PROPERTY OUTLINE
Property law tries to serve values
of:
- Rewarding productivity
and fostering efficiency
- Creating simple, easily
enforceable rules
- Creating property rules
that are consistent with societal habits and customs – provides notice
- Produce fairness in terms
of prevailing cultural expectations of fairness
Types of property actions:
- Conversion:
Tort that is the wrongful exercise of ownership rights over the personal
property of another (e.g. Moore-claimed but no c/a found)
- Trespass on the case
[ex. Throw out a log and immediately hit someone -) trespass; if someone
later stumbled on the log -) trespass on the case. (e.g. Pierson
v. Post, Keeble).
- Trover – suit
for damages for the conversion of personal property
Can divide rights differently (Property
as a bundle of sticks)
- Possession - One person
can own surface, one can own minerals beneath
- Use – one can use, one
can live (Lutz)
- Exclude
- Dispose
- Time
- Timeshare
- Ownership to A during A’s
life and then to B after A dies (Estate system)
- Johnson v. M’Intosh --
NAs get the land until US acquires by force or purchase
Determining what constitutes property
is a policy judgment (Charles Reich – The New Property (1964))
- Government provided property
in the form of benefits, licenses, subsidies
- Wealth taking the form
of professional status rather then tangible goods
- Wanted the govt. to protect
these kind of property – procedural and substantive rts.
- Intangible rts. like profession
have significance in the family law context particularly because many
people do not have significant assets when they divorce
- Essentially what constitutes
property is a conclusion based on policy
- Property rights don’t
have to be transferrable
Liability v. Property rule
- Awarding damages rather
then injunction (liability rule):
- allows losing party to
make the decision on whether to pay the damages or stop the offending
behavior
- Decreases transaction costs
– if an injunction is granted and it would be more efficient for the
behavior to continue, then strategic bargaining is necessary and there
will be transaction costs.
- Forces redistribution of
property
- Property rule preferable:
- Courts may face difficulty
in valuing injunctions, so leaves valuation to the parties
A.
ALLOCATING RESOURCES THROUGH THE LAW OF PROPERTY
- Ways Resources can
be owned
- Private property
– individuals make decisions
- Commons property
– everyone can use and no one has the right to exclude
- Open access
- No one’s excluded, e.g.
fisheries beyond 200 mi. limit
- “Tragedy of the commons”
usually refers to open access regime
- Communal property
- Defined community of users
- Can excluded non-members
from using the resource.
- State property
- Resources answerable to
needs of society rather than needs of individuals
- Less significant post-1989.
- Others – anticommons
and private commons
- Anti-commons is a critique
of too much private property: proliferation of private property
owners who can each hold-out, so creates risk of under-utilization
- E.g. Moscow store front
example – so many people had rights and vetos over their use that
no products were sold
- discussed as a risk of
recognizing small numbers of rights in cases like Moore)
- Why society protects
private property
- Wealth maximizing
(Demsetz) – Prevents tragedy of the commons
- Emergence of new property
rights in response to the desires for adjustment to new benefit-cost
possibilities
- Private property
evolves if the benefits of internalization
of externalities exceed the costs
- Can happen because value
of property increases (new market, scarcity) or the costs of implementing
private property regime decrease (new technology).
- Often due to change in
the market or technology (e.g. invention of barbed wire promoted enclosure
in the American West)
- Costs involved include
defining private property rights, policing and adjudicating disputes
- Increase in the number
of owners leads to an increase in the costs of internalizing
- Large costs of defining
private property rights may explain why it’s difficult to develop
private property in relation to oil, gas, and air.
- Private property reduces
externalities
- Communal property leads
to overuse b/c can maximize personal gain and impose costs on others
- PP reduces transaction
cost of negotiating over remaining externalities
- Present owner will take
into consideration future costs
- Ex. Pollution – if emit
fumes from apartment, impose external costs on others
- Ex. Develop house with
landscaping so that value of neighbors house goes up – externality
benefit
- Example of Montagne Indians
- Finds correlation between
increase in the value of the fur that led to growth of private hunting
territory – husbanding deceased risk of poaching
- Distinguishes from SW NA
tribe: no plains animals of comparable market value and wander
over large tracts of land – so value low and cost of developing private
property high =) no private property rights
- Example – Tribe of 100
members that own forest of 1000 trees in common. Each member of
the tribe owns 1/100th interest in 1000 trees. Every
member of the tribe has a right to any of the trees (communal property
regime)
- If x chops down a tree
and puts it to his own use, he gets exclusive control over the tree
and each other member of the tribe loses 1/100th of 999
- If each member gains more
from chopping then from leaving it:
- Assuming there’s no external
market, everyone will probably use sustainably
- If external market develops,
incentive to cut down as many trees as possible.
- Collective goods like conservation
would not be realized because even though society as a whole would be
better off, individuals have an incentive to cheat (prisoners’ dilemma,
tragedy of the commons)
- Conservation is prevented
by transaction costs – negotiating, holdout problems, enforcement,
free rider problem (conservation provides non-exclusive benefit so no
one has strong incentive to contribute to the solution
- Private ownership provides
more incentives to preserve ownership for future generations then does
public/ communal ownership
- Partially compensates the
individual for costs and benefits
- Cost of negotiating over
the remaining externalities reduced – less people that have to bring
together
- Results:
- Loss of sustainable resources
- Over-investment in technology
to cut down trees
- Undervaluing – the resource
might be worth more in the future
- Private property also facilitates
trade and minimizes conflict
- Uncertainty about what
you’ll be able to keep may provide an over-incentive for protection
- Criticisms of Demsetz
- Rose
- Theory relies on the notion
that private property developed because people are rational utility
maximizing individuals who want the most for themselves and the least
for others, meaning that collective property regime won’t work
- At the same time assumes
people have been able to cooperate in order to develop and maintain
property system
- Gives up too quickly on
communal property – assumes CP necessarily involves right of capture
– it is possible to have CP system where individuals do not have right
to appropriate resources for personal use
- Such a system requires
community cohesion to avoid monitoring problems.
- Other Alternatives:
- In communal property regime,
could have use rights
- In dictatorship, state
property
- Implications of Demsetz’
argument is concentration of ownership in 1 or a few hands b/c that
would reduce transaction costs
- Anthropological issue –
in spite of existence of NA private property, there was a sig. drop
in the number of beavers =) suggests conservation efforts didn’t work.
- Distributional Concerns
- Prestige/Power reasons–
distribution to reward supporters of a regime
- Equity reasons
- Locke’s labor theory
(discussed in AP v. INS)
- Because you own your own
labor, when you mix that labor with something unowned by anyone, you
own the resulting mixture
- Should award productivity
(e.g. Keeble)
- May not be sufficient in
situations of scarcity
- Probs. does not set boundaries
or determine whether you should get full value of property or the increment
that you added (tomato juice into the sea example)
- Property as Personhood
(Radin)
- Connections with particular
items on a subjective basis that generates a ‘hierarchy of entitlements’
– the closer a the property is to personhood, the higher the entitlement
- Distinction between personhood
property and fungible property
- Personhood property-property
that one needs in order to develop as a person
- Fungible property – property
that one needs to achieve certain goals
- Probs.:
- Not clear how one distinguishes
between the two
- Could be underinclusive
- Can always monetize –
difference in valuation
- Custom – customs
may develop that maximize aggregate wealth of the customary participants
(e.g. whaling in Ghen v. Rich)
- Application to Fisheries
- IFQs as a private property
response to the tragedy of the commons
- Problems with fisheries:
- Inefficient capture
- Overinvestment
- Overconsumption – no
incentive for conservation
- Possible approaches to
address overfishing
- Shortened season
- Adv.: allows fish
more time to reproduce
- Probs:
- Overinvestment: increase
the amount of fisherman =) race to the fish during that shorter season;
- May not eliminate the problem
of overinvestment, inefficiency
- Tax fisherman
- Prob: cheating, overfishing
to still get profit
- Auction mechanism for rt.
to fish (Russia)
- Individual Transferable
Quota:
- Put an overall limit on
traps (Australia) – give each fisherman the right to put out a specified
number of traps, limit total traps and allow to sell
- Incentive effects:
- Encourages conservation
and taking into account future b/c want trap to be worth something
- Disadvantages:
- Enforcement – high transaction
costs
- Distributional issues –
some people might not be able to access fishing/other resources under
ITQ scheme; inherently unfair
- Probs with application
in RI
- Size- industry in Australia
is relatively small
- Lengthy history of fishing
industry in RI
- Regulatory system in U.S.
may increase transaction costs – Australian Parliamentary system more
top-down
- Fisheries around the world
slow to adopt ITQs
- Probably b/c of transaction
costs of lobbying to change the system
- Alliance Against IFQs (Individualized
fishing quotas)
- Granted quota for allowable
catch to owners of fishing boats with their percentage share of the
total quota based on a figure from their highest catch in a set number
of years.
- An alliance composed of
those who fished but did not own boats and those who owned boats but
did not fish during those years sued.
- Court upheld the regulation
- The property right was
provided to the owners rather then the crew:
- Preserves underlying policy
rationale to reduce overcapitalization of the fisheries - discourages
future investment by those that have not begun to invest capital.
B.
JUSTIFICATION FOR REGULATING PROPERTY RIGHTS AND THE COASE THEOREM
- Reasons why property
law is fixed and relatively inflexible
- Product of history
- Functional/Efficiency explanation
– endless tailoring would impose external costs on third parties (externalities)
- Encourages fungibility
but reducing search and information processing costs
- Similar to Demsetz’ explanation
b/c both focus on aggregate costs as driving the system and both pointing
to addressing externalities as key phenomena in standardization of property
rights.
- Good for new players –
promotes mobility and enables them to do research more easily about
the limited number of property forms
- Justification for regulating
property rights
- Redistribution – can
be political motives underlying (Scottish land reform)
- Market failure
- could have incompatible
uses – externalities, e.g. environmental
- Imperfect information
- Coase Theorem
- Rejects traditional economic
analysis (Piguo)
- Externalities arise b/c
one party harms another
- Differences b/w Coase and
Piguo
- Characterization of what
externalities are
- Coase – externalities
are reciprocal – two incompatible land uses
- E.g. dr. and confectioner
– dr. decides to build a new consulting room right by candymakers’
kitchn – at that point, there’s conflicting land uses
- Ways they frame what arises
when have an externality
- Piguo- Should A be allowed
to harm B? How should we restrain A from harming B?
- Coase – Who should be
responsible for reducing the incompatibility at least cost? Who
can most cheaply reduce the cost that the externality has given rise
to?
- Tools for addressing
- Piguo – tax regime to
force A to take into account cost of externalities on B
- Coase – discusses possibility
that problem will be resolved by priv. bargaining in a world w/o transaction
costs and perfect information
- Where there’s no transaction
costs, parties will negotiate to achieve the optimal outcome, regardless
of initial assignment of rights.
- Ex. – either the Dr.
or the candymaker can stay in business. The dr.’s costs to go
out of business would be $7000, the candymaker’s $5000
- If court finds for the
candymaker, then doctor will offer somewhere between $5000 and $7000
- If court finds for the
doctor, candymaker will buy out the doctor
- Kinds of transaction
costs
- Negotiation costs – going
to court, valuing businesses (hiring lawyers, experts)
- Free rider problem –
most likely when there are large numbers of heterogeneous parties who
must get together in order to obtain the benefits of cooperation and
each party will receive the full benefits even if she does not contribute
- Hold outs – e.g. multiple
candymakers, dr. trying to buy off each, last candymaker trying to hold
out for more
- Opportunism – a party
attempts to extract a higher price for her entitlement by threatening
behavior that would reduce his bargaining adversary’s wealth, thus
raising the adversary’s willingness to buy the entitlement to avoid
such a threat.
- Coase’s recommendations
for allocation of entitlements:
- Allocated for the party
or parties that would have bargained for them in the absence of transaction
costs
- Impose the damage on the
lease cost avoider
- Definitions of Efficiency
- Kalder/Hicks – focus
on aggregate costs and benefits to society
- Most efficient when greatest
gap b/w benefits and costs
- Benefits have to exceed
the costs to be Kalder-Hicks efficient
- In theory, people who benefit
have to be able to compensate the losers
- Pareto efficiency
- Pareto optimal allocation
– impossible to reallocate resources to make someone better off w/o
making someone worse off – option C
- Pareto superior – at
least one party is better off and no one is worse off- option
B
- Factory v. Fishery Ex.
Resource Allocations |
Pollution
level (tons) |
Control
Costs |
Fish
loss (value) |
Net profit |
Fishery |
Factory |
A. Fishery shuts
down |
60 |
0 |
1,200,000 |
0 |
1,000,000 |
B. Primary treatment |
30 |
125,000 |
720,000 |
480,000 |
875,000 |
C. Primary + secondary |
10 |
600,000 |
200,000 |
1m |
400,000 |
D. Factory shuts
down |
O |
1,000,000 |
0 |
1,200,000 |
0 |
- Sc. 1: Factory
has entitlement to pollute
- Fishery will pay the factory
- To get primary treatment,
factory would insist on at least $125,000 and fishery willing to pay
up to $480,000
- Fishery would have to pay
at least $600,000 (incrementally $475,000) and up to $1,000,000 (incrementally
$520,000)
- Won’t negotiate to D
b/c additional profits less then what factory would insist upon
- Sc. 2: Fishery has
the entitlement
- Factory will offer to pay
the fishery between $200,000 to $400,00 and install primary and secondary
treatment
C
- Won’t get to B b/c fishery
would insist on $520,000 and factory willing to give up to $475,000
- Sc. 3: Imagine that
the fishery could relocate to another river for $500,000
- Total net profit = 1.7
million
- Would move b/c should be
able to allocate surplus so both are better off
- Sc. 4: Assume 100
fishers and 1 factory – factory has the right to pollute
- Need to get together to
pay the factory at least $600,000 and up to $1,000,000
- $400,000 cap on transaction
costs that could be incurred – if costs of organizing are higher,
then would not be able to pay the factory
- Sc. 4: Factory has
to pay the fishery
- Will insist on a minimum
of $200,000 and factory would be willing to pay up to $400,000
- Implicit cap on transaction
costs is $200,000
- Qualifications to the
Coase Theorem
- Initial assignment of rights
will have an impact on distribution of rts.
- Ex. Alliance Against IFQs
v. Brown – fighting over initial assignment of rts. b/c of significance
of distribution of wealth that flows
- Initial assignment of rts.
may matter for subsequent exchanges
- Importance of endowment
effects – party who gets rights initially may put a higher value on
those rights then might be willing to pay to pay them – will demand
more to give it up
- Implications for Estates
- Coase’s emphasis on importance
of making rts. alienable
- May facilitate addressing
externalities
- Ex. Factory/fishery –
if fishery able to purchase rts. to river from factory, can decrease
pollution through private bargaining and get to more efficient outcome
- Issue of whether rts. should
be alienable major issue in estates, e.g. fee tail
- Coase’s emphasis on importance
of transaction costs
- Not suggest parties will
always negotiate to efficient outcome – may not be able to achieve
where there’s transaction costs
- In assigning/defining property
rts should consider transaction costs
- In circumstances where
trans. costs likely to be high, courts should try to replicate outcome
parties might have negotiated in the absence of transaction costs
- Should be thinking about
how to minimize transaction costs
- Merin-Holtz – placed
restrictions on transaction costs that made it difficult to bargain
- Should prior owners/unborn
persons be able to keep those rts? – recognizing those rts. increased
transaction costs b/c difficult to bargain with those groups.
C. THE RULE OF FIRST POSSESSION
- Acquisition
Through Capture
- Possession - The
first person to exercise dominion and control over a wild animal becomes
the owner of the animal (first in time).
- Constructive possession
– landowner deemed to have ownership of wild animals on his land
- Definition contingent and
contextual
- Pursuit – Mere pursuit
does not grant the hunter a property right in the animal; however moral
wounding might be sufficient.
- Pierson v. Post
- Plaintiff was hunting a
fox on an uninhabited beach when the defendant killed the fox and carried
it off, knowing that the other was hunting.
- Court found for the defendant
because pursuit is not sufficient to entail possession; mortal wounding
or capturing in a trap might be because entails deprivation of liberty
and bringing the animal under certain control
- Some indications in the
case that if great amounts of labor had been invested, that might have
been sufficient.
- Justification for majority
opinion (bright-line rule):
- Provides greater certainty
and decreases administrative costs/number of disputes – does not require
an evaluation of whether there was a reasonable prospect of success.
- Facilitates trade – if
it’s clear who owns what, it is not necessary to conduct an investigation
before purchase
- Provides notice as to who
has a claim – may provide a consent based justification for who has
a property right (Rose).
- Served public policy end
of killing foxes - provides incentives to develop better technology
b/c do not own the animal unless you kill it.
- Disadvantages of bright-line
rules:
- Inflexible – does not
allow for adjustments based on circumstances – might decrease trade
- Might lead to unjust results
that undermine respect for the legal system
- Dissent:
- Should recognize a property
right if pursuer has a reasonable chance of success.
- Overriding policy concern
should be decreasing the number of foxes and encouraging investment
in hunting (is this true?)
- Should have examined industry
custom.
- Continuum of effort and
likelihood of success
!
!
!
- Role of custom as
competing source of property rights
- Custom often arises
to maximize the well-being of group creating a custom – individuals
conform out of self-interest and face informal sanctions from group
for failing to conform.
- Ghen v. Rich
- P killed the whale, 3rd
party found and sold to D
- Industry custom – if
killed a whale, this constituted a mark of appropriation (fast-fish)
and person who finds it gets a small salvage fee.
- Court finds that P did
not lose his possessory interest even though he did not actually capture.
- The holding enforces the
custom:
- Allows industry to be maintained
- Provides incentives for capturing whales
- Decreases transaction costs
– norm self-enforcing by communities
- Is reasonable – provides
a fee to the finder
- Probs. with relying on
custom:
- Notice - might not be fair
to enforce on someone who’s not aware
- Takes into account present
but not future industry
- Difficult to define custom
– usually only communicated orally
- Popov v. Hayashi
- P attempting to catch valuable
baseball when attacked by a mob; D was not part of the mob but obtained
possession of the baseball.
- Relies on baseball custom
where the first person to secure the ball is its possessor – P did
not establish possession but was because wrongdoers prevented his attempt.
- Court held that they should
split the proceeds so as not to encourage the use of force but also
to acknowledge that P may or may not have obtained possession absent
the wrongful act.
- Importance of policy
ends
- Ex. Whether the court
will find for a competitor depends on the extent to which competitor
is vindicating society’s interest.
- Keeble v. Hickergill
- P owned decoy pond as an
industry, D took gun and shot near the pond, frightening the ducks away
- P sued on the basis of
trespass on the case due to malicious interference with trade
- Court finds for P:
rewards productivity, capture of animals
- Distinguished case from
instances of fair competition, e.g. would be proper for a schoolmaster
to lure students away from another school by offering better instruction
but unlawful to frighten them away.
