ante, i.e. incentives for future actors; notice, i.e. preserving the peace and preventing litigation. Dissent, contextually evolving property rights: Should have submitted it to arbitration of huntsmen, i.e. custom. (Barbeyrac) Property in animals ferae naturae may be acquired without bodily touch or manucaption, provided the pursuer be within reach, or have a reasonable prospect of taking what he has thus discovered an intention of converting to his own use. John Locke: mixing ones labor with a thing gives rise to a right to claim it provided one does not overclaim to the point of spoil or waste. Focus on fairness. Other Applications of 1st Possession, Splitting Entitlements: Popov v. Hayashi (Sup. Ct. S.F. 2002) (208) Demonstrates the wastefulness of first-possession rules when a clear winner cannot be determined at an early stage, which would deter ineffective competitors. Homerun Baseballs Rule: Split the Entitlement between the Pre-Possessory Interest (Popov) in being allowed to complete the catch without interference and the First Unambiguous Possession (Hayashi). Equitable division and the law of finders. My thoughts: The interest of the parties is in the right to transfer that comes with ownership. The real value of interest is the transferable market (monetary) value that was bestowed on the item beyond its natural market value by the work of the player who hit it. In this case, we could dictate that anyone could possess the ball but the right to determine transferability would remain with the player who hit it. Open Access and the Commons: Eggertsson (95-102) Open Access users have an incentive to deplete a renewable natural resource and lower its economically usable yield to zero (thereby decreasing supply and increasing price). Efficient when there are no net benefits from establishing effective exclusive rights, i.e. at the margins of complex rights structures, e.g. salt and pepper shaker or table-time at a restaurant. Effects: Net Social Loss

o Supply-Side: Users have no incentive to invest in the quality/preservation of the resource. o Demand-Side: Perverse timing (taking too soon, the race) and overdraw of the resource. How to Avoid: o Contract o Exclusive rights as a necessary condition of a scarce resource and a large number of potential entrants o State or private regulation, e.g. quotas like the Kyoto Protocols for emissions or fishing quotas with licensing. Common Property regimes are complex and function in a society with layers of rules/levels concerning exclusion of outsiders and well as internal governance. In some cases of developing countries, nationalization transformed common property regimes into open access regimes. TRAGEDY OF THE COMMONS: Classic example of individual overdraw without enforcement/regulation that leads to aggregate destruction/depletion. Anticommons: e.g. avoiding the use of storefront property because there are so many stakeholders that could exclude a business, opt instead for sidewalk kiosks. DNA patents may complicate/frustrate research for the greater good. Can be a good thing, e.g. for preservation if anyone can object to use/destruction/modification. This is an example of underuse because of prohibitive exclusion rights. Semicommons: private exclusion in some uses or along some dimensions but open access for other purposes or along other dimensions, e.g. common grazing for one season, private planting for another year. Elaborate governance rules for people who will be tempted to improve their plot and trash their neighbors plot. Copyright with fair use/academic use is a semicommons. Can be very stable but requires effective governance structure and disentangling the private and common rights is tough (if you want to modify the regime). Discovery: The New World, Conquest: Johnson v. MIntosh (U.S. 1823) (110) Nemo Dat Non Quod Habet: No One Can Give What He Does Not Have. The Native Americans did not have the power to confer title; they were merely occupants with a legal claim to possession. Lockean Labor Value: Colonists used the land by farming. Necessity: cannot uproot the settled American property system. Prudence to preserve Courts legitimacy. Discovery: gave title to the government by whose subjects, or by whose authority, it was made, against all other European governments, which title might be consummated by possession. Dominion: established by discovery, trumps the Native Americans right of occupancy (doesnt necessarily require possession). Conquest Gives Title: The Europeans were unable to incorporate the conquered people and respect their property rights because they were savages without real property concepts. Land Grants from the Federal Public Domain: (121-128) Tension between two policies (in dealing with squatters): Tap public lands as a source of revenue in order to pay off war debts; to promote rapid development of the interior of the continent; to avoid sanctioning either speculators or squatters. Unlimited sales or homesteading would have appeared to favor speculators or squatters, respectively. Applied minimum pricing on sales and acreage restrictions, etc. on homesteaders. What conditions cause a resource to become a commons? My opinion: it has to be plentiful, costly to administer/manage, and difficult to transform into value (or it is undervalued). The Evolution of Property Rights: (292-298) Demsetz: o THESIS: If the main allocative function of property rights is the internalization of beneficial and harmful effects, then the emergence of property rights can be understood best by their association with the emergence of new or different beneficial and harmful effects.

What converts a harmful or beneficial effect into an externality is that the cost of bringing the effect to bear on the decisions of one or more of the interacting persons is too high to make it worthwhile o Internalizing such effects refers to a process, usually a change in property rights, that enables those effects to bear (in greater degree) on all interacting persons. o Allowing transactions increases the degree to which internalization takes place, though some costs/benefits are not taken into account whenever externalities exist. o New property rights emerge in response to the desires of interacting persons for adjustment to new benefit-cost possibilities, e.g. new technology (trial and error, experiments, etc.) that change the way people use property rights. (What about DNA, organs, or tissues?) Ellickson: o Efficiency thesis: new technologies for marketing, defending, and proving boundaries leads to more parcelization because they reduce transaction costs of private property regimes. Example: group ownership can be beneficial by reducing the per/unit costs of some improvement, or by spreading risk. There are complications when the amount of land and the efficiency of its use is multiple, e.g. oil drilling or building on a college campus. High-Risk environments invite collective ownership to spread the risk, e.g. the precarious position o the colonies due to disease, raids, etc. This is a costly insurance measure because of the inefficiency of private enterprises, so at some point there is a switch. o All land regimes evolve in a cost-minimizing direction in close-knit groups. Nation-state or overpowering groups lack this closely-knit connection and will not (always) yield efficient allocation. o In sum, a shift from group to individual ownership of land substitutes the relatively cheap systems of self-control and boundary monitoring for the relatively costly system of pervasive intragroup monitoring. o Event-Size Distinction: Small: Few people, e.g. growing a tomato. Private ownership incents personal responsibility to take care/cultivate and to wait to pick. The person gets the benefit from their investment and patience. They internalize all the effects. There are some costs, e.g. defining boundaries, policing, etc. Medium: More people, e.g. building a dam. Private ownership incents lower transaction costs between the actually affected parties. It incents cooperation, e.g. the people who own the plot where the dam will affect use, etc. will cooperate to make a decision/assess the costs/benefits. It will be easier to resolve these disputes. Large: Everyone/Many people, e.g. a forest fire. o Adverse Possession: Duration of the Statute of Limitations for Trespass. Presumption that adverse possession cannot work against the Crown (or the U.S. government). United States v. Thompson (U.S. 1878); United States v. Hoar (C.C. Mass. 1821) (Story J.) 1. Actual Possession (Not Claim or Hypothetical) a. Lessee of Ewing v. Burnet (U.S. 1837) (194): Does NOT require actual occupation, cultivation, nor residence when the property is unsuitable for any permanent useful improvement and the continued claim of the party is shown by public acts of ownership, such as he would exercise over his own property, but would not exercise over property he did not possess. 2. Exclusive (not a number of trespassers, including exclusive of the original owner). 3. Open and Notorious (i.e. fly your flag) 4. Continuous (not intermittent, discrete trespasses or periods of possession) a. Tacking: Add up periods of adverse possession (sometimes) when a predecessor adverse possessor sells the property to the second adverse possessor through a transfer (gift or sale). b. Relation Back: An AP that prevails is deemed the owner from the time of initial entry and is responsible for issues relating to that time period, e.g. back taxes. c. Disability: typically, state statutes provide that the SOL is tolled (pauses) when an owner is disabled (narrow), e.g. minors, insanity, legally incompetence, and sometimes in prison, at the time the adverse possessor enters the property. Disabilities arising after the entry usually do not toll the SOL, and disabilities of successive owners cannot be tacked.

5. Adverse under a claim of right or color of title [some document, either defective or unlawfully granted, in some states shortens SOL; in almost all states allows for constructive possession of the whole for a claim of AP by possession of a small part] (without permission) a. Good Faith: subjective belief (mistaken) of legal title. Carpenter v. Ruperto (Iowa 1982) (203): When knowledge of lack of title is accompanied by knowledge of no basis for claiming in interest in property, a good faith claim of right cannot be established. It is an overstatement that title cannot be attained through adverse possession by one who knows he has no title; he must also know that he has no right. b. Bad Faith: subjective belief of lack of legal title (Maine Rule). Very few states follow this rule requirement. Preble v. Maine Cent. R. Co. (Me. 1893) c. Irrelevant (Connecticut Rule), the predominant rule, as long as the AP does not have permission of the owner. Lessee of Ewing v. Burnet (U.S. 1837) (194): Defendants knowledge of prior title (making his claim of right/color of title void), is irrelevant when he had actual adverse possession.
Justifications: Reliance: [M]an, like a tree in the cleft of a rock, gradually shapes his roots to his surroundings, and when the roots have grown up to a certain size, cant be displaced without cutting at his life. Loss Aversion/Endowment Effect: Taking from the adverse possessor would be more demoralizing than denying recovery to the true owner because losses fall more harshly (psychologically) than gains. (AP has more of her person wrapped up in the thing, the TO has an interest in the nature of the fungible asset) Penalty on those that sleep on their rights. A means of firing poor gatekeepers. Reduces transaction costs of determining titles that may stretch for a long time. Clear away the cobwebs of old title. Marketable title acts do the same thing, but with a longer statute of limitations, i.e. automatically disregarding claims of title over X years old (generally 40). Creation: Common Law Intellectual Property: What is the implication of a non-rivalrous use conception? Ones knowledge/use does not detract value or anothers ability to utilize. Standard for Equitable Relief: Irreparable injury Inadequacy of remedy at law Balance of hardships in favor of the plaintiff (remedy in equity justified) Public interest not disserved by a permanent injunction of a violator Note: the Right to Exclude is difficult to protect using monetary remedies onlyBe wary of firms buying patents (e.g. pharmaceutical or genetic) to extort high fees for their use. International News Service v. Associated Press (U.S. 1918) (135): recognized Quasi-Property Right in the acquisition and expedient transmission of the news, information being a nonrival good. Recognized a right with Relativity of Title in that enjoined INS, but not the rest of the world. It merely delayed competition. A Proprietary Right that postpones participation by complaintants competitor in the processes of distribution and reproduction of news that is has not gathered, and only to the extent necessary to prevent that competitor from reaping the fruits of complaintants efforts and expenditure. Lockean Labor Value theory. Public policy to incent the acquisition and transmission of information. The information itself was publici juris, the history of the day, while the literary production was deserving of protection. News as stock in trade to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it. This is the basis for many recognitions of a common law right to exclude in the use of time-sensitive information. Dissent: Holmes: There is no property in un-copyrighted combinations of words. The solution should be a limited time ban, e.g. X hours. Brandeis: Rejected the Lockean Labor Value theory. Public policy determines the assignment of property rights to information (creations, inventions and discoveries) in limited circumstances. This is a new rule the law, as all unfair competition generally means fraud or force, e.g. following

an entrepreneur into a new market. This was merely an omission, not a misrepresentation of AP work as that of the INS. Patent: (generally 20 years) New, Useful, Non-Obvious Inventions. Copyright: (owners life + 70 years) Original works of authorship, subject to academic/fair use allowances for portions. Trademark: (perpetual) Words or symbols that identify commercial enterprises. Can be abandoned by non-use. Property & Intellectual Property: Assembly in Digital Databases (Lessig): Advocates a legal exception for large searchable databases (from copyright law). Prohibitively large transaction costs involved in getting permissions justify the exception because of the great benefit to society of the utility of the database. Economic Analysis of Intellectual Property Law (Posner): Gridlock and the Tragedy of the Anticommons (Heller): Airport expansion, pharmaceutical patents, MLK Jr. documentary. Need to find a balance between extreme overuse and extreme underuse. Copyright (Lessig): Compare current, non-reverting 95 year protection even if there is little commercial value in protection v. turn of the century 14 year protection with optional (often forgone) 14 year renewal. Trademark: (perpetual) trust in products, low-cost differentiation method, incents quality, social value unrelated to incentives for innovation. IP and Medicine: Example, Indias compulsory license for pharmaceutical manufacturing (part of WTO agreement). (Estimate that a new drug costs $1.5 billion to produce)

