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Property Outline

I. ACQUISITION............................................................................................................................................................................................6 A. INTRODUCTION.............................................................................................................................................................................................6 B. ACQUISITION BY DISCOVERY.........................................................................................................................................................................8 C. ACQUISITION BY CAPTURE..........................................................................................................................................................................11 1. General Rule......................................................................................................................................................................................11 2. Role of Custom...................................................................................................................................................................................13 3. Competition........................................................................................................................................................................................14 D. ACQUISITION BY CREATION?.......................................................................................................................................................................16 E. PROPERTY IN ONES PERSON?......................................................................................................................................................................16 F. ACQUISITION BY FIND.................................................................................................................................................................................16 1. Abandoned Property, Generally........................................................................................................................................................16 2. Lost and Mislaid Property, Generally...............................................................................................................................................16
1. 2. 3. 4. Rights of Finders against Original Owners......................................................................................................................................................16 Rights of Finders against 3rd Persons..............................................................................................................................................................17 Prior Finders....................................................................................................................................................................................................18 Rights of Finders against Landowners.............................................................................................................................................................19 a. Trespassing Finders.....................................................................................................................................................................................19 b. Employee Finders.......................................................................................................................................................................................19 c. Invitee Finders............................................................................................................................................................................................20 d. Embedded Objects and Treasure Trove.......................................................................................................................................................20 e. Private Homes.............................................................................................................................................................................................21 f. Public Places................................................................................................................................................................................................23

3. Equitable Division: A Modern Compromise.....................................................................................................................................25 G. ADVERSE POSSESSION ................................................................................................................................................................................26 1. Rationales for AP...............................................................................................................................................................................28 2. Elements of AP...................................................................................................................................................................................28
i. Actual Entry.....................................................................................................................................................................................................29 ii. Exclusive Possession.......................................................................................................................................................................................30 5. Open and Notorious........................................................................................................................................................................................30 6. Adverse or Hostile & Under a Claim of Right.................................................................................................................................................31 7. Continuous Possession....................................................................................................................................................................................34 8. For the Statutory Period..................................................................................................................................................................................35 9. Payment of Taxes............................................................................................................................................................................................35

3. Extent of the Property Acquired by AP..............................................................................................................................................35 4. Issues (Statutory and otherwise Tacking, Tolling, etc)..................................................................................................................36
i. Tacking............................................................................................................................................................................................................36 10. Ouster............................................................................................................................................................................................................37 11. Tolling: starting the SoL later........................................................................................................................................................................37 12. AP against the gov........................................................................................................................................................................................37 13. AP by Tenants and Co-Owners.....................................................................................................................................................................38 14. Lienholders and Future Interest Owners........................................................................................................................................................38

5. AP of Chattels....................................................................................................................................................................................38 6. Alternatives to AP in Boundary Disputes..........................................................................................................................................40 7. Accession...........................................................................................................................................................................................40 H. ACQUISITION BY GIFT (PERSONAL PROPERTY)...............................................................................................................................................41 1. Intent..................................................................................................................................................................................................41 2. Delivery..............................................................................................................................................................................................42
i. Rationale..........................................................................................................................................................................................................42 1. Delivery re: Intent...........................................................................................................................................................................................43 2. Delivery by Deed............................................................................................................................................................................................43 3. Symbolic Delivery..........................................................................................................................................................................................43 4. Constructive Delivery.....................................................................................................................................................................................43 5. Special Problems.............................................................................................................................................................................................44

3. Acceptance.........................................................................................................................................................................................45 II. POSSESSORY ESTATES (OWNERSHIP INTERESTS)..................................................................................................................45

A. HISTORY - ORIGINS & TAXONOMY OF FREEHOLD ESTATES..............................................................................................................................47 1. Estates (generally).............................................................................................................................................................................47 2. Feudal Tenures..................................................................................................................................................................................48 B. FEE SIMPLE...............................................................................................................................................................................................48 1. Creation of Fee Simple Absolute.......................................................................................................................................................48 2. Alienability, Devisability, and Inheritance........................................................................................................................................49 C. FEE TAIL (FEE SIMPLE CONDITIONAL)............................................................................................................................................................50 1. Origin & Operation of the Fee Tail...................................................................................................................................................50 2. Elimination of the Fee Tail................................................................................................................................................................50
i. Fee Tail and Disentailing Conveyance.............................................................................................................................................................50 i. Statutory conversion to Fee Simple Absolute...................................................................................................................................................51 1. Statutory conversion to Fee Simple Subject to Executory Limitation..............................................................................................................51 2. Life Estate and Remainder in life tenants issue..............................................................................................................................................51 3. Fee Simple Conditional created.......................................................................................................................................................................52

D. LIFE ESTATES............................................................................................................................................................................................52 1. Nature of a Life Estate.......................................................................................................................................................................52


i. Life estate pur autre vie................................................................................................................................................................................53 4. Defeasible life estates......................................................................................................................................................................................53 5. Life estates in a group or class of people.........................................................................................................................................................54 6. Ambiguous grants...........................................................................................................................................................................................54 7. Valuation of Life Estate and Remainder..........................................................................................................................................................54

2. Modern Life Estate............................................................................................................................................................................54 3. Waste..................................................................................................................................................................................................55 E. RESTRAINTS ON ALIENATION OF FREEHOLD ESTATES.......................................................................................................................................56 F. DEFEASIBLE ESTATES..................................................................................................................................................................................57 1. Fee Simple Determinable..................................................................................................................................................................57 2. Fee Simple Subject to Condition Subsequent....................................................................................................................................57 3. ?.........................................................................................................................................................................................................57 G. FUTURE INTERESTS (MOVE TO HEADING 1? MAYBE?)......................................................................................................................................58 1. Happy Chart of Future Interests........................................................................................................................................................58 2. The Interests Themselves (side note: i want to die right now)..........................................................................................................59 H. THE RULE AGAINST PERPETUITIES................................................................................................................................................................60 III. PROPERTY RIGHTS............................................................................................................................................................................61 A. THE RIGHT TO EXCLUDE.............................................................................................................................................................................61 B. THE RIGHT TO DESTROY.............................................................................................................................................................................64 C. THE RIGHT TO SELL/TRANSFER....................................................................................................................................................................65 D. THE RIGHT TO BUY....................................................................................................................................................................................67 IV. MANAGING COMMON AND DISPUTED RESOURCES...............................................................................................................70 A. THE COMMONS (AND ITS RESPECTIVE TRAGEDIES)...........................................................................................................................................70 B. THE PUBLIC TRUST DOCTRINE.....................................................................................................................................................................72 C. COASE THEOREM & BEHAVIORAL K.............................................................................................................................................................74 D. SOCIAL NORMS & INSTITUTIONS (AND MAYBE SOCIAL CAPITAL)......................................................................................................................75 1. Norms of Neighborliness...................................................................................................................................................................76 2. Norms v. Law.....................................................................................................................................................................................77 3. Norms at Law Firms..........................................................................................................................................................................78 E. TRESPASS, PROPERTY RULES & LIABILITY RULES, AND THE EX-ANTE/EX-POST PROBLEM..................................................................................80 1. Encroachments & Trespass...............................................................................................................................................................80 2. Property Rules & Liability Rules.......................................................................................................................................................82 3. Ex-Ante / Ex-Post Problem................................................................................................................................................................84 F. NUISANCE LAW..........................................................................................................................................................................................85 1. Elements of Private Nuisance............................................................................................................................................................86
i. Intentional Interference.................................................................................................................................................................................87 8. Unreasonable Interference...........................................................................................................................................................................87 9. Substantial Interference...............................................................................................................................................................................89 10. Interference w/ Use & Enjoyment of Land...............................................................................................................................................89

2. Remedies............................................................................................................................................................................................90
i. Injunction: grants the entitlement to the , enjoins ........................................................................................................................................90 11. Damages to : where an injunction is too costly............................................................................................................................................92 12. Enjoin and give damages to go away (preexisting use)...........................................................................................................................92

G. MARKET-BASED SYSTEMS FOR POLLUTION CONTROL......................................................................................................................................94

V. CONCURRENT OWNERSHIP & MARITAL INTERESTS..............................................................................................................95 A. CONCURRENT OWNERSHIP...........................................................................................................................................................................95 1. Types of Concurrent Estates..............................................................................................................................................................95
i. Tenancy in Common........................................................................................................................................................................................95 i. Joint Tenancy...................................................................................................................................................................................................96 a) Severance of Joint Tenancy........................................................................................................................................................................98 i. Tenancy by the Entirety...................................................................................................................................................................................98 13. Presumptions.................................................................................................................................................................................................99 14. Avoidance of Probate..................................................................................................................................................................................100 15. Unequal Shares............................................................................................................................................................................................100

2. Inefficiency of Co-Ownership & Partition......................................................................................................................................100 3. Relations Among Co-Tenants!.........................................................................................................................................................101 B. MARITAL PROPERTY & DIVORCE................................................................................................................................................................101 1. Traditional Common Law System....................................................................................................................................................101 2. Modern Common Law System.........................................................................................................................................................102 3. Rights of Creditors...........................................................................................................................................................................103 4. Termination of Marriage by Divorce..............................................................................................................................................106 C. LANDLORD-TENANT LAW..........................................................................................................................................................................107 1. The Leasehold Estates.....................................................................................................................................................................107
i. Term of Years Tenancy (ToY).......................................................................................................................................................................108 16. Periodic Tenancy (PT).................................................................................................................................................................................109 17. Tenancy at Will (TaW)................................................................................................................................................................................109 18. Tenancy at Sufferance: Holdovers...............................................................................................................................................................110

2. Holdovers.........................................................................................................................................................................................110 3. The Lease.........................................................................................................................................................................................112 4. Selection of Tenants (Herein of Unlawful Discrimination).............................................................................................................113 5. LLs Duty to Deliver Possession .....................................................................................................................................................115 6. Remedies When T Defaults: Self-Help Eviction.............................................................................................................................116 7. LLs Duties to the T: Implied Warranty of Habitability.................................................................................................................117 8. Tenants Remedies...........................................................................................................................................................................118 D. MORTGAGES............................................................................................................................................................................................118 1. What is a Mortgage?.......................................................................................................................................................................119 2. Evolution of the Mortgage...............................................................................................................................................................120 3. Creation of a Mortgage...................................................................................................................................................................121 4. Foreclosure of Mortgage.................................................................................................................................................................122 5. Special Mortgagor Protection Laws................................................................................................................................................124 6. Other Financing Devices.................................................................................................................................................................124 VI. RELATIONS AMONG NEIGHBORS: SERVITUDES & ZONING..............................................................................................125 A. EASEMENTS.............................................................................................................................................................................................125 1. Classification of Easements & Terminology...................................................................................................................................126
i. Defining the Easement...................................................................................................................................................................................126 1. Affirmative or Negative?...............................................................................................................................................................................127 2. Easement Appurtenant or In Gross?..............................................................................................................................................................127

2. Express Easements...........................................................................................................................................................................128
i. Nature of Express Easements.........................................................................................................................................................................128 i. Creation of Express Easements......................................................................................................................................................................128 ii. Policy Rationale for Express Easements.......................................................................................................................................................129

3. Implied Easements from Prior Existing Use...................................................................................................................................129


i. Nature of Easements Implied from Prior Existing Use...................................................................................................................................129 ii. Creation of Easements Implied from Prior Existing Use...............................................................................................................................130 iii. Policy Rationale of Easements Implied from Prior Existing Use.................................................................................................................131

4. Easements by Necessity...................................................................................................................................................................132
i. Nature of Easement........................................................................................................................................................................................132 ii. Creation of Easement....................................................................................................................................................................................132 iii. Policy Rationale...........................................................................................................................................................................................134

5. Easements by Prescription..............................................................................................................................................................134
i. Nature of Prescriptive Easement....................................................................................................................................................................134 ii. Creation of Prescriptive Easement................................................................................................................................................................134 iii. Policy Rationale of Prescriptive Easements.................................................................................................................................................136

6. Scope of Easements..........................................................................................................................................................................136
i. Location or Dimensions of easement.............................................................................................................................................................136 3. Manner, Frequency, and Intensity of use of easement...................................................................................................................................136 4. No Benefit to Nondominant Property Allowed.............................................................................................................................................137

5. Improvements, Maintenance, and Repair .....................................................................................................................................................137

B. COVENANTS & EQUITABLE SERVITUDES......................................................................................................................................................138 1. Real Covenants: Enforceable at Law..............................................................................................................................................140


i. Original Promisee v. Promisors Successor: Does the BURDEN run?...........................................................................................................140 1. Promisees Successor v. Original Promisor: Does the BENEFIT run?..........................................................................................................144 2. Promisees Successor v. Promisors Successor: Does the BURDEN AND BENEFIT run?..........................................................................144 3. Validity & Enforcement of Real Covenants..................................................................................................................................................145 4. Scope of Real Covenants...............................................................................................................................................................................147 5. Termination of Real Covenants.....................................................................................................................................................................147

2. Equitable Servitudes: Enforceable in Equity...................................................................................................................................147


i. Original Promisee v. Promisors Successor: Does the BURDEN run? (es)....................................................................................................148 1. Promisors Successor v. Original Promisor: Does the BENEFIT run? (es)...................................................................................................148 2. Promisees Successor v. Promisors Successor: Does the BURDEN AND BENEFIT run? (es)...................................................................149 3. The Subdivision Problem in Equitable Servitudes.........................................................................................................................................149 4. Scope of Equitable Servitudes.......................................................................................................................................................................149 5. Termination of Equitable Servitudes.............................................................................................................................................................149

C. COMMON INTEREST COMMUNITIES..............................................................................................................................................................151 D. ZONING...................................................................................................................................................................................................154 1. Zoning basics...................................................................................................................................................................................154 2. Constitutional Validity.....................................................................................................................................................................154 3. Zoning & Aesthetics.........................................................................................................................................................................156 4. Exclusionary Zoning........................................................................................................................................................................158 VII. TAKINGS.............................................................................................................................................................................................160 A. EMINENT DOMAIN....................................................................................................................................................................................161 1. Takings Clause of the Fifth Amendment: Nor shall private property be taken for public use, without just compensation.......161
i. Nor Shall Private Property......................................................................................................................................................................161 16. Be Taken..........................................................................................................................................................................................162 17. For Public Use.................................................................................................................................................................................162 18. Without Just Compensation.................................................................................................................................................................164