- Difference from Pierson
v. Post
- The objectives are the
same but require a different holding – encouraging investment in business
v. killing foxes
- In this case competitor
was vindicating societies’ interest – the competition was destructive;
in Pierson it was constructive.
- Court distinguishes on
the basis of the fact that the property was owned in Keeble
and unowned in Pierce - Landowners have possession of animals
on their land (rule of capture applies only on commons land and not
private property)
- Relativity of title
- Property rights are not
absolute but are relative and contingent.
- Ex. If Trespasser(1) goes
on O’s land, kills a fox and displays it and Trespasser(2) takes the
fox from T1s land, T1 has a more valid title then T2, although O has
the most valid title.
- Modern applications
- Mineral resources, water,
radio frequencies, fisheries
- Situation of altruistic
interlopers – interloper is thwarting efforts of another party to
further policy objective, e.g. Greenpeace’s acts to prevent whaling.
- Situation where there’s
2 competing professions that have socially useful functions.
- Opportunistic interlopers
– e.g. Hayashi
- Comparison with Post/Keeble
- Similar b/c involves competition
over a resource
- Different in that there
was a band of 3rd party wrongdoers in Bond case whereas in
the other cases D diverted the resource
- Possible outcomes:
- Might makes right (e.g.
Pierson v. Post)
- Auction
- Split the spoils equally
(Bond)
- Who needs it most
- Disadvantages of rule
of capture
- Encourages over-consumption
- Encourages over-investment
b/c everyone has an incentive to invest in capturing
- Ex. Fisheries – 70% overconsumption
b/c difficult to limit once there’s been investment in fishing technology
and processing
- Has distributional
consequences b/c favors who gets there first
- Creation/ Intellectual
Property
- Includes patent law (seeks
to protect invention), copyright law )protecting original forms of expression),
trademarks, right of publicity (rights of celebrities)
- Exclusivity and Imitation
- Disputes over how rights
should be allocated when unpatented, uncopyrighted material is imitated
by competitor
- Dispute between policy
concerns
- Protection of labor (Locke)
- allowing competitor to
reap benefits would be unfair
- encourages investment in
innovation
- Ensuring availability of
public goods like information
- Promoting competition and
availability of high quality products at low prices
- Ex. International
News Service v. Associated Press
- ANS seeking INS to be enjoined
from copying bulletins. Court granted injunction based on finding
of a quasi-property right in news and that International News’ actions
constituted unfair competition.
- Injunction granted until
commercial value of the news has been lost (property rule)
- Decision based on need
to provide incentive to invest resources in newsgathering and research,
which had social value. (utilitarian/productivity argument).
- Dissent pointed out that
there was scarcity in that AP had exclusive right to the news of the
war in Europe
- Dissent also looked to
institutional competency – the decision involved granting a new right
– the legislature is better suited since can put in place regs. and
gather info - the judiciary cannot weigh the equities as well.
- But at the same time courts
are more insular so might be better able to do so
- Could have chosen not to
have granted the right =) might have led to development of a new business
model and promoted lower prices through competition.
- Ex. Cheney Bros.
v. Doris Silk Corp.
- Cheney seeking recognition
that had an exclusive right to the pattern for the season
- No right granted out of
concern for institutional competence (leg better suited) and concern
that recognition of property right in designs would create a slippery
slope:
- Ex. Chanel
- Chanel did not want D to
be able to use their trademark in promoting their product
- Court found for the defendant.
No patent on Chanel 5 and “imitation is the life block of competition”
– keeps prices low, therefore serving public function.
Expenditure of money does not create a property right.
- Property Rights in Body
Parts/ What is property?
- Ex. Moore v. California
Regents – case about use/creation vs. original ownership (first
possession)
- Cancerous spleen removed
and used to develop valuable patented cell line w/o his consent
- Issue whether human donors
be able to receive payment for their organs? – humans have right to
use their organs while they are inside of them, but do they have right
to sell them?
- Court found no cause for
conversion b/c Moore had no expectation to retain possession or ownership
of his spleen (so not property) – perhaps not enough of the ‘sticks’
to be equated with property
- J’n for decision:
would chill medical research, decision of whether there should be a
market in tissues better made by leg., and Moore could still pursue
action of breach of fiduciary duty
- Dissent: property
describes right of any kind or number that govern that person’s relationship
with the resource- recognizes rights in limited number of sticks.
- Probs. holdout probs/
anti-commons in recognizing small bundles of property rights, e.g. in
a situation where need tissue samples from a wide variety of the population
and if anyone vetoed, then the product would not be developed
- Alternatives:
- Could set up a reg. scheme
where every person got a royalty w/o being able to refuse
- Could have recognized right
to control the use but have a market inalienable right
D. SUBSEQUENT POSSESSION
- Acquisition by Conquest
- Ex. Johnson v. M’Intosh
(SC, 1823)
- Implications:
- Demonstration of the socially
contingent nature of property rights
- Illustrates how property
rights can be divided into different packages
- Draws attention to the
source of land title in the U.S.: federal patents that rely on
Johnson for validity
- Facts:
- Conflicting claims to land
between someone claiming to hold land from the federal government and
purchaser from tribe
- Issue: Whether NAs
could convey title to private individuals.
- Holding: U.S. has
right to the land subject to possessory rts. (occupancy) by the NAs
- U.S. govt. has ultimate
dominion over the land
- Govt. has exclusive right
to extinguish their rights by purchase or by conquest
- Rights of NA: to
use the land or to sell it but only to the govt., can retain when in
peace (later case held that there was no requirement to compensate for
involuntary transfer).
- 2 requirements for purchasers
to have full title (otherwise NA had occupancy rts):
- Purchase from the government
- U.S. had purchased occupancy
right from NA
- Acknowledgement of Indian
Title potentially powerful tool for aboriginal people to reclaim lands
- Land that they held under
aboriginal title is still theirs b/c has not been relinquished
- Justifications for title
- International law – discovery/conquest
- Prob.: More of a
rule among European powers for allocating land among them – does not
necessarily create a rule about sale of private land transactions
- Regulations between discoverer
and natives generally settled amongst themselves, so diff’t countries
could choose different rules
- Nec. to holding but not
sufficient.
- Custom: settled expectations
and the need for certainty
- Generated differently then
Ghen v. Rich b/c NAs not part of the development of the custom
- Institutional competence:
decisions made by other branches; not for judiciary to question
- Productivity
- NA could not use the land
- Necessity - taking over
of title necessary to obtain land
- Delgamuukw
- Dispute in Canada between
tribe and government. Tribe had exclusive use and occupation of the
land through aboriginal title;
- Tribe can use only use
in a manner consistent with ancestral use (does not seem to be a fair
constraint on use of land)
- Legislature can infringe
on aboriginal right if in furtherance of a legislative objective and
if consistent with fiduciary relationship
- Institutional competence
- Both cases recognized that
there are inherently certain kinds of questions beyond the scope of
the court and best left to other parts of the government.
- Implications for possession
- Johnson
– ownership vested in possession
- Cronon – perception of
what amounts to possession rooted in conception of what possession is
(ideological)
- Radin – groups need land
and property in order to sustain themselves; implies that groups are
entitled to land b/c of possession
- Distributive justice –
have property rights in order to achieve certain goals (Delgamuukw
and IFQs)
- Seems inconsistent w/first
in time – but can be viewed as consistent b/c in their own culturally
biased framework the colonists believed that they were the first to
own it.
- Finders Keepers?
- Policy justifications
- Desire to promote return
to true owner
- Rewards honest finders
- Encourages productive use
of found property
- Reduces administrative
costs
- if possession wasn’t
sued as a proxy for ownership, has potential for messy fights
- Justifies return in cases
of voluntary bailment, e.g. dry cleaner, coat check (prior possessor
owns)
- Discourage wrongdoers and
tresspassers
- Reduces need to engage
in self-help remedies
- Abandoned Property
- Ex. Popov
– baseball considered abandoned property
- Lost and Mislaid Property
- Finder has a right to found
property greater then anyone else except the original owner and any
prior possessor, possibly the locus-owner (relative title)
- Prior finders - win over
later finders
- Ex. Armory
(finder v. dishonest bailee)
– Chimney sweep found jewel and goldsmith swiped it – equivalent
in highest value of gem awarded to the sweep
- Sued in trover – action
for money damages resulting from defendant’s conversion to his own
use of a chattel owned or possessed by P
- ? of whether value of property
should be awarded or whether that should be discounted by the probability
that the owner will reappear =) but the owner can always go after the
finder; difficult determination to make; not consistent with the idea
that title is relative
- If true owner reappeared,
could sue Armory for unjust enrichment or conversion
- Could not sue the goldsmith
if already paid b/c of double liability
- If goldsmith purchased
honesty and finder a thief
- Competing policy justifications
on both sides:
- Goldsmith should pay:
in a better position to check background
- Owner should pay:
in a better position to secure his property; should not force those
acquiring property to do a background check.
- Finder v. Landowner
- Homeowners are generally
awarded products found in their home
- Imbedded property
owner
- Ex. Elwes v. Brigg
Gas
- Land leased to gas company
who found a pre-historic boat embedded in the soil; awarded to owner
of property
- Ex. South Staffordshire
(from Hannah)
- Pool cleaners find 2 rings
embedded in pool =) have to return to the landlord
- Justification – too invasive,
don’t want people digging in other people’s property
- Private homes
owner
- Exception- Hannah
v. Peel (locus-owner v. finder) - Locus-owner held title to
the house but never occupied; requisitioned by the army for quartering
soldiers; one of the soldiers found a broach in the house and sold it;
court awarded proceeds to the finder.
- This case is an exception
to the general rule:
- Justification: owner
had never assumed constructive possession of the house – had no personhood
investment in the property
- Rewarded honesty: gave
it to the police – provided opportunity for true owner to obtain it
- Not embedded property
- Public Places (finder
v. shopkeeper)
- Lost property= property
that’s unintentially separated
- Mislaid property = intentionally
separated and unintentially left behind
- Lost property =) finder
- Ex. Bridges:
Wallet found on the floor, customer gave them to the shopkeeper to advertise
them; when owner didn’t return, finder awarded the $$
- Mislaid property =)
shopkeeper
- Ex. McAvoy:
Wallet found on the counter, customer gave to shopkeeper; awarded to
shopkeeper
- Prob. with distinction
- Looks to the state of mind
of the person who left the property – can be difficult to determine
- Linked to notion of likelihood
of return – but is someone who mislaid property more likely to return
to look for it then someone who lost prop.?
- Justification for awarding
to shopkeeper return to true owner
- Shopkeeper has greater
incentives to return b/c of desire to maintain reputation
- More stable location –easier
to find
- Prob.: disincentive
to finder
- Alternatives
- Can give shopkeeper custody
and award to finder if owner doesn’t claim it
- Can award finders fee
- Can split the difference
- Alternative system:
bright-line rule that finders keep the property
- Decreases transaction costs
of determining who owns the property
- Motivates people to take
better care of their property
- More consonant with reality
– typically people who find things, keep them.
- Adverse Possession
- Background
- If 1) a person occupies
land adversely and 2) the statute of limitation has run, the adverse
possession can sue to obtain title to the land and can be awarded a
property right in the land
- The new title extends back
to point of entry and APer is liable for any liabilities acquired during
that time
- Under doctrine of exclusion,
true owner had right to eject the APer
- Law varies from state to
state in terms of what’s required to satisfy the elements as does
the S/L
- Ex. Some states require
APer to pay taxes
- In NY State, S/L is 10
years
- AP Law product of statutory
and common law
- Typically can’t make
AP claim against government property held for public use
- Rationales
- Earning theory
- Prevents valuable resources
from going to waste
- Inconsistent with environmental
objectives – assumes highest value is use of the land rather then
conservation in a pristine state
- Sleeping owner theory
– punishes true owner that has not being paying attention to land
- Personhood theory
(Holmes/Radin) – person living on land is more closely associated
with the land
- But true owner may
highly value their property
- Repose
- Quiets claim to title and
reduces dispute over land
- But
is inconsistent with first in time rules – setting up a mechanism
where someone who comes later has more rights then someone who comes
first
- Reliance
- APer develops expectations
of continued possession of the land
- Costs would be incurred
if adverse possessor had to move – the benefits of reverting to the
original land structure might decrease after a certain number of years
- Others might be relying
on this interest, bank, neighbors, etc.
- Marketability
- Easier to transfer title
b/c do not have to worry about stale claims to the land
- Reduces information costs
associated with transferring land - may be difficult to find evidence
after a certain period of time has passed (probably less true today)
- Elements
- Actual
- Possessor must physically
take possession of owner’s land
- Ex. Lutz v. Van Valkenberg
- D had garden on the land
in question and traveled through it. Purchaser of land sued D
to remove his property. D claimed had acquired by AP.
- Under NY statute, essential
elements to prove actual possession were substantial enclosure or cultivation/improvement
- Rooted in idea of notice
of adverse possession and
- Linked to productivity
argument
- Court awarded land to P
b/c found that D’s actions did not amount to improvement (“junk”)
and b/c all the land was not cultivated, that requirement was not satisfied.
- This is a value-laden statement
as to what constitutes improvement
- Dissent argued that requiring
cultivation of the entirety was not reasonable – should have read
statute broadly and looked at reasonable use in light of the character
of the land; justified awarding rts. to all of the land
- Could have also granted
at least what’s cultivated, based on Lutz’ investment and reliance
- Open and notorious
- Must be sufficient
to inform attentive land owner that someone is on their land
(usually owner does not need to actually know)
- Generally satisfied when
have actual possession, but if properly used at night would be actual
but not O & N
- Usually rely on physical
evidence, can also rely on reputation (e.g. neighbors calling the area
“Lutz’ garden”)
- Purpose of req:
- ensure the true owner has
notice of what use is being made of the land if being reasonably vigilant
- consistent with the notion
that want to encourage a productive use of the land.
- Establishes that there’s
been some reliance by AP and/or third parties
- Boundary disputes
- Generally no presumption
of notice for minor encroachments – must have actual knowledge or
be obvious in order for S/L to run, e.g. Manillo
(steps encroached 15 in.)
- Arg. That if encroachment
not obvious to naked eye, unrealistic to expect the true owner to have
notice
- Econ. eff. j’n – d/n
want owner to have to resurvey land every time improvement made
- No reason to punish owner
- No productivity increase
in minor encroachment
- Probs.:
- Inconsistent with repose
rationale – reversing settled expectations
- Actual notice might not
make sense given the purposes of AP
- Actual notice of what?,
e.g. what if knows that there’s a minor encroachment when it’s actually
major?
- Not efficient or productive
to require tearing up result of small encroachment
- Court could have said that
only needed inquiry notice – could have required something that would
have put a person on notice (e.g. your neighbor putting in an addition)
and then imposed a burden to inquire
- Manillo court
imposes a liability rule when there is no open and notorious possession
– may seem more fair
- May seem contrary to goals
of repose, quieting title, reducing admin. costs
- May give sleeping owner
a windfall
- Valuation probs.
- Hostility
- AP occupies the land w/o
the true owner’s permission, explicitly or implicitly, and intends
to remain.
- Possible that permissive
use could ripen into non-permissive use, e.g. if tenant gave clear notice
to landowner that was taking the property in their own right and she
didn’t do anything
- Some courts consider state
of mind – blends into claim of title req.
- Under claim of
title
- Ways of considering
AP’s state of mind:
- Majority
– Obj. standard – state of mind is irrelevant (Conn. Rule)
- If evaluating here, indistinguishable
from hostility requirement, b/c all you are looking at is whether AP
occupied the land w/o permission of the true owner.
- Subjective good faith
standard – must have believed that were occupying own land
- Helmholz suggests that
courts implicitly use a good-faith standard and reward honesty
- Subjective
bad faith standard – acted w/intention to take someone else’s
property (aggressive trespasser standard, like majority in Lutz)
Maine rule
- Inconsistency in state
of mind req. from Lutz case
- Majority held that Lutz
didn’t intend to encroach when he built the garage so didn’t satisfy
claim of title =) suggests there’s a bad faith req.
- Says that Lutz knew it
wasn’t his land when he built the shack so no claim =) suggests good
faith req.
- Alternative: could
have 2 tier S/L system requiring bad faith APers to wait longer then
good faith APers (but has evidentiary probs).
- Situations where state
of mind relevant:
- Color of title cases
– AP took possession by a claim based on some written instrument,
but there’s a defect in the conveyance so has only color of title
- Both owner and APer intended
that AP own land
- AP generally had good faith
- AP subject to more lenient
reqs. (unless knew title was void), e.g. shorter S/L period, may obtain
entire land even if only cultivated part
- Mistaken boundary cases
- AP overreaches boundary,
perhaps due to faulty survey, deed descriptions
- Ex. Manillo
- D built steps that encroach
on P’s land by 15 inches by mistake; P sued for trespass.
- Court applied obj. standard,
finding that encroachment does not need to be intentional
- Honesty helps in these
cases, even though courts say they are applying a good faith rule –
goal of helping good faith trespassers (who were at a disadvantage to
bad faith trespassers under Maine rule)
- Aggressive trespasser
- Goes onto land knowing
that it doesn’t belong to him but intending to take possession
- Very unlikely will find
for willful trespassers – will construe other elements very strictly
(e.g. open and notorious req). – implicit good faith req.
- Ex. 2002 Mass. Case (court
refused to find open and notorious requirement met by bad faith possessor)
- Exclusive
- Reqs. AP not sharing
use of the land (not concurrent possession)
- AP not sharing land with
anyone else except in cases where an average owner would (e.g. brother
and sister farming land together OK) =) prevents competing AP claims
- Helps to establish notice
- Continuous
- Must occupy continuously
– without interruption – during the limitations period
- If AP abandons- leaves
with no intention to return b/f SL expires, then period ends and would
have to start over again
- Justification
- Ensures they are earning
their rights to the land
- Ensures that AP is relying
on possession of the land
- Notice req.
- Don’t have to establish
constant possession over time – must be consistent with actions that
a like owner would take (Kunto)
- Kunto occupied a summer
residence under color of title (defective deed). The record owner
sought to eject him on grounds that he had not occupied continuously
so did not have an AP claim
- Court upheld Kunto’s
claim b/c is consistent with what owners would have done with land of
this nature
- Arg. Would have been more
difficult if use of the land had left no trace
- Court used an objective
standard for state of mind – Kunto had no intention of possessing
land that wasn’t his but still received it.