Owner Sovereignty and Its Limits Protecting the Right to Exclude: Notice Ex Ante vs. Ex Post applications of Rules and Standards, respectively. Rules are costly to implement (information costs) and cheap to enforce (incent future behavior), but Standards are cheap to implement and costly to enforce (balancing the interests). Criminal Laws: People v. Olivo (N.Y. 1981) (394): Personal Property: An exercise of control wholly inconsistent with an owners continued rights, with requisite intent, it will sustain a conviction for larceny. Larceny was once narrowly defined (trespassory taking), and gradually expanded (custody), until the intent element predominated (larceny by trick King v. Lear). It eventually shifted to focus on protecting societys general peace/protection of property rights. An owner retains legal possession of the merchandise until the sale. Factors: concealment, furtive/unusual behavior, abandonment in exchange, proximity to exit, specially designed garment or accessory (practically conclusive). Some movement is required. State v. Shack (N.J. 1971) (401): Real Property: Property rights serve human values. They are recognized to that end and are limited by it. Standard-like treatment: The rights of a landowner are always subject to the restriction that their use cannot harm the rights of another, and this qualification evolves with society (and technology). A landowner therefore cannot bar access to governmental services available to tenant migrant workers, for their health or well-being; entrance pursuant is not a trespass. Why is trespass to personal property treated harsher than trespass to real property? Possibly Risk of an altercation. Brings in police intervention thereby deterring self-held and resistance. Priority of protecting the peace (and presumably people). Punish arson and burglary harshly, but not mere trespass because those structures (likely) contain people. Why require landowners to post notice to would-be trespassers? Cost effective, i.e. does not require constant vigilance or interaction. Allows for Ex Ante information. Civil Actions: Retain elements to establish a case that originated in common law writs for prescribed remedies under specified causes of action. Real Property: Trespass quare clausum fregit (Trespass QCF) for breaking the close; protects possession, vindicates possession. Trespass de ejectione firmae (Trespass DEF) vindicates (generally) title against the person wrongfully in possession. (e.g. tenant in possession can sue in trespass, the landowner must sue in ejectment) Personal Property: Trespass de bonis asportatis: forcible asportation of plaintiffs goods. Wrongful taking, but did not require conversion. Plaintiff could recover damages only. Detinue: unlawful detention of goods. Mainly used to recover lost property and disputes over bailments. Defendant (if liable) had the choice of paying damages or returning the item(s). Trover: (evolved out of trespass on the case) defendant wrongfully converted the goods to his own use, did not have to remain in the defendants possession. Damages only, initially, unti 1854 then return of goods was allowed. Note: in American it became the favored action for plaintiffs seeking relief from wrongful conversion of personal property; became overshadowed by the tort of conversion. Replevin: originally in the narrow context where a landlord seized personal property of the plaintiff as distraint for unpaid rent, to get the goods back the plaintiff had to post bond (twice the value of the property) to immediately recover. If the plaintiff won, the bond was returned; if he lost, then it was used to pay the defendants claim. Note: popular in America because you could get the goods back. Trespass to chattels: no asportation but the defendant had injured or interfered with the property (not quite conversion). Self-Help: Berg v. Wiley (Minn. 1978) (428):Minority Rule: The only lawful means to dispossess a tenant who has not abandoned nor voluntarily surrendered but who claims possession adversely to a landlords
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claim of breach of a written lease is by resort to judicial process. Self-help, e.g. changing the locks, is NOT available to dispossess a tenant who is in possession and has neither abandoned nor surrendered. Majority rule: allow self-help, subject to the conditions that recovery must be achieved without a breach of the peace and the landlord must be legally entitled to possession. MPC: Allows reasonable force to prevent entry onto real property or the carrying away of personal property. Use of deadly force only if there is a threat to human life. Criticisms: Allowing self-help upholds the sanctity of property ownership. Self-help reduces transaction costs, i.e. courts/arbiters are not necessary every time. Self-help is immediate and has a deterrent effect. Exceptions to the Right to Exclude: Necessity: Generally requires the threat of [imminent harm to people or persons] that is [not the fault of the trespasser]. Ploof v. Putnam (Vt. 1908) (439): RULE 3. Any port in the storm. (quasi-functionalist) Certain necessity justifies entries upon land and interferences with personal property that would otherwise have been trespass. Examples: A sheepdog pursuing too far if the owner does his best to recall the dog; passing cattle over a way through land and a few eat the grass in passing or stray and are promptly brought back; traveler on a highway that is obstructed may pass on adjoining land; one assaulted in peril of his life run through the property of another to escape his assailant. Mouses Case (12 Co. Rep. 63) (1609): General Average Contribution that encourages honesty in valuation and minimization of aggregate costs. Everyone onboard ought to bear the loss, pro rata, so the people saved pay a proportionate sum of the value of their saved property in order to compensate the owner of the property cast overboard (in this case, a casket). Vincent v. Lake Erie (Minn. 1910) (441): RULE 2. The intruder has the right but must pay for damages to the owners entitlement (tying the boat to the dock during a storm damaged the dock; justified by noting that boat was retied). Custom: McConico v. Singleton (Ct. App. SC 1818) (442): by a long-standing and recognized custom, hunters have the right to hunt over unenclosed, unimproved lands. (Interestingly stated that there must be some injury to support an action for trespass; treading of the grass insufficient.) Note Posting and Fencing In/Out Laws (East/West). Public Accommodation Laws: A general duty of non-discrimination, service on a first-come basis, charging only reasonable rates (can be different among customers as long as within reasonable range). Originally applied to innkeepers, common carriers, and common services; narrowed during Jim Crow to mere travel-related businesses. Then Title II of the Civil Rights Act of 1964, 42 U.S.C. 200a (2000): broadened the definition of public accommodation to include various entertainment/exhibition places (not historically the case) along with hotels, inns, restaurants, cafeterias, and food-consumption-on-the-premises places. (Note, NOT department stores). Uston v. Resorts International Hotel, Inc. (N.J. 1982) (448): (continuum) A person has a right of reasonable access to property open to the public as long as the person [does not threaten the security of the premises and its occupants] and his actions [do no disrupt the regular and essential operations of the premises] [cannot be otherwise disorderly or dangerous]. Duty not to act in an arbitrary or discriminatory manner. State v. Schmid (N.J. 1980) (448, cited): Common law evolved, recognizing that private property devoted to public use (for owners profit) must accommodate the rights which inhere in the individual members of the general public who use that property. Constitutional right to distribute literature on a private university campus; balance strong individual interest against weak institutional interest. See also PruneYard Shopping Center v. Robins (U.S. 1980): must permit political expression as long as reasonable in time, place, and manner so as not to disturb other patrons. NOT a Taking. But see Kaiser Aetna v. United States (U.S. 1979): directive to open a privately-constructed marina to the public, justified as being part of navigable waters, constituted a Taking.
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State v. Shack (N.J. 1971) (401): strong right to exclude v. strong right of access. Brooks v. Chicago Downs Assn., Inc. (7th Cir. 1986) (453): Can exclude a group or individual (expert handicappers) for any reason or no reason at all as long as it is not discrimination based on race, color, creed, national origin, or sex. Market forces preclude outrageous excesses; markets are inevitably imperfectthis was not a monopoly or an allegation of consumer fraud. Possible Alternative: Right to Exclude others subject to a general good cause requirement.. Antidiscrimination Laws: There is no legal principle that prohibits a homeowner or tenant from announcing that a person of a particular race or other category will be systematically excluded from a home/apartment. Shelley v. Kraemer (U.S. 1948) (457): The 14th Amendment prohibits judicial enforcement (state action) of discriminatory covenants between private parties. State action: exertions of state power in all forms. So long as the purposes of those agreements are effectuated by voluntary adherence to their terms. Barrows v. Jackson (U.S. 1953): judicial judgments awarding damages for breach of racial covenants violate the Equal Protection Clause. Re Drummong Wren (Ontario 1945) (464): public policy. State Action Doctrine: Voluntary discriminators cannot force state discrimination. Racial covenants equivalent to racial zoning laws. Interest balancing: discrimination v. liberty to discriminate. Shelley correctly separated out for invalidation nongovernmental activities whose existence impairs fundamental constitutional values. Enforcement of the covenant would have been an exception to the general rule of prohibiting restraints on alienation. Bell v. Maryland (U.S. 1964) (465): Dodged question of whether convictions for trespass for participation in sit-ins were unconstitutional state action; Maryland passed a law making racial segregation in public accommodations, including restaurants, unlawful. Dissent, J. BLACK: Trespass law necessary for order. Force leads to violence, violence to mob conflict, and these to rule by the strongest groups with control of the most deadly weapons. Response, Arthur Goldberg: Convictions would have been unconstitutional had the law not been changed. Civil rights, reasonably extrapolated to modern conditions, were broad enough to cover discrimination by restaurants and lunch counters (clever because this argument did not threaten to transform all judicial enforcement of trespass law into state action). The Fair Housing Act, 42 U.S.C. 3601-3619 (467): 3604: Discrimination in the sale or rental of housing or other prohibited practices. (Prohibits refusal, lying, for profit inducement, etc.) o (c) Prohibits the printing, publishing, or causing to be printed or published any notice, statement, or advertisementdiscrimination/preference/limitation based on race, color, religion, sex, handicap, familial status, or national origin (or intention to make such preferences). This applies even under the Mrs. Murphy Exception. o Prevents misrepresentation, denial, refusal, or making unavailable 3603(b): Exemptions: The Mrs. Murphy Exception: owner must live on the premises, not intended to have more than 4 single families. Essentially leaves private property owners on their own to discriminate but prevents large property holders from becoming slum lords or holding an interest in such businesses. 3607: Religious organization or private club exception: A private club that, incident to its primary purpose, owns propertycan limit or give preference to its members provided that the property is owned for something other than an commercial purpose. May restrict sale to persons of the same religion or prefer members unless membership is restricted based on race, color, or national origin. Betsey v. Turtle Creek Assocs. (4th Cir. 1984) (469): Discriminatory effects are sufficient. Brown v. Artery Org., Inc. (D.D.C. 1987) (469): Requires proof of discriminatory intent; effect is sufficient for a prima facie case against government actors. Craigslist Ad Hypothetical, falls under Privacy and Association Rights (roommate gender preference).
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Other Powers of Ownership: Licenses: Essentially a waiver of the right to exclude; similar to a contract. Marrone v. Washington Jockey Club of the District of Columbia (U.S. 1913) (480): Licenses are revocable at will unless incidental to a right (grant) of an interest in the property. The purchase of a ticket does not grant a right in rem, good against the world (Wood v. Leadbitter (153 Eng. Rep 351 Ex. 1845) (481)). Note: A license that is not a contract, e.g. dinner guests or a visiting repairman. ProCD, Inc. v. Zeidenberg (7th Cir. 1996) (491): A shrinkwrap license restricting the commercial use of a program is enforceable against a buyer presented with the additional terms (inside the packaging) and offered an opportunity to reject the terms and return the goods, but who does not do so. This functions like a contract between the two parties; the licensor has the right to restrict certain uses. Revocability of Licenses, Prof. Kelly: 1. License is revocable at will; difficult to fit with new contract-based (particularly IP) licenses. 2. The only remedy allowed for breach is damages. What Holmes said in Marrone (480) fits better with the modern characterization, but damages is not the only possible remedy for licenses, sometimes you can get specific performance, e.g. equitable estoppel (deer hunting). 3. Licenses fall into a category of in personam rights, so if you have a license it doesnt give you the right to exclude others. However, it does give you the normal damages you would get under a contract for an unreasonable revocation. In certain circumstances where damages are insufficient, you could get specific performance (accords with the modern treatment). SCOTUS conflict on the issue of provisions for payment of royalties in a license: Brulotte v. Thys Co. (U.S. 1964) (496): Patent Act preempted enforcement of a contract providing continued accrual of royalties after the last of the patents incorporated into the machines expired. Aronson v. Quick Point Pencil Co. (U.S. 1979) (496): No preemption where the agreement provided for reduced royalties in the event that the inventor failed to get a patent. o My opinion: In Brulotte, royalties were likely not going to be paid in the event that there was no patent. In Aronson, on the other hand, royalties were understood to be paid regardless of a patent, so the payments were not made pursuant to a patent, but pursuant to the private agreement and augmented by the acquisition of a patent. Bailments: An owner (bailor) temporarily transfers custody and control over the property to another (bailee) with the expectation that when the purpose for the transfer is complete, the bailee will return the property to the bailor. Can be created by express or implied contract; reduces transactions costs in the protection of property (rational ignorance); the bailor does not have to then prove negligence (likely impossible). What can go wrong: damage/misuse or mis-delivery. Allen v. Hyatt RegencyNashville Hotel (Tenn. 1984) (497): Mixed in rem and in personam rights. A bailment is created through implication and a reasonable expectation of protection through the assumption of control and custody of vehicles, limited access thereto with attendants and patrols and requiring presentation of a ticket upon exit. Presumption of negligence. But see Rhodes v. Pioneer Parking Lot, Inc. (Tenn. 1973) (500 cited): Bailment did not exist when the lot was open, wholly unattended, metered parking (coins), and cars parked and locked independently. Note: facts to look for: valet, who keeps the keys, attendant/limited access, security patrols/responsibilities, metered or ticket parking. Dissent: tickets automatic, no driver identification, sometimes gate left open, bailment requires full transfereven exclusion of the owner and all other persons. Bailees Duty of Care: Originally, absolute duty. Overruled in Coggs v. Bernard (1703) (505): C.J. HOLT: (the barrels of brandy). Six forms of bailments. 1. Depositum: Bare naked bailment of goods from one to another to keep for the use of the bailor. 2. Commodatum: Useful goods/chattels lent to a friend, gratis. To be restored in specie. 3. Locatio et conduction: Bailor (locator) leaves goods with bailee (conductor) to be used by him for hire.