2. Eminent Domain Procedure............................................................................................................................................................164 3. Takings Rules...................................................................................................................................................................................164 4. Conceptual Severance Rule List......................................................................................................................................................165 B. CATEGORICAL (PER SE) TAKINGS...............................................................................................................................................................166 1. Permanent Physical Occupations: Loretto......................................................................................................................................166 2. No Economically Beneficial/Productive Use: Lucas......................................................................................................................168 3. Nuisance or Noxious Use Exception: Hadacheck..................................................................................................................171 C. REGULATORY TAKINGS..............................................................................................................................................................................172 1. Past: The Pennsylvania Coal Goes Too Far Test.......................................................................................................................172 2. Present: The Penn Central Balancing Test.....................................................................................................................................174 3. Conceptual Severance.....................................................................................................................................................................176
i. Vertical Severance.........................................................................................................................................................................................177 ii. Horizontal Severance....................................................................................................................................................................................178 iii. Temporal Severance.....................................................................................................................................................................................179

D. CHATTELS: NIXON....................................................................................................................................................................................180 VIII. INTELLECTUAL PROPERTY.......................................................................................................................................................181 A. TRANSITIONING TO INTELLECTUAL PROPERTY...............................................................................................................................................181 B. PATENTS.................................................................................................................................................................................................181 1. Patent Prosecution...........................................................................................................................................................................182 2. Patent Requirements........................................................................................................................................................................182
i. Patentable Subject Matter...............................................................................................................................................................................182 1. Utility............................................................................................................................................................................................................184 2. Novelty/Prior Knowledge..............................................................................................................................................................................185 3. Non-obviousness...........................................................................................................................................................................................185

3. Rights of Patentee............................................................................................................................................................................186 4. Infringement.....................................................................................................................................................................................186 C. COPYRIGHT..............................................................................................................................................................................................187 1. History of Copyright Protection......................................................................................................................................................188 2. Purpose & Philosophies..................................................................................................................................................................189 3. Elements of Copyright.....................................................................................................................................................................189
i. Copyrightable Subject Matter.........................................................................................................................................................................189 1. Threshold for Protection................................................................................................................................................................................191 a) Original Works of Authorship...................................................................................................................................................................191

b. Fixation in a Tangible Medium of Expression..........................................................................................................................................194 2. Formalities....................................................................................................................................................................................................194 3. Authorship & Ownership..............................................................................................................................................................................195 4. Duration of Copyright & Term Extension.....................................................................................................................................................195

4. Rights of Copyright Owners............................................................................................................................................................196


i. Against copying or unlawful appropriation....................................................................................................................................................197 1. Against contributory infringement................................................................................................................................................................199

5. Contrasts w/ Patent Law..................................................................................................................................................................200 6. Fair Use Doctrine, baby..................................................................................................................................................................201

I.

ACQUISITION
A. INTRODUCTION
Property = Rights among people that concern things; a package of legally-recognized rights held by 1 person in relationship to others with respect to some thing or object Courts tend to break property into 3 core elements: right to exclusive possession, right to exclusively use, and right to dispose/transfer. Note: possession can mean two thingsa physical act or a legal conclusion. Be precise. o Bundle of Rights: (some of the primary rights associated with property) 1) Right to possess 2) Right to transfer 3) Right to use 4) Right to exclude 5) Right to destroy Some rights in the bundle can be limited: Partial Market Inalienability When sales are prohibited and gifts are allowed (e.g. body tissue) Market Alienable When gifts are prohibited and sales are allowed Inalienable When neither gifts nor sales are permitted

Importance of policy ends to nature of prop rights: Generally, property doctrine tries to serve four important values. Sometimes these principles point to a single rez; sometimes different directions (Compare Ghen and Keeble). 1. Reward productivity and foster efficiency 2. Create simple, easily enforceable rules 3. Create property rules that are consistent w/ societal habits and customs 4. Produce fairness in terms of prevailing cultural expectations of fairness.

How does someone come to own property? o First in Time: The 1st occupant owns the land o Labor-Desert Theory (Lockesee below): By mixing ones labor with the land, one acquires rights to the land. Still, only applies to the first person to work on the land. o Utilitarianism: Private property exists to maximize the overall happiness or utility of all citizens

o o

Property rights serve human values. They are recognized to that end, and are limited by it. (State v. Shack) Law & Economics: Property exists to maximize the overall wealth to society. The law enforces property rights to valuable resources to motivate people to use those resources efficiently Personhood (Radin): Private property as essential to the full development of the individual Certain things (e.g. wedding ring, family home) are seen as so closely connected to a persons emotional & psychological well-being that they almost become part of that person A person should have enhanced property rights over these things THEORIES OF PROPERTY Utilitarian theories Utility & Efficiency
Hume: Property = selfinterested acquiescence in Prop is an efficient response to scarcity. Efficiency is

Lockes Labor Theory


(see B, below, for more)

Other Natural Law Theories


Property is a pre-political entitlement, natural and

Custom
Prop rights occur by customs intended to

Every person owns himself. Because you own your own

labor, when you mix that labor with something unowned by anyone, you own the resulting mixture.

eternally existing. Problem: Conceptions of property rights vary a lot. Strength: It is a nearuniversal human trait to link possession of an object w/ ownership. (Though this can also be explained by less mystic util theories)

social/legal rules. We accept legal protection for others prop b/c we want the same protection. In a world w/o scarcity, there would be no need for prop; but in the squo its imp to protect what you possess. Bentham: Popularized Hs interp, rooting prop in the protection of expectations. Note: H & Bs theories rest on unarticulated premise that initial possession is legit. Locke explained why this is so; H & B dont.

utilitiarian. Externalities (costs produced by an activity but not borne by person reaping the benefits of the activitiy) are internalized (borne by their maker) production of goods needed for human life more efficient. Recognition of prop right (e.g.: in crops, a pond of fish) internalizes the benefits.

maximize aggregate wealth of customary participants. (Whalers like in Ghen v. Rich)

Lockes Labor Theory (p15) Why should anyone else be obliged to respect the claim of the first possessor? The obligation was imposed by the law of nature, and bound all men fast long before mere human conventions had been thought of. MODERN: Removing something from the state of nature = mixing your labor with it, and joins it to something that is your own (your labor) makes it your property, and excludes the rights of others. HASLEM V. LOCKWOOD (Conn, 1871, p14) [Manure pile-maker (P) v. Manure taker (D)] Rule: Abandoned property belongs to the first occupant, the P, who had changed its original condition and greatly enhanced its value by his labor. D argues that P leaving it overnight means P lost his rights but: Q: If a party finds property comparatively worthless and greatly increases its value by his labor and expense, does he lose his rights if he leaves it a reasonable time to procure the means to take it away, when such a means are necessary for its removal? A: NO. Facts: P raked into heaps manure that had accumulated in a public street , intending to carry it away the next day. Before he could do so, D found the heaps and hauled them off in his cart. Court held for P.

RELEVANT CLASS NOTES Alternative Theories & Regimes of Property Right Allocation
Random Assignment

Characteristics
- Fairness - Terrible job of accounting for preferences - Doesnt facilitate satisfaction of those preferences unless we allow people to trade - Some criteria used (grades, score, etc.) - Sometimes Rich get richer - IncentivesDesirable behaviors we want to encourage - Bad for privacy interests Also: social engineering Bidding/market allocation system Allotted a certain amount of points to spend. Conquering = Random + Market (hybrid) -rules -minimize violence and chaos -opportunity -Instructors (or govts) interest

Merit

Tribe/Social Network Market Might Makes Right Lottery

Why Choose One Over Another?

B.

ACQUISITION BY DISCOVERY

General Rule: A person who discovers land has title to it a variation on cross-cultural 1st in Time principle Chain of Title: Links in the chain are the transactions (conveyances) by which a parcel of land moves from owner to owner over time. See Chapters 7 and 8.

JOHNSON V. MINTOSH (US 1833 p3) [Successor to Indian title (P) v. Subsequent purchaser (D)]

Facts: Plaintiffs have acquired title to land in Illinois from two Indian tribes. They brought suit to quiet title against the defendant, who was granted the land from U.S. government. The issue is who had the right to sell or grant the land. o Rule: The discovery of the Indian-occupied lands of this nation vested absolute title 1in the discoverers, and rendered the Indian inhabitants themselves incapable of transferring absolute title to others. The govt gives us the entitlement to own things, and we only own them at the states sufferance o Holding: Native Americans held only a right of occupancy; title to lands must be admitted to depend entirely on the law of the nation in which they lie (i.e. all property rights derive from the sovereign) o Implications: This Machiavellian decision is the basis for property rights in the US. Demonstrates that property rights are defined by the society in which they are an issue. o Johnsons claim was as the last link in a chain of title going back to the Piankeshaw; MIntosh claimed his title was better b/c it came from the U.S. Court said Indians only held aboriginal title (right of occupancy that could be cut off at any moment by the U.S.); U.S. derived ownership by conquest of the Pinkeshaw. 4 Rationales Theories of Land Ownership as Bases for the Holding of Johnson International Law of Discovery
-supposed consensual consensus among nations of the world -US government has right to land it discovers. International European land says that the discoverer of land has exclusive right to it, and you can either conquer or buy out former inhabitants. -This international law is concerned not so much about encouraging discoveries, but about preventing conflicts between countries. Morally troubling. -NAs dont have the right to sell the land they were living on (when first Europeans came over & discovered said land)NAs only have right to sell land to gov or resist force -must occupy and transform land -But is this really legitimate? Nope - What if many people claim to
1

Domestic Law
- The Indians could only sell the land to the government. -Virginia statute says only they can buy land from the Indians. says govt has exclusive right to acquire land from NAs and prior claims are null and void (including those of NAs); This law in 1779 binds on the purchases in 1773 and 1775 because it recodifies accepted rules. -Problems: puts the Indians in a very poor bargaining position and substantially deprives them of their property rightsenactments of a local/state legislature -This lands in Illinoiswhy is the court citing a Virginia statute?
-Courts often do this: No law on point in their jurisdiction, but they adopt the rule of another state. But thats not whats going on here. -Bottom of page 6 Virginia owns

Lockean Justification (also Utilitarian)


-The US government can make better use of the land than the NAs -- NAs had the land and didnt develop it. The Europeans transformed the land and this is what they wanted for economic development -Locke says that transforming the land by mixing your labor with it makes it your land. -Problem with this is that even if the land doesnt necessarily stay with the NAs, they should have freedom to sell it. How much labor is enough to claim the land? -Indians use of land is not necessarily the kind of land that implies ownership--NAs did not mix labor with nature to have a respected property right -Idea that to leave land to NAs is to leave the land a wilderness Marshall had the best use of the

Fait Accompli (Settled Expectations)


-probably best defense of opinion out of the 4 -Millions have settled expectation of how things work. If P wins, then all those people have built on lands P didnt have title to. This pragmatic argument probably works best. Too many people have invested based on this chain of title, and whats done is done. -Related argument is that the Europeans keep damn good land records -- Europeans were better record-keepers of title situations. -Chief Justice Marshall is reluctant to hand down an unenforceable, extremely unpopular decision. He is wary of ruffling feathers and disrupting young nation even though he is not completely comfortable ruling so. -Squo has the loudest voice.

ABSOLUTE TITLE - Exclusive right to land RIGHT OF DOMINION Possessing both title and ownership of property and having total power over its distribution.

discover/conquer the same land? There is no law if no nation exists to settle these disputes.

Illinois. VA used to have a huge swath of land reaching into the great lakes, including the land in question. -Indians had no voting rights, no real rights. -VA Rule is retroactive -legitimacy issue -Marshall quotes b/c Illinois and other territories once part of VA charterlater granted to US after independence.

land in mind (taming the wilderness) & Not worth as much in the Indians hands as in the governments. (Ultimate interest of the government is ownership by the white man). -ought to give land to its highest value user (How does this impact how we view eminent domain issues of a Wal-mart vs a homeowner??) -Why would we worry about the rules of the Native American tribes? In this case it is not controversial, but Indian land ownership is a formality and they do not really rely on documents and records so much as just dealmaking Europeans keep damn good land records. -Initial appeal west did need to be tamed in some sense, U.S. needed to be developed. In many respects, a good thing facilitating land masses & industrialization. But we dont need the decision in Johnson to have this result.

-Marshall recognizes an injustice hereuneasiness. Says: but if we rule the other way, there will be chaos, uncertainty, people will stop investing economic damage, etc. (Might makes right). -Trying to upset settled expectation sis a messy process (now we can see this in the mass death in the breadbasket of Africa, Zimbabwe; land reform done badly in Maoist China kills 10 million people, etc). -One reading of the case: Marshall saying lets recognize these inequities but provide a legal rule to settle this dispute about who owns florida. -Marshall worried about undermining SCOTUS -Even if way of thinking of ownership and NA rights is wrong, it has become the way of the land and we should go with it.

Discovery versus Conquest (p10-11) o Discovery the sighting or finding of hitherto unknown or uncharted territory; it is frequently accompanied by a landing and the symbolic taking of possession, acts that give rise to an inchoate title that must (on one view) subsequently be perfected, within a reasonable time, by settleing in and making an effective occupation. o Conquest the taking of possession of enemy territory through force, followed by formal annexation of the defeated territory by the conqueror. Marshall: Discovery gave an exclusive right to extinguish the Indian title of occupancy, either by purchase or by conquest. (Johnson) The modern indictment of acquisition by conquest is not regarded as being retroactive to titles made by conquest in an earlier period. (Jennings, p11) Doctrine of First Possession: Occupancy Theory and the principle of First in Time o Universal Principle: The common and civil law alike adopted the proposition that taking possession of unowned things is the only possible way to acquire ownership of them; the universal principle is original possession. (Epstein, p13) o Existence: The notion that being there first somehow justifies ownership rights is a venerable and persistent one. (Becker, p11) Despite its persistence, the normative case for first possessionits force as justificationis commonly thought to be rather weak. o Influence: The theory of first occupancy (or first possession) dates back to Roman law, and played a considerable part in the writings of Grotius and Pufendorf (p11, also p18, 19, 21). Grotius believed the riches of the earth were initially held in common (nothing belonged to any one individual). But b/c avarice eventually led to scarcity, the institution of private property became necessary to preserve peace. Private ownership was imagined to have developed according to agreements, explicit ones or those implied by occupation. o Private Ownership: Formal right of ownership to the first grabber, putting no limit on the amount of property any one person may occupy, everything passes into private ownership, and the equal right to grab would cease to have any practice value (Schlatter, p13)

Equality of right in property - every man has an equal right to grab A2 Schlatter: The words ones own in the arguments of Grotius and Puffendorf refer not just to what one can get hold of, but to the idea that one has a right to life and liberty, and that actions based on this right are necessary and sufficient to create a right to property. (Mossoff, p13) o Reflects the attitude that human beings are outsiders to nature. Indians didnt mark the land but moved lightly through it; CL of First Possession gives preference to those who convince the world they can catch the fish and hold it fast. May reward useful labor, but is more precisely the articulation of a specific vocab w/i a specific structure of symbols understood by a commercial people. It is this commonly understood/shared set of symbols that gives significance and form to the claim that one has, by possession, separated for ones self property from the great commons of unowned things.