- Tacking
– APers
- Can add the time of the
possession of the previous owners to the time of their possession to
reach S/L (ex. Kunto)
- Allowed when 1st
and 2nd APers are in privity – when there has been
a voluntary transfer of possession from one APer to another (does not
need to be written)
- Concerns about tacking
b/c:
- Inconsistent with earning
theory of AP
- Concerns about sleeping
owner theory – want to make sure the true owner has enough opportunities
to know what’s going on.
- Tacking
– Owners
- Automatic tacking on owners
side
- For the period of the S/L
- Will extend longer if the
true owner suffers from a disability
at the time of the initial entry , e.g. minor, mental illness.
- Squatters v. AP
- Could potentially claim
rights based on AP
- At CL when courts don’t
want to find AP, will say that is a squatter with the implication that
AP reqs. Not satisfied
- Various obstacles squatters
face:
- Aggressive trespassers
- May have difficulty in
satisfying continuity req. or obtained through voluntary transfer
- May be hard to show used
like true owner would.
- AP of personal property
- AP approach –
S/L begins running once APer satisfies elements
- True owner does not have
a great deal of control
- In theory open and notorious
req. should give the true owner protection
- Court is looking at activities
of APer, e.g. whether they displayed open and notoriously
- Discovery rule approach
– S/L run when true owner knows or should have known of the loss and
the identity of the subsequent possessor through the exercise of due
diligence (objective test)
- Burden on true owner –
what true owner did or could have done to find possession
- Offers more protection
then #1 and possibly #2
- Protection undercut by
requirement to engage in due diligence –
- Suggestion in O’Keefe
might be some t/h level of efforts - if the owner doesn’t undergo
sufficient due diligence from an objective standpoint, then s/l could
start running.
- Burden shifted to owner
rather then possessor- possessor does not have a burden to look into
the history of the object
- Ex. O’Keefe v.
Snyder (true owner v. good faith purchaser)
- P had a painting stolen,
which later appeared in an art gallery. D argues that had acquired
by AP. Question was whether exhibition of painting was open and
notorious
- Court adopts discovery
rule
- Limitation period for recovery
of personal property starts to run when the owner first discovers, or
through reasonable efforts should have discovered, the cause of action,
including the identity of the possessor
- Allows owner who diligently
seeks recovery of lost or stolen objects the ability to preserve rt
of title.
- Difficulty of demonstrating
open and notorious requirement for personal property and the tendency
to keep within the home.
- Court doesn’t have the
power to mandate registry
- Demand and refusal approach
– S/L doesn’t run until true owner finds, demands it be returned
and the demand is refused
- Most protective of true
owner
- Essentially eliminates
the limitations period – protective of art owners b/c does not impose
onus on owner
- Other person can defend
on equitable estoppel approach – the true owner waited too long
- NY adopted demand and refusal
approach and rejected discovery rule b/c does not provide enough protection
for good-faith purchasers –
- Until demand is made, possession
is not considered wrongful
- Thought inappropriate to
put a duty of reasonable diligence on the true owner b/c the difficulty
of meeting up to this duty might encourage illicit trafficking in stolen
art.
- Should protect owners by
requiring potential purchasers to investigate the provenance of works
of art.
- Modern applications
- National identity, conquest,
theft - Artifacts taken during colonialization and being displayed in
W. museums/ Nazi loot plundered from Holocaust victim
- In support:
- Social welfare argument
– they are better able to preserve the collections, benefit to humanity
- Reliance arg. – a great
deal of time has passed
- Repose
- Similar to Johnson v. M’Intosh
- Against:
- Personhood - even
though survivors have not had physical possession, they are connected
to the pieces
- Moral/historical dimensions
of how the pieces were taken speak against allowing current possessor
to retain them
- Purchaser in the best position
to avoid the loss – able to check the origin of the painting and avoid
acquiring antiquities taken in dubious circumstances.
- Supported by prospect
theory – loss v. gains –people value losses more then they value
gains; if you have it in your hand, losing it is worse then the opportunity
to have it in the future. Mainly impacts present possessor although
can cut towards true owner in some situations.
- Marital Property
- Justification for degree
as property
- Encourages investment/sharing
in the marriage (productivity)
- Labor – rcognize contribution
that non-degreed spouse made to degree
- Equality – would protect
more vulnerable parties, typically women
- Reliance – supporting
spouse might have relied on explicit/ explicit promise that would share
in the proceeds (although undercut by fact that 50% of marriages end
in divorce)
- Practical/policy reason
– alimony wasn’t adequate support
- Probs. with recognizing
increased earning capacity as property
- Difficult to determine
- Rigid – might have circumstances
after award that would seem to call for reducing payments, e.g. non-degreed
spouse remarries
- American Law Institute
recommended that alimony be re-conceived to include degree
- Professional skills
and credentials/ Increased earning capacity
- One view
- Not property – property must be tangible, able to be transferred;
essentialist view (like Moore) – professional credentials have no
exchange value
- Ex. In re Marriage
of Graham (CO, 1978)
- Whether acquisition of
an MBA during a marriage constitutes marital property subject to division
by the court.
- Court found that MBA was
not property b/c it could not be transferred or inherited but merely
an intellectual achievement.
- Concern about how wife
could be awarded a share of something non-transferrable – valuation
problems
- But some things
are not inheritable, e.g. life estates, but still have recognition as
property; plus we do recognize property rights in intellectual achievement,
e.g. IP, and property rts. in non-transferrable benefits, e.g. social
security
- Court said that it could
take financial support of a spouse for her partner to obtain an education
into consideration when there is a demonstrated need.
- Dissent argued that increase
in earning power constituted an asset that wife’s support conferred
on D.
- Equitable division states
– can be considered marital property that is divided based on range
of factors at time of divorce including who will maintain the children
(NY as exception to general rule)
- Some impose mandatory rule
of equal division – 50/50
- Others apply a presumption
of equal division
- Ex. Elkus v. Elkus
- P sued to determine whether
her career/celebrity status as an opera singer constituted marital property.
D – her husband- had contributed in numerous ways to support her career
(including voice lessons) and raise their children.
- Court found that the contributions
to her career and career potential made by her husband entitled him
to share in P’s increased earning power – his contribution was direct
and concrete and the nature and extent of the contributions justified
the decision.
- Found that things of value
acquired during marriage are property even if outside the scope of traditional
property concepts
- Purpose of the statute
was to prevent inequities and recognize the principal upon which equitable
division is based – marriage is an economic partnership to which both
parties contribute
- Resititution
- Might seem easier to award
out of concern for valuation probs.
- Ex. Mahoney v. Mahoney
(New Jersey, 1982)
- Professional degree seen
as too speculative to value
- Court thought idea of a
spousal investment in human capital demeaned the concept of marriage
- Suggested Reimbursement
Alimony
- Non-married persons
- Recommendation that there
be a shift away from contractual approach to status approach
- Unmarried cohabitants should
be deemed domestic partners if their relationship satisfied certain
criteria – time, children, etc.
- If are domestic partners
should have similar rights as married couples
- Prob. – might be seen
as undercutting the autonomy of non-married persons
- Less persuasive for same-sex
couples
- This is only a default
regime – can be contracted around
- Shows that autonomy can
be a reason for counseling against property rights
E. ESTATE SYSTEM
- Overview of Estate
System
- Relation of Estate System
to Feudal System
- Define ownership of land
by time and possession
- Developed in England
- King thought to be the
ultimate owner of land
- Interest of the various
layers under the king differed primarily in terms of how long it would
last
- Tenant was seized of the
land- he held possession from his lord and owed services to the lord
(feudal tenures and incidents)
- Subinfeudation (granting
of land in exchange for services)lengthy chain of possession and obligation
- Applies only to real property
- Ways in which property
can change hands:
- Intervivos – conveyance
between 2 living persons
- Devise - Will or testament
- Property law – when die
intestate
- Possessory v. Non-Possessory
Estates
- Estates limited to interests
that are now possessory or capable of becoming possessory in the future
- Ex. O to A for life, then
to B
- A-present possessory; B-future
interest
- Non-posessory- interest
in land that gives owner right of use of land (e.g. Lutz had
right to pass over)
- Present Possessory v.
Future Interests
- Estate divides possessory
interests in terms of immediacy
- In ex. above, A becomes
an owner when conveyance is made
- B becomes an owner at time
O conveys the property, but cannot possess his timeshare until A’s
timeshare ends
- Future interest – presently
existing legally protected interest – gives legal right to owner
- Duration
– hierarchy
- Fee simple - Potentially
infinite duration
- Generally inheritable –
can be inherited by any of the owners’ heirs even if dies intestate
- Only way that comes to
an end is if O dies intestate w/o heirs escheats to state
- Life estate – lesser
duration
- Comes to an end when A
dies
- Leasehold estates – periodic
tenancy for a term of years/months
- Principal of conservation
of estate – when estate is divided into sub-estates of lesser duration,
the entirety has to add up to that duration
- When O who owns FSA grants
present interest in life estate to A, someone has to own the future
interest, either O or 3rd party – if silent, law sill presume
it’s O
- O granting FS to A for
life, then B for life
- A-present possessory life
estate
- B-future interest in a
life estate
- O-future interest in a
fee simple
- Freehold v. Nonfreehold
- Freehold – fee simple,
fee tail, defeasible fees, life estate
- Nonfreehold – leased
– distinguished based on type of interest transferred
- Term of years
- Estate with fixed duration
– period of time expressed in terms of unit of a year and fraction
of a year
- Tenancy at will – tenancy
that extends as long as both parties desire it
- No fixed duration
- Terminable at any time
by either party
- Periodic tenancy – if
lease apt. to A on month to month or year to year
- No fixed duration (like
tenancy at will)
- Continues until one of
the parties terminates
- Requires termination notice
- To be effective must be
given time period
- Notice period often set
by statute – varies based on length of reoccurring
PRESENT POSSESSORY ESTATES
- Fee Simple
- History of FS
- When landlord subinfeudated,
tenant received possession and use for his life on the condition that
he provide certain services
- When died, land reverted
and lord had discretion about whether to give to heir
- Rise of inheritability
- Lord usually provided land
to heir b/c knew the family and received tax (relief)
- 1100- Henry V required
that heirs be able to assume tenancies by paying a relief and lords
imitated
- 1200 – inheritance of
fee became matter of right
- Rule of primogenitur –
male heirs preferred to female heirs.
- Rise of alienability
- Initially 2 restrictions
on alienability
- Rights of lord - concerned
about tenants transferring interest
- If substituted new tenant,
lord risked getting unreliable tenant
- Didn’t want tenants to
subimpudate – tenant added new layer in feudal chain – greater likelihood
that obligations not met
- 1290- Statute Quia Emptores
settled that the fee was freely alienable – the holder could transfer
w/o consent of the lord – but it prohibited subimpudation (compromise
leg.)
- Rights of heirs (people
who inherit when land passes under laws of intestate succession)
- Right to alienate also
potentially right to disinherit – heirs wouldn’t receive land that
they anticipated receiving
- Some gained b/c could soften
harsh effects of primogeniture – could transfer to younger sons during
lifetime
- 1200- heirs apparent could
still block tenant from selling land
- If land transferred to
A and his heirs and A transferred to B, then upon A’s death, reverted
to heirs (A thought to have life estate)
- D’Arundel’s Case –
established that in a transfer to A and his heirs, heirs had no right
to recover lands alienated by a tenant during his lifetime – received
when A died unless he transferred
- Rise of devisability
(ability of a tenant to pass the estate by will)
- 1540- Statute of Wills
made it possible to devise legal estates by will
- Even b/f Statute of Wills,
some exceptions:
- Could devise equitable
estates
- Could use “use” (trust)
– mechanism for landowners to avoid primogeniture and avoid paying
incidences
- Interrel. b/w S/Wills (1540)
and S/Uses (1536) – attempt to mollify landowners
- Applicable theories:
Economic Story (Demsetz) - Applicable if value of land increases or
cost decreases
- Incentive to invest in
land
- Coincided with rise of
market economy
- Increasing land scarcity
– might have prompted an increase in the value of the resource –
might have induced alienability and created a greater incentive to try
to capture the benefits of that alienation
- After Quia Emptores, land
consolidated in few hands
- Creation of FSA
- Intervivos conveyance
- At early common law
- To convey FSA, conveyance
had to be to “A and his heirs”
- “to A” - words of
purchase – indicate who takes FSA
- “and his heirs”
words of limitation – define duration of the estate
- Intervivos conveyance to
“A, successors and assigns forever in fee simple”
- No FSA transferred - A
has a life estate, successors and assigns not have anything – failed
words of limitation
- From the 13th
century on, “and his heirs” meant that conveyance was a fee simple
– did not take in their own right
- So, transfer to “d and
his heirs,” D has a fee simple (present interest) and heirs have no
rights
- After 1540
- Didn’t need “and his
heirs” to transfer FS in a will – any clear expression of intent
to transfer a FSA was enough
- If no intent shown, then
CL would presume a life estate was being transferred
- Modern View
- Presumption that person
intended to convey FSA unless there are indications that intends
to give lesser estate
- By Devise
- Before 1540, devises not
recognized
- S/Wills (1540) allowed
an estate in land to be devised
- Characteristics of
FSA
- Represents the greatest
possible aggregation of rts, powers, priv. and imm. a person may
have in land
- Holder doesn’t share
ownership in time with anyone
- Has the rt. to possess
for the longest duration in the CL
- Of a potentially infinite
duration
- Comes to end only if owner
dies w/o a will and w/o heirs escheats to state
- Generally inheritable
- If owner of FSA dies intestate,
FSA passes to heirs
- Holder of FSA can’t place
limitations of inheritability of FSA – can’t create new interest
that would restrict who obtains if dies intestate
- Can convey by intervivos
conveyance and by devise
- Freely devisable and transferable
(govt. can restrict transfers by law)
- Living people don’t have
heirs – just heirs apparent
- If a person has died
and trying to figure out heirs
- Under laws of primogeniture
- estate passed to decedents
(children/grandchildren) – oldest son took priority
- If w/o decedents, then
closest collateral relatives- brothers, nephews
- Deceased’ ancestors (parents)
couldn’t inherit
- Under modern law, intestate
succession rules set by states
- If no surviving spouse,
then designated as intestate successor of some share
- If no surviving spouse
or not take entire estate, passes to decedents
- If no decedents, some states
permit antecedents (parents, grandparents)
- If no antecedents, collateral
- If no collateral, escheats
to state
- Examples
- O conveys Greenacre “to
A and her heirs.” A’s only child, B, is a spendthrift and
runs up large, unpaid bills. B’s creditors can attach B’s
property to satisfy their claims.
- Does B have an interest
in Greenacre, reachable by B’s creditors? Suppose A wishes to
sell Greenacre and use the proceeds to take a trip around the world.
Can B prevent A from doing this?
- No – “and her heirs”
are only words of limitation; A has FSA and heirs have mere expectancy
but no legal future interest.
- O, owner of Blackacre,
has two children, A (daughter) and B (son). Subsequently B dies
testate, devising all his property to W, his wife. B is survived
by three children, B1 (daughter), B2 (son) and B3 (daughter).
A1 (son) is born to A. Then O dies intestate.
- Who owns Blackacre in 1800?
- Law of primogeniture
B2 takes by representation (oldest son)
- Under modern American law?
- A gets �, 3 kids share
the remaining � (W doesn’t inherit b/c you can’t transfer expectant
property)
- O conveys Blackacre “to
A for life, remainder to B and her heirs.” B then dies intestate
w/o heirs. A then dies. Who owns Blackacre?
- A has a life estate, B
has vested remainder in FSA at time of conveyance
- Property escheats to the
state – O had transferred entire interest
- Life Estates
- Types
- Life estate measured by
life of donee (life estate holder) – O to A for life
- Life estate measured by
someone else then donee (per autre vie) – O to A for life of
B
- Creation of life estates
- Express words – when
conveyance expressly limits duration of expressed interest in terms
of life of a person
- Legal construction
- At early CL life estate
created whenever owner granted land to A w/o any specification of time
- Today, law presumes granter
intends to convey FSA- only conveys life estate if clearly indicates
intention to create
- In England, life estates
have been abolished and proceeds from sale of land go into trust for
life estate holder and remaindermen
- Operation of law – more
historical
- At CL, 2 types of LE in
husband
- As a result of marriage
– obtained estate by marital right – acquired a life estate in certain
types of property that belonged to wife
- Estate gave man use and
occupation of the land and any profits from the land
- Lasted until divorce, either
spouse died, or child born alive
- Curtesy – once child
born alive, husband’s estate was enlarged into a life estate for his
own life
- Rationale for giving husband
estate by marital right connected to doctrine of coverture
- Women received dower –
life estate for widowed wives
- At CL, woman entitled to
LE in form of dower in terms of 1/3 of LE
- Rights to dower and curtesy
could be waived by either spouse
- Estate by marital right
abolished – dower and curtesy abolished in most states
- Characteristics of LE
- Transferability
- Life tenant can convey
what s/he owns but only for the remainder of his/her life
- Ex.
- O to A for life, then to
B
- A conveys interest to C
- C has a life estate measured
by A’s life
- After A dies, B will have
a present fee simple
- Defeasible – can
be subject to certain conditions
- Inheritability/devisability
- When LE measured by donee’s
life, not inheritable or devisable by will b/c ends when donee’s life
ends
- Ex. O to A and her heirs
for A’s life
- A gets a life estate and
heirs don’t get anything
- When life estate measured
by someone else’s life, then devisable and inheritable (today) but
only for the duration of that person’s life.
- Every life estate is
followed by a future interest, either a reversion in the transferor
or a remainder/executory interest in a transferee.
- Rights of Life Tenants
- Rt. to undisturbed possession
during life tenant’s estate; applies against strangers/remaindermen
- E.g. if a neighbor builds
a garage that encroaches, life tenant and remaindermen each have right
to sue
- If one of the remaindermen
comes onto the property, can be ejected
- Do have right to come onto
land to make sure life tenant hasn’t committed waste
- Entitled to ordinary
and reoccurring items of income recurring from the property, e.g.
rent
- Open mines doctrine –
if there’s a coal mine or oil field and used b/f will took effect
or when conveyance is made, then life tenant is entitled to income from
this
- Entitled to income from
continuing operation provided that prudently manages (reasonableness
test)
- If no mine on property
when conveyance made, life tenant can’t drill for oil to capture the
benefits – would need agreement of remaindermen
- Obligations of Life
Tenant/ Waste
- Life tenant has the obligation
not to commit waste – not to make unreasonable use of the property
that permanently impair the property’s value or interferes with the
interest of the future interest holders
- Law of waste is applicable
to concurrent owners and to any present/future interest
- Categories
- Permissive waste
–failure of LT/present possessor to act reasonably to protect deterioration
of the land (negligence)
- LT has obligation to preserve
property in reasonable state of repair
- Includes paying carrying
costs (e.g. interest on mortgage) plus taxes
- Not responsible for extraordinary
costs, e.g. improving or repairing damages that are not the LT’s fault
- Affirmative waste
- Injurious acts that substantially
reduce the value of the property in question forbidden
- Early English decisions
were that anything that LT did to change the character of the property
(even if increased value) would constitute waste
- Early NY decision forbade
landlord from tearing down mansion to build apartment building
- Currently in NY LT can
do what prudent owner would do under the circumstances, including making
substantial alternations or even demolishing a structure when conditions
change, provided that the value of the remainder is not diminished by
these actions.