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Vadium (pawn or pledge): Security to the bailee for money borrowed from him by the bailor. 5. Goods/chattels delivered to be carried, or something is to be done about them for a reward to be paid by the person who delivers them to the bailee, who is to do the thing about them. 6. Goods/chattels delivered to somebody to carry them or do something about them, gratis, without any reward for work or carriage. J. STORY: Three tiers of liability (low, standard, heightened) depending on for whose benefit the bailment is made (bailors, reciprocal, bailees). Modern standard: Universal duty of care, though this may not be what is actually applied; stricter on mis-delivery than on destruction/theft. 4.
Abandonment and Destruction: Placing property back into the public domain. Abandonment: Imposes externalities, e.g. polluted land. The Comprehensive Environmental Response, Competition, and Liability Act (CERCLA) imposes liability on the last owner. Pocono Springs Civic Association, Inc. v. MacKenzie (Penn. 1995) (518): Real property under Perfect Title CANNOT be abandoned. (RSP 504 cmt. a (1944)). o Possession is presumed in the party who has record title. Overly v. Hixson (Pa. Super. 1951) (520). o Fee simple absolute must be sold or transferred. Under Imperfect Title: Abandonment = [relinquishment of all rights, title, claim and possession] + [intent of terminating ownership] + [intention of not reclaiming further possession or resuming ownership, possession, or enjoyment] Unsuccessful/Irrelevant Actions: Offer, Gift, Nonpayment of taxes, notarized statement of intent to abandon, refusal to accept mail, long period of nonuse without visiting. FROSTY THE SNOWMAN: Professor Hinkle seemed to abandon the Magic Hat, so the children had first possession thereafter. Can Frosty have property rights? Destruction: A bit more problematic because it prevents future derivation of value. Eyerman v. Mercantile Trust Co. (Ct. App. Missouri 1975) (523): Functionalist, A person may be enjoined to stop the destruction of property (in a will) if [there is no objective good reason for the destruction] and [the act is against public policy; mischievous tendency so as to be injurious to the interest of the state apart from illegality or immorality]. A court will almost never allow/order destruction of property causing substantial loss in value. MCraigs Trustees v. Krirk-Session of the United Free Church of Lismore, et al (1915 Sess.Cas. 426 (Scot) (cited): Dictated to successors for estate money for the erection of statutes that would not be available for public viewing. (The majority had to dig deep for this extreme example). Dissent: assumes psychic knowledge of the testratrixs reasons, officiously confers a benefit. Note: Ex Ante/Ex Post illustration; there may be reasons ex ante that are outweighed ex post. Example. Supreme Court Justices notes are traditionally specified to be destroyed upon their deaths; if this was disregarded, then they might have an incentive to destroy early or never create. Transfer: Permits the owner to shed Gatekeeper Responsibility. Lauderbaugh v. Williams (Penn. 1962) (532): Restraints on alienation of real property are disfavored at law. Common law rule against restraints on alienation, now qualified Absolute (Disabling) Restraints are against public policy and Void. Forfeiture Restraints are usually not enforced (alienation triggers forfeiture to a third party or the grantor). Promissory Restraints are sometimes enforced, depending on the circumstances (suspect due to the possibility of unconstitutional discrimination). Partial restraints will be upheld and enforced only if reasonable under the circumstances. If standard-less, the restraint could be capricious. Reasonableness: Percentage of the market restricted from transfer.
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Extent of discretion of the entity exercising authority over the restraint. Even if there is some discretion, is that discretion limited by some ascertainable standard? This can be subject to judicial review for appropriateness. The motive behind the restraint. The risk that the restraint could be used for discriminatory purposes.
Statute of Frauds: Conveyance of a right in land, other than a short term lease, and any contract for the assignment, surrender, or sale of property right in land must be in writing and signed by at least one of the parties. This enhances overall transferability by making such transactions uniform, secure, and easier to regulate (prevents frauds), even though it is a restraint on alienability. Delivery Requirement: A deed must be signed, sealed, delivered in order to be valid. Even if the grantee is informed that the deed has been written and signed, he must have it as evidence o title. Gift also requires delivery. This prevents clouding of title, disagreements, etc. Title Records and Recording Acts: Nemo Dat (Quod Non Habet): No one can give that which he does not have. The Derivation Principle states that the transferees rights derive from the transferors, so the transferee only has what the previous owner had and nothing more. Kunstsammlungen Zu Weimer v. Elicofon (E.D. N.Y. 1981) (885) (affid 2d Cir. 1982): One cannot acquire good title from a thief, even if a bona fide purchaser; only the true owners conduct or operation of the law can divest the true owner of his title in property. It was irrefutable that the property (paintings) were stolen, so the thiefs title was void. The Good Faith Purchaser (Exception to Nemo Dat): The Uniform Commercial Code (UCC) 2-403 limits this exception to cases where the purchaser has voidable title, i.e. due to a technical defect or defective purchase. The purchaser can transfer good title to a Good Faith Purchaser (GFP). Even if: a. The (original) transferor was deceived as to the identity of the purchaser, or b. The delivery was in exchange for a check which is later dishonored, or c. It was agreed that the transaction was to be a cash sale, or d. The delivery was procured through fraud punishable as larcenous under the criminal law. Kotis v. Nowlin Jewelry, Inc. (Ct. App. Tex. 1992) (891): A purchaser acquires at least voidable title if the transaction was voluntary. A Good Faith Purchaser (honesty in fact) can acquire good title in an exchange for value (gift does not apply). A quasi-objective/subjective standard of Good Faith: Actual honesty in fact, belief of the party, qualified by an examination of reasonable evidence (such as lying or an unreasonably low price). Requires a voluntary transaction as a transaction of purchase, i.e. theft does not count. Estoppel by Deed: A fraudulent first party, lacking title, conveying real property to another cannot claim superior title to his grantee if he later acquire title; under another version of this doctrine, title transfers to the third party grantee as soon as the fraudulent grantor acquires title. Notice: Actual Notice. Inquiry Notice: a reasonable person would have engaged in further inquiry to lead to actual knowledge. Record Notice: one with a duty to research the title records will be deemed to know relevant facts disclosed by the records even if that person does not, in fact, inspect them. Recording Acts: 1. Race: the First-to-Record prevails, regardless of knowledge of a prior grant. 2. Notice: A subsequent Good Faith Purchaser (Bona Fide Purchaser BFP) for value will prevail unless she has notice (actual, constructive, inquiry, or record). Incents immediate recording as protection against later claimants as GFP. 3. Race-Notice: Required Good Faith Purchaser for value and First-to-File in order to prevail over other claimants. Prof. Kelly: There is no really good explanation as notice already incents
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immediate recording. Perhaps it allows an early Good Faith Purchaser to keep title by recording before other Good Faith Purchasers instead of losing the chance of title, immediately. The Shelter Rule: Once a GFP prevails, he is given all the attributes of ownership. A GFP may transfer good title by gift or for value to a third party even if that third party has actual knowledge or notice of a conveyance prior to the one to the GFP. The Original Owner Exception: The Original Owner cannot shelter in the ownership of a GFP, thereby walking away with both the land and the proceeds from prior, dishonest conveyances to parties against whom the GFP prevail. Risk of collusion.
How to Conduct a Title Search: 1. Look in the grantee index for the would-be transferor and trace backwards to as far as necessary (statutory requirement) or possible. 2. Trace forward in the grantor index to determine what the grantors did with the title between (i) the execution of the deed to them and (ii) the recording of the deed to the next person. Note: This Chain of Title includes transactions that a grantor may have done after the execution of the deed to another, but before recording. Note: Anything outside the chain of title (e.g. a grant after the grantee recorded) does NOT give constructive notice, but the good faith exception to nemo dat still applies. Note: Look for OVERLAP, i.e. examine the grantor until the recording of the deed to the grantee, and examine from the grantee backwards, starting from the execution of the deed from the grantor (even though it wasnt recorded until later).
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The Forms of Ownership Estates in Land: (545-563)
Note:
(1) Identity of takers known, no other contingency before the interest is possessory other than the natural termination of the previous interest. (3) The remainder is certain to vest initially but could be taken completely or partially upon the occurrence of a contingency. (4) (a.k.a. Subject to Open) Parties could add to the class to dilute the interest, e.g. more children born before the holder of the Life Estate dies; upon death of the Life Estate holder, the then-living children collectively hold a Fee Simple Absolute.
Present Possessory Interests: (Freehold) Fee Simple Absolute: Potentially infinite, the largest aggregation of property rights. Transfers to devisees or heirs upon the original owners death. If the owner dies without heirs, the property escheats to the State (very rare). Life Estate: Duration defined by a particular life, usually that of the devisee, but possibly someone else (pur autre vie). It either Reverts to the Grantor or is a Remainder to a Third Party. Defeasible Fees: o Fee Simple Determinable: Automatically expires (Possibility of Reverter) at a state time. Uses Durational Language. (Future interest to the Grantor)
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o o Fee Simple Subject to a Condition Subsequent: Does NOT automatically expire when the triggering event occurs; the future interest holder (Grantor) must take affirmative action to end the estate (Right of Entry/Power of Termination). Conditional Language. Fee Simple Subject to an Executory Limitation: Automatically expires when a state event occurs, but gives the right of possession to a transferee (Third Party). Durational or Conditional language.
Future Interests: Whenever there are rights left over from the conveyance of possessory interests that are less than Fee Simple Absolute. Reversion: Retained by the Grantor, automatic at the end of a life estate. Possibility of Reverter: Retained by the Grantor, automatic upon the occurrence of a contingency. Follows fee simple determinable. Right of Entry (Power of Termination): Retained by the Grantor, NOT automatic. Follows fee simple subject to condition subsequent. Remainder: Follows life estates, interest vested in a Third Party. Executory Interest: An interest in a transferee that divests a previous interest. o Shifting Executory Interest: Divests the interest of the Third Party. o Springing Executory Interest: Divests an interest of the Grantor, e.g. a gap between the death of the Life Estate holder and the remainder vesting in the Third Partyin the interim, the Grantor has the reversion. o May cut short an interest that would ordinarily be ended by deathdoes not become possessory upon the death of the preceding interest holder. (e.g. A to B for life, but if B remarries, then to C (daughter)). o MUST become possessory in order to vest in interest. Vesting: Vesting in Interest: When the uncertainty of the potential grantee is resolved. Vesting in Possession: When an interest becomes present-possessory. o Vested means that uncertainty about whether the interest will ever come to a particular individual is resolved. 1. Uncertainty as to the identity of the taker (of possession). 2. Uncertainty as to the occurrence of contingencies.
Problems: (561)
I.
O grants Blackacre "to A for life, then to B and his heirs." a. Present Interest: A Life Estate b. Future Interest: B Remainder in Fee Simple.
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II. Same as in Question 1. Then C enters adversely. Then thirty years later C is still on Blackacre and A, still alive, has never entered. a. Present Interest: A Life Estate, Adversely Possessed by C (Life Estate pur autre vie linked to A's life). B can probably do nothing, but might be able to sue A in waste in some jurisdictions. b. Future Interest: B Remainder in Fee Simple. O grants Blackacre to A for life, then to B and her heirs; but if B ever remarries, then to C and her heirs. a. Present Interest: A Life Estate. b. Future Interest: B Remainder in Fee Simple Subject to Executory Limitation. (Alternatively, and what is more conventional, we describe B's future interest as a Vested Remainder Subject to Complete Divestment. Note that once A dies, B does have a present possessory interest which would be a fee simple subject to executory limitation.) c. Future Interest: C Executory Interest. i. Wrinkle: the remarriage limitation could be void against public policy. ii. If B cannot ever remarry, even if A is still alive, it would make more sense to call it a Remainder in Fee Simple Subject to Executory Limitation. O grants Blackacre "to Huxley College, as long as it is used for instructional purposes." a. Present Interest: Huxley College Free Simple Determinable. b. Future Interest: O Possibility of Reverter. O grants Blackacre "to A; but if marijuana is inhaled on the premises, then O shall have the right to reenter and take the premises." a. Present Interest: A Fee Simple Subject to Condition Subsequent. b. Future Interest: O Right of Entry/Power of Termination. O grants Blackacre "to A; but if marijuana is inhaled on the premises during A's lifetime, then to B and her heirs." a. Present Interest: A Fee Simple Subject to Executory Limitation. b. Future Interest: B Executory Interest in Fee Simple. i. Note: Conventional wisdom says that it is automatic, regardless of durational or conditional language used. O conveys Blackacre "to A for life, then to B for life, then to C." a. Present Interest: A Life Estate. b. Future Interest: B Remainder in Life Estate (implicitly contingent on B surviving A, so it is contingent). c. Future Interest: C Remainder in Life Estate. O grants Blackacre "to A for life, then to B for life, then to B's children who survive him." a. Present Interest: A Life Estate. b. Future Interest: B Remainder in Life Estate. c. Future Interest: B's Children have Contingent Remainders (if vested, i.e. children born, they are subject to partial divestment) d. Future Interest: O Reversion. O grants Blackacre "to Springfield Hospital as long as it is used for the care of patients, then to Springfield Animal Clinic." a. Present Interest: Springfield Hospital Fee Simple Subject to Executory Limitation. b. Future Interest: Springfield Animal Clinic: Executory Interest. i. This may invoke a RAP problem, but the "two charities rule" may exempt this grant. To A for life, then to A's husband if he survives her. a. Present Interest: A Life Estate. b. Future Interest: A's Husband Contingent Remainder, contingent on surviving her. For Vesting, we need to know who the husband is and whether the husband survives her. c. Future Interest: O Reversion. O conveys to A for life, then, if B passes the bar, to B and his heirs as long as he remains a member in good standing of the bar. B is a student in law school. a. Present Interest: A Life Estate b. Future Interest: B Contingent Remainder in Fee Simple Determinable. (Alternatively, we could call B's interest a Contingent Remainder. Note that if B passes the bar, B has a present possessory interest which is a fee simple determinable)