LOCKE on Johnson (p15) o Locke shared the common European view that the NAs had no substantial claim to the New World they had so long occupied. Why? Aboriginals didnt provide labor to increase the value of their land, so they did not have a right to it. Its functionally undiscovered. NAs occupancy of their aboriginal lands did not involve an adequate amount of labor to perfect a property interest in the soil. o Though there is considerable ev that Indian ownership was common in the early 1790s; but by the time Johnson rolled around, NAs were not owners but merely had a right to occupancy (Banner, p15) o The penultimate paragraph of Johnson recognizes Indian title of occupancy, which only the government could purchase. o According to Professor Kades, the settlers objective was efficient expropriation; get the land at the least cost to themselves, with cost defined broadly to include lives lost in battle, diversion of capital to military production, etc. Purchase was often the cheapest course. Why? The gov was a so-called monopsonist (a sole buyer), which helped reduce the price for the Indian title of occupancy. Major portions of early American land law (favorable financing, squatters rights, and Homestead Acts) had the purpose and effect of weakening Indian resistance by luring settlers to the frontier (bringing disease and famine, of course) Property & Power o Property confers and rests upon powerit bestows on owners a form of sovereignty over others, b/c property means that the sovereign state stands behind the owners assertions of right. BUT, recognition of private property as a form of sovereignty isnt itself an arg against it for some form of gov we must always have. While gov is a necessity, not all forms of it are equal in value. Necessary to apply to the law of property all those considerations of social ethics and enlightened public policy which ought be prought to the discussion of any just form of gov. (Cohen, p16) o Critical Legal Studies: Leftist disenchantment w/ existing social/legal institutions, w/ liberal legalism and the idea that law transcends politics and is or can be objective or politically neutral. (p16) K of CLS: Distinction b/w public realm of coercive sovereign authority vested in the gov and the private realm of individual autonomy and voluntary transactions. Reject notion that legal principles can be neutral and argue that all legal principles are indeterminate, such that the choices of legal decisionmakers can never truly be based on them. Choices are mere exercises of power and ideology, justified in terms that invariably beg certain questions.

RELEVANT CLASS NOTES

First two (ILD and DL) encounter some legitimacy issues Native Americans not discoverers? They were represented in neither the community of IR nor VA legislature. o Relative Title Marshall is careful to avoid saying that D explicitly owns the land. They call him the presumptive owner. Doesnt say MIntosh owns the land, but it does say Johnson does not own the land. Why? Perhaps to leave room for legitimate claims from others. No one is definitively the owner of land. Court just says that ones right to land is superior to anothers---relative ownership. o First in Time? - Johnson (P) acquired it firstclaim to land derives from two grants (1773 and 1775); MIntoshs (D) grant is later. Ultimately, court decides it doesnt matter if he had it first. o Marshall makes the govt the foundation of property rights Government has exclusive right to sell the land, not the Indian tribe. (Nullity). Leading expression of legal idea of legal positivism. State is overall---someone owns property when state says soa legal positivism. Puts rights squarely with govts and not individuals or individual discoverers. Uniformity, order, arbitration and oversight to process. o Impact on daily lives this decision is as important as any other case. -Case is important as foundation for property rights in the United States

C.

ACQUISITION BY CAPTURE
As a general principle, no one owns wild animals in their natural habitat Under Common Law capture rule, property rights in wild animals are obtained only through physical possession 1st person to capture/kill a wild animal acquires title to it

1.

GENERAL RULE

PIERSON V. POST (NY 1805 p17) [Fox Hunter (P) v. Fox Killer (D)]
Facts: Post was hunting a fox with hounds on common, unowned land. Pierson caught, killed, and took the fox while Post was still in pursuit. Behind doctrinal debateownership depend on actual possession, mortal wounding (making possession a near certainty), or hot pursuit w/ reasonable likelihood of capturelies debate over how law can best effectuate desired public policy. Rule: Property in wild animals is only acquired by occupancy, and pursuit alone does not constitute occupancy or vest any right in the pursuer. o Depriving animal of natural liberty amounts to occupancy/ possession. Must establish certain control. o Mere pursuit not enough. While pursuit = labor, this labor isnt mixed enough w/ fox to create property until pursuit produced capture. o This case is one of mere pursuit; presents no circumstances/acts which can bring it w/i the def of occupancy by Puffendorf, Grotius, or Barbeyrac.

Puffendorf: occupancy of beasts ferae naturae = actual possession of them. With hesitation, he affirms that a wild beast mortally wounded, or greatly maimed, cannot be fairly intercepted by another, whilst the pursuit of the person inflicting the wound continues (p18). Barbeyrac: actual bodily seizure is not, in all cases, necessary to constitute possession of wild animals.

Holding: Pursuit (probable capture) itself doesnt give a hunter title/possession of a wild animal; certain control (actual bodily seizure/mortally wounding & continuing to chase) is required o Concerned with formalistic approach (use ancient authors as precedent) Dissent (Livingston): A new rule should be adopted: property in wild animals may be acquired w/o bodily touch, provided that the pursuer be in reach or have a reasonable prospect of taking the animal (then there is occupancy). o Two grounds for dissent: 1) better to adopt customs of sportsmen to determine ownership of fox; 2) Recognition of property right in wild animals when reasonable likelihood of capture more rapid extermination of foxes. o Livingston frames the question much less neutrally, more on the side of the hunters. His suggestion for resolving: Custom Arbitration from a panel of hunters. Would have taken the side of Post. Problem: issue with going along with custom is that the custom may not include the p.o.v. of all who have a vested interest in the outcomenot necessarily welfare maximizing. o whose custom? A panel of saucy intruders would decide just the opposite. Jury of hunters; farmers as well? Mortally wounded or reasonable prospect of taking the animal Technology who has invested in taking the animal? A policy suggestion to encourage hunters to maximize fox destruction. Clear intention if youre chasing with large dogs, its your property; if beagles only, its not looking like your goal is to catch the fox. Focus on sort of technology used to establish ownership rights hounds v beaglesweakest idea o On side of hunters/policy justifications; goal is to maximize killing of foxes Does Livingstons proposal fulfill his goal of eradicating the foxes? Want to incentivize killing, not just the chase thus, youd require killing to acquire ownership. Issues with policy as basis for Livingstons decision: o Is the policy chosen really a good idea? I.e.eradication of foxes may not be best method (whole extinction thing) o Does the policy even work or work better than the rule established by the majority?

RELEVANT CLASS NOTES

Relative Title - Doesnt say MIntosh owns the land, but it does say Johnson does not own the land. o What entitles you to own the fox? Actual capture Mortal wounding Certain control You dont actually have to have the thing, but having it has to be an eventual consequence o LOCKES VIEW: He who exerts the most labor gets the fox But Majority doesnt cite Locke, though his account is just as persuasive Temptation to include your friends and ignore your enemies (?) Question under Labor Theory: was Posts labor sufficient to deem the fox as his own? o Locke would rule in favor of Post (D) in this dispute. (Supp: 30, page 2) o Courts purpose

Court seeks to establish rule to preserve order and minimize litigation (lower decision costs) For the sake of certainty

Certainty good for security and stability (econ)


Its easier to decide who killed it than who saw it

and preserving peace and order in society. (p19, 21) Court omitted facts re: the well: A fact not in the opinion was that Post had actually chased the fox down a well, depriving it of its natural liberty. With this fact and the courts rule, Post should have possession of the animal and the lower court ruling should have stood. Bad lawyering has led the court into a tangent that made the case more complicated than it needed to be (they totally left out the fact that the fox was trapped in a well after having been chased there by Post). o Majority focus and approach is standard formalist - Relies on citing old authorities rather than using discretion or interpretation of statutes that relate to it Justifications come from old legal texts (not U.S. law) Old authorities sometimes lead to a lack of consensus (the majority opinion left out Locke) Locke puts emphasis on labor expended, thus contradicting the majority o This reveals the weaknesses of formalismalways competing theorists and just a matter of who you choose to listen to. Bracton/Barbeyrac/Bynkershoek/Grotius/Pufendorf/Locke/Blackstone/Ben tham (p21)

2.

ROLE OF CUSTOM
Custom may help to define capture Following custom makes for easy enforcement, but it isnt always the wisest decision Should courts defer to social norms when litigating questions? Enforcing the law is costly if law reflects custom that people already adhere to, then enforcement costs are low because people self-enforce

GHEN V. RICH (Mass. 1881, p23)

Facts: Plaintiff wounded a fin-back whale with a marked lance. Industry custom is that finder of whale should send word to the whaler, who will come for the whale and give finder a small fee. Instead, finder of whale auctioned whale to defendant, who extracted the oil from the whale. Plaintiff claimed whale. Rule: When all that is practicable in order to secure a wild animal is done, it becomes the property of the securer who has thus exercised sufficient personal control over the wild animal. Holding: Wounding the whale is taking possession of it this is the established industry custom, and there is no legal reason to change it. Requires first taker the only act of appropriation possible in this case. o If a fisherman does all that it is possible to do to make the animal his own, that would seem to be sufficient. o Custom necessary to continuation of whaling industry: Custom determined ownership b/c nature of whale industry was that whales could only be killed w/o acquiring immediate possession. If rule changed to finders keepers, then no incentive to hunt whalesdepriving society of benefits of continued supply of whale oil and blubber. Ellickson: three supposed/actual whaling norms: o 1. Fast-fish/loose-fish: claimant owns whale so long as its fastened by line or otherwise to claimants boat. o 2. Iron-holds-the-whale: right to capture on whaler who affixed a harpoon to body of whale. Doesnt have to be connected by line so long as claimaint remains in fresh pursuit. o 3. Value of carcass split b/w first harpooner and ultimate seizer.

o Note: Issue in Ghen v. Rich was when a fish was to be considered


fast/loose. Prof. Rose alludes to this re: Johnson v. MIntoshWhat was America then in 1492 but a Loose-Fish? RELEVANT CLASS NOTES

o Ghen court defers heavily to custom. They worry that if formal law contradicts the custom,
it will create negative economic consequences for the community, disrupt well established market. Can be very cheap for state to enforce formal law when people already parallel set of social norms; when state tries to legislate against well-established norms, it can do so, perhaps effectively, but itll be costly. o

3.

COMPETITION
Courts are sympathetic to pro-competition uses of property, pro-competitive. Anti-competitive measures hurt competition and contribute to social strife

Relative Title: Actual possession isnt everything. One persons claimed prop right is almost always good (or not good) only in relation to others.

If the fox in Pierson was on land owned Posts land, and Pierson was a trespasser, there would be a conflict b/w two prop rules: first possession and the landowners right to exclude others. Post would have a better fox, not b/c he was a prior possessor, but b/c he was entitled to deprive trespassers of game from his estate. o Assumes a society that thinks its more imp to discourage trespass than reward first possession of unowned objects when the two values collide. Law rarely encourages trespassing b/c security of exclusive possession is conducive to peace and order and investment of an owners resources in the prop.

If Post trespassed on Xs land, took the fox, and Pierson came on Posts land and took it, Post still winseven among wrongdoers the prior possessor prevails (See Anderson v. Gouldberg, below) BUT Helholz disagrees w/ this outcome.

KEEBLE V. HICKERINGILL (England 1707 p27) [Duck Pond Owner (P) v. Duck Frightener (D)]

Facts: Plaintiff was operating a decoy pond to trap ducks for sale. Defendant, who has a nearby decoy pond, for two days fires a gun to scare away ducks from the plaintiffs decoy pond. o Rule: Damages may be recovered for the intentional frightening of game off anothers land. o Holding: Violent or malicious acts done to ones occupation, profession, or way of getting a livelihood create a cause of action in all cases. BUT if a man damages him by using the same employment (i.e.: if D competed in the fowl business against P), no action would lie, b/c he had as much liberty to make and use a decoy as P. Unfair Play Rule: If one hinders livelihood, he can be held liable. Interference must be lawful (i.e. fair competition) Ratione soli2 If a wild animal comes onto your property, you are treated as its owner until it leaves your property o Courts motivation is to encourage proper competitive behavior by giving protection from malicious competition When we allow people compete the way Hickeringill is competing, then we are harming consumers.
2

RATIONE SOLI: the conventional view that an owner of land has possession constructive possessionof wild animals on the owners land; landowners are regarded as the prior possessors of any animals ferae naturae on their land, until the animals take off.