- Factors that influence
when action will be considered waste
- Influenced by societal
perspectives on use of land at that time period
- Nature of possessory estate
and future interest
- The stronger the future
interest, the weaker the rights of possessory holder – the more likely
actions will be seen to constitute waste
- If 2 present possessory
holders, person with life estate more free to act then those on month-to-month
tenancies
- Remedies for waste
- Forfeiture – extreme
remedy – only likely if present possessory estate holder has acted
wantonly or maliciously
- More likely damages/injunction
– damages vary depending on strength of future interest, e.g. vest
interest stronger then contingent interest
- Function of law on waste
- Fairness
– protect rights of remaindermen
- Efficiency – the
holder of the present estate potentially internalizes some of the costs
that might not otherwise take into account.
- Demonstrates problems with
creating a legal life estate, e.g. issues of sale, lease, mortgage,
waste, insurance
- Could have devised land
in trust
- Reconciling successive
interests in property
- Can be difficulties in
balancing immediate interest of life tenant with future interests of
remaindermen
- J’n of court to intervene
in these types of situations:
- When there are unborn,
unascertained or minor beneficiaries and need to prevent a loss in the
value of the land (most states)
- Makes sense b/c impossible
for life tenant to negotiate
- Identified remaindermen
and sale requested b/c sale beneficial to the parties, e.g. Baker
(some states will allow but is more difficult)
- Ex. Baker v. Weedon
- P’s husband devised his
farm to his widow for life, to her children if she had any then to his
grandchildren by a prior marriage (widow had a life estate, her children-
contingent remainders, his grandchildren – contingent remainders,
reversion to Weedon’s heirs)
- Life tenant wants to sell
the land and obtain income –
Elderly/childless widow lived on a farm that was rising in market value
but provided meager rental payments that were insufficient to support
her
- Remaindermen (grandchildren)
feel land will increase in value in the future (court suggests would
be worth 3x its value in 4 years – maybe not take into account inflation)
- Court ruled that must
consider best interests of the parities. Held that sale of
all of the farm would not be in the best interest of all of the parties
but suggests that will allow a sale of part of the land, but only if
parties can’t think of a way of mortgaging the land to provide for
Anna’s reasonable needs.
- Reasons for supporting
remaindermen’s interest
- Personality theory (although
not supported by facts of this case b/c there was no ancestral home,
but if had a higher value for remaindermen, would want to recognize
higher value)
- Empathy of grandchildren
to date for Anna’s situation
- Basis for judicial intervention
- Paternalism
- Anna’s weak bargaining
power – she’s just the life tenant and can’t sell property unilaterally
- Lowering transaction costs
- Bilateral monopology –
2 parties who have to deal with each other, e.g. adjacent land owners
- Can create holdout problem
– possibility that one party may holdout and refuse to deal.
- Probs. with decision:
- Refusing to order sale
literally enforces the will but acts contrary to Anna’s best wishes,
which John sought to protect in his will
- How are her reasonable
needs to be determined? – might require continuous court monitoring.
- Potential for higher transaction
costs if only sell part of the land
FUTURE INTERESTS
- Characteristics of
Future Interests
- Legal interests in property
that are not possessory but which are capable of becoming possessory
at some time in the future. It’s a presently existing property
interest but it confers only a future right to possession.
- Retained by transferor:
- Reversion
- Possibility of reverter
(ii and iii companion interests to defeasible estates)
- Right of entry
- Retained by transferee
- Remainder
- Vested
- Contingent
- Executory interests
- Future Interests
Retained by Transferror
- Reversions:
- Future interest created
when the grantor conveys a lesser estate then he originally owned and
does not provide for a 3rd party
to take the property when the lesser estate expires
reversion arises in transferor
- Ex. O to A for life, then
to B – B has a vested remainder in fee simple – the owner has given
up everything, so there’s no reversion
- Ex. O to A for life, then
to B for life – is a reversion to O– both are life estates and are
lesser
- Creation of reversion
- Can be expressly retained
- Ex. O to A for life, then
to revert to me and my heirs
- Can arise by operation
of law – usually not expressly retained
- Ex. O to A for life (reversion
to O implicit)
- Reversions are:
- Transferable intervivos
- Decendable
- Devisible at death
- Subject to defeasance
– not necessarily certain to become possessory in the future (O A
for life, then to B’s kids – if B has kids, then could be defeased)
- Ex.
- O owns a fee simple and
makes the following transfers. In which cases is there a reversion?
- O conveys “to A for life,
then to B and her heirs”
- No reversion – B has
a vested remainder in fee simple b/c not lesser
- O conveys “to A for life,
then to B and the heirs of her body” or if O conveys “to A for 20
years.”
- Is a reversion b/c it’s
lesser
- O conveys “to A for life,
then to B and her heirs if B attains the age of 21 before A dies.”
At the time of the conveyance B is 15 years old.
- Is a reversion b/c there’s
a contingent remainder – at age of 21, remainder becomes vested
- O conveys Blackacre “to
A for life, then to B for life.” O subsequently dies with a
will devising all of O’s property to C. Then A dies and B dies.
Who owns Blackacre.
- C- reversions are devisable
- Possibility of Reverter
- Created whenever
the grantor conveys the same quantity of estate that he originally had,
but conveys it with a determinable limitation attached and retains the
right to future possession if and when the determinable limitation occurs.
- Transferability
- At CL
- Not devisable or transferable
b/c not considered true property interests
- Could be inherited or released
to present possessor
- Today - Generally alienable
- Statute of limitations
begins when the condition occurs b/c of automatic divestment.
- Owner can be required to
re-register to maintain interest
- Right of Entry
- Created whenever
the grantor retains the power to cut short the conveyed estate before
its natural termination.
- S/L not supposed to run
but in practice courts impose equitable principles.
- Transferability
- At CL
- Not devisable or transferable
- Could be inherited or released
to present possessor
- Today - increasingly alienable
but more restricted than possibility of reverter
- Owner can be required to
re-register periodically to maintain interest
- Future Interests Created
in Grantees
- Remainder
- Future interest created
in a transferee that’s capable of becoming a present interest immediately
upon expiration of the prior estate created in the same conveyance
- A remainder cannot divest
any interest except an interest left in the transferor.
- The only way a remainder
becomes possessory is the nature expiration of the prior estate
- Characteristics
- Interests created in
a transferee
- Capable of becoming
possessory immediately upon expiration of prior estate
- Doesn’t have to be certain
or even probably that the remainder will become possessory.
- Ex. O conveys Blackacre
“to A for life, then to B if B gives A a proper funeral.”
Does B have a remainder or an executory interest?
- B has springing executory
interest – there has to be a gap in time between when A dies and when
has a proper funeral. Therefore, B’s interest will divest O’s
reversion.
- Ex. O to A for life, then
one day after A’s death, to B (el. 2)
- B doesn’t have a remainder
b/c not possible for B to take possession immediately after end of prior
estate – gap in time
- B has a springing executory
interest – B’s interest will divest O’s reversion
- Remainder must not cut
short prior possessory estate
- Is allowed to cut short
prior possessory estate if is a reversion in the transferor
- Ex. O to A for life, then
to B if B graduates from law school (el. 2)
- B has a contingent remainder
– there is a condition that B has to satisfy
- A has a life estate; if
B hasn’t graduated then reverts to O and then goes to B if he graduates
- The only interest it cuts
short is O who is the transferror
- Ex. O to A and his heirs,
but if A dies without surviving children, then to B and his heirs
- Bs estate does not have
a remainder since he must divest a prior estate (A’s FSA)
- For a remainder to arise,
all the prior estates must have been particular estates – smaller
then FS
- Simultaneity requirement
– can be conveyed only in the same estate in which the prior estate
created
- Transfer: On June
1- O to A for life; On June 13 – O to B
- Not a remainder b/c not
part of the same conveyance; gives what he has left to B
- Classification of remainders:
vested or contingent
- Vested Remainders
- Criteria:
- Given to ascertained person
- No condition precedent
to remainder becoming possessory other then natural expiration of prior
estates
- Transferable intervivos,
descendable and devisable – at CL and now
- Contingent Remainders
- Criteria:
- Given to an unascertained
person OR
- E.g. if it’s created
in favor of someone who hasn’t yet been born
- E.g. if it’s created
in favor of someone who hasn’t yet been identified
- Contingent on some event
occurring other then the natural expiration of prior estate
- Transferable intervivos,
descendable and devisable –now but not at CL
- When there’s a combination
of life estates and contingent remainders, O has a reversion.
Life estate can end prematurely if transferee commits waste.
- Vested remainders subject
to complete divestment – Remainder created in a known person and
not subject to any condition precedent, but which is subject to a condition
subsequent that, if it occurs, will completely divest the remainderman
of his interest
- Vested remainders subject
to open or partial divestment – Remainder created in a class of
grantees, at least one of whom is presently existing and entitled to
possession as soon as the preceding state expires, but which is capable
of expansion to include as yet unknown people.
- Ex.
- O conveys “to A for life
and in the event of A’s death to B and her heirs.”
- Is B’s remainder vested
or contingent”
- Vested – condition not
sufficient to make contingent b/c has a life estate
- If B subsequently conveys
her interest back to O, what does O have?
- Vested remainder (name
doesn’t change)
- O conveys “to A for life,
then to B for life, then to C and her heirs.”
- What interests are created?
- A has a life estate, B
has a vested remainder, C has a vested remainder in fee simple
- Suppose the remainder to
C had been “then to C and her heirs if C survives A and B.”
What interests are created?
- A has a life estate, B
has a vested remainder, C has a contingent remainder, O has a reversion
- O conveys “to A and B
for their joint lives, then to the survivor in fee simple.”
Is the remainder vested or contingent?
- A and B have joint life
estate, A and B have a contingent remainder in fee simple (b/c not know
who the survivor would be), O has a reversion (condition might not vest
b/c might be killed together).
- O conveys “to A for life,
then to A’s children who shall reach 21.” A’s oldest child,
B, is 17.
- Is the remainder vested
or contingent?
- Before B reaches 21, is
contingent b/c B might die
- B subsequently reaches
21. Is the remainder vested or contingent?
- Vested subject to open
or partial divestment b/c more children can be born.
- Executory Interests
- Any future interest
in a transferee that’s not a remainder
- Can divest or cut short
an interest in another transferee
- Types:
- Springing: Divests
an interest in the transferor
- Ex. O to A for life, then
to B one day after A dies
- Shifting: Divests
another transferree’s possessory or future interest
- Ex. O to A for life, but
if B should marry during A’s life, then to B
- Ex.
- O conveys “to A for life,
then to A’s children and their heirs, but if at A’s death he is
not survived by any children, then to B and her heirs.”
- At the time of the conveyance,
A is alive and has no children. What is the state of title?
- A has a life estate, A’s
children have a contingent remainder in fee simple (contingent on them
being born), B has an alternative contingent remainder in fee simple,
O has a reversion (b/c A’s life could end prematurely)
- Two years after the conveyance,
twins, C and D, are born to A. What is the state of title?
- A has a life estate, C
and D have vested remainders in fee simple subject to open and total
divestment (b/c might die before A dies), B has a shifting executory
interest (b/c divesting interest of a transferee)
- Suppose that C dies during
A’s lifetime, and that A is survived by B and D. What is the
state of title?
- C’s heirs get 50% of
a fee simple (by representation); D gets 50%; B doesn’t get anything
- O conveys “to A for life,
then to such of A’s children as survive him, but if none of A’s
children survives him, to B and her heirs.” At the time of the
conveyance, A is alive and has two children, C and D. What is
the state of title?
- A has a life estate, C&D
have a contingent remainder in fee simple, B has an alternative contingent
remainder in fee simple, O has a reversion in fee simple
- A could commit waste and
lose life estate b/f he dies would revert to O
- Not possible to determine
whether A’s children survived him or whether B should take
- O conveys “to A for life,
then to B and her heirs, but if A is survived at the time of his death
by any children, then to such surviving children and their heirs.”
At the time of the conveyance, A is alive and has two children, C and
D. What is the state of title?
- A has a life estate, B
has a vested remainder subject to total divestment (not contingent b/c
the condition comes after the grant), C and D have a shifting executory
interest in a fee simple (would have to cut short B’s interest)
- A conveys Blackacre to
B for life and if C survives B, then to C and his heirs, but if C dies
before B, then to B and his heirs.
- B has a life estate, C
has a contingent remainder in fee simple, B has an alternative contingent
remainder in fee simple, O has a reversion
- O conveys Blackacre to
B for life then to B’s widows and her heirs
- B has a life estate, B’s
widow has a contingent remainder in fee simple, O has a reversion
- O conveys Blackacre to
B for life then to C’s heirs.
- B has a life estate, C’s
heirs have a contingent remainder in fee simple (if C has not died),
O has a reversion; If C has already died at the time of the conveyance,
C’s heirs have a vested remainder
- T conveys Blackacre to
B for life, then to C and his heirs but if C dies before B leaving no
issue surviving him then to D and his heirs
- B has a life estate, C
has a vested remainder in fee simple subject to total divestment with
a condition subsequent, D has a shifting executory interest (to take
effect, D would have to divest C’s estate).
THE ANTICOMMONS AND OTHER IMPEDIMENTS
TO BARGAINING RESULTING FROM THE ESTATES’ SYSTEM
- Dead Hand Control
- Def. Attempts by prior
owners to control what happens to their property once they’ve transferred
- Tension b/w people who
want to maintain control and those that think land should be freely
alienable
- Coase would say land should
be as alienable as possible
- Parties will resist alienation
for purposes like:
- Keeping wealth in the family
b/c of political power
- Controlling family members,
e.g. who they marry
- Restricting use in the
future so as to increase current value of the land
- Objections to restraints:
- Efficiency/impact on
marketability
- Need marketability to enable
land to end up in hands of users that value them most (Coase)
- Undermines incentive to
invest in improving the land
- Market impacts – decrease
price, limit number of potential buyers
- Tragedy of the anti-commons
– when you recognize restraints on alienation and propery parceled
out, can create a prolif. of private property rights that is destructive
b/c too many people have veto over the resources.
- Perpetuate concentration
of wealth.
- Hardship on creditors –
can’t seize land in return for money that have lent; may be reluctant
to lend money for improvements; may make it more difficult to buy property
- Justifications for retaining
conditionalities (restraints on alienation)
- Promote charitable gift-giving
– may want to have some influence in order to give
- Grantor has superior information
- Personal autonomy – personality
theory
- Promote investment by grantors
– need to weigh against loss of investment that may flow from restraints
on alienation.
- Promote certainty in the
transferor – e.g. Toscanos; may reflect a bargain b/w
the parties, prevents a windfall gain to the grantee.
- Restraints on marriage
- CL hostile to restraints
on marriage b/c society is seen to promote marriage – construe restraints
as narrowly as possible
- Prohibition can be evaded
– if seen as a guarantee of support up to time of remarriage
- Courts have generally
attempted to restrict dead hand control and promote alienability
- Reluctance to allow grantors
to keep land w/i family (fee tail)
- Defeasible fees – when
faced with characterizing clause, tend to prefer least drastic estate,
- May be willing to uphold
when there’s strong public policy reasons, e.g. promoting charitable
giving
- Hostility to restraints
on marriage.
- Rule against perpetituities
– allows property owners to control devises to people they know and
one generation afterwards
- A condition must vest if
at all not later then 21 years after some life in being at the time
of creation of the interest (applies to contingent remainders or executory
interest not reversions, possibility of reverter, rt. of entry)
- Fee Tail
- History
- Created by conveyances
of “To A and their heirs of his body”- Attempt to restrict passage
of land – to keep last w/i the family
- Words interpreted by judiciary
in favor of alienability
- Before 1285, judiciary
interpreted as a fee simple conditional – once A has issue can transfer
land in fee simple
- Passage of Statute de Donis
(1285) – Replaces fee simple conditional with fee tail
- Allows grantor to pass
land to A and then limit ability of A to pass land, so goes only to
lineal heirs (children/grandchildren);
- If not have heirs
reversion to grantor or 3rd party as a remainder
- All A could do was convey
a life estate in land for A’s own life
- 1400s – Passage of a
common recovery law that allowed people to convert a fee tail into fee
simple
- Modern Day
- Only 4 states permit creation
of fee tail, but all provide that the fee tail can be converted to a
fee simple
- Only 2/3 states recognize
attempted fee tail as creating a fee simple conditional – fee simple
conditional upon having an issue (if issue born, then can transfer).
- Defeasible Fees
- Defeasible fee simple
is subject to termination or divestment upon the occurrence of a future
event
- Represent efforts by prior
owners to impose conditions on continued ownership of estates – requiring
them to undertake or not undertake certain actions
- Courts tend to favor interpreting
conveyances creating the least drastic estate – disinclination to
find FSD, more willingness to find FSS, greater comfort w/finding covenant
- Reason: do not want
to promote forfeiture of estates
- Policing responses to
ensure conditions not overly restrictive
- Restrict time-period of
these conditions
- Statutes that require people
who hold Possibilities of Reverter and Right of Entry (to periodically
re-record – otherwise title extinguished
- Statutes are not enforced
if benefits that would accrue are minimal
- Absolute restraints on
alienation of FS but will allow partial restraints if reasonable in
purpose, effect and duration (Res)
- Absolute disabling restraint
of life estate void, but a forfeiture restraint is valid (Res)
- Disabling restraint: “O
to A for life but if A attempts to transfer the property, then to B”
- If A borrows $ and defaults
on loan, bank tries to take the asset and violates restraint – bank
loses $ but A retains land
- Forfeiture restraint: “O
to A for life but if A attempts to transfer the property then to B”
- If A defaults, bank can’t
take $ but A loses the land
- Fee Simple Determinable
- Created when the grantor
intends to grant a fee simple only until a specified future event happens
- ends automatically
- Accompanied by future interest:
the possibility of reverter.
- Durational language
evidence of intent to create FSD “so long as” “until” “during”
“while”
Ex. “O conveys Blackacre
to the Hartford School Board, its successors and assigns, so long as
the premises are used for school purposes.”
- Ex. Marenholtz
- Conveyance in 1941 by the
Huttons to the Trustees of School District No. 1: “this land
to be used for school purposes only; otherwise to revert to Grantors
herein.”