III.
IV.
V.
VI.
VII.
VIII.
IX.
X.
XI.
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Future Interest: O has reversion and a possibility of reverter. (When B passes the bar, B's remainder would vest in interest and O would only have a possibility of reverter) Bequest by O of "$100,000 to A, to be paid when A reaches age twenty-one." a. Present Interest: O (actually O's successor) retains fee simple b. Future Interest: The future interest often goes without a name and is sometimes called an executory interest, which would be the closest pigeonhole. The unappealing alternative is to recognize a category of present interests with possession postponed. c.
XII.
Maintaining the Estates System: Conservation of Estates: All of what a Grantor had must be accounted for (i.e. it must all add up to a Fee Simple in the Last Interest when it becomes possessory, otherwise the chain of interests could end without anyone ready to take). Note: In considering the effect of an invalid condition in a defeasible fee, it may make a difference whether the grantor used a FSD or a FSSCS, i.e. whether there was POR (automatic) or ROE/POT (not automatic). Example: Evans v. Newton (US 1966) (575): declared gift of a park failed due to a restriction demanding racial segregation, implied a reversion to the heirs of the grantor (Senator Bacon). City of Klamath Falls v. Bell (OR 1971) (568): (Minority rule): Attempt by a grantor to alienate the Possibility of Reverter does NOT destroy it. POR CANNOT be alienated. (Under FSD, PORGrantor, to shareholders and their heirs. It ended up with them, anyway). The Rule Against Perpetuities (RAP) does NOT apply to Possibility of Reverter. POR is descendible, here to the shareholders (Shallock and Daggett, deceased so to heirs). General Rule: [W]hen an executory interest following a fee simple interest in landis void under the Rule Against Perpetuities, the prior interest becomes absolute unless the language of the creating instrument makes it very clear that the prior interest is to terminate whether the executory interest takes effect or not ([1]This would have made the FSD as long as a FSACity owner). However, the courts of the US do not create an indefeasible estate in the first grantee when a subsequent executory interest (Shallock and Daggett, owners and sole shareholders of the grantor corporation, now dissolved) is void under the RAP. [2] Instead, the grantor (here the corporation) retains an interest known as a POR. (Rejected expansion of FSSEL into FSA) [3] Rejected alternative: POR escheated to the State of Oregon. Disclaimer: You can disclaim a transfer of property, usually by a writing or clear and unequivocal declaration. This is treated as having never owned the property (to avoid taxes on further transfers, avoid a losing asset, or prevent disclaimants creditors from access). However, accepting ANY benefits means acceptance of ALL. The Flexibility of the Estate System: Under Numerus Clausus, the catalog of estates is finite and closed, though recursive, i.e. can be chained indefinitely and creatively. Merrill & Smith: This strikes a rough balance between complete regimentation and complete freedom/customization; the system is closer to being optimal than that which would be produced by either extreme. Three classes affected by idiosyncratic property rights: (1) Originating Parties, (2) Potential Successors, and (3) Other Market Participants. (1) and (2) are in privity, but their fancy delineation of rights imposes a burden on (3) by raising information costs. Justification: Limits confusion and prevents fragmentation. Estate Planning: (577) A Trust gives legal title to all assets to a trustee in FS and describes equitable interests in those assets to the designees of the creator. Modern Intestacy statutes look like a traditional system of equal shares among surviving children. Intestacy statutes reflect default presumptions about what the decedent would have wanted if there had been a valid willpriority going to the spouse and issue; if their absence, other relatives or successors (lineal ascendants and collaterals (blood relatives). Blood relation has two forms:
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Consanguinity system: Priority to shortest distance in terms of the number of generations to a common ancestor (e.g. 1 parent-child), and if necessary to the collateral, (e.g. 2 sibling-parent-sibling) o Parentelic system: Priority in terms of sharing a common ancestor, even if the decedent and the person in question are from different generations. (e.g. grand-nieces [4 consanguinity to the decedents parents] have priority over aunts [3 consanguinity to the decedents grandparents] because a grand-niece is descended from the decedents parents while an aunt is descended from the decedents grandparents). Spousal Elective Shares: Usually 1/3 option of estate even if, under the will, they were given less. Per Stirpes System: Estate divided into equal shares based on the number of children, alive or deceased, who have descendants living at the time of the intestates deathany share corresponding to a deceased child is divided among descendants. (This provides the deceased parents share of the decedents estate to the living grandchildren, etc.) Per Capita System: Estate divided equally among members of the generations closest to the intestate with at least one living member. o
Mediating Conflicts over Time: Waste: Brokaw v. Fairchild (S.C. N.Y. 1929) (596): Any act of a life tenant which does permanent injury to the inheritance is waste; this is a question, at the time of the act, whether the estate was so changed as to be an injury. The motives of the interested and objecting parties are irrelevant. Life Tenants may do what is required for the general Use and Enjoyment of the estate received, but use is NOT dominion or ownership. An exercise of ownership deprives him of the protection of his tenancy. Agate v. Lowenbein (N.Y. 1874) (599 cited). Distinguished from Melms v. Pabst Brewing Co (Wis. 1899) (600 cited): (Minority view) Permit Ameliorative Waste when it can be justified by a change in the circumstances. The demolition of a house, isolated and alone, 20-30 feet from the surrounding graded ground (brewery, railroad tracks, etc.) did no injury to the plaintiffs (remainders) as the house was absolutely undesirable as a residence and the action increased the value. Standing: Originally only allowed Indefeasible Vested Remainders or Reversions, but loosened to allow nonpossessory interests provided they sued on behalf of ALL nonpossessory interest holders. Ameliorative Waste: Affirmative act by the Life Tenant that significantly changes the property but results in an increase rather than a diminution in its market value. Traditionally regarded as impermissible affirmative waste; remainder interest holders were entitled to take possession at the end of life tenancy in substantially the same form it had been in at first possession by the Life Tenant. Affirmative Waste: Misfeasance Damage/Harm to the property through some affirmative, unreasonable action that causes excess damage to the reversionary or remainder interest; often defined in terms of what constitutes normal use. Open Mines Doctrine: Any extraction of minerals constituted waste unless mining was already ongoing on the land at the beginning of the life estate. Permissive Waste: Nonfeasance, failure to take some action with regard to the property that is unreasonable and causes excess damage to the reversionary or remainder interest; again compared to rough conceptions of normal behavior, e.g. failing to repair a roof resulting in water damage, or allowing an adverse possessor to remain on the property. Valuation of Interests: (605-607) Lump Sum: Calculate the discount rate using the real interest rate and the expected rate of inflation to calculate back the expected present day value of the property (as per the future interest of the party with a remainder). Stream of Payments: Calculate the rate of return of yields at present and discount to present value, getting the same result as above. The Discount Rate is hotly contested: the higher it is, the lower the present day value of a future dollar (the Life Estate is then more valuable). A young person with a Life Estate reduces the present day value of a remainder (that increases as the Life Tenant gets closer to expected death). Restraints on Alienation: See Lauderbaugh v. Williams (Penn. 1962) (532) (14 of Outline)
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The Rule against Perpetuities: No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. Lucas v. Hamm (CA 1961): You cannot sue a lawyer for malpractice for screwing up the Rule Against Perpetuities because it is so complex
Subject to the RAP
NOT Subject to RAP
Contingent Remainder: Ascertainment of the identity of the Taker and the Satisfaction of all Conditions Precedent.
Any Interest Retained by the Grantor: Reversions Possibility of Reverter Right of Entry/Power of Termination Other Types of Vested Remainders: Indefeasibly Vested Remainder Vested Remainder Subject to Complete Divestment
Executory Interests: Take Possession (cutting short of the prior interest actually occurs), or the conversion of the Executory Interest into a Vested Remainder.
Vested Remainder Subject to Partial Divestment (Open): Closing of the class, i.e. the identity of the Taker(s) must be determined and the Contingency must occur.
Perpetuities Savings Clause: Backup plan allowing for the appointment of assets/interests by a trustee/done when attacked as violating the RAP. These have been upheld, though there has been much statutory reform. Cy Pres: Saves gifts to charity from the RAP; in cases of wastefulness or impossibility the court will substitute another close-in-kind charity. Wait and See: If the interest under attack actually vests within the common law period. Wait and See or 90 Years: If the interests vest within either period, they are valid. Doctrine of Worthier Title: A remainder in the Grantors heirs is invalid and becomes a Reversion in the Grantor, e.g. O to B for Life, then to the heirs of O. This doctrine is generally treated as a rule of constructionit only applies to Inter Vivos (not wills) transfers and only if the word heirs is used. It does not apply if the intent to create a remainder in heirs has been clearly manifested; not widely recognized. Uniform Statutory Rule Against Perpetuities: A person can petition to have the conveyance restructured according to Interpretation/Implication so that it does not violate the RAP and is as close to the transferors intended plan of distribution (and is within 90 years). Merger Rule: Conveyances can be merged, e.g. Of to A for Life, and separately conveys his Reversion to Athey merged into Fee Simple.
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Co-Ownership and Mediating Conflicts Between Co-Owners: The Law does not deal in trifles (de minimis non curat lex), so love it or leave it rule. Either sell your interest or use the Right of Partition to exit a coownership regime with which you are unhappy. Tenants in Common (TIC): Each tenant has a Separate but Undivided Interest. Separate: independently descendible, conveyable, and devisable; can be conveyed or attached by creditors. NO Right of Survivorship (still have to go through Probate). Undivided: Each TIC has the equal right to possess the whole of the property thought they need not exercise that right. Shares do not have to be equal, i.e. rents or profits. Joint Tenancy (JT): Same as above, except that a Surviving Joint Tenant automatically fills in the extinguished interest of another JT when that JT dies. To create requires the Four Unities: 1. Time: each interest must be acquired or vest at the same time. 2. Title: each must acquire title by the same instrument or by joint adverse possession, never by intestate succession or other act of law. 3. Interest: each must have the same Legal interest to the property, such as Fee Simple, Life Estate, Lease, etc. although not necessarily identical fractional shares. 4. Possession: each must have the Right to possession the whole. If any interest is Transferred or Attached, this is a Partial Exit Right and the JT is Severed and TIC is created. This form of ownership is usually only done in intimate relationships such as committed relationships or family businesses. (e.g. Abe Simpson and The Flying Hellfish.) Tenancy by the Entirety (TBE): (Minority of States) Each co-owner in a Married Couple has a separate and Undivided interest and each has the right to possession of the whole. Like JT, there is a right of survivorship, but in some states that use the TBE, neither can unilaterally transfer or encumber their shares without the consent of the other. As long as the couple remains married, there NO UNILATERAL exit option. Both can convey to a straw that then conveys back to then as TIC, but neither acting on their own can sever TBE (other than divorce). Four Unities + (Marriage). Community Property: South/West for Married Couples, requiring Joint Consent for transfer or encumbrance. The party claiming separateness has the burden of proof (acquired before marriage, not comingled thereby becoming community property). Upon divorce, the property is subject to an equal division. Both spouses have the rights to management and control of the property during the marriage for transactions. Conflicts Between Co-Owners: Partition: Any Co-Tenant can sue for Partition for any reason or no reason at all (TIC and JT only). Beware Holdout Problems. An avenue for Exit, places a co-tenant outside the property. Delfino v. Vealencis (Conn. 1980) (637): (TIC) Defendant allowed to keep 1-acre with home and business operation, but had to pay Owelty for the PIK (adverse effect of Defendants business on the subdivision residential value). Partition in Kind (splitting up the property) is preferred when practicable. In a PIK, the courts will try to allow a cotenant living on the parcel to keep the portion on which she lives. Anderson v. Anderson (Minn. Ct. App. 1997) (example). Partition by Sale should only be ordered when two conditions are met: 1. The physical attributes of the land are such that Partition in Kind is impracticable or inequitable; and 2. The interests of the owners would better be promoted by Partition by Sale (Burden of Proof on the party seeking Partition by Sale). Consideration: Consequences of Both forms of Partition o Zoning laws o Size, shape, area, and structures o Present use (Residence, Business, Source of Livelihood) o Future uses o Effect on Sale Price and Value