Court is setting up a distinction between healthy competition (attracting students to your school) and unhealthy competition (shooting a gun off). Concern about maintaining social order, that this will cause problems between neighbors or competitors. o Courts treat different types of competition differently: sympathetic to pro-competitive uses of property/exercising of rights; generally more hostile to anticompetitive uses of property In this case, first in time doesnt matter. Even if Hickeringill is first, this doesnt grant him a monopoly. Depends on pub pol that law is supposed to serve: Distinguished this case from fair competition, noting it would be perfectly proper for a schoolmaster to lure students away from another school by offering better instruction, but unlawful to frighten them away. Bottomed on notion that fair competition improves society (e.g.: better schools), while Hickeringills conduct was a drag on social improvement (e.g.: fewer ducks for the table). In a society where killing ducks for food is inappropriate (e.g.: to protect biodiv) Hickeringills conduct might be unlawful. Lack of early English reports official reports were not taken prior to the 19th century (p28). o East thought to be particularly trustworthy o Modern not esteemed o Salkeld also not esteemed Keeble and Pierson o Ratione Soliyou own whats on yo soil

The court in Pierson reckoned with Keeble; the report suggested to the court that the result in Keeble was influenced by the fact that the ducks were in Ps decoy pond, such that the P had possession of the ducks ratione soli. But this theory has little influence in Keeble. Counsel convinced Holt to change his mind and rest the judgment on the theory of malicious interference w/ trade. Interference with capture o Interference w/ the capture or killing of wild animals has become such a problem that 37 states have enacted legislation outlawing hunter harassment on state owned land, and a bill introduced in Congress would make it a Federal crime to obstruct the hunter or scare the animal being hunted. o Most challenges to the antiharassment laws have succeeded on grounds of unconstitutional vagueness and violation of the First Amendments protection of free speech.

RELEVANT CLASS NOTES

Court asserts property right in the trade, not in the ducks themselves. Wants to compensate for interference with trade rather than for the value of the ducks D scared away. o Case makes the point that there are certain types of competition that are welfare enhancing. (ie. UChicago scholarship plan v. retaliatory Thuggery Initiative against NW) o Later investigation shows that P built his decoy next to Ds existing decoy. Would this make a first-in-time argument to support D valid here? No2nd decoy pond was lawful/ productive competition. o Take Home Point: Different types of competition are treated differently by the courts. Harm to consumers is what concerns the courts most.

D. E. F.

ACQUISITION BY CREATION? PROPERTY IN ONES PERSON? ACQUISITION BY FIND


The finder of a lost object has a superior claim to anyone but the true owner or a prior possessor. Finders claim depends on who the rival claimant is and whether the property was lost, mislaid, or abandoned by the true owner. A finder has relative title. Policy objectives in finders law: restore property to true owner, reward honest finders, deliver the reasonable expectations of land-owners, discourage trespassers and other wrongdoers, and encourage productive use of found property.

Categories of found property, according to the presumed intentions of the owner: o Abandoned property When the owner intentionally and voluntarily relinquishes all right, title, and interest in it, the first person to find the property has title to it, even against the original owner. o Lost property When the owner unintentionally and involuntarily parts with property through neglect or inadvertence and doesnt know where it is, the finder has rights to the property against everyone except the owner. o Mislaid property When the owner voluntarily puts the property in a particular place, intending to come back for it, but then forgets where it is. o Lost vs. Mislaid can be in the eye of the beholder

1.

ABANDONED PROPERTY, GENERALLY

Generally, finder of abandoned property acquires title. Abandoned = property to which true owner has voluntarily given up any claim of ownership. Trespassers who find abandoned property are denied title unless the trespass is trivial or merely technical. (Favorite v. Miller, DK104) Mere elapse of time is not enough to prove abandonment (Columbus-America Discovery Group v. Atlantic Mutual Insurance Co, 4Cir 1992, Where insurers paid off for gold in sunken ship, 131 years elapsing not enough to prove they abandoned it)

2.

LOST AND MISLAID PROPERTY, GENERALLY

Generally, a finders title is good against the whole world except the true owner, and (sometimes) the owner of land where an object is found. Mislaid = true owner places it somewhere w/ intention of returning for it, but which cannot now be located.

1. Rights of Finders against Original Owners


General Rule: owners keepers, finders weepers, unless the property was abandoned. Law seeks to encourage the owners effort to acquire property, not the finders minimal efforts.

Rule provides security of title and protects against thieves pretending to be finders. Under Armory, finder has greater ownership rights against the whole world except the true owner. Once TO proves he is the TO, he wins and finder loses.

2. Rights of Finders against 3rd Persons


General Rule: Relative to 3rd parties, the 1st finder has superior claim to a found object.

ARMORY V. DELAMIRIE (England 1722, DK96) [Jewel Finder (P) v. Goldsmith (D)]

Facts: Chimney sweep boy finds jewel, takes it to goldsmith. Apprentice takes out the stones and gives back the empty socket. Chimney sweep boy sues goldsmith for the stone. Holdings: o 1. The finder of a lost object has a superior claim to anyone but the true owner*, upon which he may maintain an action at law or in equity.

*The meaning of the phrase true owner depends upon who the other claimants are. Title, or ownership, is relative: B can have title as against C but not as against A. The rule that a prior possessor prevails over a subsequent possessor applies in cases involving land as well as cases involving personal property (Tapscott v. Cobbs, DK97).

o 2. Action can make made against the master (D), who is liable, as he was
responsible for the actions of his apprentice and is answerable for his neglect. o 3. If D did not produce the jewel, and show the stones were not of the finest value, we should presume strongest against him, and make the value of the best jewels the measure of their damages. Courts reasoning: o Minimizes disputes o To encourage finding, ultimately to return the item to the owner Gives incentives to finders to do socially good thing of turning in property o First finder over second finder because it is easier for the owner to find the first finder than the second finder
Finder has a choice of remedies: o Action in Troveraction at law to recover the value of a chattel. Here, the sweep opted to recover value of the item rather than the item itself. (DK97) Action for money damages resulting from Ds conversion to his own use of a chattel owned or possessed by P. P waives his right to obtain return of the chattel and insists that D be subjected to a forced purchase of the chattel from him. If D loses, he must pay money damages to P. The action similar to trover in real property cases is an action for damages (trespass). o Action in Replevinaction in equity to have the item returned. The action similar to replevin in real property cases is an action for possession (ejectment). (DK98) o The courts appear more reluctant to give the prior possessor of land, who has no title, permanent damages than to put the prior possessor back into possession. (DK98)

Tapscott v. Cobbs Prior possessor wins in ejectment

Winchester v. City of Stevens Point Possessor denied damages for permanent reduction in value of the land Illinois & St. Louis Railroad & Coal Co. v. Cobb Possessor allowed to recover from trespasser damages up to the commencement of action; language

of court indicates possessor can recover full damages for permanent injury to the land, even though D can prove an outstanding title in some third person.

WRONGDOERS: Wrongfully obtained property

Anderson v. Gouldberg (Minn, 1892, DK97-8) Facts: P trespassed upon the timberland of a third party, cut logs, and hauled them to a mill, where D took them. In an action of replevin (a lawsuit to obtain return of the goods, not damages), the court ruled for P. Rule: The only question is whether bare possession of property, though wrongfully obtained, is sufficient title to enable the party enjoining it to maintain replevin against a mere stranger, who takes it from him. (Yes) o When it is said that to maintain replevin Ps possession must have been lawful, it means merely that it must have been lawful as against the person who deprived him of it; and possession is good title against all the world except those having a better title. o Any other rule endless series of unlawful seizures and reprisals in every case where property had once passed out of the possession of the rightful owner. Cases like Anderson, involving two wrongdoers, seldom arise. Hemholtz concludes that the more common case of disputes b/w a prior wrongful possessor and an honest subsequent one, courts regularly prefer the latterin quiet defiance of the hornbook rule. The rule of prior possession is said to be explicitly invoked only in support of honest claimants.

RELEVANT CLASS NOTES o Common Law Approach favors prior finder or possessor. o Want to prevent a (potentially violent) free-for-all decrease incentive to take things from others; discourage someone who possesses property from taking excessive precaution with it. Danger dont want a legal rule that will encourage people who find property to shut up about it or hide the property away, because it might take a productive/valuable resource out of production/circulation o Armory = Recognition of need to provide some incentive finding lost property useful to society Law sees property as referring to relationships among people to things rather than a relationship b/w a person and a thing The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the bailor. In other words, if the true owner of the jewelry showed up later demanding the jewelry from the goldsmith, he would have no legal standing to demand it back.

3. Prior Finders
General Rule: Prior finders prevail over later finders. Applies even if First Finder had stolen the watch from True Owner. (See Anderson v. Gouldberg, Minn. 1892) Rationales for protecting prior possession (esp. when we know there is some unknown true owner): 1. Encourage finders to make productive use of their finds rather than hide them.

2.

Provide a cheap, easy means of establishing presumptive title.

4. Rights of Finders against Landowners

2 competing lines of authority: 1) giving title to finder (Armory); 2) giving title to landowner (Ratione soli) General trend is giving the landowner a superior claim over the finder Key factors: o Location of object: Objects found within a house or embedded in the soil on private land are awarded to the landowner, not the finder o Status of finder: If the finder is a lawful occupant (e.g. tenant), he may have rights to the found object Landowners claims generally prevail over those of employees, people on land for a special purpose (e.g. mailman), or trespassers

a.

Trespassing Finders

General Rule: As is true of abandoned property, trespassing finders of lost or mislaid property lose. Owner of locus prevails as against trespassing finder unless trespass trivial or merely technical (Favorite v. Miller, DK104) If the discoverer is a trespasser such trespasser can have no claim to possession of such property even if it might otherwise be considered lost (Bishop v. Ellsworth, 2d, 1968, DK104) o We think the Bishop courts statement that a trespasser has no claim to possession of lost property is erroneous. (Hendle v. Stevens, 2d, 1992, DK104)

b.

Employee Finders

General Rule: Older cases tend to find that employee finders must surrender the find to their employer if the employee has a contractual duty to report finds. Duty to report makes sense to restore lost property to true owner (TO), but if TO never found, doesnt make sense to deprive finder. Might finders not reporting at all. Objectives of restoring lost property to TO and of rewarding honest finders can be achieved by combining a duty to report w/ award to the finder when the TO never materializes. Newer cases tend to award found property to employee finder.

Employees and other agents (DK106 n.3)

If mislaid duty to deliver to employer (Jackson v. Steinberg, Or, 1948) If abandoned no duty to report to employer (Erickson v. Sinykin, Minn, 1947) If lost/abandoned finder. Court rejects English master-servant exception as not in accord w/ the weight of American authority (Kalyvakis v. The T.S.S. Olympia, NY, 1960) Police Officers

Taking charge of a scene where money was scattered along a road, before the deputy arrived, was enough to give P the rights of a findersuperior to anyone (even a sheriff) but the true owner of the funds; not having taken literal possession of the money was irrelevant b/c the deputy had ordered them not to touch it. (Hoel v. Powell, DK107 n.3)

c.

Invitee Finders

General Rule: An invitee who finds property in the course of doing what s/he was invited to do must surrender it to the landowner. South Staffordshire Water Co. v. Sharman (DK102cited in Hannah) [Pool Owner (P) v.
Finder/Pool Cleaner (D)]

Facts: While cleaning, D (pool cleaner), under orders of P, found two rings embedded in the mud at the bottom of the pool. P concede he was unaware of their existence till the find. D declined to deliver them to P, but failed to discover the real owner. Judgment for the P. o Landowner is treated as constructive possessor (legal conclusion that the landowner should prevail) o P are freeholders of locus in quo, and have right to forbid anybody coming on their land or in any way interfering w/ it. o Ps must show that they had actual control over the locus in quo and the things in it. Justification: Leaving property w/ landowner may slightly improve the odds of returning the property to the true owner, and landowners do have expectations of ownership over immobile things on their land. o Butawarding the find to the landowner undermines the goal of rewarding honest finders. Perhaps the value of the find should be split b/w finder and landowner

Pollock & Wright: The possession of land carries w/ it in general, by our law, possession of everything which is attached to it or under that land, and, in the absence of a better title elsewhere, the right to possess it also And it makes no difference that the possessor is not aware of the things existence. Principle: Where a person has possession of house/land, w/ manifest intention to exercise control over it and the things which may be upon/in it, then, if something is found on that land, whether by an employee of the owner or by a stranger, the presumption is that the possession of that thing is in the owner of the LOCUS IN QUO!. o Changes Pollocks attached interp Upon/in If you find something as the servant/agent of another, you find it not for yourself, but for that other, and you can claim no title for yourself (DK103) Follows rule similar to Pierson v Postland owner owns everything on or in his property.

d.

Embedded Objects and Treasure Trove

General Rule: When property is embedded in or under the soil, it is awarded to the landowner, on the rationale that the landowners expectations of owning this in the dirt itself are especially strong. At English CL, any property below the earth belonged to the king.

Treasure Trove in American law = any hidden money, gold, and silver, whether or not buried underground, usu. w/ intent of return and recovery tendency to treat it like any other found property (lost, mislaid, abandoned) Trend among state and fed courts to refuse to recognize the doctrine of treasure trove (Corliss v. Wenner, DK107 n.4) Where driveway builders discovered buried property under Jann Wenners house, court gave rights to Wenner, rejecting treasure trove as unsuited for modern timesand the finders were acting on agents on Wenners behalf. (The Gold Diggers, The New Yorker, DK107) Elwes v. Brigg Gas Co. (DK103cited in Hannah) Facts: Land had been demised to lessees (D) for 99 years w/ a reservation to the lessor (P) of all mines and minerals. A pre-historic boat was discovered by D. Holding: The boat (whether regarded as a mineral or as part of the soil, or as a chattel) did not pass to the lessees by the demise, but was property of the lessor though he was ignorant of its existence at the time of granting the lease. Q: Did the boat belong to P at the time of granting the lease? A: Yes (whether mineral, or part of soil, or chattel). o If mineral/part of soil belonged to owners of the inheritance as part of the inheritance itself. o If chattel the property in the chattel was vested in P. Obviously, right of original owner could not be established after hundreds of years. Makes no diff that P wasnt aware of boats existence.

e.

Private Homes

General Rule: Homeowners are awarded objects found in their homes. A homeowner has an especially strong expectation of ownership of objects found insider her home and, to the extent the property was mislaid, the odds of its recovery by TO are increased by leaving it w/ the homeowner. When the homeowner is an absentee ownernot in possession of the homeresolution of the question turns on whether the homeowner was in constructive possession of the home. If homeowner is briefly absent, she is in constructive possession of objects found in her absence.