- 2 separate conveyances
of land and remaining interest
- Huttons (1941)
Jacqmains (1959) Marenholz
- Huttons- parents
Hutton (son)
Marenholz
- May – Son conveyed to
P all of his interest in the land
- September – Disclaimed
his interest in favor of the defendants
- Who owns right dependent
on whether original grant was a FSS or FSD
- If FSD, once the condition
was broken, Harry would have automatically acquired a FSA that he transferred
to the Marenholtz’
- If FSS Harry had only a
right of re-entry when the condition was broken, which could not be
transferred intervivos. The right was extinguished when he signed
over his rights to the school board.
- Assumptions
- Condition breached
- Valid conveyance from Harry
to Marenholtz
- Release not trump conveyance
- School board not acquire
land by AP (prob. not enough time had passed since condition breached)
- Holding
- Grant was a fee simple
determinable
- word “only” suggests
durational language
- Questionable b/c of conditional
language (‘but if’)
- Use of word ‘revert’
helpful but not determinative
- Absence of ‘revert’
will probably mean no FSD
- If conditional language
(as oppose to durational) but no mention of poss. or reverter/rt. of
entry
covenant (entitlement to damages/injunction rather then forfeiture)
- Precedent – similar cases,
e.g. North v. Graham held to be FSD when there was durational language
(whenever) and use of word revert.
- Fee Simple Subject to
a Condition Subsequent
- Fee simple that does not
automatically terminate but may be cut short or divested at the transferor’s
election when a stated condition happens.
- Future interest:
Right of entry.
- Right of entry can only
be created in a grantor
- If want to go to 3rd
party, need to create FSS and then in a separate transaction, assign
right of entry to 3rd party (in j’ns where these are transferable)
- Conditional language-“upon
condition that” “provided that”
- Ex. O conveys Whiteacre
to the Hartford School Board, its successors and assigns, but if the
premises are not used for school purposes, the grantor has a right to
re-enter and retake the premises.
- Ex. Tuscano
- Tuscanos convey land to
lodge by gift deed: restricted to use and benefit of the second
party and provided for reversion upon sale or transfer.
- Lodge took action against
Toscanos estate to quiet title – argued that restrictive language
is a restraint on alienation
- Court ruled that it was
a valid fee simple subject to condition subsequent.
- Took into account context
of the gift – found Toscano was a member of the lodge and granted
“with love and affection”
- Clause restricting sale
invalid but clause restricting use valid on public policy grounds
- Conditionalities have long
been allowed and otherwise would invalidate all (formalistic analysis)
- Fee Simple Subject to
an Executory Limitation
- Created when reversionary
interest is to a third party (not in grantor)– automatic divestment
- Ex. O conveys Blackacre
to A for school purposes only, and if it ceases to be used for such
purposes, then to B.”
CONCURRENT OWNERSHIP
- Tenancy in Common
- Own separate but undivided
interests in the same interest of property (unity of possession)
- Presumption of tenancy
in common (even if have 4 unities), unless there is a clear statement
in the alternative form
- Each TIC has the right
to possess the entire property (per my (share) and non per tout (not
in the whole)
- No right of survivorship-
can be alienated, devised, or inherited separately
- Joint Tenancy
- Unities
- Time – JT must be acquired
at the same time
- If convey property to yourself
and your brother, not meet unity requirement – not acquire at the
same time (some states will allow)
- Title – Must acquire
by same conveyance, will or AP (not by intestate succession)
- Interest – All must have
equal, undivided and identical interests –
- This rule has been waived
in some states
- Undivided interest –
interest not assigned to particular piece of property (Popov)
- Identical – estate of
same quantum/duration
- Possession
- Each person has the right
to possess the whole
- Some states have abolished
the requirement of the 4 unities and provide that a joint tenancy may
be created simply by stating explicitly the intent to do so.
- Property is held - per
my (fractional shares) and per tout (possess the whole) – multiple
people own an equal interest in the entirety of the property.
- Right of survivorship–
when a joint tenant dies, his entire interest dies with him
- Implications for creditors
– must seize during joint tenant’s life – otherwise the interest
disappears
- Why are these interests
transferable and not devisable?
- Reliance interest
- Avoidance of probate
- Ability to sever
- Can convert JT into tenancy
in common unilaterally by conveying interest to 3rd party
intervivos but can’t break or sever by will (Delfino case)
- Ex. Riddle v. Harmon
- Wife attempted to break
joint tenancy by conveying to herself rather then a straw and then died
- Court finds that wife can
unilaterally break the joint tenancy w/o conveying to a straw
- Joint tenant should be
able to accomplish directly what could otherwise do by legal fictions
- Argument that needed two
to transfer is a historical remnant
- Strong argument for upholding
her actions in this case b/c reflects her wishes
- Concerns with allowing
people to break joint tenancies unilaterally:
- Protecting people’s expectations
with consistent practices
- Ensuring people have notice
– her husband did not have notice about her actions until she had
died – might have acted differently to dispose of his interest as
a TIC
- Concerns about fraud –
could not tell anyone about the transfer so if outlived other joint
tenant can inherit the whole
- Mortgage: Ex.
Harms v. Sprague
- Brothers owned property
as joint tenants; one took out mortgage on the property w/o notifying
the other; he died and devised his property to his boyfriend; did the
mortgage sever the joint tenancy so the estate passes?
- Issue depends on whether
mortgage is seen as a title or a lien:
- Title theory: mortgage
effects a transfer of legal title, subject to a right of the borrower
to reclaim title by paying off the loan
-
would sever joint tenancy b/c would be transfer of title to the lender
- Lien theory – Lender
only has a lien against the property (can seize title if the loan is
not paid)
-
joint tenancy not severed, b/c borrower keeps legal title
- Court adopts lien theory,
so second brother obtains entire property by rt. of survivorship, and
rules that the mortgage does not survive his death (true in most states)
- To better protect the creditor,
the court could have allowed the joint tenancy to remain but the mortgage
to survive
- Creditors could also have
protected themselves by doing a title search and insisting both joint
tenants sign.
- Court protected 1st
brother’s personal autonomy interest to get the mortgage w/o having
to seek his brother’s permission
- Ex. ABC are joint tenants;
A conveys intervivos to D, B devises to E and dies
- When A conveys to D, would
break unity of title and time, as between D and B/C
- D owns 1/3 interest as
a tenant in common
- B/C continues to own 2/3s
tenancy jointly
- When B dies, then C takes
the whole b/c B can’t devise
- C has a 2/3s interest by
virtue of the right of survivorship
- D and C are now tenants
in common
- Tenancy by the entirety
- Unities – same 4 as for
JT + have to be lawfully married at time of the conveyance
- Recognized in only 22 states
- Conveyance to husband and
wife jointly would be construed as a tenancy by the entirety in these
states but not all
- Property is held - per
tout (by the whole) and non per my (not by the share) – own the whole
– no shares (own as one person)
- Current presumption in
favor of tenancies in common
- If not married, when first
own property would have to convey to a straw and then convey to themselves
after marriage (dummy conveyance)
- Ability to sever – neither
can unilaterally sever conveyance by conveyance to 3rd party,
judicial succession, will, etc.
- Rights and Obligations
of Concurrent Owners
- Partition
- A joint tenant or a tenant
in common may demand partition of the property at any time and for any
reason or for no reason at all
- W/no agreement among the
parties, partition is accomplished by a suit in equity
- Different from partition
in cases of successive owners (e.g. Baker) b/c there are unascertained
parties and more valuation probs. (has to compare valuation in the future)
- Remedies:
- Physical division of the
property
- Sale and division of the
sale proceeds
- There is an automatic right
to partition in kind
- Courts will order partition
in kind unless a party can prove:
- Physical partition is impossible
or extremely impractical
- Physical partition is not
in the best interests of all the parties – both economic and subjective
costs
- Physical partition not
possible in cases where:
- 1 person taking up majority
of land
- Many owners – would need
to divide the land into many small parcels
- Partition by sale most
widely used method of partition
- Often preferable b/c of
valuation probs. with physical partition
- Exceptions:
- Strong personality interests
- Society has strong interest
in preserving use of the property (which cannot be reflected in market
conditions)
- Ex. Delfino (Ct,
1980)
- D and P owned land as plaintiffs
in common (D-31%; P remainder)
- D lived on portion of the
property and operated a garbage hauling business
- P wished to develop the
property into single-family residences and brings an action for partition
by sale – D wanted physical partition
- Court held that it was
not in the best interest of all the parties to have a partition sale
– used Pareto efficiency rather then Calder Hicks efficiency
- Court focuses on D-Home
(personality connection), livelihood, lengthy period of residence
- Crafted a compromise that
protected D’s interest
- Physical partition deemed
practical – only 2 sets of owners, shape of property rectangular,
only 1 dwelling – located on the far side, 2 roads
- Exclusive possession by
one co-owner
- Exclusive possession by
one co-owner presumptively valid b/c each co-owner has a right to possess
all of the property
- No liability for rental
value unless
- The other cotentants have
been ousted – prevented from exercising their equal right to possession
- If tenant in exclusive
possession prevents or bars physical entry by a cotenant
- Denies the cotenant’s
claim to title
- The cotenant in possession
owes a fiduciary duty to the other cotenants
- The cotenant in possession
has agreed to pay rent
- Ex. Spiller
- Tenants in common in warehouse
- Lessee vacates and one
party occupies; dispute over whether they need to pay � of the rent
to the other party
- Court rules that there
was no ouster
- Must have denied attempt
to enter – request to vacate not sufficient
- Putting on locks does not
indicate denial of entry – just safeguarding property
- Options when not satisfied
with co-tenant
- Ex. Swartzbaugh v. Sampson
- D and P are husband and
wife who owned as joint tenants
- Husband leases part of
land to 3rd party (boxing promoter)
- Wife doesn’t consent
and brings an action to cancel the lease
- Holding – joint tenant
can’t cancel the lease, even though she disagreed
- But actions of one joint
tenant do not bind or affect the rights of the other – so she still
retains her � interest in the leased property
- Criteria difficult to determine:
- Not concerns about externalities
b/c there are externalities to a holding of the court either way –
allowing her to cancel the lease or allowing the boxing promoter to
stay despite her wishes
- Autonomy concerns on both
sides
- Not clear that society
would be better off with or without the boxing pavilion
- Her alternatives:
- Partition
- Can bring a physical partition
action against promoter for leased land for the duration of the lease
- Promoter would likely get
the half of the land with the most improvements b/c he’s the improver
(assuming there’s no prejudice to her)
- Partition sale – buyer
would get leased portion of the land for duration of the lease for an
up-front payment
- Would subtract the value
added by the improvements, which would be allocated to promoter
- Remaining portion split
b/w wife and promoter
- Wife could move for a partition
of the land ag. husband
- Would give up right of
survivorship if there was a petition
- If husband is awarded leased
part of the land then promoter would remain
- Ouster
- Wife would need to establish
that she was denied access to the land by promoter
- Might be able to force
him to oust her by being a nuisance
- Wife could then collect
rent from Sampson directly – half of the fair market value for renting
the premises (could argue that current fee is only for husband’s share
and not hers)
- Accounting
- Wife could seek to get
rent directly from husband
- She can only get half of
the rent that he’s receiving
- Waste – could maybe argue
that low rent constituted waste, but he could argue that it is his right.
- Hope for her husband’s
death so his rights are extinguished (along with the lease)
- Options at the offset
- Holding land as tenants
by the entirety – would require consent of both tenants to get a lease
(but CA had abolished)
- Try to get husband to make
an agreement not to alienate
- But would have had to be
careful in wording so not subject to CL suspicion of restrictions on
alienability
- Hold property as community
property – agreement of both parties would have been required
- AP
- Sampson can’t acquire
husband’s interest b/c holding as lessee w/permission
- Unlikely would have been
able to acquire wife’s interests- not easy for co-tenants to claim
that are acquiring title – promoter substituted for husband b/c is
leasing
- Accounting for the costs
of ownership
- Each cotenant liable for
proportionate share of carrying costs, e.g. mortgage payments, taxes,
and maintenance – w/the exceptions below
- Mortgage – principal
and interest – if one cotenant pays more then her proportionate share,
can recover from the others
- Taxes – can recover excess
paid
- Repairs – cotenant has
no obligation to repair property
- Cotenant who voluntarily
repairs the property may not force cotenants to reimburse him for the
repairs
- If under duty to account
for rents, can deduct from rents
- Upon partition, repairing
cotenant is entitled to be reimbursed for the repair costs in excess
of her share
- Improvements
- No duty to improve
- Improving cotenant cannot
recover share of cost of improvements
- Upon partition, cotenant
entitled to recover only the value added by the improvement, not the
cause of the improvement.
PRIVATE LAND USE CONTROLS: COVENANTS
AND SERVITUDES
- Background
- Covenants are private land
use arrangements – area of the law where judiciary has been quite
deferential to private land use arrangements
- Private land use came into
force in mid 19th c.
- Response to emergence of
importance of the home and move to the suburbs – single family subdiv.
In place
- Home very important –
primary financial investment and way of life
- Bargaining among neighbors
can minimize harmful impacts that arise from conflicting land uses –
more likely to be struck if successors in interest will be bound
- Various options available
to protect:
- Zoning – leg. land use
controls that develop in early 20th c.
- Zoning not fully adequate
tool to deal w/incompatible land uses
- Nuisance control
- Outcomes may not always
be in society’s best interest
- Not prevent nuisances from
arising – may want to be more proactive
- Certain uncertainty associated
w/it
- Defeasible fees
- FSD/FSSCS – homeowner
could convey interest subject to proviso that could retain only for
residential uses
- Judicial construction of
defeasible estates – courts reluctant to classify in that way b/c
would lead to forfeiture – so should make them less then a perfect
tool
- Defeasible estate like
the one described – ultimately relying on person w/reversionary interest
to enforce – might not do so and may not be able to transfer reversionary
interest.
- Contracts
- In order to effectively
regulate land uses, need to be able to bind not only those making the
contract but all the successives – but no privity
- Law developed servitudes
– devise that creates an interest that runs w/estate in land (property
right); burdens and benefits run not only to original parties but also
to their successors
- Easements
- Real covenants
- Equitable covenants
- Easement
- Interest in land that’s
in the possession of another
- 2 types
- Affirmative – allows
the holder to go onto the land of the servient landowner and make a
specified use of the land *Most easements
- Servient – land burdened
by easement
- Dominent – one who can
use
- E.g. one neighbor can put
clothesline onto others’ property
- Negative
- Allows one landowner to
forbid another landowner from doing something that could otherwise do
w/their property
- Only 4 types of neg. easements
in English CL:
- Right to keep neighbor
from blocking windows
- Keep neighbor from interfering
w/airflow to your land
- Keep neighbor from removing
supports of your building
- Keep neighbor from interfering
w/flow of water in artificial stream
- Am. cts. not more generous
– may grant neg. easement to protect unspoiled view
- Easements have not made
a sign. contrib. to reg. of land use
- CL has been very stingy
in recognizing neg. easements
- If you wanted to use easements
to reg. land use, cts. would have to be willing to enforce easements
that restricted certain uses, e.g. granting another the right. To keep
landowner from building factor
- Law has been reluctant
to recognize neg. easements that weren’t express
- For easements to be effective,
CL would have needed to recognize easements arising as form of practice
or informal agreement
- E.g. 2 neighbors living
in next to each other for years – 1 decides to build a factory.
Court doesn’t recognize easement to prevent him from building in absence
of a formal agreement.
- Reluctance b/c:
- Concern about lack of notice
– not very easy to discover if you’re a potential purchaser –
might not know it’s bound by an implied neg. easement
- Concern about freezing
land uses in existing forms
- Real Covenant
- Agreement b/w 2 parties
that imposes obligations on the possessor of land to do something or
refrain from doing something
- More than a K b/c binds
successors
- Covenants are enforced
by damages
- Examples
- Affirmative covenant –
Tulk – requirement to maintain garden
- Negative covenant –
Tulk – not to build on the garden
- Requirements for a real
covenant to be enforceable
- Horizontal privity b/w
original covenentor and original covenentee
- Must have been in certain
kind of relationship – varied by jurisdiction
- Vertical privity
- Benefits – b/w estate
of orig. promisee and the successor to the promisee who’s trying to
enforce
- Burdens – b/w estate
of original promisor and estate of the person against whom enforcement
was being sought
- Had to touch and concern
the land – not be personal to individuals
- Bigalow test: Covenant
touches and concerns land if legal interest is affected (increased or
decreased in value). If conventor is rendered less and convenetee
is rendered more.
- 3 situations:
- Covenants that obviously
touch and concern b/c they directly affect the land, e.g. promise not
to use land in a particular way
- Covenants that obviously
don’t touch and concern, e.g. promise by grantee to have weekly pedicures
- Harder cases, e.g. affirmative
covenant to pay money (e.g. Neponsit)
(reluctance to enforce affirmative cov. b/c of req. of court enforcement,
reluctance to impose liability on all successors to orig. interest and
fear of feudalism)
- Res. has suggested getting
rid of this requirement and replacing w/reasonableness test
- B/c the test is not a bright-line
rule, has become a way of policing covenants whose usefulness diminishes
over time
- Reasonableness would force
courts to be more explicit as to why they are enforcing certain covenants
- Ex. Neponsit Property
Owners
- Whether affirmative covenant
binding property owners to pay a fee to homeowner’s assn. satisfies
the touch and concern the land req.
- Finds does touch and concern
land b/c charge is to maintain common areas
- Property owner has easement
on right of use of the common areas in acquiring land – enough of
a link
- Court says homeowners assn.
can still enforce covenant b/c homeowners assn. is agent of original
homeowners
- Covenentor and covenentee
had to have intended to covenant to run w/the land and not be
personal to either of them
- Notice -
Party against whom enforcement was sought had to have notice of the
covenant
- Subject to SoF –
had to be created by written instruments
- Privity
- Horizontal privity
– privity of estate b/w the original covenanting parities
- Depending on jur’n, had
to be certain special relationship b/w original
promisor and promisee
- HP is more of an issue
if attempting to enforce the burden of a covenant on a successor in
interest to the original promisor
Benefit
A
Promissee
D
Burden
B
Promisor
Vertical
Privity
Vertical Privity
Horizontal privity
C
- Ex. Benefit running
- B makes a promise to A
– A sells estate to D and B breaches
- For D to recover damages
form B, needs to establish that the benefit runs from AD
- Would not need to be concerned
about rel. b/w A & B
- Ex. burden running
- B sells to C and C breaches
- A has to prove burden of
B’s promise runs from BC
- Needs to prove horizontal
privity
- Approaches:
- Strictest test – English
CL test
- HP only existed when orig.
promisor/ee were in landlord-tenant rel.
- Mass. Privity – Simultaneous
interest in the land req. (MA/NV)
- Promisor/ee held simultaneous
interests in the same parcel of land (SHE SAID AT MAIN TIME)
- Landlord/tenant rel.