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Alternatives: Voice: Express Dissatisfaction; occurs within the structure of governance rules, less formal than partition. Loyalty: Participants avoid leaving and if they do, they do so quietly. Criticisms: Might Partition be to blame for the decline of African American farming since the late 19 th Century, i.e. the land of the intestate was split among heirs. o Other possible causes: Jim Crow discrimination, Unequal access to credit, decline of the family farm in general. Justification: Contract and other relationships (corporation, partnership, etc.) allow for tailored ownership and require little judicial intervention. This suggests little need to modify automatic exit by right at common law. Contribution and Accounting: Gillmor v. Gillmor (Utah 1984) (645): When a cotenant out of possession makes a clear, unequivocal demand to use land that is in the exclusive possession of another cotenant, and that cotenant refuses to accommodate the other cotenants right to use the land, the cotenant out of possession has established a claim for relief. Mere exclusive use is not sufficient to establish an ouster, unless accompanied by a refusalthen it is an Ouster, the effect of necessarily excluding a fellow cotenant and violates the cotenants rights. This starts the SOL for purposes of Adverse Possession. o The standard for AP ouster is more stringent than that for Contribution and Accounting. E.g. in the creation of selective community with equal, undivided interests TIC, the ability to stake a claim for a residence was permissive and not an ouster for AP. McAllister v. Norville (Ala. 1987) (649). When a cotenant in sole possession makes repairs or improvements to the common property without the consent of his fellow cotenants, he generally has no right of Contribution. Can get Contribution when: 1. Good faith act in bona fide belief that he is the sole owner. 2. Repairs were essential to preserve/protect the common estate; entitles an offset. o If the relationship is ONGOING, then likely able to get Contribution for expenditures necessary to prevent forfeiture, e.g. property taxes or mortgage payment) but unlikely for repairs/maintenance and NOT for improvements. o If the relationship is at an END, then courts will be more willing to consider offsets for repair/maintenance expenses and may even take improvement expenditures into account (offset from imputed rental payments or awarded as Owelty). Rights to Rents/Profits: Depends critically on the basis for the payments, i.e. has the cotenant necessarily excluded the fellow cotenants. If rent is collected through lease to a Third Party, then there is an obligation to share in apportionment to the ownership shares. In general, a cotenant in possession does not have to pay rent to other cotenants for the value of the possession unless there has been an ouster. Severance: of JT does NOT require Notice. Riddle v. Harman (Cal. Ct. App. 1980) (656): one party in JT can convey to a straw to sever JT and create TIC. (Many states, including CA require recordation to sever JT in some circumstances.) Today, it is possible to convey to oneself without use of a straw, but it may require some recordation or notice so as to avoid problems of hidden intent and hindsight (the other JT dies, so now you have an incentive to claim no severance). Harms v. Sprague (Ill. 1984) (650): A mortgage (a mere lien) does NOT sever the JT (by destroying one of the Four Unities). Title to the property is NOT separated until execution and delivery of a Masters Deed (in foreclosure). Kling v. Ghilarducci (Ill. 1954 (653 cited). o Attachment of a judgment lien upon the interest of JT did not destroy the JT. Jackson v. Lacey (Ill. 1951) (652 cited): A conveyance, even involuntary, destroys Unity of Title and severs a JT; however there CANNOT be a conveyance until the redemption period has expired without redemptiontitle is not yet divested so JT is unaltered.
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Lien Theory: A mortgage on an interest in JT (therefore) does not survive the death of the party who (co-)signed (mortgagor) because it is merely for the limited purpose of protecting the interest of the mortgagee. Lightcap v. Bradley (Ill. 1900) (652 cited). Title Theory (rejected): a mortgage is a conveyance. The Right of Survivorship becomes operative upon death and Extinguishes the rights/interest of the deceased (i.e. it ceases to Exist). It is NOT a transfer/passing of that interest. (Therefore, under Nemo Dat, the decedent had no interest to convey/leverage under the mortgage). o
Note: It is possible for a court to find the opposite result, even under the Lien Theory. Wilken v. Young (Ind. 1895) (655). o It is possible that the distinction is largely formal, employed for the judges convenience and sense of justice in the given case. Slaughter Rule: You cannot profit, including inheritance, from ones own act of murder, i.e. killing your wife (JT) severs the JT and creates a TIC so that her interest passes to her other heirs. Maine Savings Bank v. Bridges (Me. 1981) (656).
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Marital Interests: How should the role of Innate Talent be treated in Valuation of Property? OBrien v. OBrien (N.Y. 1985) (665): A medical license (interest in a profession) is marital property subject to Equitable Division through a distributive award. Considers contributions to a career or career potential as well as the component asset to any interest in a profession. Even outside of statutory designation, a license is a property right protected by law (reflected in money, effort, and lost opportunity). That it has no market value and is inalienable is irrelevant. (Maintenance would be unfair and reimbursement would under-compensate, i.e. mere restitution). A partys marital fault must shock the conscience of the court in order to warrant consideration in the Equitable Distribution. Dissent: Distributive award not subject to change prophesies the (doctors) profession and locks him into a career he might otherwise choose to leave. Elkhus v. Elkus 572 N.Y.S.2d 901 (App. Div. 1991) (673): increase in opera singers earning potential due to husbands domestic voice coaching subject to division; enhanced skill grown from innate talent, increased earning potential was valued as marital property. Different: Promotion earned through merit of individual work, not joint effort. Innate singing talent was developed, i.e. matured into a valued asset through joint effort. But for voice coaching, the talent would not have come to value. Singing talent became comingled (common property). Promotion was not resulting from an asset, developed or undeveloped, that was part of the property of the marriage (weak arg.) Same: Talent made valuable through the merit of individual work, despite some help. Officer able to devote himself to his work because of spousal support. Innate talent was valuable (potential) from the state, and was separate property before marriage, just as the officers ambition (might have been). Possible that but for the wife, the officer would not have been able to earn the promotion. Promotion resulted from personal talent, like vocal talent, that was part of the property of the marriage.
Bystricky v. Bystricky 677 N.Y.S.2d 443 (N.Y. Sup. 1998) (673): increase in husbands earning power from a promotion in a police department was not subject to equitable division.
Common Property: All property acquired during the marriage (except for gifts and bequests to one spouse), including any Separate Property that has been comingled with the Community Property. Transfer (big decisions such as sale or mortgage) requires the consent of the both parties. Death: each spouse is entitled to 50% of the Community Property; the other half can be distributed by will. Divorce: Equal 50%/50% split, though increasingly an equitable division, unless control by a prenuptial agreement. Separate Property: Property acquired before marriage (unless comingled with common property); plus gifts and bequests to one spouse during marriage. Common Law States: Basic Rule: Separate Title, if one spouse is named on the title, then that spouse owns the interest. If both named on the title, then each owns interest. Note that management and control of the property follows the title. Death: TIC or JT.
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Intestate: Most states provide that the surviving spouse takes all or most of the property; or Testate: Spouse can dispose of the property subject to a Forced Share (typically 1/3 or ) of the estate.
Divorce: Pre-1970: Title Rule, with alimony based on comparative fault and equitable considerations. Post-1970: Equitable Division (highly ad hoc and discretionary), unless controlled by a prenuptial agreement. More recently, presumption of a 50/50 split and lump sum settlement rather than alimony (though support payments called maintenance may still occur); also, no-fault divorce (now showing of wrongdoing required). Cohabitating Relationships: Marvin v. Marvin (CA 1976) (674): Nonmarital partners are NOT entitled to Equitable Division of Community Property, but the courts will instead enforce Express Agreements between parties to the extent that these agreements do not rest on an unlawful meretricious consideration (prostitution) (unenforceable only to the extent that the agreement explicitly rests on immoral/illicit consideration of meretricious sexual services). In the absence of an Express Agreement, the courts may look to a variety of other remedies in order to protect the parties lawful expectations. Dissent: The parties may have rejected marriage to avoid marital economic obligations; the Family Law Act was intended to reduce bitterness through the no-fault system, examination of conduct is inappropriate; unmanageable burden of domestic disputes; quantum meruit would place meretricious spouses in a better position than married spouses; does fairness require all services/benefits regardless of difficulty of evaluation? H&W Assets: $1 million House bought with H's earnings during marriage; both H&W on title as TIC. a. If JT, then W would own the House 100% and H's interest would extinguish. This would avoid probate. $10 million H's earnings during marriage; H has title. $2 million Apple stock acquired by H before marriage; H has title. Intestate Testate #1 (all property to W) W takes all Testate #2 (W gets nothing) H devisees take the property, subject to an "Elective Share" for W (1/3 or 2/3) W has 1/2 interest in the House as TIC
1.
2. 3.
Common Law Property (40 States) H: $10 million $2 million 1/2 House TIC W: 1/2 House TIC Community Property (10 States) Community (automatically split 50/50): House $10 million Separate: $2 million
W takes all or most of the property
W owns her 1/2 and receives the rest of the property (H's /2) through intestacy statute (assuming the statute dictates this outcome).
W takes all (as before)
We don't have the same concern, here because W already has her 1/2. H's devisees get H's 1/2 of the House, $10 million, and the whole of H's $2 million stock. No Elective Share
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Entity Property Possessory Rights: Leases: (1) De Factor Financing Device, (2) Risk Spreading Device, and (3) Governance for Integration/Management of Assets. o Term of Years: Fixed time, generally subject to the SOF (greater than 1 year). Does NOT require notice of termination; automatic. o Periodic Tenancy: Requires notice to terminate, the lease rolls over automatically for a specified period of time. At common law, a lease from year to year required 6 months notice, in month to month leases 1 month notice is required. o Tenancy at Will: At Will, self explanatory. Now the law requires notice equal to the period of time at which rent payments are made. o Tenancy at Sufferance: A tenant that holds over after the right has ended; the original entry was not wrongful. There is a limit on self-help by the landlord, but he has the use of forcible entry and detainer statutes or through an action for ejectment. Independent Covenants: Paradine v. Jane (K.B. 1647) (691): A Lessee still has an independent obligation to pay rent if expelled from the leased property by a Third Party; advantage of casual profitshazard of casual losses. The law will not protect contract parties beyond their original agreement. Covenants are to be performed regardless of non-performance by the other party, though the remedy is there for breach of contract. o A Landlord owes a Covenant of Quiet Enjoyment to the Tenant; a promise not to interfere with the Tenants possession of the land for the duration of the lease. o A Tenant owes a Covenant to Pay Rent; Implied as a matter of law in all leases. This is implied even if the amount is all that is specified (as in this case). o Contract Doctrines of Impossibility and Frustration of Purpose have been applied to relieve a Tenant from further obligations when the premises are destroyed, e.g. no long have to pay rent for a house that has burned down. EXCEPTION for Eviction or Ouster (Unilateral, i.e. Tenant against Landlord ONLY) Smith v. McEnany (MA 1879) (694): (Step towards Dependency) A Landlords building encroachment (wall) on the leased property of the Tenant constituted an Eviction from the whole, as it is an interference with the right to (Use and) Quiet Enjoyment (of the whole parcel of land). This absolves the Tenant from the obligation to pay rent, but NOT from other obligations, e.g. Duty to Repair. o Importance of the parcel from which Tenant deforced irrelevant. o Outside of de minimis (requiring unaware), degree of interference is important only in cases of acts NOT physically excluding the Tenant but having the same practical effect. o Rent traditionally thought to issue from the land; Leases therefore construed to exclude apportionment. Suggested that there MAY be an Apportionment when the Eviction is by Title Paramount or when the Lessors entry is rightful. Justifications: o Difficulty of calculating apportionment. o Otherwise remove the force/meaning from the contract covenant. o Predictability in bargaining/expectations. o Incentives for Ex Ante cooperative behavior and pre-lease bargaining. Blackett v. Olanoff (MA 1977) (703): Constructive Eviction is a breach of the Covenant of Quiet Enjoyment if substantial deprivation/interference was the natural and probable consequence of what the Landlord did, failed to do, or allowed to be done for a substantial time. Conduct controls, NOT Intent. E.g. failure to force another Tenant to stop intolerable noise causing a reasonable Tenant to vacate.
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Tenant may NOT have to actually vacate for a claim of Constructive Eviction. Echo Consulting Servs., Inc. v. North Conway Bank (N.H. 1995) (707). Risky to require tenant actually vacate. Forfeiture Clauses: Provide that upon Tenants violation of enumerated covenants in the lease, e.g. the rent, the tenants interest in the lease will be immediately forfeited. Analogous to FSD (automatic POR) and FSSCS (ROE/POT). Generally upheld, making tenant covenants (covered in agreement) dependent. E.g. non-paying Tenant loses CQE and becomes TIS, subject to Eviction. Surrender: In Re Kerr (S.D. N.Y. 1939) (707): o Doctrine of Surrender: If a Tenant vacates premises with the intention never to return, there is a mutual release of further obligations by implied contract at the moment of acceptance by the Landlord, i.e. some act recognizing surrender, an act inconsistent with the Tenants right to the leasehold interest, (as here) e.g. a new lease (terms and duration) (murky when it comes to equivocal actions such as retaining keys or entering the premises to put up a for rent sign). o Tenant is liable for Rent up to the moment of acceptance. o (Held) Entry and Re-Letting, in the absence of an express provision authorizing it, is an acceptance of Surrender of the then existing lease and the Landlord is presumed to be acting for his own account. o Re-Enter and Re-Let: Landlord may do so as the agent of the Tenant, for the balance of, and under the terms of, the existing lease. Allows the Landlord to recover the spread between the owed and new rents. The Tenant remains liable for expectation damages if the Landlord cannot re-let the premises at a rate equal or greater than the original rent. o Extinguishes Privity of Estate, but NOT Privity of Contract (obligation to pay rent). Therefore o Landlord has a (Good Faith) Duty to Mitigate, i.e. accept/offer only competitive (reasonable) rates. (Continued liability clauses are often construed/enforced against the Landlords. Dependent Covenants: (Modern Landlord-Tenant Law) Governance of Complex Assets. Medico-Dental Building Company of Los Angeles v. Horton and Converse (CA 1942) (712): o Those features of a lease which are strictly contractual in their nature should be construed according to the rules for the interpretation of contracts generally and in conformity with the fundamental principle that the intention of the parties should be given effect as far as possible. o (Held) Covenants that run to the entire consideration (essence) of a contract are mutual and dependent, Major (Material) Breach of which, sufficiently serious, grants the option to Rescind and Terminate further performance (no rent), continued under the lease and sue for damages (lost profits, too) or rescind/terminate and sue for (back) damages. Note: More likely where the party follows a reasonable and deliberate course of action designed to afford [the breaching party] an opportunity to adjust the controversy in a manner consistent with the rights and obligations of the parties. Minor Breach of a less serious covenant (Immaterial or to the essence of consideration) entitles damages ONLY (including lost profits). (Treated under Independent Covenants model). Wesson v. Leone Enterprises, Inc. (Mass. 2002) (718): Leak NOT a Constructive Eviction of a printing company because it did not make the premises Untenable for the Purpose for which they were Used. Implied Warranty of Habitability: Generally NOT Waivable, Implied in ALL Leases (usually not commercial leases, only residential). Continuous obligation to the Tenant to maintain the premises in accordance with all applicable law (that concern health and safety). Javins v. First National Realty Corp. (Ct. App. D.C. 1970) (719): Leases of residences carry a nonwaivable (fn. 49) IWH and should be construed and interpreted like any contract. o