HANNAH V. PEEL (England 1945 DK99) [Brooch Finder (P) v. Homeowner (D)]

Facts: Peel buys house but doesnt live in it. Hannah, while stationed in the house, finds the brooch and turns it into the police. The police gives the brooch to the homeowner, who sells it. Held (in a muddled opinion), the finder has the right to the object. Rule: The finder of a lost article is entitled to it as against all persons except the real owner. Holding: While an owner possesses things that are attached to or under his land, it isnt clear that he owns things that are loose P (finder) gets the brooch o Because Peel had never moved in, he never had constructive possession of the houses unknown lost contents. o Confronts two lines of authority:

1. Armory (finders keepers, except against true owner) 2. Cases suggesting landowners have priority in event of property being found on their land

o Key: Once possession of house transferred to govt, landowners


expectation of owning objects later found in the house was greatly diminished since someone else couldve hidden the brooch in the crevice o An occupier of land does not in all cases possess an unattached thing on his land even though the true owner has lost possession. Although a man possesses everything which is attached to or under his land, a man does not necessarily possess a thing which is lying unattached on the surface of his land even though the thing is not possessed by someone else. Peel (D) was never physically in possession of the premises at any time; it is clear the brooch was never his, in that he did not have prior possession. o Judge wants to follow Bridges, in light of following facts:
The brooch was lost in the ordinary meaning of that word It was found by P in the ordinary meaning of that word Its true owner has never been found D was the owner of the premises AND had his notice drawn to this matter by P, who found it.

The key lies in the expectations of the landowner. Once possession of the house was lawfully transferred to the government, the landowners expectation of owning objects later found within the house was greatly diminished; after all, an object like the brooch might have been hidden in the crevice by another solder after the government took possession. The Courts decision o Court tries to reconcile rule of Armory vs. principle that found item is property of the owner of the land on which it was found. o Court argues that Peel had no clue of existence of broach and never had true possession of it. o Court just chooses a rule, but doesnt say why Armory rule is better than South Staffordshire rule. What if Peel had been living there? o The occupier of a house will almost invariably possess any lost article on the premises. He may not have taken any positive steps to demonstrate his animus possidendi (intent to possess), but so firm is his control that the animus can be seen to attach to it. (Parker v. British Airways, 1982, DK104) Hannah is an all-or-nothing approach to ownership, seems poorly fitted to goals of finders law. Ownership in Peel punishes honest finder. Ownership in Hannah defeats Peels reasonable expectation that he owns everything in the house. Perhaps the value of the find shouldve been split b/w Hannah and Peel. RELEVANT CLASS NOTES

Hannah court resolves them in a straightforward wayfinder of lost property had rights against all but true owner Soldiers conduct commendable and meritorious Courts arguments are quite weakwhether owner knew of broachs location, etc. Court focuses on technicalitiesie owner never lived in house, soldier acted admirably, broach found above ground and not in the ground o Problems: Might give others ability to snoop around on others property Might make ppl unwilling to invite others onto their property Might worry that property not be restored to true owner o Elwes & S. Staffordshire rights of the landowner for property on/in his/her land.

o
o

Relevance of Elwes discourage nosiness/intrusiveness. Should it matter if you own the property? Occupants more likely to have, at one point, been the owner of property or have had possession of it. o Should it matter if the owner knew of the broach? Suggests he didnt really make an effort to find valuables in his property, and he may never have found out about it. P put property back into circulation, which the court favors. Want to provide an incentive for the finder to take the stuff out of their pockets and return it to the proper owners. o Government control of propertywasnt it the owner? Why would Hannah have had any property rights? Gov took less than absolute ownership of this property. Lease period was for the duration of the war. Lease Interest v. Absolute Ownership gives them less than full rights to property. o Why is one rule better than the other? How would each rule impact behaviors? Perhaps Armory rule gives incentives to finders. But, South Staffordshire rule could also inspire finderstreasure hunters who buy land to search. Encourages finders not to secret away the things that they find. Armory rule would also encourage people to go on their land to find valuable items, making people hesitant to invite people on their property. Makes it difficult for true owners to find their property.

f.

Public Places

General Rule: Lost property found in public places goes to the finder. Mislaid property found in public places goes to the landowner. Rationale: the odds of restoring lost property to TO are slim, while the TO of mislaid property may well return to the place where it was mislaid. (But TOs often retrace their steps when they lose items, so this rationale is not airtight.) A valuable object left in a public place (e.g. store, bank, restaurant) is usually considered mislaid property and is awarded to the owner/occupant of the premises, not the finder.
Note: The lost-mislaid distinction requires courts to surmise from circumstantial evidence. Critics argue that the policies of finders law might be better served by a sharing rule.

MCAVOY V. MEDINA (Mass. 1866, DK105) [Wallet finder (P) v. Barber shop owner (D)]

Facts: Customer (P) finds pocketbook inadvertently left on table in a barbershop; the barber (D) asserted ownership. o Rule: Misplaced goods (items unintentionally placed by the owner where they were found and then forgotten or left there) are deemed to be in the bailment of the owner of the property on which they are found for the true owner. o Holding: Pocketbook is misplaced, not lost, property, so it goes to the shopkeeper, who has a duty to exercise reasonable care under the circumstances o Rationale: Better adapted to secure the rights of the true owner. Owner more likely to return to claim misplaced vs. lost property Owner will be better able to find the shopkeeper rather than a finder

As a bailee, the shopkeeper was obligated to use reasonable care for the safekeeping of the same until the owner should call for it No need to reward finders of mislaid property, b/c shopkeeper or other customers will likely find it P acquired no original right to property; and Ds subsequent acts in receiving and holding it in the manner he did doesnt create any. Problem: This rule may result in the finder pocketing the find

*Bridges v. Hawkesworth (DK100-1cited in Hannah) [Banknotes finder (P) v. Shopkeeper (D)]

o o

*Hannah court wants follow this decision.

Facts: P found banknotes that had been lost in a public shop, turned them in to shopkeeper to be advertised; true owner was never found. P appled to D to have notes returned, offering to pay expense of ads, and to give an indemnity; D refused. o Q: Does the circumstance of the notes being found in Ds shop give him (D) the right to have them as against P, who found them? If D never knew about the discovery, could the real owner have a cause of action against D b/c they were in his house? A: No. The notes were never in the custody of D, nor within protection of his house, before they were found (as they wouldve been had they been intentionally deposited there). o Follows rule of Armoryfinder has property right over all except true owner

LOST v. MISLAID v. ABANDONED

Lost Finder is bailee Thus, b/c the finder was the first in possession, he will have paramount rights. o Mislaid Owner (of store) is bailee On the other hand, where goods have been voluntarily placed and then forgotten, the true owner is much more likely to be found. B/c the true owner is more likely to return, the owner of the premises will be deemed a bailee for the true owner. Property is in plain sight and valuableso reducing finders incentives increases likelihood it will be left alone and found o Abandoned Finder Abandoned property necessitates a manifest intent to relinquish. o A finder of property acquires no rights in mislaid property, is entitled to possession of lost* property against everyone except the true owner, and is entitled to keep abandoned** property (Michael v. First Chicago Corp, 1985, n.1 DK106) *Incorrect, at least in some jurisdictions. Neglects distinctions, as in
Hannah, having to do w/ circumstances under which lost goods are found:
Embedded in the soil, or not? Found in a public place, or a private one?

**Inaccurate as to abandoned property (items intentionally and voluntarily relinquished, with no intent to reclaim). The dominant concern of the law of findersto protect true ownersdrops out w/ abandoned property, b/c true owner has renounced any claim, but interests of the owner of the place of the find remain.

Objective: Reunification of lost property w/ owner. Focus of lost/mislaid property cases is to determine whether it is likely that the true owner can ever be found.

To place a pocketbook on a table and forget to take it is not to lose it, in the sense in which the authorities referred to speak of lost property. (Lawrence v. The State, Tenn, DK105) RELEVANT CLASS NOTES

Court is developing a new property categorymislaid propertyand in this case, its particularly likely that the true owner will return to the place where s/he parted with the property, so we ought to prefer landowner over the finder Alternatives: Might be things you can accomplish through legal institutions that cant be accomplished through legal doctrine. o Not courts, but Japanese legislatures and PM, has set up Lost & Found Centers

3.

EQUITABLE DIVISION: A MODERN COMPROMISE

Because the all-or-nothing approach to found property sometimes results in irreconcilable conflict b/w the goals of finders law, some commentators have argued that found property be shared equitably among the competing claimants, each of whom have a claim as good as the other claimants. (Hemholz) Courts have been reluctant to abandon the all-or-nothing approach, but an exception was made in Popov.

POPOV V. HAYASHI (Calif. 2002)

Facts: Popov was attempting to catch Barry Bonds record-breaking homerun when he was knocked down by the mob. Hayashi, also knocked down by the mob, recovered the ball. Rule: Equitable Division when more than one party has an equal claim to a property, they both have an equal interest in it and split the value of it. If you want to encourage chivalrous behavior (reduce violence), then rule for Popov; if you want an easily enforceable rule, rule for Hayashi. o If an actor undertakes an intent to possess and is thwarted because of illegal acts of others, he, in fact, gains a pre-possessory interest- But, this interest is not protected as full possession from a subsequent legal claim. Holding: They both have equal competing claims and must split the value of the ball. o Popov doesnt establish control, but has a pre-possessory interest in the ball and unlawful interference prevented him from completing his attempt at possession and control (he was in the process of catching the ball but was deliberately stopped the violent mob). o Hayashis possessory rights were equally good. Hayashi had possession and control, but did so under a clouded titlePopov has a valid claim. o Keron v Cashman: Analogous case of 5 boys and the sock full of moneyintent and domain must concur in time. The 5 boys all had control at one point but no intent to keep sock until they all saw the money fall out at the same timethey all have equal claim.

RELEVANT CLASS NOTES o How do we approach this case?

Brightline Rule Approach majority approach in Pierson; the clearest, most straightforward approach is certain control But if the rule is certain control, it encourages violences

Standard Approach adopting a standard. Most reasonable chance of taking (Livingston) sensible rule to apply in context of baseballs. Downside of a standard: likely to invite further disputation, which is expensive for litigants and taxpayers. Deference to Custom social norms. Must choose among competing customs. Difficult problems i.e.: custom is to throw the ball back if opposing team Livingston approach (reasonable chance of taking): Would minimize violence in the stands but increase litigation

Context matters. Judge looks at cases like Pierson, and determines that balls are different from foxes, and that you cant wrap your arms around a whale (Ghen), and that context really matters BUT, ends up creating a sweeping rule for abandoned personal property/pre-possessory interests (rather than about balls specifically). Look for rule on p15. o Is this an equitable remedy? Does it accord with our ex post intuitions? Courts remedy is equitable. Establishes rule of splitting ball (profit from sale) when there are equal but competing property rights/ claims. But, this doesnt work well for things that are not commercially valuable. (My thoughts: What about personal property (not fungible, purely personal sentimental value)? Splitting the proceeds from sale of such item would not be in interest of justice.) o Copout by judge on fact-finding. First says we need a special rule for baseballs, then establishes rule for abandoned personal property. Creates a more sweeping rule than its rhetoric says it should. Rule doesnt work well for baseballs that have only sentimental value. o Legal rules can influence the norms. Left with a dilemma: if you want to encourage chivalrous behavior (reduce violence), rule for Popov, but if you want an easy to enforce rule, rule for Hayashi. Uneasy compromise between the two. What if court had granted ball to Hayashi? Would be a move for finality. What if court granted to Popov? Would discourage violence in the stands. o The case should clear up the law to answer questions in future cases, but it may not. Did not craft a clear rule for future courts to follow. o How specific do we want our legal rules to be? Broad holding pre-possessory interest in the property

G.
o

ADVERSE POSSESSION

Adverse Possession = Acquiring land by taking it from the original owner. The acquisition of property by a party that includes no compensation, but instead is based upon an individuals use of the property for a significant period of time o The doctrine of AP combines two broad requirements: (1) expiration of the relevant statute of limitations, and (2) AP during the limitations period. The first requirement is statutory and its elements are determined by the statute. The second requirement consists of a series of CL elements concerning the nature of the possession that must be proven.

Virtually all legal causes of action must be brought w/i the period of time set out in the SoL. If TO of land fails to start legal proceedings to remove a person who APs his land w/i period of the SoL, the true owner is forever barred from removing the APor. B/c there is no other owner, the APor has taken title to the land and can obtain a judgment to that effect. The APor acquires whatever title to the property the owner had. This is the doctrine of AP. (See Powell on Real Property, 91.01, DK112)

VAN VALKENBURGH V. LUTZ (CtAppNY, 1952, DK115) [Tract Owner (P) v. APor (D)]

Facts: Around 1920, D traveled across a triangular tract to reach his home on a nearby parcel, and also built a shed and kept a garden on the tract. In 1947, P purchased the tract at a tax sale, and when P demanded D vacate the land, D obtained a judgment that granted him a right of way by prescription over the tract and then in a judicial proceeding established title to the tract by AP. Judgment for P.

Prescriptive Easement right to use anothers property; access land thru landowners property AP right to possess property (main diff exclusivity) Rule: Title to a parcel may vest in an APor who occupies the parcel under a claim of right, protects the parcel by an enclosure, improves or cultivates the parcel, and maintains that state of affairs for the statutory period. Holding: No proof offered of any protection of the parcel by D, and the proof shows he did not cultivate the entire premises claimed. No improvement of the land b/c the shed was built by D w/ conceded K that he didnt own the land under it. In this case, the elements permitting AP were not present. Dissent: Weight of ev establishes Ds right to property by AP. There was a traveled way across it, D operated a truck farm there of substantial size. That D knew he had no title to the tract is irrelevant so long as he intended to acquire title in himself, as he did. D actually occupied the property and title vested in him. No requirement in statute or decision that proof of AP depends on cultivation of the whole plot or of every foot of the property in question. Usually cultivated or improved means only that the claimants occupation must consist of acts that are normal in ordinary cultivation/improvement of similar lands by thrifty owners. (DK122) o Property Rules & Liability Rules

When property interest is protected by a property rule, the interest cant be taken from owner w/o owners consent; all transfers are voluntary. When property interest is protected by a liability rule, the interest can be taken w/o owners consent but only upon payment of judicially determined damages; transfers are forced. AP protects: (1) owners interest w/ a property rule before SoL has run, then (2) the APors interest w/ a property rule after SoL has run. Mandatory compensation approach for bad-faith AP would observe (1) but as to (2) would leave in the owner after SoL has run an interest protected by a liability rule. Transfer of owners interest to APor could be forced but only upon payment of compensatory damages by the latter.