- When one owns FSA and the
other has an easement on land in FS
- Maj. View – Successive
interest in the land req.
- Covenant was made in a
context where another interest in land is being transferred between
the covenentor and the convenentee in addition to the covenant.
- Grantor/grantee rel.
- Ex. Sell land to X and
X promises to use only for res. Purposes
- Discarding HP altogether
– only prevails in minority of jurisdictions
- Examples
- A and B – neighboring
landowners – promise to restrict lots to single-family residential
use and record decision. B sells to C and C builds apartment house.
A sues C.
- A must allege burden runs
to C and that there was horizontal privity b/w A & B
- A & B would not satisfy
tests 1-3
- No damages
- If A builds apartment house,
can C recover
- C has to show benefit runs
from B
C – can be recovery b/c not have to worry about horizontal privity
when it’s the benefit running
- Vertical privity – privity
of estate b/w one of the covenanting parities and a successor in interest
- VP required for both the
benefit and the burden to run
- For burden to run must
be to same estate or estate of equal duration.
- For benefit to run, just
have to succeed to same estate or lesser estate.
- At CL, a covenant only
runs to those who acquire covenentor’s estate or an estate of equal
duration
- If conveys FSD or FSSCS
to B, are in VP b/c considered to be of equal duration – potentially
infinite duration
- If conveys life estate,
no b/c of lesser duration (on burdens side, yes on benefits side –more
lenient)
- If conveys 1/3 of property
does run – physical partition not important
- AP – AP can’t
sue or be sued to enforce a covenant b/c does not acquire an estate
- Proposal by Restatement
- Suggests discarding VP
doctrine entirely and distinguishing b/w negative and aff. covenants
- Negative covenant – promise
not to do something – suggests should be allowed to run (like easements)
- Aff covenant – req. owner
to do something, e.g. pay $$ - burdens and benefits run to persons who
succeed to estates of the same duration as were held by the original
parties (orig. privity req.)
- Both aff. and negative
covenants would bind APers
Covenants run w/estates – property
right. Equitable servitudes run w/land. Property right much
broader then contract right.
Prob. #1 – p. 863
- Equitable Servitudes
- Covenants that b/c of some
violation of rules of covenants can’t be enforced by court of law
– enforced by court of equity
- Allows enforcement of covenants
that are desirable for enforcement of land use, even w/o HP or VP (ex.
if estate of lesser duration)
- Remedy for breach is injunction
- Requirements
- Parties must have intended
promise to run
- Intention is found by looking
at contract or the deed – indicators that intended promise to run
w/the land
- Some courts will imply
from general plan for a common development scheme (reciprocal covenant)
– others, e.g. CA – take written req. more seriously
- Grantor must have intended
to impose a gen. plan of mutually enforceable restrictions – can determine
through number of lots sold w/restriction, advertising materials, oral
representations, neighbors’ actions
- Scheme has to start w/common
owner who owns 2 or more plots of land that are related
- Common owner has to sell
one of the pieces of prop. w/restrictions that benefit the land that
he’s restrained
- Restrictions have to become
mutual – burdening sole and retained pieces of property
- Subsequent purchaser must
have had actual or constructive notice
- Must touch and concern
the land
- Privity
- HP not required
- VP not required for burden
to run
- VP – Benefits
- Most jur’n not require
(so 3rd party to a covenant can sue – like Neponsit
or 3rd party beneficiary – p. 883)
- In some jur’n, person
seeking to enforce must have acquired title from original promisee.
- Sometimes Am. courts use
term neg. easements interchangeably with Equitable Servitudes – b/c
of restrictions on negative easements, came to be enforced by Equitable
Servitudes
- Ex. Tulk v. Moxhay
- Part of Leicester Square
was sold w/covenant to not to build (negative cov), to maintain the
garden (affirmative cov), and allow other tenants to use the garden
in exchange for money (easement in favor of a third party)
- Subsequent purchaser sought
to change use
- Sued by original seller
- Could only sue in a court
of equity b/c of absence of HP (only b/w landlord and tenant in England)
- Would exist under modern
American rule which includes grantor/grantee rel.
- Court upheld injunction
- Would be unfair to purchase
land at a discount b/c of covenants and then not to be bound by them
- Ex. Sanborn v. McLean
- Defendants sought to build
a gas station on their property which was on a residential development
and neighbors sought to enjoin
- Court awarded an injunction
b/c implied negative servitude (reciprocal easement)
- Some lots sold by original
seller w/a residential lot restriction and some not
- Court wanted to protect
reliance interests of other purchasers who bought w/restrictions
- 2 major issues:
- Whether negative servitude
should be implied to every lot in the subdivision – finds that there
is
- Number of the lots sold
w/restrictions (53/91 – is this enough to infer an original plan?)
- Plan existed b/f the defendant’s
predecessors in interest bought their plot
- Whether D is a subsequent
purchaser w/noticecourt rules he did
- Doesn’t have actual notice
b/c no explicit restriction in his deed
- Had constructive/inquiry
notice – enough facts evident that should have altered him to acquire
– subdivision, residential character
- But what would he
have found out if he inquired – just that some of neighbors had restrictions
but nothing about his own property – did he really have notice?
- Scope of Covenants
- Res. �3.1- Servitudes
valid unless illegal or unconstitutional or violate public policy (e.g.
arbitrary, spiteful or capricious, unreasonably burdens a fundamental
constitutional right, unreasonable restraint on alienation, trade or
competition, unconscionable).
- Different ways to evaluate
covenants
- Market implications
- Public policy justifications,
e.g. protecting gifts to charity
- When challenging covenants:
- Can find a way to interpret
differently so no violation
- Can use provisions of Constitution
or FHA
- Principals of construction
of covenant (from Hill v. Community of Damien of Molokai)
- If language is unclear
or ambiguous, restrictive covenant resolved in favor of the free enjoyment
of the property and against restrictions
- Will not read restrictions
on the use and enjoyment of the land by implication
- Must interpret the covenant
reasonably but strictly, so as not to create an illogical, unnatural
or strained construction
- Must give words in the
restrictive covenant their ordinary and intended meaning
- FHA
- Prevents discrim. on the
basis of race, color, religion, sex, familial status or national origin
in sale, rental, representations or advertising
- Prevents discrim. on the
basis of a handicap - interpreted to provide 3 distinct claims
- discriminatory intent –
d/n need to show malice but that there was a desire to act against group
- disparate impact
- a little tenuous from the
plain language of the statute
- focus is on effect on the
victims and not state of mind of the perpetrators
- reasonable accommodations
- need to be willing to bend
policies and practices unless would impose undue hardship or require
fundamental alterations in nature of restrictions
- Ex. Hill v. Community
of Damien of Molokai
- Facts – Neighbors sued
on grounds that group home for people w/AIDS violated covenant restricting
land use to residential purposes
- Considered whether it meets
def. of single family/residential decided that it does
- Provides traditional family
structure, setting and atmosphere – individuals using the home use
as would any disabled family member
- Involvement of the community
does not make group home nonresidential – collateral to the prime
purpose and function of a family housekeeping unit
- Term family in covenant
not defined (ambiguous) and must be resolved in favor of free enjoyment
of property
- Pointed to municipal zoning
ordinance which included as a family any group of not more than 5 unrelated
persons
- Public policy in favor
of including small group homes w/i definition of family- removes barriers
to people w/disabilities as expressed in FHA
- Other jurisdictions have
found that group homes do not violate similar restrictive covenants
- Amount of traffic not relevant
for the covenant
- Even if did violate covenant,
attempt to enforce violates FHA
- Ruled that prohibiting
group homes would result in a disparate impact on disabled individuals
– Comm. Interest in providing housing to disabled individuals o/ws
neighbors interest
- Neighbors required to make
reasonable accommodations – nonenforcement of covenant d/n impose
undue burden
- No direct evidence that
there was discriminatory intent
- Shelley v. Kramer
- Issue: Does judicial
enforcement of racially restrictive covenants amount to state action
that would violate 14th Amendment
- Covenants in Missouri and
Michigan that forbid occupation by blacks – Missouri court divests
of title (further than covenant) and Michigan court forces them out
- Covenants themselves d/n
constitute state action b/c by private individuals
- Court enforcement of discriminatory
covenants are state action that violates 14th American.
- But doesn’t this set
up a broad idea of what constitutes state action? – any private action
could ultimately fall w/i this category and be subject to provisions
of Constitution.
- Judicial enforcement is
supposed to be neutral – just enforcing private agreements
- Court could also have relied
on CL restraint on alienation
- white owners prevented
from selling to A-A
- Right have A-A to participate
in the marketplace have been infringed – significantly reduced # of
potential purchasers
- Courts have been reluctant
to extent holding of case to covenants other then those discriminating
on the basis of race
- Would now not need to use
Constitutional route – can use statutes like FHA and Civil Rights
Act.
- Termination of Covenants
- Grounds
- Public policy
- Changed circumstances:
Conditions have so radically and thoroughly changed w/i the area affected
by a covenant or in the surrounding area that enforcing the covenant
would not bring any real benefits or substantial value to people intending
to enforce
- Abandonment/waiver
- Covenant expiring by its
own terms (e.g. Neponsit – covenant expired in 1940)
- Ex. Changed Circumstances
– No termination. Western Land Co. v. Truskolaski
- Motion to challenge covenant
based on changed circumstances
- Initially subdivision was
outside of city limits and the property was primarily used for residential
and agricultural purposes
- Area had changed – 5-fold
increase in population, increase in traffic, , increased commercial
development
- Court rejected the argument
– even though the property is more valuable for commercial than residential
purposes, not enough to hold that covenant cannot be enforced
- Single-family residential
character of the neighborhood continues and covenant still valuable
to the residents
- Original purpose of the
covenant can be accomplished and benefit will result
- Zoning ordinance cannot
override privately-placed restrictions – when zoning and restrictive
covenants conflict, the more restrictive prevails
- Violations of covenant
that have occurred not consistent enough to constitute abandonment or
waiver
- Arg. that maybe the court
should have awarded damages
- Shopping mall might have
been Calder-Hicks eff.
- Developer might have been
able to pay homeowners off
- Might not have reached
that result b/c of high transaction costs
- Wouldn’t seem fair to
grant homeowners injunction but make them pay b/c they bargained for
and paid for injunction originally
- Ex. Balance of Hardships
o/ws but rejected. Rick v. West
- Covenant in ’46 restricting
land use to single-family homes; attempts to develop have failed b/c
of resistance of D to release the covenant
- P sued – no longer enforceable
b/c of changed conditions
- Court says D entitled to
injunction to uphold the restrictions – protected D’s reliance interest
- P was one who chose to
make the covenant (but should he always be bound)
- Owner is not acting unconscionably
or oppressively – just trying to enforce the covenant to protect her
home
- What if there’s strong
public policy interest in building the hospital?
- Mass. Statute would allow
damages to be awarded in this situation
- Benefits and Limitations
of Using Covenants to Reg. Land Use
- Probs. w/using covenants
to regulate land use
- Covenants freeze land use
and outlive their usefulness
- Complexity
unpredicatabity
- Judicial values may mean
there are idiosyncratic decisions
- Covenants may be under-inforced
b/c of transaction costs in enforcing
- Increase in use of covenants
for residential comm. assns (Common Interest Communities)
- Rely heavily on covenants
as a structuring mechanism
- Homeonwers assn., Condo
assn., Coops – owners must contribute to support of common property
and support the assn simply by buying a home there
- Typically covenant formed
by developers b/f sold, once sold then resp. for enforcing cov. transferred
to Board
- HP and VP privity usually
met (b/c in privity w/developer and subsequent purchaser in privity
w/orig purchasers and requirement that touch and concern land usually
met
- Benefits to joining
- To obtain better quality
facilities
- Belief that’s more secure
- Buying property may be
safer way of protecting investment
- Special services that are
available
- Desire to be w/like-minded
people
- Lack of choices
- Reasons why res. comm.
assns. are better providers of services
- People who join are sub-groups
of pop. who are like-minded – so easier to provide
- Municipalities not created
to provide all services that people want – too broad
- Can obtain services through
private market whereas govt may be unable to privatize or subject to
lobbying (corruption)
- Dangers:
- Certain indiv. may impose
costs on others, e.g. litigious member
- Assn. may impose cost on
non-member
- Res comm. assn. used for
exclusionary purposes, de facto based on income and race
- Members of comm. assn may
be less willing to pay taxes b/c receive services themselves
- Types of disputes
- Cases where member has
been died permission to bring in a pet, e.g.
- Disputes among members
- To what extent should court
intervene in these cases?
- Arg. for deference:
Notice
- But if can overcome by
vote of members, is there a problem?
- Legal remedies
- Contract law
- Remedy based on prevailing
statutes – State, FHA
- Judicial review on reasonableness
grounds
- Constitutional remedy
- Standards for judicial
review of master deed
- Reasonableness test –
in reference to common interest of the development
- burden o/ws the benefit
so as should not be enforced
- Some commentators propose
b/c of belief that association membership is not entirely voluntary
and fear the loss of personal autonomy that results from strong protection
of group autonomy
- Argument that rules promulgated
by the governing board of the condo owners association as opposed to
the rules in the master deed should be subject to a reasonable test
(Hidden Harbor Estates cited in Nahrstedt)
- Ex. Mulligan
- Homeowners assn adopted
covenant restricting registered sex offenders
- Court applied reasonableness
test b/c of public policy concern about most of the state prohibiting
them from living there meaning they are concentrated in the area
- Court expressed uncertainty
about whether Assn’s actions could be considered analogous to govt.
actions b/c of fact that they perform quasi-municipal functions
- Clear presumption of
validity
- Courts will not enforce
when
- Arbitrary - no rational
relationship to the protection , preservation, operation or purpose
of the affected land
- Burdens on land impose
harm so disproportionate to the benefit that the restriction ought not
be enforced.
- Violates public policy
or Constitutional rights
- Sometimes more deference
is given to rules in master deed due to the reliance interest, premium
that might have been paid initially for the covenant and admin. costs
- Encourages the development
of shared ownership housing by attracting buyers who prefer a stable,
planned environment
- Ex. Nahrstedt v. Lakeside
Village Condominium
- Homeowners assn sued to
enforce restriction against keeping animals
- Owners says is reasonable
– cats not make noise and created no nuisance
- Applied presumption of
validity – restriction must be uniform unless the Value of bright
line rules that protect recorded use restrictions – less litigation
and simpler
- Upsets expectations and
disrupts uniformity of enforcement
- Difficult to make and would
increase burden on homeowners assn.
- Homeowners have the right
to repeal pet restriction, so continued existence reflects desire to
retain it.
- Business judgment rule
– applied as standard governing decisions of the Board
- Board protected from any
review provided that acting in good faith – b/c courts lack knowledge
about the issue, will defer to the judgment of the Board
- More limited litigation
protects business decisions from indiscriminate attack
- Arg. that b/c are consensual
regimes, courts should try not to intrude
- Rationality
- Treat like municipal governments
- Conflict
- Want to preserve ability
of people to live in these communities
- Concerns about implications
– do people really have a choice?
Put in outline:
Concurrent ownership/Demsetz – if
have small number of concurrent owners, they can police each other –
there are low monitoring costs and can reduce extent to which they impose
externalities on each other – benefit of going to private property
might be so small (e.g. family)
Tragedy of the commons explanation
for delphino case – Helen imposing costs on delphinos by insisting
on maintaining garbage disposal operation; can also be characterized
differently – vetoing another use of the property (anticommons) –
anticommons associated w/proliferation of property rights, which you
don’t see in this case. Demsetz might have trouble explaining
why anticommons arise but might say that it’s just a transition problem
– only temporary problem – over time these property rights will
be combined. In situation like spiller, demsetz would predict
that you should be moving to private property regime.
Issues discussed:
Why property develops
Estates in land as a case study of
private property
- Different forms of ownership
and some of the probs. that can arise – restraints on alienation that
may be econ. Ineff.
- Laws responses – judicial
and leg. responses to probs. that can arise
- Standardization of forms
of ownership
CONFLICTS BETWEEN NEIGHBORS:
THE COMMON LAW SOLUTION OF NUISANCE
- Allocation of right
- Peguvian – look at in
terms of who was at fault to establish who has the right
- Coasian – look at what’s
the most efficient outcome and how can we allocate that right so as
to encouraging bargaining to achieve it.
- Elements of Nuisance
- Substantial invasion
of use and enjoyment of land
- Unintentional –
negligent, reckless or ultrahazardous OR
- Intentional and unreasonable
under the circumstances
- Intentional – when the
person whose conduct in question as a basis for liability acts for the
purpose of causing it, knows that it is resulting from his conduct or
knows that it is substantially certain to result.
- Most cases we’re studying
are intentional
- Ex. Morgan v. High
Penn Coal
- Oil refinery near residential
area emits gasses and odors for 2 mile radius sickness in ordinary people
- Court decides that nuisances
is intentional b/c of the degree of harm that P suffers
- T/H test
for determining unreasonableness – whether the interference crosses
a threshold that marks the point of liability (substantial harm) (Pegouvian)
- In practice courts tend
to use this test rather than the Restatement test, maybe because of
concerns about morality
- Ex. Morgan
– the court really focuses on harm to P w/o weighing against harm
to D and socially utility of D’s conduct
- Restatement test:
(Coasian)
- Comparing gravity
of harm to P v. social utility of D’s conduct (utilitarian test)
– can get injunction or damages
- Gravity of harm to P
- Extent and character of
harm
- Social value of P’s use
- Suitability to location
in question
- Cost to P of avoiding harm
- Social utility of D’s
conduct
- Social value
- Suitability to location
(can consider local norms and actions of others in the neighborhood)
- Impracticability to prevent/
Abatement costs (least cost avoider issue)
- OR
Serious harm to P and compensating P wouldn’t put D out of business-
implicit in this prong is that can only get compensation or damages
- If P wants damages, 2nd
prong is easier test
- Gives more weight to P’s
interest – if serious harm is reached, then has entitlement to damages
- Forces cost internalization
- Justification for excusing
actor from liability:
- Harm-inflicting activity
generates positive externalities – benefits that the actor cannot
use to compensate but o/w the harm.
- Injured party may be the
lowest cost avoider, e.g. by closing windows
- Attempt to reconcile nuisance
with trespass
- Liability for unintentional
trespass – a physical invasion of land – is treated virtually the
same as unintentional nuisance
- Difference for intentional
trespass and intentional nuisance
- intentional trespass=liability
- intentional nuisance under
prong 1= reasonableness test/amount of harm
- Means that intentional
release of contaminated water onto neighboring land (trespass) would
be treated differently from intentional release of polluting gases (nuisance).