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Rent is Dependent upon performance of IWH. Test: [1] (BOP on Tenant) Violations must exist during the period for which rent is due/past due and [2] the court must calculate the value suspended. Suggests: IWH applies even if the residence was leased in a state of disrepair known and expectedLandlord still has a duty to repair to a habitable condition. Remedies: 1. Rescission of the lease, Vacate without any obligation for Rent. 2. Specific Performance of the IWH. 3. Damages for breach of IWH. 4. Sett-off against Rent liability reflecting violation of IWH. 5. Withholding Rent until Landlord corrects IWH. Illegal Lease Doctrine: (Minority) Brown v. Southall Realty Co. (D.C. app. 1968) (725).A lease for property that is subject to a code violation(s) that render it unsafe or unsanitary is void and precludes the Landlord from suing for unpaid rent. Doctrine of Retaliatory Eviction: Landlords CANNOT retaliate against a Tenant for reporting code violations and may NOT terminate periodic tenancies if motivated by a desire for retaliation. Note: IWH NOT in Alabama, Arkansas, Colorado, and Wyoming. Duty to Mitigate Damages: Sommer v. Kridel (N.J. 1977) (735): A Landlord has a Duty to Mitigate damages from a defaulting Tenant by making reasonable efforts (in the circumstances) to Re-let an apartment wrongfully vacated by the Tenant (i.e. if the Landlord refused the Tenants Surrender). A Landlord does NOT have to rent the vacated apartment firstsome apartments may have unique qualities. He must treat the apartment as if it was one of the vacant stockthe BOP is on the Landlord (better position). Ordinarily the Tenant bears the costs of any reasonable expenses in attempting to re-let. The court will consider such things as advertisements, exhibitions, or use of an agency; there is no precise formula; a single ad or far higher rent (slightly higher ok) are not showings of good faith. NOT Mandatory, can be WAIVED. Can act as an alternative to Surrender, and may arise earlier. Foggia v. Dix (Or. 1973) (740 cited): A Landlord does NOT need to accept less than Fair Market Value or substantially alter his obligations as established in the pre-existing lease. Acceleration Clauses: Under the traditional view that rent issues out of the land (Smith v. McEnany (MA 1879) (694)), such clauses are disfavored at law as an excessive liquidated damages penalty not allowed under Contract law. However, they can sometimes be enforced under the idea that, if a bilateral agreement, then the landlord has a duty to mitigate and the acceleration simply ensures that the landlord will be made whole Damages: o Lost Value: problematic because the loss in value may in fact be zero. o FMV (Compliant) Actual Value = Damages. Might award a windfall to the Tenant if the reserved rent was less than the FMV of the premises in compliance. o (Difference in Value/Complaint Value)*(Rent Reserved) = Damages. This might also result in a windfall. The % Reduction method relies on a proportion comparison of the value of the reduction to the value of the compliant premises, i.e. if the difference is very severe, then the damages could be very large. Consequences: o Note: increased Tort Liability. o Theory: Orthodox Microeconomic Assumptions: [1] Demand and Price will increase, and [2] Rents will then increase and Supply will decrease. IWH is bad for lowincome tenants. Low-Income Rental Market is Different: [1] Supply is largely fixed, renters cannot or will not pay more our double up in units and landlords will not leave the market because of their investment. Supply and Demand are inelastic. IWH good. [2] Landlords would have to improve the premises due to a mandatory o o
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IWH even though depleting the resource to an exit point, i.e. milking the property before it has to be abandoned years in the future. As long as the price increase accompanying the IWH is less than the maximum the consumers are willing to pay for it, the warranty makes them better off. The inverse is also true. (may give the infra-marginal tenants a consumer surplus, i.e. the price is set by the marginal tenant before they have to bid). Forces some marginal tenants out of the market to the benefit for the inframarginal tenants. Some are worse off (those unable to pay the higher rent) and fails John Rawls suggestion that deviations from equal treatment are justifiable if they make the worst-off group better off. Empirical Evidence: Sparse. Receivership laws caused an increase in rent (noncompliant landlord would lose control of a building). Largely benefited the elderly/indigent and harmed African-Americans: possibly [1] aged tenants move less often, or [2] aged tenants are perceived to cause less damage.
Transfer of Interests:
o o
o o
Sublease: LL with FSA carves out lease to Prime Tenant (PT) who then carves out a Sublease for a Sub-Tenant. NO PK or PE between LL and ST. Assignment: LL with FSA carves out lease to PT who alienates to 1st Assignee (A1) who alienates to A2, etc. Every successive Assignee steps into the shoes of the previous Assignee and enters into direct relations with the LL. (Below are independent) Assumption: When A1 expressly agrees (with the LL) as part of an assignment to be bound by the terms of the original lease. A1 agrees to be bound by Privity of Contract and Privity of Estate. PT still bound by PK. Novation: Parties agree to erase any PK of the PT. So when the PT assigns to A1 and the LL agrees to Novation, PT is off the hook (no PE and erases PK). THESE APPLY TO SUBLEASES TOO! Privity of Contract (PK): Obligations that come from being a party to a binding bilateral contract (written lease). Privity of Estate (PE): 1. Parties must have Nested Interests (directly carved out of the other), and 2. One party must be in Actual Possession of the property. Obligations: [1] Look to the lease that defines the original leasehold interest, and [2] Impose on the parties those covenants that run with the land, i.e. those that (i) the parties intended to run and (ii) that touch and concern the land.
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Mullendore Theatres, Inc. v. Growth Realty Investors Co. (Ct. App. Wash. 1984) (743): A lease covenant does NOT run with the land unless it was [1] intended to run and [2] touches and concerns the land by being so related to the land as to enhance its value and confer a benefit upon it. In order to be a running covenant, a promise to pay money (such as a security deposit) must restrict the use of the funds to the benefit of the property. CANNOT contract for covenants to run with the landonly Intent + Touch and Concern. General Rule: A successor Landlord (of a Reversion) is bound ONLY by covenants that run with the land. Rent Control: Casebook: (767-770) Notes: (95) Fixtures: [A] thing which, although originally a movable chattel, is by reason of annexation to, or association in use with land, regarded as part of the land. (Possible a court will lean one way or the other in the context of a mortgagor/mortgageemore likely to find items personal property.) Strain v. Green (Wash. 1946) (188): There is a wilderness of authority. [T]he luxuries of a given generation become the necessities of the next. o A fixture is determined by Three Criteria: 1. Actual annexation to the realty or something appurtenant thereto. 2. Application to the use of purpose to that part of the realty, and 3. Intention of the party to make the annexation a permanent accession to the freehold (This is an Objective standard in evaluation of the circumstances). Intent to be inferred (when not express agreement) from [1] the nature of the article affixed, [2] the relation to the situation of the freehold of the party making the annexation, [3] the manner of the annexation, and [4] the purpose for which it is made. This cannot be affected by Secret Intent. Ballard v. Alaska Theatre Co. (Wash. cited) o Landlord: Presumption that the LL intended to enrich the freehold (Fixture). o Tenant or Licensee: Presumption NOT intent to enrich (NOT Fixture). Note: May result in the same item being a Fixture/NOT Fixture depending on WHO annexed the article. o Examples from this case: Hot water tank & enclosed electric heater (replaced with inadeq. originals) Venetian blinds (particular to the windows of the house) Lighting, chandeliers and sidelights (replaced, indicating necessity) Mirrors fixed to walls with boards/nails (NOT un-fixed powder-room mirror) Suggested: mantels or bathtubs. Co-ops, Condos, and CICs: Condominium: Nahrstedt v. Lakeside Village Condominium Association, Inc. (CA 1994) (782): Hidden Harbour Estates v. Basso (Fla. Dist. Ct. App. 1981) (cited): Restrictions 1. Rules promulgated by the governing board are subject to a reasonableness test (reference to the common interest development as a whole, not the specific objector). 2. Use restrictions set forth in the Master Deed/Declaration: clothes with a very strong presumption of validity. NOT subject to reasonableness standard. o Presumptively VALID unless: 1. Arbitrary. 2. In Violation of Public Policy or some Fundamental Constitutional Right. 3. Imposes a burden on the Use of lands it affects that Substantially Outweighs the restrictions benefits to the developments residents. Suggested: (disapproved of the following cases) Bernardo Villas Management Corp. v. Black (Cal. Ct. App. 1987) (held unenforceable against a homeowner with a truck and camper shell a provision that prohibited the storage of a struck, camper, trailer, boat, or other form of recreational vehicle in carport) & Portola Hills Community Assn.v. James (Cal. Ct. App. 1992) (refused to enforce a planned community restriction banning satellite dishes against a homeowner who installed one in his backyard, not visit to the other residents or the public)
32
Dissent: Cat lover(788) Justifications: Protects general expectations of condominium owners, creates stability and predictability, reduces litigation costs over exceptions to the rule, encourages development of land and ensures promises will be kept, provides assurance for reliance and protects owners from mounting costs, eliminates costs of defense against suits for exceptions or suits contesting exceptions already made. Robert Ellickson: Developer only has incentive to include in Master Deed restrictions that increase the value (purchase price); this leads to market equilibrium for supply/demand. (skepticism about meeting market demand and protecting democratic values) Cooperatives: 407 West 67th Street v. Pullman (N.Y. 2003) (793): Eviction of a tenant by the Co-Op Board Business Judgment Rule: A Court will defer to Good Faith decisions made by Boards of Directors as long as the Co-Op is acting in the collective interest of its tenants. (For Termination, Courts will exercise heightened vigilance in examining whether the action meets this test.) Bundle of Sticks: Voluntary submission to the Boards authority, restrictions on some sticks ok. BOP on Co-Op to show that Tenants conduct was objectionable. Complaining Tenant (Shareholder) Must Prove: o Board acted outside the scope of its authority, o In a way that did not further the corporate purpose, or o In bad faith Nonpossessory Interests: Trusts: Involves 3 Legal Personas and at least 1 Thing. Can be created by Will, Inter Vivos Transfer, or Declaration. Note: Generally regarded as distinct from the assets of the Settlor and Trustee. In some jurisdictions (Spendthrift Trusts) cordon off the trust assets even from the creditors of the beneficiaries. Power of Appointment: The donor reserves a power in some other person to designate the recipient(s) of particular property or beneficial interest. PERSONAS: Do NOT need to be separate people, however it has been traditionally prohibited for one person to be both the Trustee (sole) and the Beneficiary (sole). The interests do not complicate transactions in the underlying assets, so the Trust System tolerates greater complexity. 1. 2. Settlor: Legal persona who creates the Trust through conveyance of property held in FS or with Absolute Title. Trustee: Legal Persona who receives the property and is responsible for its management and control, subject to Fiduciary Duty to manage for the best interest of the beneficiary. The trustee has legal title to the property and can enforce the title against Third Parties. Generally holds the property in an undivided FS or Absolute Title. The Trustee is NOT subject to the law of waste, the rules of contribution and accounting, or other rules that apply when interests are carved up according to the estate system. Beneficiary: Legal Persona who receives (typically) periodic distributions of income from the trust; not actively involved in managing the property and generally does NOT have a possessory interest. More often carved up, described using the terms from the estate system, though this has NO effect on the deployment of the underlying resource and merely determines who receives what amount as distributions from the Trustee.
3.
THING 1. Corpus of the Trust a.k.a. Trust Res: The Asset or Collection of Assets.
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Corporations and Partnerships: Corporations: Often called the Nexus of Contracts due to the governance of relationships among managers and employees. Two levels of ownership: Shareholders own the corporation and the Corporation as an entity owns the assets of the enterprise. Partnerships: Much like TIC, but Tenancy in Partnership, so to speak. Two levels of ownership: Partners own the partnership conceived of as an entity, and the Partnership, as an entity, owns the underlying assets. Implications: o Shield from creditors. Entity NOT liable for personal debts of its owners (This is a Property Rule, sort of, because it cannot be efficiently created by contract and MUST be authorized legislatively). o Permits the specialization of functions. o Raises difficult problems about how to manage the managers (duty of loyalty to the corporation/partnership).