MANNILLO V. GORSKI (SC of NJ, 1969, DK130) [Lot owner (P) v. Encroacher (D)]
Facts: D built steps and a concrete walkway to her dwelling that encroached on Ps property. P argued D lacked the requisite hostile intent to obtain title by AP. Rule: To claim title by AP, the possessor need not have been aware that the land in question was in fact owned by another. Holding: Court adopts the Connecticut Rule. o (1) Maine Rule sux. Requiring APor to have knowing intentional hostility (know its anothers prop) is the Maine Rule, which was the law of NJ for many years, but is of questionable historical pedigree and leads to undesirable results. It places a knowing wrongdoer in a better position than an innocent party, a result the law ought not to condone. The law here is bad law, and Stare D doesnt mandate adherence thereto. o (2) No AP by itty bitty encroachment. However, no presumption of K on the part of the true owner arises from a minor encroachment along a common boundary. In that case, only where the TO has actual K thereof may the possession be said to be open and notorious. When encroachment not clearly and self-evidently apparent to the naked eye but requires an on-site survey, no AP. o Remanded for three Qs: 1) Whether TO had actual K of the encroachment 2) If not, whether Ps should be obliged to convey disputed tract to D 3) If answer to 2 is yes, what consideration should be paid for the conveyance. Problem w/ Connecticut rule TO might not be put on notice that someone is in possession of a very small strip of land. Hence the courts rejection of the traditional presumption of K as fallacious or unjustified.

HOWARD V. KUNTO () [Record title owner (P) v. APor (D)] title had wrong land in it
Facts: D took possession of a summer home under a deed which, unbeknownst to them, described the adjoining property. After discovering the mistake, P obtained a conveyance of the deed which described the prop occupied by D, then sought and obtained judgment quieting title in himself. Rule: Where several successive purchasers received record title to tract A under the mistaken belief that they were acquiring tract B, immediately contiguous thereto, and where possession of B is transferred and occupied in a continuous manner for 10+ years by successive occupants, there is sufficient privity of estate to permit tacking and thus establish AP as a matter of law. Holding: The deed running b/w parties purporting to transfer land traditionally furnishes the privity of estate which connects the possession of successive occupants. The technical requirement of privity shouldnt be used to upset the long periods of occupancy of those who, in good faith, received an erroneous deed description. The use of a summer cottage in summer is uninterrupted possession sufficient to establish AP. There is a public interest favoring early certainty as to the location of land ownership. Good example of how the sometimes seemingly unjust doctrine of AP can produce a just result! Issue: Should K be granted title to the lot by adverse possession when he only used the property part of the year (does that count as continuous occupation)? Test: whether the claimant used and enjoyed the land as an average owner of similar property would have used and enjoyed it. Conclusion: evidence indicates Kuntos use of the land was continuous and the length of ownership from the original landowner (McCall) can be attached to Ks possession of the land Rationale: summer occupancy can extend to year-round ownership if the land and house were kept as a typical owner would (most people use this type of land in this manner, for summer houses) and a purchaser may tack the adverse use of its predecessor in interest to that of his own

1.

RATIONALES FOR AP

Sleeping Theory: Use it or lose it! Slothful owners, who ignore ppl using their land in brazen violation of legal right, deserve to be penalized. By failing to bring timely action, they create a problem (adjudicating stale claims is difficultwitnesses die, docs are lost, memories fade). Slothful owner ought to bear the risk of losing his property if he doesnt care enough to assert his ownership. Some argue stripping slothful owner of title comports w/ his reasonable expectations. Earning Theory: People who use land productively and beneficially for a long time ought to be rewarded. Though land is owned by someone else, actual possessor has invested time and effort in making it productive. After a long enough period, the APor has earned some interest in the land. When coupled w/ Sleeping Theory, justice of cutting off TOs claim seems even stronger. Psychologically, if not legally, the APor develops expectations of continued possession, which expectations are pet by the doctrine of AP. Stability Theory: AP enables disputes or doubts about land titles to be cleared expeditiously by delivering title to the person who has occupied the land as if she were the owner for a long time w/o objection. UTILITARIAN MODELS (UPL465)

2.

ELEMENTS OF AP

ELEMENTS OF AP (must win on all 5 elements): 1. 2.


ACTUAL EXCLUSIVE

3. 4.

OPEN

& NOTORIOUS (or hostile) & UNDER A CLAIM OF RIGHT

ADVERSE

3 approaches (see below)

5.

CONTINUOUS and for the STATUTORY PERIOD (generally between 10-20 yrs) Note: The SoL is extended if specified disabilities are present o A disability is immaterial unless it existed at the time when the cause of action accrued

Note: In some places, possessor must also prove she has paid the property TAXES for the limitations period

i.

Actual Entry
Requires: Must actually, physically, enter and take exclusive possession of the property. The owners cause of action accrues at that moment, and the clock on SoL starts to run at moment of actual entry. Note: often coupled w/ Exclusive. See below. MAJORITY APPROACH Claimant must physically use the particular parcel in the same manner that a reasonable owner would Acts that meet this requirement vary from parcel to parcel, depending on the nature, character, and location of the land, and the uses to which it may be devoted. o BUT When mineral rights severed from surface ownership, occupancy of the land surface alone is not deemed actual possession of the underlying materials. MINORITY APPROACH (California, Florida, New York) Claim of right: Where AP premised on mere claim of right, claimant must cultivate, improve, or substantially enclose the property. Van Valkenburgh v. Lutz (insufficient ev of cultivation to justify AP) Color of title: may also meet the actual requirement by cutting firewood or timber for fences. These antiquated standards developed to govern AP of rural, undeveloped landlittle application to urban property. o APor residing in a Florida condo presumably lacks actual possession required by statute EXCEPTION: CONSTRUCTIVE POSSESSION Claimant w/ color of title who has actual possession of part of the land described in the deed is deemed to be in constructive possession of the entire parcel. Color of title: APor has a claim to the land based on a defective document that purports to transfer title (invalid deed/will)

ii.

Exclusive Possession

Possession must not be shared w/ either the TO or the general public. o Absolute exclusivity not requiredClaimants possession must be as exclusive as would characterize an owners normal use for such land. Multiple occupiers ok: Exclusive does not mean only one APor can occupya group of people adversely occupying may acquire a shared titleconcurrent ownershipby AP. Must exclude 3rd parties only to extent that reasonable O would do so o Isolated visits by 3rd parties doesnt destroy exclusivity o Two APors who hold joint possessiontenants in common Some states define actual possession by statute. Van Valkenburgh: NY law at issue required APors occupying w/o color of title to prove that they had substantially enclosed or usually cultivated or improved the property. Required clear and positive proof that the occupation of premises be under a claim of title Ds garden and shed on part of the property not enough. (DK119) o D conceded (earlier, in a case w/ a lower court) that Ps legal title conferred actual ownership in Ps entitling them to possession of these and other premises in order to provide a basis for establishing Ds right to an easement by AP (use of the travele way). D chose to litigate the issue of title and, having succeeded in establishing his claim of easement, he may not disavow the effect of his favorable judgment or prevent its use as ev to show his prior intent. (DK120)

5. Open and Notorious

Requires: Must be readily detectable/visible to an inspector of the property. Occupation is Open and Notorious if it is the type of occupation a TO would make. The idea is that the TO would know of the occupation if she visited her property. Open and Notorious occupation constitutes notice to the owner that her rights are being violated. No K necessary: dont have to prove O obtained actual K of claim, or O conducted an inspectionO charged w/ K that a diligent inspection would reveal (remember Van Sandt v. Royster with the sewer!) Underground occupation Its difficult to occupy subsurface locations openly & notoriously. To satisfy the O&N element, its probably necessary to prove that the owner knew of the occupation, or at least knew of the underground space and that it was accessible by outsiders. o Possession not open and notorious where A discovers entrance to a cave thats under Bs land, opens it up to public, the lims period ends, and B brings suit to quiet title. (Marengo Cave Co. v. Ross, 1937, DK125) Note: implicit that owner of surface parcel also owns the part of a common cave underlying the parcel. (ad coelum doctrine to whomsoever the soil belongs, he also owns to the sky and to the depths). Most property scholars think the decision was wrong

Modern property theory, b/c of Coase, would suggest the result in this case should have no impact on the use of the cave since the loser would buy out the winner. Low-transaction cost assumption overlooks a problem called bilateral monopoly (when two parties are locked into dealing w/ each other, giving rise to high negotiation costs that foreclose efficient transfers). They dont always kill beneficial bargains, but theyre a social problem b/c the transaction costs incurred by each party in an effort to engross as much of the profit as possible are a social waste they alter relative wealth of the parties, but dont increase aggregate wealth of society. AP of subsurface minerals B/c APor takes whatever title TO had, APor of surface acquires title to subsurface minerals if TO had title to them. If minerals were owned by someone other than the surface owner (TO) when the APor occupied the surface, the APor acquires title only to the surface. In that case, APor would have to remove minerals in a manner that meets each of the elements of AP. Boundary disputes Some jurisdictions hold that encroachments by one neighbor onto the land of another are not O&N if the encroachment is of a small area and is not clearly and selfevidently an encroachment. Here, the SoL doesnt begin to run unless owner has actual K of the inadvertent encroachment. (Mannillo v. Gorski, 1969, DK130). Most jurisdictions follow the Objective Test for hostile elementintent is irrelevant, so long as the APor used the land as a reasonable owner would. But TO must have actual K of minor encroachment along boundary line for possession to be O&N (Mannillo v. Gorski) May also be resolved by the doctrines of agreed boundaries, acquiescence, and estoppel. o Doctrine of Agreed Boundaries: if there is uncertainty b/w neighbors as to the true boundary line, an oral agreement to settle the matter is enforceable if the neighbors subsequently accept the line for a long period of time. o Doctrine of Acquiescence: Long acquiescencethough perhaps shorter than SoLis ev of an agreement b/w the parties fixing the boundary line. o Doctrine of Estoppel: Comes into play when one neighbor makes reps about (or engages in conduct that tends to indicate) the location of a common boundary, and the other neighbor then changes her position in reliance on the rep or conduct. First neighbor is then estopped to deny the validity of his statements or acts. Has also been applied when one neighbor remains silent in the face of expenditures by another that suggest the latters notion of the boundary location.

6. Adverse or Hostile & Under a Claim of Right

Requires: Must occupy the land w/o consent of the owner and w/ an intention to remain. APor has no permission to be there and also claims the right to stay there. Consent or permission means that the APor has occupied in some capacity subordinate to the owners title.

Disclaimers of Ownership If an APor disclaims ownership in order to persuade the owner not to sue, the possessor has stopped being adverse. The adversity element destroyed and limitations clock stops. Conclusion that adversity has ended is a little fictionalits just not fair to let the APor lull the owner into a loss of his rights.

Boundary Disputes Often one landowner mistakenly occupies a strip of her neighbors land in the belief that its her own. Most courts apply an objective test of hostility to these cases. If the encroaching owners actions appear to the world to be those of a TO (e.g., she built a fence), she occupies adversely to her neighbor. MAINE DOCTRINE: APor must intend to claim title to all land up to a specific line (fence, hedge, road) whether or not it is the true boundary A minority applies a variant subjective test, the Maine doctrine, after Preble v. Maine Central Railroad (DK 131). In it, the occupier is not possessing adversely if she occupied under a good faith but mistaken belief that the land is hers, but she would not have occupied if she knew the true facts. This isnt the same as the subjective good faith test. o Frequently Kd b/c encourages perjury (Sure, I wouldve stayed anyway), rewards the intentional trespasser but not the honest one, and requires a difficult and contested judgment about what someone mightve done if their state of knowledge had been different. (minority view!) o Kd in Mannillo v. Gorski (DK 132) for rewarding intentional wrongdoer and disfavoring an honest, mistaken entrant.

3 views of hostility

1.

Subjective: good faith occupation: Under this test, the APor must have a genuine, good faith belief that she owns the occupied property. Possessors who know that the property they are occupying is not their own can never acquire title by AP in a jurisdiction applying this version of hostility. o TO tells Friend that the farm is his; Friend occupies for SoL period, but isnt the owner cause land cant be transferred by oral conveyance. But acquires it by AP b/c believed the farm was his own. Entry not subordinate to owners continued claim of title; TO intended to pass land to Friend. (Newells v. Carter, Me. 1922) o Kd b/c rewards slothful owner, penalizes the productive occupier who lacks a good faith belief of ownership, and does little to promote settlement of clouded titles. o Claimed to be the minority test, but Hemholz (DK127) says majority (all cts implicitly require it) b/c squatters and other deliberate trespassers rarely win w/o a strong equitable case. To enter upon the land w/o honest claim of right to do so is but a trespass and cant ripen into prescriptive title. (Halpern v. Lacy Inv. Corp, Ga., 1989, DK127). In this case, ev Halperns knew land owned by another yet just took possession when offer to purchase was declined. 2. Subjective: Aggressive/Intentional Trespass: There are a few old cases that appear to require the occupier know the property is not his own but intend to claim it nevertheless. o APor must (1) know that he doesnt actually own the land, and (2) subjectively intend to take title from TO. (Van Valkenburgh v. Lutz, suggesting occupants good faith belief that they owned the land under encroaching garage precluded hostility) o Reigle and Shingledecker moved onto a parcel they knew wasnt theirs; for 20 years used as average owner would, never claiming ownership; said they intended to leave when real owner, the old soldier, should come for it, but not till then. Court awarded title to themthey intended to claim it against all but old soldier, whose claim was time-barred. (Patterson v. Reigle, Pa, 1846, DK 127) o Almost no one adheres to this view today rewards only the most determined of deliberate trespassers. o Compensation requirement would be imposed to punish and deter consciously wrongful activity. BUT court rejected comp requirement in case concerning a prescriptive easement (Warsaw v. Chicago Metallic Ceilings, Inc., Cal, 1984, DK128). 3. Objective: State of mind irrelevant: Under this test, often claimed to be the majority view (see Totman v. Malloy and Tioga Coal Co. v. Supermarkets Gen. Corp. and Chaplin v. Sanders, DK126-7), the state of mind of the occupier is essentially not relevant. Instead, courts focus on two things: o 1) Lack of permission (in the sense that the occupation is not subordinate to the owners title) o 2) Whether the occupiers acts and

Color of Title not Claim of Right Claim of right describes the element of hostility or adversity. BUT a possessor who enters under color of title is one who has a defective deed or other writing that purports to deliver title to the possessor, but which the possessor does not know to be invalid. Deed might be improperly executed, forged, or signed by somebody who doesnt own the land. Note: Possessors who enter under color of title satisfy the adversity element. Only a few states require color of title to satisfy hostility, or adversity. Color of title has other implications concerning how much land the occupier is deemed to have APd.