- Probs. with
Utilitarian approach
- Practical
- Institutional competence:
courts may not have the right information and skills to be able to value
the harm to the P and D
- Information demands
– courts may not fully take into the full range of costs of pollution
b/c they do not have full information- that evidence is hard to get
- May undercompensate
– only Ps in court get damages
- Intrinsic
- Moral equivalence - tries
to move from Peguvian to a Coasian perspective - neither are truly at
fault in a moral sense and only looks to relative costs/benefits in
monetary terms
- Payment might be considered
a kind of moral sanction
- Sacrifices interests of
individual rights
- If company gets right to
pollute, they are able to infringe on individuals
- They have to pay damages
but there may be valuation and moral problems
- May not fully value interests
at stake, e.g. personality interest in the property
- Aggregation problem –
trying to add up various problems of different magnitude.
- Ignores distributional
concerns
- Types of Harms that
can be considered
- Fear
- Some courts have found
this to be a sufficient basis for liability, e.g. Arkansas
Release Guidance Found. (halfway house– D liable b/c P had substantial
grounds to feel insecure and property values had gone down.
- Other courts found not
sufficient:
- E.g. Nickolson v. Connecticut
Halfway House – Apprehension about future criminal activity and
mere depreciation of property values do not give rise to nuisance liaibility.
- Adkins v. Thomas Solvent
– negative publicity resulting from unfounded fears due to threat
of groundwater contamination did not constitute sufficient interference
w/use and enjoyment of the land.
- Abnormally Sensitive
- Nuisance law generally
protects ordinary uses not abnormally sensitive ones
- No nuisance
- Ex. Amphitheatres
– court found no nuisance when the operator of a drive-in theater
sued the owner of an amusement park whose bright lights interfered with
the use of the drive-in.
- Can be a nuisance
- Ex. Prah v. Maretti
–property owner’s trees deny sunlight to a neighbor’s solar panel
can be considered a nuisance if gravity of harm to P o/ws
- Critized by Sher v.
Leiderman as unjustified departure.
- Spite
– courts usually find nuisance liability if one neighbor builds a
structure solely to annoy another neighbor
- Ugliness is not
a valid reason for a nuisance
- Other factors that the
courts consider in determining whether nuisance exists:
- Broader social implications
of conduct, e.g. discriminatory impact (although can be considered
in the 1st prong of the test)
- Ex. the Arkansas Release
Guidance Found. Halfway house case – fears may not be the product
of the halfway house itself but of societal stereotypes.
- Coming to the nuisance
- Can credit the fact that
a defendant is there first:
- Person who’s coming to
the nuisance is the least cost avoider – can avoid moving in
- Want to give 1st
person incentive to invest in their property w/o concern for others
coming in
- Not a bright-line rule
b/c want 1st person to have incentive to take some precautions
realizing that another person may come in
- Spur, where developer
comes after the feedlot represented a compromise – the feedlot operator
had to move but was granted damages in recognition that he was there
1st.
- Transaction
costs (Coase) should this be under determining the nuisance or deciding
the remedy?
- Can consider in allocating
rights
- Might not have enough information
about who’s the least cost avoider
- Have sense of transaction
costs that each party might face to bargain,
- Can give right to party
with lower transaction costs of negotiating, e.g. party of 100 v. party
of 1 – give party of 100 the right and then easier for party of 1
to go negotiate (but certain indeterminacy b/c will still face holdout
problem)
- Some nuisances are so small
– do not want to encourage litigation and transaction costs
- Remedies
- Ways of awarding liability
- Property rule protection
– Party has absolute veto over whether it is going to give up the
right or not and the price of that right
- Liability rule protection
– can do what you want if you can afford to pay for it;
- Person with the protection
can be forced to give up that protection if the other party is ready
to pay damages at an amount determined by the court/legislature
- Combination of schemes
where remedy is combined,
- e.g. D has right to pollute
up to Y amount (property right) and after that Y amount P can have right
to be free of more pollution (property right)
- If D wants less pollution
then Y, P can try to buy out D’s right; If P wants more pollution
then Y, D can try to buy out P’s right
- Tradeable pollution
schemes – incentive systems set up by govt.
- Balancing of the Equities
- Weigh damages to D/public
if an injunction is granted and to P if it is not granted (Estancias)
- If injuries to P slight
in comparison to harms to D/P from an injunction, no relief
- Necessity of others may
compel injured party to seek damages instead
- Ex. Estancias –
- Court found that damages
to P from D’s noisy AC system would be $25,000; would cost D at least
$150,000 more to change the system, but granted an injunction
- Determining the nuisance
- Not explicable under Restatement
tests
- under Res. 1st prong, no
nuisance b/c social utility of D’s conduct seems to outweigh harm
to P
- Under second prong of test,
then would be entitled to damages not injunction
- Court applied t/h analysis
: P had personality interest in the property and suffered great harm
- Determining remedies:
- Court looks mainly at damages
to the public if injunction granted (e.g. shortage of apartments) and
decides that there was not a great danger
- Court might have granted
an injunction rather than damages b/c of problem with properly assessing
damages – maybe fair market value not enough b/c of subjective, personality
interests:
- When the case was remanded
to trial court, the court awarded high amount of damages – more then
just fair market value
- Apartment owner was in
fact the lowest cost avoider - once property right given to the neighbor
then was provided with an incentive to abate the nuisance at the lowest
cost, so he moved the system.
- Ex. Boomer –
- Defendant operates a large
cement plant and action brought for injunction and damages by neighboring
land owners alleging injury to property for dirt, smoke and vibration
from the plant.
- Injunction granted unless
defendant pays the plaintiff permanent damages as fixed by the court
- Justification:
- Damage to Ps properties
relatively small in comparison with value of D’s plant and consequences
(jobs) of granting an injunction
- Redress economic harms
of P
- Incentive to do research
to develop improved technologies to minimize the nuisance
- Similar to 2nd
prong of Res. test
- Dissent: licensing
a continuing wrong and saying monetary payment is sufficient, no incentive
to innovate once permanent damages are paid
- Probs. w/decision – Valuation
probs.
- Overvalued costs to D
- Rather than looking at
total costs, should look at relocation costs for the cement plant
- All jobs will not be lost
– some will move somewhere else
- Undervalued costs to P
- Ultimate amount of damages
that cement company pays is much higher
- Court might have looked
way too narrowly; looked only at cost to these particular Ps and not
society as a whole
- Economic Test (Calebresi
and Melamud)
- Advantages and Disadvantages
of property rules and liability rules
- Benefits of property
rules
- Avoid valuation probs.
of liability rules
- Damages might undervalue
– might not fully internalize costs of D’s behavior
- Will bargain to the
efficient outcome (if transaction costs low)
- If use damages, may incorrectly
value P’s damages and the right party might not end up abating the
nuisance
- If award damages, unlikely
that will see negotiations follow b/c following any damage assessment
likely one party will be advantaged and one party disadvantaged and
the advantaged party has not incentive
- Even though P suffering
harm, P might be lowest cost avoider, e.g. maybe cheaper for
Estancias to move their house then for P to move AC
- by giving P damages, foreclose
possibility of negotiating who would be more efficient cost avoider.
- Benefits of damage rules
- Force cost internalization
- Where there’s high
transaction costs, property rules will not likely lead to bargaining
(freerider, holdout probs)– so might be more favorable to impose damages
- Prob.: Damages can
have distributional consequences if undervalue P’s damages (windfall
gain for D) or overvalue P’s damages (windfall for P)
- Factors to consider
- Parties’ respective faults
- Hardship to the parties
in respect to continuance or discontinuance of the nuisance – character
of the activity, context
- Social utility of the activity
- Relative power differential
(should give power to party less likely to be able to initiate the bargain
or buy the other party out)
- Transaction costs
- Information available
Calebresi
and Melamed |
|
Property Rule |
Liability Rule |
Plaintiff |
Rule 1: P gets
the right and D has to stop the nuisance
Morgan, Estancias
|
Rule 2: P gets damages
(court determines) and D continues
Boomer
|
Defendant |
Rule 3: D gets
the right and continues to operate |
Rule 4: D gets
damages and has to stop (compensated injunction)
Spur
|
(switch around numbers)
- Various Rules and their
effects
- No Nuisance: Continue
the activity (property rule) – Entitlement to pollute, make noise
protected
- Certain actions are
trivial – result of living in modern society – annoyance and
petty inconveniences.
- D given a right to continue
actions, even if they interfere with P’s right to the land.
- If P is bothered sufficiently
and has the means, can bargain with D to stop (although this only works
when there are single Ps and not multiple b/c of freeloader problems).
- Nuisance: P Enjoins
D (property rule) – Entitlement to be free of pollution/ noise
protected
- Should be used when D is
in the best position to avoid the risk for the lowest cost or we think
he might be.
- General rule: If
D’s activity causes harm to P (objective or subjective) that is not
insubstantial can grant injunction (seems like there’s a presumption
towards granting unless the equities weigh decidedly for D). Ex.
Morgan, Estancias
- Best used in situations
where damages to P are hard to calculate.
- Can also give time period
for D to cease activity before injunction enforced as an incentive to
develop or acquire new technology, make the injunction narrow (e. g
equipment cannot be run at night) or grant an injunction until D meets
certain conditions (temporary injunction).
- Obstacles to post-injunction
bargaining – may be reason to grant even a few Ps injunction for a
nuisance that effects the whole neighborhood – may be able to sell
out to D but not likely
- If protection of P comes
at a very high price (e.g. shutting down) D then has the option of complying
or bargaining with P.
- Prob: Potentially
high transaction costs and bargaining barriers
b/c there is a lot of room for negotiation – P has upper-hand so would
be able to negotiate until the limits of D’s interests– may means
that it’s impossible to negotiate.
- If there are many potential
Ps, they can all bring injunctions and demand that D pays them (potential
hold out problems).
- Nuisance: D Compensates
P and continues w/activity (liability)
- Can be used even when utility
of the conduct is great and the amount of harm relatively small.
- Damages usually market
value but not always – D places P in the same position (to the
extent that this is possible with money) that she would have enjoyed
if D had not committed the wrong –
- Used when 1) bargaining
problems will interfere with ex poste adjustment, 2) damages
are easy to gauge and 3) multiple Ps.
- Temporary v. Permanent
damages – temporary damages allow the court to make an accurate
assessment of actual harm and can induce innovation but have large administrative
costs. Permanent damages have the converse harm.
- If court is wrong and costs
are high, then will go out of business, which has the same effect.
- Boomer v. Atlantic
Cement.
- Nuisance: Enjoin activity
and P Compensates D – liability
- Situations when:
- P asserts activity more
valuable
- It is not clear either
that:
- Challenged activity is
a nuisance OR
- Equity favors unadorned
injunction
- Unlikely P is able or willing
to acquire use right in open market
- Under certain circumstances,
may lead to distributional/efficiency benefits [ex. Wealthy landowners
able to pay factory that employs the poor to stop polluting – the
land owners get what it’s worth to them or less and the factory can
continue to operate and pay for pollution reducing mechanisms.]
- Problems: Coercion,
enforcement and administrative costs.
- Ex. Spur Industries
v. Del E. Webb. P was a residential developer who came
to the nuisance, a cattle feedlot. Court concluded that developer
(as the newcomer) should bear the cost of relocating the feed-lot. (essentially
entitled to purchase an injunction.]
- Options
- Sc. 1: Low transaction
costs (b/c have relatively small number of parties)
- Property rule b/c
parties can reallocate rights b/c trans. costs are low
- If offer damages, might
not accurately value and wrong party might undertake the prevention
- Factors to consider
when allocating initial assignment of right:
- Distributional:
Give right to party with less bargaining power or more deserving
- Least cost avoider
– ex. If more expensive for P to avoid the nuisance, then give P the
property rt. in order to force D to incur the burden of reducing the
pollution.
- Sc. 2: High transaction
costs and very good information about P’s harm (e.g. loss in property
values, can monetize discomfort) and about D’s prevention costs
(how much it would cost to move or install abatement technology)
- Liability rule b/c
not sure that parties will be able to reallocate if assign property
rts.
- Could also choose property
rules – since have perfect info about P’s harm and D’s costs,
should be able to efficiently allocate property rights at the outset:
can choose b/w Rule 1 and 3 relying on this information
- Factors to take into
account:
- Distributional preference:
Give right to party with less bargaining power or more deserving
- Least cost avoider
– make the party who’s the cheaper cost avoider pay the damages;
if the cheaper cost avoider is faced with the burden of paying damages,
will make the choice b/w paying the damages or abatement – will only
pay the damages if the damages are less then the prevention costs.
- Sc. 3: High transaction
costs but only have good information about either P’s harm or D’s
abatement costs
- Liability rule:
- If have info about P’s
harm, then make D pay damages – will only pay them if more expensive
for D to pay rather then abate
- If have info about D’s
prevention costs, will make P pay – will only pay if cheaper to do
so then to avoid the harm (e.g. move)
- Wouldn’t give property
rule b/c concerned about giving to the wrong person
- Sc. 4: (closest to
real world); High transaction costs and no good information about
either
- Indeterminacy
- Sc. 5: High transaction
costs and poor information about harms to P and about prevention
costs of D but have info that one of the parties has lower transaction
costs at the outset then the other (single party v. group of 1000
parties- easier to initiate the negotiation)
- Property
right to party with higher transaction costs in order to ensure
that party with lower transaction costs would have an incentive to bargain
with the other party if that party was the higher cost abater (if they
were the low cost abater, they would abate).
- Ex. Newspaper article where
there was a situation where utility buys out the town, so should assign
to the town – the utility probably had lower transaction costs and
figured out that it would be cheaper for town to move then for utility
to abate
- Problems w/Nuisance
Law
- In most cases won’t have
good info about transaction costs, prevention costs, P’s harm, difficult
for courts to make these decisions – can lead to windfall.
- In large part, shift to
zoning rather then nuisance to make these determinations b/c leg. seen
as better in acquiring information and making cost-benefit analysis.
THE FIFTH AMENDMENT’S TAKINGS CLAUSE
-
Overview of Takings
- Per se rule that if condemning property and exercise
right of eminent domain, then there is an entitlement to compensation
- Reasons we study takings:
- Illustrate probs. that
arise w/govt. regulation that interferes w/private property
- Institutional competency
issues – when is it the role of the court to step in and overturn
the majority’s will?
- Conflicts b/w majority
and minorities - when should the majority be allowed to sidestep minority?
- Theories behind the takings
clause:
- Rationale for the power
of Eminent Domain
- Incident of state sovereignty
- Land derived from the
state– individual possession by citizens derived from grants from
the state w/implied reservation that state can resume ownership.
- Functional justification
– efficiency (Posner)
- Posner - Govt. needs to
have takings power in order to deal with holdout probs. arising from
large projects (railroad, pipeline) decreases transaction costs so leads to a
more efficient outcome.
- Critique: Posner
– this does not show why eminent domain power is needed in situations
of low transaction costs (post office, school, etc.)
- Certain restraints on
way govt. can operate – may not be able to utilize mechanisms
available to private parties
- Rationale for mandatory
compensation
- Protection of individual
rights
- Guard against redistribution
- Cost internalization
– forces govt. to internalize costs of its actions so only take when
benefits to society as a whole o/w costs to individual actors – way
of preventing govt. from acting arbitrarily
- Prob.:
- May not be necessary b/c
there’s already other mechanisms for holding govt. accountable –
not clear if these work.
- Govts. just pass on the
cost via taxes – effectively diffuse the obligation to pay to a large
number of people.
- Could require govt. to
conduct cost-benefit analysis rather then compensation
- Protecting discrete
and insular minorities – designed to correct a failure in the
political process (Farber)
- Many discrete and insular
minorities will actually be effective in the political process b/c will
be groups with small numbers and high stakes (political choice theory).
- But some groups
won’t be effective in organizing in the political process – mandatory
compensation rule might be designed to ensure that these weaker groups
get compensation just like the more powerful groups.
- Need mandatory rule/uniform
req. to provide certainty so don’t create inequalities
- Enables majority to
overcome certain powerful groups by buying them off (Farber )
- E.g. Creating IFQ scheme
by giving rights to fisherman effectively ensures their cooperation
in the scheme.
- Fairness – designed
to protect individuals against arbitrary action by government (but very
difficult to apply)
- Investment – provide
property owners w/enough security so invest in their property.
- But begs the question as
to why private insurers don’t provide this service
- Farber – private insurance
might not be useful – deterring lobbying against, moral hazard, those
who buy in would be people particularly susceptible to takings
- Is it important to have
a takings clause (e.g. in the “new” Iraq?
- Yes - beneficial to disciplined
govt., need to foster legitimacy, foreign investment
- No – don’t want to
have to pay out to people who acquired property in corrupt ways
- Can address this through
various ways – in determining what is just compensation, through at
truth commission
- Need to be very sensitive
to the material situation on the ground – money to compensate, distribution
of land, strength of judiciary to enforce the law.
- Implications if the
court finds a taking:
- Govt may have to pay damages
for period b/w regulation and when defined as taking
- Can pursue taking and pay
or can attempt to redraft the legislation so as to avoid it being a
taking.
- 1st
Categorical Rule: Permanent physical occupation = taking
(Loretto) 1982
- Permanent physical
occupation authorized by govt. is a per se taking, no matter how minor
- Facts – law that requires
landlords to permit a cable television company to install cable facility
upon his property and provides for payment of token fee ($1)
- Distinguishes from:
- Regulatory taking
“adjusting benefits and burdens of economic life” (balancing test
would be used)
- Ex. navigational servitude
requiring public access to a pool – govt. appropriated right to exclude
(amounted to a taking under balancing test)
- State constitutional requirement
that shopping owners permit individuals to exercise free speech on their
property (not a taking – can still impose restrictions so only temporary
and limited in nature).
- Temporary physical invasion
that would be subject to a balancing test – degree of economic impact,
character of government action, degree of interference w/owner’s physical
investment
- Ex. construction of temporary
dam doesn’t equal a taking
- Examples of permanent physical
occupation:
- Construction of a dam that
permanently flooded D’s property
- Frequent flights immediately
above a landowner’s property
- Justification for establishing
a bright-line rule:
- Intrusive - govt.
effectively destroys right to possess and use the occupied space and
no power to exclude the occupier from possession
- Critique: does this
really have a severe impact?
- Few problems of proof
- avoids difficult line-drawing problems on the question of how much
of a physical invasion constitutes a taking.
- Special injury from invasion
by stranger
- Critique: is there
really a special psychological trauma from having a stranger install
something instead of you? (e.g. mailboxes)
- Constitutional protection
cannot depend on size (this should factor into the compensation question)
- Not affect other aspects
of landlord/tenant relations (e.g. mailboxes, smoke detectors) – b/c
is not physical occupation by 3rd party
- Analogy to takings law
- same restrictions that apply to private actors under trespass law
apply to govt. Any physical invasion is a trespass and assumed
to cause some harm.