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Security Interests General Notes: Mortgage or other Security Interest is distinct from the debt it secures; two separate instruments, promissory note and mortgage. Mortgages of Real Property are subject to State filing requirements. Seller paid through escrow or a check. At the same time, you execute a promissory note and mortgage to the lender (often a bank). After closing, the contract is no longer operative but it merges with the deed. From that point forward, the deed is the controlling document. Property Right: Secured party has the right to take over the property and sell to satisfy the lien. Priority Right: Where collateral is sold to satisfy the debt, the secured debt is satisfied out of the proceeds of the collateral in order of seniority, before unsecured debts, and in order of the date the creditor filed a financing statement or perfected its security interest through filing the financial statement in a particular place or by taking possession of the collateral. (UCC Art. 9 gives priority to possession or control) Pledge: Security interests in early times involved the lender taking possession of the asset through a bailment called a pledge. This is how pawnshops operate. Note: In cases of personal property, courts start from a basic suspicion of non-possessory security interests. Security Interests in Land: Purchase Money Mortgages: Used to finance the acquisition of the land used as a security for the loan (the modern, common mortgage). Marketable Title: Title that is free from defects and encumbrances (e.g. adverse possession or an encroachment but NOT an overhanging awning or cornice) but is NOT Perfect Title, i.e. title that is free from reasonable doubt or title that a reasonable person would accept. Types of Deeds: o General Warranty: covenant by the seller that he is able to, and does, convey good title to the buyer (sort of all-encompassing). o Quitclaim Deed: Conveys what the seller had but contains no assurances as to what that is. o Special-Warranty: Gives a covenant against title defects stemming from acts of the grantor and related parties, but not other defects. Robert H Skilton, Developments in Mortgage Law and Practice (1943) (843): o American innovations in the device of public sale: 1. Allowed the mortgagee to bid on the property himself (previously prohibited). 2. Permitted the mortgagee a claim for the difference between the sale price and the original claim, regarding the sale price as conclusively establishing the value. o Foreclosure by Writ of Entry and Peaceful Possession: Constructive possession by the mortgagee is now sufficient; the redemption period runs from the time of NOTICE after its commencement after default; either the written consent of the mortgagor to its commencement is necessary or written notice must be served on the mortgagor, and a certificate to this effect filed on record. (resembled strict foreclosure in outcome, i.e. conferment of the full title on the mortgagee, without public sale) o Foreclosure by Power of Sale: Mortgagee could sell the property without court action, freed from the equity of redemption. They grew very popularthough mandatory provisions governing the process must be complied with and cannot be made easier in the mortgage. Required [1] Notice and [2] Sale. o Statutory Periods of Redemption: Usually run after a foreclosure sale. They early statutes came as the result of depression periods and may be associated with the general collapse of land values, the failure of governmental public land policy, and governmental relief and moratoria measures in connection with the sale of public land. Tend to extend during depressions and shorten during business upswings to incent new investment. Statutory or judicial approval of waiver of redemption rights weakens the mechanism and became commonplace (boilerplate). Murphy v. Financial Development Corporation (N.H. 1985) (847): A mortgagee conducting a foreclosure sale has a Fiduciary Duty to the mortgagor to act in Good Faith and exercise Due Diligence (reasonable lender action, ordinary methods to make buyers aware) in the pursuit of a fair price, including (if necessary) setting a (minimum) upset price and adjourning the sale if no bidder meets that price. Inadequacy of price
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alone is NOT sufficient to demonstrate Bad Faith (intentional disregard of duty or intent to injure) unless the price is so low as to shock the judicial conscience. Damages: difference between Fair Price and Price at Sale. DeLellis v. Burke (N.H. 1991) (854): Duty of the Mortgagee to Obtain a Fair Price does NOT apply to other creditors of the mortgagor. Land Sale Contract: Seller elects to finance the sale at her own risk. Avoids mortgage and foreclosure restrictions and provides credit to those who are at high risk of default.
Security Interests in Bankruptcy: See Notes p. 105 Property & the Mortgage Crisis: See p. 102 of notes Dana: Foreclosure and the Antifragmentation Principle (prevent fragmentation of interests or treat reorganization of those interests as if they are not fragmented). Report to Congress: NYT Article: Slate: Rudawsky:
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The Law of Neighbors Nuisance: An Intentional [voluntary, knew or should have known] [negligent, reckless, or ultrahazardous], Unreasonable [harm v. social value; balance of equities if both activities reasonable], Non-Trespassory Invasion/Interference that causes a Substantial [Actual] Harm to the owners Right of Use and Enjoyment of the land [or result in abnormally dangerous conditions or activities in an inappropriate place]. Gravity of Harm factors (RST 827): o Extent of harm o Character of harm o Social value that the law attaches to the type of use or enjoyment invaded o Suitability of the particular use or enjoyment invaded to the character of the locality o Burden on the person harmed of avoiding the harm Social Value/Utility of the Conduct factors (RST 828): o Social value that the law attaches to the primary purpose of the conduct o Suitability of the conduct to the character of the locality o Impracticability of preventing or avoiding the invasion Alternative Nuisance Doctrines: o Invasion causing significant harm o Enforcement of community determined normal uses of land o Temporal priority o Neighborliness Private: Individual/definite small number of persons in the enjoyment of rights not common to the public. Public: Rights of many people/citizens as part of the public, or an entire community or neighborhood. E.g. Public Health, Safety, and Comfort: obstructing highways, keeping a vicious dog, putting on an opera that threatens to cause a riot. (970) Government Officials ALWAYS have STANDING to seek an injunction against a public nuisance. Private Parties must suffer a SPECIAL INJURY to have STANDING. Adams v. Cleveland-Cliffs Iron Company (Mich. 1999) (938): Michigan trespass law does NOT cover airborne particulates, noise, vibrations, (smoke, soot, or fumes) and a complaint alleging damages resulting from these irritants sounds in Nuisance and requires Proof of Actual and Substantial Injury and a Balancing of the Disturbances complained of against the Social Utility of its cause. (Dust is not legally tangible) Boundary between Trespass and Nuisance: Whether the defendants action giving rise to the intrusion was committed on the plaintiffs land or outside of it; Whether the harm to the plaintiffs land was direct or indirect; Whether the invasion was committed by a tangible matter or by some intangible substance; Whether the intrusion deprives the plaintiff of possession of the land, or merely use and enjoyment of the land. Purely Aesthetic/Non-Invasive Nuisance: Almost impossible, traditionally, but potentially possible now. Courts have been relatively receptive to noninvasive nuisance claims based on the depressing effect of funeral homes and graveyards (or, e.g. nudist in a wildlife area). My opinion: Creepiness Factor. (947) REMEDIES: Boomer v. Atlantic Cement Company, Inc. (N.Y. 1970) (956): RULE 2 (Plaintiffs have entitlement to be free from pollution but they are protected only by Liability Rules) (Huge $$$ disparity in damages/injunction.) Permanent Damages: Where Nuisance is of such Permanent and Un-abatable Character that a single recovery can be had, including the whole damage past and future resulting therefrom, there can be but one recovery. [Injury was slight] (Departure from old rule that Nuisance would be Enjoined, drastic remedy, regardless of expense of abating the condition). Dissent: Permanent Damages were generally only allowed where the property was intended to be put primarily for the public benefit. The residents were first, and technology may advance
37
Spur Industries, Inc. v. Del E Webb Development Co. (AZ 1972) (964): RULE 4 (very rare). Defendant has the entitlement and is protected by liability rule (can be taken for just compensation). Public Nuisance Dangerous to Public Heal Compensated Injunction: Where a developed has brought people to an externality (which transforms into a nuisance by virtue of its proximity to residential homes) to the foreseeable detriment of the person producing the nuisance, he must indemnify the one he has effectively forced out for the costs of shutting down and relocation. Coming to the Nuisance: Landowner may not have relief if he knowingly came into a neighborhood reserved for industrial or agricultural endeavors and has been damaged thereby. Rule is elastic. NARROW holding: The relief is limited to cases like this, where a developer has, with foreseeability, brought into a previously agricultural or industrial area the population which makes necessary the granting of an injunction against a lawful business and for which the business has no adequate relief.
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Servitudes: EASEMENTS: Always Run with the Land, In Rem Effect (good against the world). Right to a Particular Use of the Land. Complication: Can get an easement to commit a nuisance, but not to prevent one. CREATION: 1. Grant/Deed: Seller can reserve an easement for himself but at common law one could not create an easement by grant in a Third Party. Some modern courts have disapproved of this rule: feudalism is dead, so the rule designed to prevent end-runs around the rules of seisin is unnecessary. Essentially [Writing] + [Formality of Deed/Recording] + [Delivery] o Possible to get Easement for Unobstructed Light by Grand in some jurisdictions. o New Hampshire and Wisconsin accept Blocking Sunlight as a Nuisance. 2. Implication: Schwab v. Timmons (Wis. 1999) (979): Separation of title; use before separation took place, which continued so long and was so obvious or manifest as to show that it was meant to be permanent, and must appear that the easement is necessary to the beneficial enjoyment of the land granted or retained. a. Common Grantor. a. Existing Private Road/Path (at time of Grant). Schwab v. Timmons (Wis. 1999) (979) b. Reasonably Necessary. 3. Necessity: b. Common Grantor. c. Landlocked at the time of the Grant, NOT done by the party seeking the easement. Schwab v. Timmons (Wis. 1999) (979) o Note: Half of States provide through Condemnation of Private Easements to landlocked parcels through application to a government official for permission; must pay FMV. d. Extreme Necessity. o Geographic Barriers will NOT warrant an Easement of Necessity. If there is ANY Alternative (install stairs/escalator, cost to claimant) the law will NOT imply an easement. Schwab v. Timmons (Wis. 1999) (979) 4. Prescription: ONLY where the purported holder has a Legal Right (only important when it comes to Ancient Light doctrines); can use property to the harm of another as long as the harm does not otherwise constitute a nuisance (interpretation of: sic utere tuo ut alienum non laedas). Fontainebleu Hotel Corp. v. Forty-Five Twenty-Five, Inc. (Ct. App. Fla. 1959) (1001) (bilateral monopoly) (CANNOT get a Negative Easement; partial spite is allowed) a. Actual Use. b. Open and Notorious. c. Exclusive (relaxed). d. Continuous (relaxed). e. Adverse (See p. 9 of Outline for Split on Good/Bad Faith/Irrelevant) 5. Estoppel: a. Permission (i.e. License). b. Detrimental Reliance. c. Inequitable revocation. TERMINATION: 1. Grant/Deed: Releasing or Extinguishing the Easement. 2. Merger: Dominant and Servient Tracts come under common ownership; Merger of the Easement into the FS. 3. Adverse Possession: Termination through adverse possession. 4. Abandonment: Prolonged Non-Use giving rise to the inference that the easement has been abandoned. (Generally NOT Change in Circumstances unless Easement stated in terms of particular purpose that becomes obsolete). TYPES: 1. Easement Appurtenant: An easement tied to the tract of land, e.g. the easement follows the possessor of the tract and can be conveyed.
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a. Dominant Tract: The tract benefited or enhanced by the easement. b. Servient Tract: The tract burdened by or out of which is carved the easement. Easement in Gross: An easement tied to a particular grantee and does NOT transfer to the buyer of real property owned by the easement-grantee, e.g. an easement to fish in a neighbors pond. In American courts, however, they are recognized as Inheritable and Transferable ONLY for commercial purposes (e.g. railroad). Baseball Publishing Co. v. Bruton (Mass. 1938) (972): Easement in Gross can be created, even if mistakenly named a Lease, through an attempt to Contract for the Grant of a License (revocable at will), as the Written Instrument shows parties intent to excuse acts done that would otherwise be a trespass. This does NOT require a Seal or Signature for Specific Performance in Equity. Profit a.k.a. Profit a Prendre: Right to enter upon the land of another in order to extract something of value such as fruit, timber, fish or game, or surface minerals like gravel or sand. Mining and oil/gas are governed by mineral leases. Profits carry an implied license to enter upon the land that is irrevocable as long as the Profit continues. Affirmative: Requiring an affirmative action (much more prominent). Negative: Requiring that the owner of the Servient Tract desist from certain actions. Traditionally only allowed in 4 Categories: blocking sunlight, interfering with free flow of air, removal of lateral support of a building, and interference with the flow of water from an artificial stream. Today, most negative duties are imposed through Covenants that Run with the Land. CANNOT be acquired by Prescription. Fontainebleu Hotel Corp. v. Forty-Five Twenty-Five, Inc. (Ct. App. Fla. 1959) (1001). ONLY by Grant/Deed (Covenant). Private/Public: Named parties for specific purposes v. General public for designated purposes (such as general highways or waterways). Public access for recreational purposes are likely going to be held as public easements. Sometimes there are Negative Public Easements, e.g. for scenic preservation, conservation, or historic preservation.
2.
3.
4. 5.
6.
COVENANTS: The right to insist that the land is used in a particular way. Governed under the SOF. NO Duty of Forbearance on the part of Third Parties. Common Schemes/Common Plan Doctrine: 3 Steps to cause covenants associated with common schemes to run to successors: 1. Record: Declaration of the common plan with the list of covenants, conditions, and restrictions. 2. Reference: the Declaration in the Final Subdivision Map. 3. Refer: to the Declaration of the Common Plan in the actual deed to first purchaser of each parcel. Note: If there are Mistakes in (3), the Doctrine allows Reciprocal Negative Covenants to be implied as of the time the plan arose. Conservation Easements: Fastest growing type of covenant. Servitudes that restrict the future development or building on the land. The most common variety is one that would prohibit a subdivision or commercial development but would allow an existing residential or agricultural use. Encouraged by some tax changes. Problem with Dead Hand Control. Abuse through promise not to development of land that would not have otherwise been developed. CREATION: Grant/Deed in Writing. TERMINATION: 1. Sunset Provision, Its Own Terms. 2. Statute. 3. Contract. 4. Changed Circumstances in certain contexts, frustration of purpose, relative hardship. 5. Abandonment. 6. Laches: unreasonable delay in enforcing it. 7. Estoppel. 8. Public Policy.
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TYPES: 1. Equitable Servitude: Plaintiff seeks Injunction. 2. Real Covenant: Plaintiff seeks Damages. Benefit to Run 1. Intent 2. Touch and Concern Burden to Run 1. Intent 2. Touch and Concern 3. Notice Tulk v. Moxhay (1848) (1014) 1. Intent 2. Touch and Concern 3. Strict Vertical Privity: the exact same durational interest, e.g. FS-FS transfer. Assignment but NOT sublease. 4. Horizontal Privity