7. Continuous Possession

Requires: Must occupy continuously without interruption during the limitations period. APor must occupy the property as continually as would a reasonable and average TO of the property. If the possessor ever abandons the propertyintentionally gives up possession w/ no intent of returningcontinuity is destroyed. A later return by the possessor triggers a new cause of action in the owner and the start of a fresh limitations period. This element combines w/ the subjectivity of the possessors state of mind (When he left, was it always his intention to return?) with objective appraisal of what the possessor actually did. If possessor always intended to return, and treated absences as sojourns, and actually occupied for as much time as an average owner would, this element is satisfied. o Possession and dominion as ordinarily marks the conduct of owners in general in holding, managing, and caring for property of like nature and condition. (Whalen v. Smith, in Howard, 1918, DK 139). Summer occupancy ok: Occupancy during summer months of a summer beach home sufficient for uninterrupted possession (Howard v. Kunto, DK139). Note: AP may exist even if occupant doesnt reside on property and for long periods doesnt use it at all (see Ewing v. Burnet, 1837, below, DK124) BUT generalization that use of property as TO would AP has exceptions. o AP of 8-acre wooded tract not established notwithstanding that the claimant used the land for a variety of purposes throughout the statutory period (Pettis v. Lozier, Neb, 1984, DK125) Exception: Tacking o Successive periods of AP by diff ppl may sometimes be combined together to satisfy the statutory duration requirement. o Permissible only if successive claimants are in privity w/ each otherwhen one claimant transfers possessory rights to another o Most commonly made by deed; can be effected thru devise or intestate succession

8. For the Statutory Period


Ranges from 5 to 40 years Most states have periods of 10, 15, or 20 Western states: shorter period (10 or less) Northeastern states: longer period (20+) Special circumstances may extend (or toll) the statutory period Some jurisdictions shorten the period for AP if claimant holds color of title

9. Payment of Taxes
Some states (mostly in the West) require APors to prove theyve paid property taxes on the occupied property for the duration of the lims period. (DK 124) B/c tax collectors usu. make the owner aware of a strangers attempt to tender taxes, this element makes it unlikely that a person can AP w/o uncommon negligence on the part of the other owner or a mutual mistake as to ownership of the property. AP of lot used for digging sand/gravel established, when claimant (under color and claim of title) paid taxes, dug sand and gravel, brought actions of trespass against others for doing so w/o permission (Ewing v. Burnet, DK124)

3.

EXTENT OF THE PROPERTY ACQUIRED BY AP

What is the physical extent of the occupied property? Depends on whether APor entered w/ or w/o color of titleunder a defective deed or other instrument of title but w/o K of the defect.

Entry w/o color of title: Acquire only the land they have actually physically possessed for the limitations period. o Entry under color of title: Deemed to possess all the land described in the defective deed, so long as it consists of a single parcel and the possessor has occupied a significant portion of the parcel. Remember: lacks color of title if doesnt believe, in good faith, that his defective deed is valid.

Enters Blackacre (100 acres), actually possesses only 50 deemed to have constructively possessed the remaining 50; acquires title to all o H gives you deeds to 1 and 2, actually owned by X and Y, but you think owned by H; you occupy half of 1 and none of 2 acquire title only to 1, b/c Y couldnt have reasonably known that you thought you owned 2. Constructive possession never as good as actual possession; APor entering under color of title doesnt acquire title to land that (tho described in the deed) is actually occupied by someone else. o You enter Blackacre (100 acres), occupy 60, b/c a squatter has taken possession of 40 can only acquire 60. o X owns 100 acres, you enter under color of title to whole plot, but occupy 2, building a cabin can acquire title to 2, but nothing more. Actual possession of 2 better than Xs constructive possession, but Xs (the TO) constructive possession of the rest (unoccupied) is better than your constructive possession.

APor can only get what the old owner hadif X owned life estate, APor gets a life estate till X dies. If X had fee simple absolute subject to mortgage lien, thats what APor gets.

4.

ISSUES (STATUTORY AND OTHERWISE TACKING, TOLLING, ETC)

i. Tacking
o
Tacking adverse possessors: Common problem w/ continuity is whether one possessor can add tack the possession of a prior possessor to his own. If privity of estate exists b/w the prior possessor and the present possessor, tacking is permitted. Purchaser may tack adverse use of its predecessor in interest to that of his own where the land was intended to be included in the deed b/w them, but was mistakenly omitted from the description. (Buchanan v. Cassel, in Howard, 1959, DK 139) In Buchanan, X buys certain property described in a deed from seller, who had also (unknowingly) APd a strip adjascent to the described land. If ev shows the deed to X was intended by the parties to convey not only described land but APd strip, X is allowed to tack that strip onto the land described in the deed. Howard (relying on clear intentions of parties in privity w/ one another) extends Buchanan to situation where the deed describes none of the land in Q, such that there is nothing onto which the APd land can be tacked. Tacking of AP is permitted if the successive occupants are in privity. (Faubion v. Elder, in Howard, 1956, Wash, DK 140). Here, appellants were claiming more land than their deed described and where successive periods of occupation were allowed to be united to each other to make up the time of adverse holding. Requirement of privity is no more than judicial recognition of the need for some reasonable connection b/w successive occupants of real property so as to raise their claim of right above the status of the wrongdoer or trespasser. (Howard v. Kunto, DK 140).

Privity of estate the voluntary transfer from the 1st possessor to the 2 possessor of either an estate in the land or actual possession of it. (Note: In servitudes, privity of estate has a different meaning.) o Tacking owner: Tacking follows automatically on the owners side. Once the SoL has started to run, the cause of action for ejectment (together w/ its expiring limitations period) goes along w/ ownership.
nd

10. Ouster

Ouster: If an APor is ousted from possession by a 3rd party, 3rd party may not tack ousted possessors period of possession onto his own. Privity is lacking b/c the transfer wasnt voluntary. Courts take three views of what happens if ousted possessor returns. View most favorable to TO (may be least preferred by American courts) limitations starts anew w/ the re-entry. Treats ousted possessors harshly, ignoring their determined (and successful) effort to regain possession. View most favorable to APor ouster does not interrupt the continual running of the limitations period. o Problem: permits ousted possessor to tack her possession after re-entry onto 3rd partys possession, but no privity to support this conclusion. Courts paper over this flaw by calling the ousting 3rd party a trespasser rather than possessor, and treating ousted possessor as being in constructive possession during 3rd partys occupation. Intermediate view (preferred by some academics) the ouster possessor can tack her new possession onto her old possession but cant take credit for occupation by the 3rd party. For the duration of 3rd partys occupation, lims period is tolled, or suspended. for the possessor to acquire title she must occupy for the lims period plus period of 3rd party occupation.

11. Tolling: starting the SoL later


o
SoL typically provide for tolling (suspension) of the lims time clock if owner is disabled from bringing an action to recovery possession at the time the cause of action accrues. Statutory disabilities vary but typically include: 1) Insanity or other unsound mind 2) Imprisonment 3) The condition of being a minor. o Typical statute provides that if the owner is disabled at the time the cause of action accrues, the owner may bring suit for some specified period after the disability ceases, even though the normal lims period has expired.

12. AP against the gov


Under CL rules, AP doesnt run against the gov. American courts have relied on this rule as well as state constitutional provisions restricting alienation of state lands. Courts often say the state owns its land in trust for all the people, who shouldnt lose the land b/c of the negligence of a few state officers or employees. o

Some states have changed the CL rules, by legislation or judge-made law. A few permit on same terms as against private land. Others permit only if possession continues for period much longer than that applied in case of private lands. Others permit only against gov lands held in proprietary (as opposed to public or governmental) capacity. Even w/o such changes, the gov may be estopped from asserting any right to land where a person improves the land w/ K and acquiescence of gov officials. (Clinton Natl. Bank v. City of Camanche, Iowa, 1977, DK143 fn26)

13. AP by Tenants and Co-Owners


Tenants: Not usu. capable of AP b/c their entry was permissive (subordinate to owners claim of title). They lack hostility, or adversity. Takes extraordinarily explicit and clear action on tenants part to do this. Co-Owners: One co-owner may not usu. AP against co-owner b/c every co-owner has equal right to possession. Co-owners possession not adverse to the claim of ownership of fellow coowners. To possess, adverse co-owner must oust the other co-owner by excluding the co-owner from possession and claiming sole ownership.

14. Lienholders and Future Interest Owners


Lienholders (e.g., mortgage lenders) have a claim on the property but no righ tot possession until and unless default and foreclosure, so claims not destroyed by expiration of the lims period. Holders of future interests are not entitled to possession now. AP doesnt cut off their future claim to possession. When the future interest holder becomes entitled to possession, his cause of action accrues and the lims period starts running.

5.

AP OF CHATTELS

Title to chattels can be acquired by AP; a shorter SoL usually applies (2-6 years) Not suited to chattels. Possession of chattels in the manner of TO is not usually open and notorious. (O&N usually) Traditional approach requires possession of chattel to be: 1) Actual 2) Adverse 3) Hostile 4) Exclusive 5) Open & Notorious 6) Continuous for SoL period (2-6yrs) (subject to limitations)

OKEEFE V. SNYDER (NJ, 1980, DK144) [Artist (P) v. Adverse Possessor (D)]
Facts: P wanted her paintings back, alleging they were stolen in 1946. D asserted he bought them and acquired possession through AP, and P was barred by expiration of the 6yr SoL pertaining to action in replevin. Rule: The discovery rule controls in actions involving the AP of chattels. o Discovery Rule: A cause of action will not accrue until the injured party discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis of a cause of action.

Holding: Focus no longer on meeting requirements of AP, but on whether owner acted w/ due diligence in pursuing his/her personal property. Under discovery rule, if artist diligently seeks recovery of a lost/stolen painting, but cant find it or discover the identity of the possessor, SoL wont run yet. The burden is on the owner as the one seeking benefit of the rule to establish facts that justify deferring running the SoL. If SoL does begin, expiration of 6 year period should vest title as effectively under discovery rule as under AP. o Purpose of SOL is to stimulate activity and punish N and promote repose by giving security and stability to human affairs. (Wood v. Carpenter, 1879, DK148)

TRADITIONAL APPROACH Requires the 6 conditions (above) for AP Critique: if the elements of AP are intended to give adequate notice to the TO of the chattel so as to start the SoL running, might argue that the notice provision is insufficient b/c chattels are not like real property (OKeefe v. Snyder) o Real property is immobileits ordinary use by APor may provide notice to TO. Law presumes owners periodically inspect their land o Chattels are portableAPors use usually not put TO on notice DISCOVERY APPROACH (New Jersey, California) SoL begins running only when TO actually knows (or reasonably should know) that the APor holds the item. (New Jersey, in OKeefe v. Snyder) o Does not commence unless conduct of APor is obvious enough to place a diligent owner on notice Puts significant burden on APor. o To commence SoL period for recovery of painting, APor might be required to maintain painting on public display in a museum or publish news ads seeking TO Good faith APor who is unaware of competing claimant unlikely to take these steps and wont acquire title Bad faith APor who knowingly complies w/ the law will obtain title from the negligent owner Discovery Rule by Statute? o Californiahas adopted one. o Indianafollows discovery rule in OKeefe. Where mosaics stolen by Turkish forces from Church in Switzerland, appearing 9 years alter and sold to art dealer in Indiana, the court said Cypriot owners were duly diligent in notifying the art world of the theft and SoL hadnt run. Due diligence determination is highly fact-sensitive and must be decided on a case by case basis. (Greek-Orthodox Church of Cyprus v. Goldberg, DK155) Note the exceptions discussed on DK 154-155, though, such as New York's refusal to follow the discovery rule. DEMAND AND REFUSAL APPROACH (New York) SoL period for replevin action against good faith purchaser of stolen chattel does not commence until purchaser receives and refuses the owners demand to turn over possession of the item. Solomon R. Guggenheim Found. v. Lubell (NY, 1991, DK154) o NYrefused to adopt discovery approach b/c it provides insufficient protection for owners of stolen artwork. SoL doesnt begin to run until TO makes a demand for return and the good-faith purchaser refuses. Until demand, possession of stolen property by good-faith purchaser is not considered wrongful. (Guggenheim v. Lubell, DK 154) Offers owners even greater shelter than discovery approach

6.
o

ALTERNATIVES TO AP IN BOUNDARY DISPUTES

Other methods to solve boundary disputes:

Ad coleum Doctrine: Ownership of the soil also includes what is above & below the land (Marengo Cave Co. v. Ross,DK125) Doctrine of Agreed Boundaries: if neighbors have an oral agreement to settle what the true boundary is, the matter is enforceable if that line is accepted for a long period of time Doctrine of Acquiescence: Long acquiescence, even for a time shorter than SoL, is evidence of agreement between parties fixing a boundary line Doctrine of Estoppel: When 1 neighbor makes indications of the location of a common boundary and the other neighbor changes his position in reliance on those representations, the 1st neighbor is estopped to deny the validity of his statements or acts Estoppel has also been applied when 1 neighbor remains silent

(maybe missing A and B p24 Emmanuels on bailments)

7.

ACCESSION

Occurs when a person in good faith adds his labor to the property of another, or in good faith mixes his labor and his property w/ property of another. When only labor is added the owner of the original prop owns the resulting product Unless the value added by the labor is substantial laborer owns the resulting product but must compensate the owner of the original property for the trespass. When labor and new material is mixed w/ anothers original property goes to whichever person supplied the more significant and valuable material. If its the good faith improver, she must pay for trespass.