- Relation to the reasons
for takings law
- Fairness? – Not necessarily
fair to create an automatic taking for such a small occupation
- Protecting against a loss/insurance?
No guarantee that any permanent physical occupation will
loss.
- Protecting discrete and
insular minorities? Ensures horizontal equity (Farber) but underinclusive
b/c temp. takings could affect these groups as well.
- Cost internalization?
May be true for temp. takings as well.
- Dissent
- Distinction b/w permanent
and temporary too formulistic, e.g. what if cable disappeared as a technology
and is foreseeable?
- Could lead to more litigation
and manipulation
- Should there be a de
minimis test?
- Creating a superprotection
for acts by the govt. – but don’t we have a voice in govt?
- No competition in the provision
of cable – geographic monopoly
- Result on the compensation
question - $1 – undercuts anything achieved as a taking
- but perhaps is important
to label as a taking b/c of cumulative effect
- Could still be a significant
impact
- Regulatory Takings
- Nuisance (Hatacheck
v. Sebastian) 1915 – statute upheld as valid use of police power
as a nuisance
- 2nd
Categorical Rule - State can regulate activity that’s detrimental
to health and safety of the public even if the activity is not a nuisance
per se provided that the state is not acting arbitrarily or engaging
in unjust discrimination.
- Prob.: effectively
says that governments can act to prevent harms w/o their activities
being considered a taking but if they act to confer benefits on the
public, then it’s a taking.
- But anything can be construed
either as a benefit or a harm (Lucas)
- Facts - man using land
for brickmaking in an area that became residential. There is a
much higher value in using the land for brickmaking than anything else.
City passed an ordinance saying he couldn’t do it.
- Nuisance per se
- Activity made illegal by
statute
- e.g. Morgan –
oil refinery – would have been nuisance per se if it was illegal to
emit smoke or odors
- Violating pollution control
statute;
- Abnormal or unduly hazardous
(even if not reg. by statute)
- Justification to regulate
the brickyard:
- Emission of smoke in the
middle of a city environment/emerging residential area
- Conflicting land uses –
wasn’t a nuisance b/f area started to be developed for residential
purposes
- Similar facts to Spur,
where the residential developer had to compensate the feedlot operator.
- Should the government have
been required to compensate hatacheck?
- Seems like it – he suffered
a significant loss – over 80% of the value of the land
- Could argue that town/residents
should have been forced to compensate him – but maybe they would not
have been able to enact ordinance.
- But then maybe it’s not
an efficient ordinance b/c the benefits exceeded the costs.
- Rule would disproportionately
impact poor communities
- Motivations of the developer
in spur were different from hatachek
- Hatachek might encourage
people to take out private insurance for govt. takings
- Balancing Test
- Penn Coal (Holmes)
1922: Statute struck down b/c went too far
- Test:
whether regulation goes too far
(govt. regulation of a use that is not a nuisance works too great a
burden on property owners, it cannot go forth without compensation.
- Diminution in value
– commercial impact
- Whether a particular
estate has been abolished – in this case saw what has been taken
as the entire estate
- Whether an activity
has been rendered commercially impracticable – assumed that the
statute would do this
- Reciprocity of advantage
- look to see whether the property owner who’s burdened by the
regulation is in some sense benefiting from the reg.
- Ex. Plymouth Coal
- reg. that required co. to leave in place some coal – no taking b/c
there was an average reciprocity of advantage b/c statute protected
workers.
- Requiring coal companies
to pay is in their interest b/c have done it in the past so are presumably
getting some benefits in the form of public relations – this is shown
by the fact that they had a practice of repairing or paying compensation
for subsidence brought about by mining (actually challenged Kohler Act
b/c of issue of taxes).
- Not a public nuisance,
even if affected others, b/c damage is not common and public – protection
of public safety could be provided by notice.
- If people’s properties
are collapsing as result of coal mining, could characterize as a public
nuisance.
- Court in Hatacheck
much more deferential in characterizing government’s actions as preventing
a harm.
- Holmes sees act as affecting
a redistribution in the interests of private actors and not the public.
If the surface owners weren’t savvy to acquire the support right,
then the act shouldn’t do so for free. Could also characterize
homeowners in Hatacheck as getting a windfall – in buying into
that area originally, paid less than they would originally; ordinance
is giving them right to be free can be seen as a windfall
- Brandeis dissent characterized
it as an regulation protecting public health and safety (prohibition
of noxious use/prevention of subsidence)
- preventing a public nuisance
in the only way possible
- purpose does not cease
to be public b/c some private persons benefit;
- institutional competency
in determining the best way to address a nuisance – leg. is best.
- 1987 Keystone
case, SC - Penn. took the opposite view. In Keystone, 1966 Penn.
statute forced mining companies to leave 50% in the ground – said
that didn’t constitute a taking.
- Was passed for a public
goal – promote safety, land values, conservation objectives
- Doesn’t grant a private
benefit – applied even if same owner owned the surface right and the
subsurface right
- Facts: govt.
statute was passed that forbid mining in such a way as to cause the
subsidence of any structure used as a human habitation. Owner
brought a suit to forbid Penn Coal from mining under their property
– in the contract, they purchased the surface rights from the coal
company, but the company retains the mineral rights and the support
rights.
- Denominator question/
Conceptual severance
- Need to decide whether
to define narrowly or broadly important under Lucas (need to
define relevant parcel of property to see if find total wipeout) and
Penn Central (to determine diminution in value)
- Spatial/physical terms
– common in takings (land, coal)
- Probs. w/defining in physical
terms: if you use a physical approach and narrowly define physical
parcel, in most cases will find that a taking had occurred.
- consistency b/w how define
for regulatory taking and for regular taking may be justifiable reason
for defining narrowly
- e.g. if govt. took 10 feet
of a 50 feet property for a condemnation proceeding, then would be compensated;
- but
if govt. imposed a set-back requirement saying that you couldn’t use
the first 10 feet of your property – if defined broadly then no compensation
– so might seem unfair.
- Concern about encouraging
people to buy land in very small pieces as a sort of insurance against
takings
could lead to tragedy of the anti-commons
- Temporal (present
and future interests)
- Bundle of rights terms
(air space-dissent in Penn Central)
- Functional dimension
(separate based on different uses)
- Finite individual rights
like Hatacheck (also could have talked about right to build in
the airspace contrasted w/right to pollute that airspace)
- Rules developed by lower
courts and state courts for defining what the relevant parcel of land
is: (very broad def)
- State courts general reject
– consider the impact of a land use regulation on the value of a property
owner’s entire parcel, as opposed to its impact on just the regulated
part
- Possible approaches:
- All contiguous land
- Look at how the owner has
treated these different pieces of property – if treated as one parcel,
then might treat as so;
- Dates of acquisition of
different pieces of property;
- Extent to which protected
lands enhance the value of the surrounding lands – if certain lands
are protected by regulation and are enhancing the valued of surrounding
lands, may warrant treating as one parcel.
- Hatacheck –
broad definition - defines as right to make the bricks and take
the clay – ordinance bans the former but leaves the latter
- Penn Coal (Holmes majority):
Narrow- Defines starting right as support estate, so saw that the
entire estate had been taken away.
- Penn Coal (Brandeis
dissent): Broad- Defines the starting right as the entire
property (all 3 estates), so the value of the coal kept in place is
negligible.
- Keystone:
Defined broadly –total property was total amount of coal owned
by the companies, so the amount that they weren’t able to mine was
small.
- Penn Central (Brennan
majority): Broader
definition – suggests that relevant property for determining whether
there’s been diminution in value is entire city tax block designated
as the landmark site.
- Could also have defined
it as the block of the 8 other buildings where the owners could have
transferred the transferable development rights.
- Penn Central (Rhenquist
dissent): Narrow -
Defines air rights as a stand-alone property interest that have been
taken away
- Palazollo - Basically
affirming broad definition of the property in question in this
case but can’t attribute much weight b/c of procedural history.
Sidesteps the denominator question b/c Palazollo didn’t ague until
he came to SC. Court affirms RI Supreme Court ruling that can’t
take advantage of categorical rule b/c there’s not total wipeout.
- Tahoe Sierra –Defines
broadly. Should look at the whole property. When you
define the relative parcel of property in temporal terms, then a slice
of time can’t constitute a total wipeout
- Penn Central
(Brennan - 1978): Reg. upheld under balancing test
- Company wanted to construct
office building, but Penn Central constituted a historic landmark.
Proposal denied b/c was contrary to preserving the landmark
- Test:
- Harm to private economic
interest
- Diminution in value
that warrants compensation
- Extent to which interferes
w/distinct investment-backed expectations
- History - expectations
of owners when they purchased – historical understandings and investment
are relevant.
- Reasonableness test-
Could look to what other similarly-situated owners might expect rather
than focusing on one owner’s subjective beliefs
- Quantifiable
indicators – Whether the owner who’s challenging the reg. has
already made an investment that reg. will frustrate, as opposed to regulations
limiting possible future activities.
- In Penn Central, Penn Central
and UGP had invested in development of office towers – 2 plans, going
to commission. But the timing is relevant – they invested in
the plans after the regulation had been passed.
- Prob.: people might
acquire property w/o paying for it, e.g. by will or gift, and then govt.
came along and regulated it. Could point to current understandings
of what other owners are doing and historical – what prior owner had
invested.
- Some courts read
investment-backed expectations out of taking law by holding expectations
are frustrated only when a land-use regulation denies all economically
viable use of the land
- Brennan suggest that investment-backed
expectations aren’t thwarted b/c the primary use not thwarted
- Can still earn reasonable
rate of return, potential for building some other building that’s
not so big
- Is implying that only present
uses are protected – is that true? (e.g. Palazolo)
- Character of government
action/Public Benefit – taking more likely to be found when the
interference w/property can be characterized as a physical invasion
than when it’s just about adjusting the benefits and burdens
of economic life to improve the common good.
- Greater likelihood that
a physical invasion is going to single out individual landowners –
justifies greater review b/c of concern that acting arbitrarily.
- Govt. would not be able
to function if could not affect property values w/its laws.
- Ex. adjusting the benefits
and burdens – tax adjustments unlikely to be considered takings –
but could imagine a situation where a govt. imposed a 100% tax on
a particular company’s assets – could be challenged as a taking.
- Accepting P’s argument
would invalidate all comparable landmark legislation in the US
- Allows weighing on a spectrum
– closer to exercise of eminent domain (taking) or closer to police
power (no taking)
- Dissent – Rhenquist finds
there’s no nuisance like in Hatacheck and no reciprocity of
advantage as discussed in Penn Coal.
- Multi-million dollar losses
imposed on very small group of building owners for benefit of all of
NY
- No sign. benefit. (although
could argue that they gained something from being designated as a landmark,
e.g. tourist traffic/shopping or that they benefit based on having happier
employees enjoying all the landmarks).
- Creation of an affirmative
duty to maintain the landmark.
- Transferable Development
Rights
- Discussion of whether the
existence of TDRs offsets the taking
- TDRs in the takings
analysis (Majority)– fact that TDR is given helps to reduce the
impact that they receive as part of the designation of their property
as a landmark
- TDRs in the compensation
analysis
- Dissent/ Scalia? 1173 –
SAID THAT TDRS SHOULDN’T COUNT FOR PURPOSES OF TAKINGS ANALYSIS BUT
ONLY ON COMPENSATION ANALYSIS – ONLY IN CONCURRING OPINION.
CONSISTANT W/RHENQUIST IN PENN CENTRAL.
- If TDRs are considered
in the takings analysis, then might be allowing govt. to acquire property
w/o fully compensating private owners. Just b/c are able to transfer
the right, doesn’t mean that it will have the same value on another
piece of property. Cities may have an incentive to low-zone in
order to give TDRs some value. As in Penn Central, when used in
taking analysis, did so w/o having fixed value – may not have actually
been equal to the diminution w/o the TDRs. Would be able to acquire
property on the cheap w/o fully internalizing costs.
- If did allow TDRs to be
considered in the analysis of whether a taking had occurred, you could
potentially open the doors to consider tax abatements or payments of
partial compensation in the takings analysis.
- Depends on the baseline
– if define baseline as property designated as a landmark plus all
the property that the TDRs are going to be used, then should be in takings
analysis; if think that’s artificial, then should be used in compensation
analysis.
- Total Takings
Lucas (Scalia- 1992):
- Third Categorical
Rule: If you’re deprived of all economically beneficial
use of your land, it’s a per se taking,
except if regulations codify background regs. of
state property law and nuisance law.
- Justifications:
- Total deprivation of all
value is the equivalent of a physical appropriation
- Regulations that cause
total deprivation carry out the risk that property is being pressed
into public service under guise of mitigating serious harm.
- W/total wipeout, regulation
less likely to secure an average reciprocity of advantage
- Not overburdensome on govt.
- will be few total wipeouts
- Problem:
- Rule is under-inclusive
b/c partial wipeouts may be singling out individuals
- Over-inclusive b/c not
all total wipeouts are signaling out one individual.
- Ability to recover for
a govt. deprivation of all economically beneficial use of property is
not absolute but is confined by limitations on the use of land which
inhere in the title itself.
- Nuisance Exception
- Defines nuisance as what
CL courts would determine.
- Skeptical of Hatacheck
line of cases where courts upheld regulations that were regulating harmful
or noxious uses too subjective. Any creative person can restate
as preventing a harm rather than conferring a benefit. (Raises questions
about how these type of cases will be treated in the future).
- Kennedy in Palazollo
seems to open the door to suggesting that might count legislative determinations
as background principles of state nuisance law in certain situations,
although it does not become a background principal by enactment itself.
- Prob.: Nuisance
exception isn’t any less subjective. There’s a lack of clarity/analytical
frameworks in nuisance law – usually a t/h test is followed.
- Test for
“total taking” inquiry:
- Degree of harm to public
lands and resources or adjacent private property to owner’s use
- Social value of the claimant’s
activities and their suitability to the locality in question
- The relative ease with
which the alleged harm can be avoided through measures taken by the
claimant and the govt (or adjacent landowners)
- Facts - SC passed a law in 1977 to manage its
coastal zone – required owners of coastal land in critical areas to
obtain a permit before using the land in any other way then the land
was being used in 1977. P bought 2 plots in 1986 intending to
build homes – not considered critical – legislation in 1988 which
prohibiting building habitable structures – made prop valueless.
- Skeptical of legislation
determination and whether they are able to check themselves.
- Prob.: Courts don’t
seem any more equipped to define:
- May freeze the law rather
than allowing legislatures to adapt to environmental probs. as they
go
- May increase the costs
of going to the courts in getting a remedy.
- Courts also may be subject
to capture – state court judges are elected
- Real v. personal property
- Argues that personal property
has been subject to more background restrictions on personal property,
so if took away all economic use of personal property might not constitute
taking.
- Problem:
- Seems like real property
has been heavily regulated – not very much support for this proposition.
- Implicitly saying that
land is distinct and there’s very strong reasons to limit extent to
which government can regulate land as opposed to personal property
- Dissent (Blackmun)
- Doesn’t agree on the
facts on whether there is a total taking
- Whether there has been
a deprivation of all economically valuable use cannot be determined
objectively – depends on how property is defined
- Court has repeatedly found
that can regulate property even if has an adverse impact on the owner-
depended on strength of government interest, not whether there was a
residual individual use
- Dissent
(Stevens)
- Institutional competency
– should defer to the legislature’s judgment
- No development doesn’t
mean land doesn’t have value - can still swim, picnic, camp (were
these really values?)
- Will make land-use and
env. regulation more difficult
- Notice not necessary
at time that you acquire property
(Palazzolo)
- P owned 3 waterfront
parcels of land. Purchased as company, tried to develop and proposals
rejected, subsequently legislator enacted legislation creating a regulatory
agency. Agency designated land as protected. Then, the corporate
charter was revoked and land passed to P. Further development
proposals rejected.
- Issue: does the fact
that he acquired prop. after the regulations had been introduced bar
him from asserting a Lucas claim on background principals of
state law and bar him from asserting Penn Central claim b/c no
investment-backed expectations?
- Majority (Kennedy) said
that acquiring w/notice not an automatic bar to a takings claim under
Lucas or Penn Central, although a court may consider.
- Justification for automatic
bar - helps avoid a situation where people benefit from windfalls
- Sharp real estate developer
acquires at low price, challenges as unconst., and then sells at high
price.
- May be more efficient if
you are not concerned about distribution of gains.
- Reasons why
it shouldn’t be an automatic bar:
- Discourages transfer
of property
- Incomplete internalization
by govt. – only people
who owned the property once the property was enacted could pursue their
claim.
- Creates unfairness among
owners - younger owners who can hold out longer would be able to pursue
takings claims while older owners and their successors and heirs disadvantaged.
- Does not address implications
for Penn Central claim – if court can consider, then might
be part of investment-backed expectations.
- O’Conner in concurrence
says that can consider for purposes of determining investment-backed
expectations
- Scalia in concurrence says
you can’t.
- Considerations for determining
when notice should be relevant to takings inquiry:
- Manner of acquiring property
– if acquire by operation of law (inheritance through laws of intestate
succession) wouldn’t want fact that had notice that acquiring property
to bar a claim.
- Purposes of investment
in the land and whether could have contemplated the regulation
- Temporary moratorium
does not constitute total wipeout
(Tahoe Sierra)
- Whether a moratorium
on development imposed during the process of devising a comprehensive
land-use plan constitutes a per se taking of property requiring
compensation under the rule set
out in Lucas.
- Court emphasized
the importance of a Penn Central
balancing test determination rather than a per se
rule in the majority of regulatory takings cases. B/c most regulations
impact property values in some tangential way, treating them all as
per se takings would make govt. regulation prohibitively expensive.
- Lucas was
limited to extraordinary circumstances when no productive or economically
beneficial use of land is permitted
- Ps seek conceptual
severance for the duration of the regulation – however, Penn Central
says should look at the parcel as a whole; otherwise, every delay or
moratorium would amount to a total ban.
- If imposed time
restrictions on govt. regulations/moratoria for planning, could force
officials to rush through planning processes, get rid of consultative
processes or fail to undertake them. – some reciprocity of advantage
b/c landowners benefit from being included in the planning process.
- Dissent (Rehnquist)
Emphasizes time frame as 6 years – not 32 months
- Distinction b/w
temporary and permanent taking tenuous – govt. regulation can always
be changed
- Similar to a leasehold
by the govt. which would require compensation
- Exactions –ceilings
on what municipal governments can exact from developers – major issue
in land use law
- local government measures
that require developers to provide certain goods or services or pay
fees
- municipality may attempt
to exact certain promises, land or fees from developer
- initially exactions were
policed in state courts – Supreme Court got involved b/c cannot have
effective protection on regulatory takings w/o exactions – if municipality
can enact such a high price from a developer then can effectively forbid
development – so could do indirectly what could not be done indirectly.