Equitable Servitude (Injunction)
Real Covenant (Damages): Essentially, you cannot enforce the Burden/Impose the Benefit against a New Party unless you are also New. You can, however, do so against one of the Original Parties. Neponsit v. Emigrant Industrial Savings Bank (N.Y. 1938) (1019): Merely stating that a covenant runs is insufficient. Must affect legal relations of the parties as owners of the particular parcels. Touch and Concern (discretionary): Purpose and Effect, the Covenant alters the legal rights which otherwise would flow from ownership of the land and which are connected with the land. An Association may be in Privity of Estate. Suggested possibility of finding Equitable Servitude in order to avoid requirement of Privities
1. 2. 3.
Intent Touch and Concern Lax Vertical Privity (e.g. sublease)
COMPARE (as cited in Neponsit) Sebald v. Mulholland (N.Y.) (1023): Personal Covenant: Designating party to build a wall and pay costs (Aff.) Mott v. Oppenheimer (N.Y.) (1023): Real Covenant: IF either party should build, the other would share costs and the right of use. The covenant was wholly prospective and imposed on the land of each (character of the agreement, obvious purpose, prospective provisions, and situation of the lands showed intent for covenant to run). Keppell v. Bailey 39 Eng. Rep. 1042 (Ch. 1834) (1018): Courts lack the authority to transform contract rights into new forms of property rights. (Agreement to buy raw materials from particular Quarry and ship all materials on a particular Railroad was NOT a type of servitude enforceable against subsequent purchasers as a property right running with the land. Reasoned: detriment would arise from the confusion from the invention of new modes of holding and enjoying real property; would impress a peculiar character, i.e. land held in several fashion with hidden rights/obligations, essentially excessive Third Party Information Costs.) RESTATEMENT THIRD OF PROPERTY: SERVITUDES (Not Adopted Anywhere) Enforceability is the default, very Contractarian. ***A servitude is created (1) if the owner of the property to be burdened (a) enters into a contract or
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makes a conveyance intended to create a servitude that complies with the Statute of Frauds or Exceptions to the Statute of Frauds.*** Valid unless illegal, unconstitutional, or violates public policy; places burden on the challenging party. o Arbitrary, spiteful, capricious o Unreasonably burdens constitutional right o Unreasonable restraint on trade or competition o Unconscionable
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Zoning and Other Land-Use Regulations: Zoning: Home Rule Provisions: Sweeping power to local governments to regulate. Zoning Enabling Act: Generally a comprehensive plan, implicit in zoning ordinance. Change is often rd to implement. Variance: Allow relaxation of zoning req. in cases of undue hardship determined by the governing board. Special Exception: Permit uses only if conditions specified in the ordinances are met, as a matter of right. Euclidean Zoning: Cumulative, Permissive Classes, i.e. can build a house near factory but not reverse. Village of Euclid v. Ambler Realty Co. (U.S. 1926) (1052): If a Zoning Regulation has some Reasonable Relation (Rational Basis) to Public Health, Morals, Safety, or General Welfare, then it is a Constitutional exercise of Police Power, even if it sweeps up some innocent (not harmful) uses in a reasonable margin created to ensure effective enforcement. Zoning Is a justifiable exercise of a States police power for the public welfare. Nuisance law can help guide the decision. Restrictions must be considered in connection with the factual, actual circumstances and locality, NOT in the abstract. The Zoning Ordinance was NOT in the character of a mere Arbitrary Fiat. TEST: 1. Are the provisions Arbitrary and Unreasonable? 2. Do the provisions lack Substantial Relation to the Public Health, Morals, or General Welfare? If NOT, then the regulations are Constitutional exercises of the State Police Power. Nectow v. Cambridge (U.S. 1928) (1061): Zoning ordinance that effectively cut off part of the petitioners tract, interfered with a prospective sale, and prevented the tract from being developed for residential purposes; rezoning had rendered the tract worthless (no practical use). Exemption would NOT save the zoning scheme. City of Cambridge had acted Irrationally (no adequate basis) and violated the petitioners 14th Amendment Due Process rights. Zoning overturned. Nonconforming Uses: Normally grandfathered in, often lasting longer than expected or desired due to the value of being, e.g. a valuable business in a primarily residential area. Amortization (phasing out) may be a possible solution, but it is uncertain if this would constitute a Taking. POLICY: Tiebout Hypothesis: Land-use externalities, transaction costs, inadequacy of nuisance law: may allow residents to self-sort into places that suit them. This requires the ability to exclude those who do not pay (taxes). Homeowners are expected to care because of the large investment in a home and the difficulty of diversification and likely risk-averse attitudes. Justifications: o Separating Uses to Internalize Externalities. o Protecting homeowners investments in their homes (prevents fiscal free-riding on amenities). Criticisms: o Rent-seeking and housing shortage. o Lack of information and officials might make rigid/wrong decisions. o Could be inflexible. o New Urbanism: object to the uniformity of neighborhoods; a diverse community and tax base ensures low crime and high inhabitant interest in the quality of the surroundings. o Can create externalities such as urban sprawl. o Increase prices by preventing internalization of negative externalities, causing local market monopolies and reducing general welfare. (high cost of housing in CA and East Coast) o Strong regimes flatten the usual population gradient, i.e. ring of high population around developed areas that increases the costs of developing transportation, increases commutes, and may lead to eventual abandonment of the housing; particularly problematic to economies switching from socialism to capitalism.
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Exclusionary Zoning: (p. 126 of Notes) Southern Burlington County N.A.A.C.P. v. Township of Mount Laurel (N.J. 1975) (1066): AT MARGIN Held: A municipality must use its land use regulation to presumptively make realistically possible an appropriate variety and choice of housing. It must affirmatively afford the opportunity, at least to the extent of the municipality's fair share given present an prospective regional need. Municipalities must zone primarily for the living welfare of people and not for the benefit of the local tax rate. Provision of variety of housing essential to promotion of general welfare. A developing a municipality may properly zone for and seek industrial ratables to create a better economic balance for the community, vis-a-vis educational and governmental costs engendered by residential development, provided that such was done reasonably as part of and in furtherance of a legitimate comprehensive plan for the zoning of an entire municipality. Gruber v. Mayor and Township Committee of Raritan Township (N.J. 1962) (1073) Presumptive: 1. Procedurally, a facial showing of a violation is made when it is shown that a municipality has not made realistically possible a variety and choice of housing, including the opportunity for low and moderate income housing, or has expressly prescribed requirements/restrictions that substantially hinder it. 2. Substantively, it is a about the specifics, i.e. comparing what regulations would shift the burden to the municipality, and what bases of consideration will sustain the burden. Mount Laurel II (N.J. 1983) (1076): the court articulated specific guidelines for defining and fulfilling the Mount Laurel I obligations. Most notably, the court reaffirmed and strengthened the requirement that municipalities take affirmative measures, such as density bonuses and mandatory set-asides, to encourage the construction of low- and moderate-income housing, and established a judicial oversight mechanism under which the state would be divided into three regions, each supervised by a judge who would handle all Mount Laurel claims in the region. MOST JURISDICTIONS NOT THIS HARSH.
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Natural Resources and the Environment Water: Surface Underground Watercourses (Riparian or 1st Underground Streams (typically the Appropriation Rights) same as watercourses) Diffuse Surface Water (Undesirable, Percolating Water (England: common-enemy doctrine, shift to absolute, USA: reasonableness) reasonableness standard)0 East: Evans v. Merriweather (Ill. 1842) (350) Riparian or Reasonable Use West: Coffin v. The Left Hand Ditch Co. (CO 1882) (355) Prior Appropriation Chanel or Body Riparian: Owner as rights to water that are independently non-transferrable/non-severable and appurtenant to the land that abuts the watercourse, e.g. a river or stream. (Littoral rights are the rights of owners whose land abuts a lake, sea, or ocean). (Can lead to a Bowling-Alley Problem) (justification: fairness, fugitive nature of water, differences of uses, etc.) Natural Flow Theory: Riparian owner can prevent any diversion of the natural flow of a river or stream by an upstream Riparian owner, i.e. any disturbance of the natural flow required consent of all downstream owners. This imposed great barriers to the use of water for economic development; prohibitive transaction costs. Reasonable Use Theory: Akin to sic utere tuo ut alienum non laedas Restatement Second of Torts 850(A) (1970): Reasonable Use; Water 1. Purpose of the Use 2. Suitability to the watercourse 3. Economic and Social values at stake 4. Harm caused 5. Possible accommodation techniques 6. Protection of existing investments 7. Ability of adversely affected Riparians to bear the loss 8. Justice Evans v. Merriweather (Ill. 1842) (350): Rejection of Natural Flow Theory Absolute Use of water to sustain natural (domestic) wants. Reasonable Use of water to sustain artificial wants, determined by a jury. o Distinction between Natural (thirst and some household purposes like sustaining some animals) and Artificial (improve comfort or increase prosperity, i.e. facilitate industry) may change with circumstances. Modern: domestic v. non-domestic. Absolute Use Theory (England): Acton v. Blundell (371) Owner has absolute righ tot use as much percolating groundwater as he pleases, privileged to pump within the space defined by the ad coelum rule. Prior Appropriation Theory: First-in-time appropriator can take all of the water available. Severable from the riparian land. Must be put to Beneficial Use, otherwise the rights can be lost. This encourages continued use and goes with the concept of severability. Often Transferable (Alienable). NOT Beneficial Use: drowning gophers Tulare Irrigation Dist. V. Lindsay-Stratmore Irrigation Dist. (CA 1935) (360) Coffin v. The Left Hand Ditch Co. (CO 1882) (355): First appropriator of water from a natural stream for Beneficial Use has, with statutory qualifications, a prior right to the extent of the appropriation. This right is NOT dependent on the locus of its application to the beneficial use designed, i.e. NOT dependent on the relative location of the stream to be diverted, e.g. irrigated lands) May take all the water. In-Stream Use did NOT traditionally qualify as Appropriation.
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Navigation Servitude: (p. 130 of Notes) English Doctrine: Any member of the public had the right to 1. Travel by vessel on a body of water that was Navigable, i.e. subject to ebb and flow of tides. 2. Right to fish in a Navigable body of water. 3. Land beneath the Navigable Water was presumptively owned by the Crown. 4. Disputes arising out of incidents on Navigable Waters were decided in Admiralty. Jus Publicum: Public Rights, a general easement of free navigation. Jus Privatum: The bed of Tidal Waters was a private right; could be granted by the King to a private party. American Doctrine: Commerce Clause and Admiralty Jurisdiction. The Commerce Clause imposes a "Navigation Servitude" on all waters of the USA that are, in fact, navigable. No state government or individual/corporation acting under the authority of state law, has the power to obstruct or interfere with the public's right to free use of the waterways for transportation. This is a "dominant servitude." This is grounded in a conception of the self-executing power of the Commerce Clause; the principle of free navigation is too important to await Congressional implementation. Note: Can Congress exercise its power to defeat the public right? This question has never been asked in a case or controversy (or answered) Navigable: In FACT. Look to federal law. No State/officer can interfere with publics right to use. Submerged Lands: Look to State law. Tidal, Navigable in Fact: Owned by State governments as successors to the Crown. Non-Tidal, Navigable in Fact: Majority: Adjacent landowners own the lands to the center (slice of pie). Minority: State owned. Note: with Public Trust, this makes private ownership of fishing streams remarkably difficult to establish. Navigable Airways: United States v. Causby (U.S. 1946) (313): Flights are not a taking unless they are so low (minimum safe altitudes established by the Civil Aeronautics Authority) and so frequent as to be a direct and immediate interference with the use and enjoyment of the land (nuisance). Characterized ad coelum as anachronistic and obsolete, but it is still a life question Public Trust: Doctrine grounded in State Law, meaning states are free to repudiate the Trust, either through statute or amendment to the State Constitution. This could be dangerous or problematic Illinois Central Railroad Co. v. Illinois (U.S. 1892) (314): Ownership of Navigable Waters is subject to a Public Trust and CANNOT be Alienated, except in parcels used for the improvement of the interest (public) or when the parcels can be disposed of without detriment (substantial impairment) to the public interest in the lands and waters remaining. Public Trust: Duty is discharged by the management and control of the property and CANNOT be relinquished by a transfer of the property, except as to parcels used in promoting the interests of the public thereafter, or can be disposed of without any substantial impairment of the public interest in the lands and waters remaining. An attempted grant is automatically VOID. Environmental Regulation: (323) Joseph Sax: The Public Trust Doctrine is an effective Judicial Intervention. The use of the Public Trust for Environmental Protection by increasing public intervention and judicial oversight of legislative capture by developers; transformed the doctrine from one of public access to commercial navigation to one of natural resource preservation.
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Government Forbearance The General Problem: Due Process: Takings Property and Eminent Domain: Land Assembly: Just Compensation: Regulatory Takings: Ad Hoc Tests: Categorical Tests: Extensions: The Scope of Police Power: The Problem of Exactions: Conclusion The Nature of Property:
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Essential Property Concepts and Theories

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Doug Sayranian, Property Spring 2011 Prof.

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Rule 4: Spur Industries, Inc. (very rare)

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Subject to the RAP

NOT Subject to RAP

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

W takes all or most of the property

W takes all (as before)

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Equitable Servitude (Injunction)

Intent Touch and Concern Lax Vertical Privity (e.g. sublease)

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

Doug Sayranian, Property Spring 2011 Prof. Kelly

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