Mistaken Improver of Real Property o Person who in good faith constructs an improvement on the land of another (usu. a neighbor) creates in the neighbor an option to either (1) sell the land to the improver at its fair market value (net of the improvement) or (2) paying the improver the fair value of the improvement itself. o Under CL (harsh), anything built on the wrong land, whether in good faith or not, became property of the landowner. o Modern tendency (as Mannillo indicates) is to ease plight of innocent improvers in that case, forcing a conveyance (at market value) of land from owner to improver. Variation is to give landowner option to buy the improvement instead. o If inconvenienced caused by innocent encroachment is so minor as to be trivial, relief might be denied altogether. If encroachment takes up substantial part of land in Q, removal might be ordered notwithstanding good faith of encroacher, depending on how the court strikes a balance b/w competing considerations. o Amkco Ltd., Co. v. Wellborn (N.M, 2001, DK 135) Unintentional encroachment took up almost 10% of Ps land. Court applied two-part test: 1) P has to show that it would suffer irreparable H if removal were denied. 2) Even if irreparable H proved, relief might still be denied under balancing test that compares the hardship to P if removal is denied to hardship to D if its granted. If hardship test precludes removal, encroacher acquires either title or an easement in land and pays damages accordingly.

H.

ACQUISITION BY GIFT (PERSONAL PROPERTY)

Gift = voluntary transfer of property for no consideration. To accomplish a gift of personal property, donor must intend to make a gift, the property must be delivered to the donee (recipient), and the donee must accept the property (Matter of Szabo, cited in Gruen, DK168). Commonly divided into gifts inter vivos (during life) and gifts causa mortis (in contemplation of impending death). Future transfer onlyNo gift. If a condition precedent must be fulfilled before a gift becomes effective, no immediate transfer has occurred and no gift will be found. Life estate and remainderGift. In Gruen v. Gruen, life estate in father and remainder to son Trust UPL474 Testamentary Trust (in a will, upon death) Inter Vivos (during life, effective immediately, gives trustee FS, but revocable) INTER VIVOS (IV): Requires: 1) Intent (donor must intend to make an immediate gift) 2) Delivery (dolor must deliver the gift) 3) Acceptance (donee must accept the gift) Gift is made w/o knowledge or threat of impending death. Irrevocable. CAUSA MORTIS (CM): Requires: 1) Intent (donor must intend to make an immediate gift) 2) Delivery (dolor must deliver the gift) 3) Acceptance (donee must accept the gift) 4) Donors expectation of imminent death Gift is made w/ knowledge or under threat of immediate death and motivated by that fact. Revocable if the donor recovers from the illness or threat causing donor to make gift in contemplation of death, or if donor dies of some other cause that didnt prompt the gift. Courts view CM w/ some skepticism b/c donor is likely to be dead and completed gift is a substitute for a will and undercuts value of Statute of Wills (form of giving at death, laden w/ formalities to be sure dead persons wishes are accurately carried out). Recent cases find contemplation of imminent death requirement met where person made gifts in anticipation of suicide (In re Estate of Smith, DK165). Strict approach to gifts causa mortis may not longer be justified modern trend is to enforce decedents intent even if ev of some failure to comply w/ the wills act formalities, so long as clear and convincing ev of donative intent (DK165).

1.

INTENT

Donor must intend to transfer title. If donors intent is merely to transfer possession, no gift has been accomplished. o Ev on this element is usu circumstantial, unless donor executes a deed or some other written expression of donative intent. May be shown by oral evidence. Statements & actions of donor: Intent to transfer rights established by letter. Gruen v. Gruen. Gifts causa mortis: Donors intention is presumed to be to make the gift only b/c of impending death. But if donor intends gift to be irrevocable regardless of her impending death, its not a gift CM (revocable), but IV.

2.

DELIVERY

General rule: subject of the gift must be delivered to recipient in order for gift to be complete. Requires objective acts. Best form of delivery is actual physical possession, but not always required. Where physical delivery impractical or impossible, delivery may be accomplished by symbolic delivery or constructive delivery.

GRUEN V. GRUEN (NYCtApp, 1986, DK166) [Son/donee (P) v. Stepmother (D)] Life estate and remainder!
Facts: P received a letter from his father indicating father wanted to make a gift of a painting, but father wished to use it for his life. P never took possession. After fathers death, P requested the painting from D, who refused. P sued, contending an inter vivos gift had been made; D contended no valid gift could be made if donor retained a life estate and no physical delivery was made during life. Rule: A valid inter vivos gift of chattel may be made where donor reserves a life estate and donee has never had physical possession until owners death. Holding: Donative intent was established constructively through the document of transfer (letter). Remainder interest was a presently existing property right; letter (actually, the 3 letters together should be considered together as a single instrument, Matter of Brandreth, in Gruen, DK168) was sufficient b/c it would be illogical for the law to require the donor to part w/ possession of the painting when that is exactly what he intends to retain. Acceptance is implied b/c the painting had value, P also acknowledged the gift to friends and retained it for 17 years. Thus, a valid gift was made. Correct Test: Whether the maker intended the [gift] to have no effect until after the makers death, or whether he intended it to transfer some present interest (McCarthy v. Pieret, in Gruen, DK170). As long as ev establishes intent to make present and irrevocable transfer of title or right of ownership, there is a present transfer of some interest and the gift is effective immediately (Speelman v. Pascal, in Gruen, DK170). Postponement of enjoyment of gift produced by express terms of gift, not nature of instrument as it is w/ a will (Robb v. Washington & Jefferson Coll., in Gruen, DK 170). Note: Estates in chattel can be created just as various estates in land are. The property here was personal (rather than real) yet creation of remainder interest was valid. Its clear father intended to make a current transfer of such interest, while retaining a possessory interest (life estate). Note: If father typed and signed a letter saying, I give you the painting when I die, this is NOT a valid lifetime giftit is a will. Shows no intention to give P any rights now, but only when father dies; as a will, its not valid unless properly executed as a will, w/ witnesses. If father transferred a remainder interest during his life, retaining a life interest in painting value of assets transferred during decedents life w/ retained lifetime possessory interest is subject to surviving spouses elective share (U Probate Code, DK172)

i. Rationale

Delivery has three valuable functions (Prof. Mechem, DK157): 1. Making abstraction a reality: When donor must part w/ cherished possession, the idea of giving becomes real. A donor will part w/ possession of object only if she truly wishes to give. (Actions speak louder than words) 2. Objective ev of intent: Intent is subjective, but delivery is objective. Delivery acts as a secondary check on intent. 3. Objective ev of acceptance: Delivery of property is presumptive ev of acceptance by donee.

1. Delivery re: Intent


To the extent that the element of delivery is easily satisfied by something other than delivery of actual physical possessioneither symbolic or constructive deliverythe element of delivery becomes virtually the same as intent. In both cases, the issue becomes, What did the donor intend by her acts? Traditional rule: gift promises (Ill give you this when I die) are legally unenforceable for lack of consideration.

2. Delivery by Deed
Delivery can be accomplished by a deed of gift or other writing under seal. Though the law no longer makes much of the distinction b/w sealed instruments (e.g., a notarial seal) and unsealed instruments (e.g., signed by the marker), this distinction still persists here. o Some courts only recognize sealed instruments as adequate to deliver by writing. o But unsealed instruments may accomplish the work of delivery if they are adequate to constitute symbolic or constructive delivery.

3. Symbolic Delivery
When actual physical delivery is impossible or impractical, delivery can be accomplished by delivering some object that is symbolic of possession (e.g., written instrument declaring the subject matter). BUT, Restriction on symbolic delivery relaxed somewhat. o Some states have statutes providing that symbolic delivery by writing is always permitted (CA). o 2nd Restatement says that a gift of a watch by a document is valid, even though it would be easy to take off and hand it over. Where A handed four bonds to B at a restaurant, put them in box, over the years added more bonds, left note in box saying Upon my death, contents go to B, B only entitled to first four bonds hand delivered to her; remaining contents not delivered even though B was a JT of the safe deposit box (Hocks v. Jeremiah, OrApp, 1988, DK159).

4. Constructive Delivery
When actual physical delivery is possible but impractical, delivery of some object that is the means of obtaining possession of the property constitutes constructive delivery (e.g., a key). Traditional rule: if it can be handed over, it must be. Indications that this rule is eroding. Where donor who received a check endorsed it, put it on donees table w/ suicide note, the court stated it would find constructive delivery adequate when: the ev of donative intent is concrete and undisputed, where theres every indication the donor intended to make a present transfer of subject matter of gift, and when the steps taken by donor to effect such a transfer mustve been deemed by donor as sufficient to pass donors interest to donee (Scherer v. Hyland, NJ, 1977, DK158).

NEWMAN V. BOST (N.C.SupCt, 1898, DK159) [Donee (P) v. Estate administrator (D)]
Facts: P sought to recover value of gifts CM sold by the decedents administrator (D) who didnt believe any valid gifts were made to P. (On his deathbed, Jack gave P all the keys to the household furniture, saying he intends for her to have everything in the house.)

Rule: A constructive delivery of a gift CM will be effective where it plainly appears that it was the intention of the donor to make the gift, and where the things intended to be given are not present, or, where present, are incapable of manual delivery from their size or weight. Holding: Where the articles are present, and are capable of manual delivery, manual delivery must be made. Delivery of keys = constructive delivery of furniture, b/c impractical to make physical delivery under the circumstances. But delivery of keys is not constructive delivery of life insurance policy locked in a bureau drawer, b/c not impractical to deliver the tangible ev of the life insurance rightthe policy itself. o All other furniture, except in Ps bedroom, remained in the estate. The piano was never w/i her dominion and control and there was never any delivery, so it didnt pass to her. o Disallowing symbolical deliveries of gifts causa mortis, or constructive deliveries as here, prevents devaluation of statute of wills. Distinguishes Thomas v. Lewis (VA, p162, cited in Newman), where articles were taken out of bureau drawer, handed to donor, and delivered by him to donee. Actual manual delivery gift.

5. Special Problems
AGENTS: When donors deliver property to an agent of the donee, delivery is complete. But sometimes its not clear whether the third person is an agent of the donor or donee. If delivery is to the donors agent there is no delivery b/c its as if donor had delivered the gift to herself. Attorneys: When donor delivers property to her own atty for benefit of donee, courts split over whether lawyer (whose client is donor) can be agent of donee. Risky form of delivery, involves court debates over whether delivery is of independent significance or just a redundant test of donative intent. Delivery on Death: If donor delivers property to a third party under instructions to deliver to donee on death of donor, there may be no gift. o Condition attached to death sometimes seen as impermissible attempt to avoid formal requirements of will, and thus invalid. o Preferred (modern) view gift is complete upon delivery to donees agent, regardless of condition attached. o Reasons: Delivery has been made to donee through her agent. Attached condition amounts to little more than the creation of a valid oral trust, w/ donees agent as trustee./ Choses in Action: Delivery requirements of chose in action (an inchoate legal right) depend on whether the chose in action has assumed tangible form by a writing. o Choses in action reduced to a writing (e.g., promissory note, insurance policy) must be delivered in the same way as tangible personal property. To delivery by written assignment it is necessary to show that the assignment is a valid symbolic delivery. o Those not reduced to writing (e.g., a personal injury claim) may always be delivered by a written assignment w/o necessity of proving symbolic delivery. Donee in Possession: When donee already has possession, no need to perform useless act of shifting property back and forth to prove delivery. Its been delivered; once is enough. FAULT: Donor cannot recover ring if donor is at fault. BUT: Where A gave B engagement ring, and engagement is broken, court said ring must be returned to A (donor) regardless of who broke the engagement (Lindh v. Surman, Pa, 1999, DK159). Can also be seen as a condition subsequent (marriage) CHECKS: O writes check to B on her checking account, hands it to B; before B can cash it, O dies. No gift until check paid b/c donor retains dominion and control of funds; donor could stop payment or die, revoking command to bank to pay the money (Woo v. Smart, Va, 1994, DK159). BUT, Valid gift of checks on facts similar to Woo (In re Estate of Smith, PaSupCt, 1997, DK 159)

3.

ACCEPTANCE

A gift is not complete until it has been accepted by the donee. (DK171) Delivery triggers a presumption of completed gift; can be rebutted by donees rejection of gift. o Presumption of acceptance is strongest when the gift benefits the donee and virtually nonexistent when the gift is (rarely) of no benefit. o A donees delay in rejecting known unwanted gifts also endangers the donees ability to claim that there was no acceptance. o

o When a gift is of value to the donee, law will presume an acceptance on his part. Gruen v. Gruen

II. POSSESSORY ESTATES (OWNERSHIP INTERESTS)

Fee Type

Words of Limitation

Duration

Limits on Inheritability

Relevant Cases

Divestment

Future Interest

Grantor

3rd Person

Fee Simple Absolute

To A To A and her heirs

Infinite

None

Never

None

None

Fee Simple Determinable ENDS AUTOMATICALLY

To A so long as

until while
during unless

So long as the conditions specified endure.

None

Mahrenholtz word only FSD


(used for school purposes only; otherwise to revert to Grantors herein)

Automatic Termination

possibility of reverter.

n/a

Notemost cts will construe as FSSCD to avoid forfeiture

Fee Simple Subject To Condition Subsequent ENDS UPON REENTRY

To A but if

Until specified event occurs

None

upon
condition provided that

however

Cut Short: Terminates once the grantor exercises his right to re-entry (which vests at the moment the condition occurs)

right of re-entry AND must exercise it.

maybe executory interest

Fee Simple Subject to Executory Limitation SAME AS DETERMINABLE EXCEPT DIVESTS IN FAVOR OF 3RD PERSON

but if plus
then to 3rd person other limiting language as in condition subseq

Until specified event occurs

None

Divested in favor of 3rd person

possibility of reverter

executory interest

Fee Tail Only Del, Maine,

to A and the
heirs of his body to A and her bodily heirs (lineal descendents)

Mass, RI, SC
have it. Important in feudal times because it kept land in the family of wealthy nobles.

Only so long as the grantee or any of his descendants survives. Each descendant gets a life estate.

Can go only to lineal descendents

Automatically transfers to next descendent, until all descendents die, then it reverts to O.

reversion

remainder

Life Estate -cant do much with a life estate, cant get loan to improve property w/o consent of O or subsequent fee simple heirs

To A for life. To A for her lifetime

So long as A lives

Life Tenant can transfer, lease, encumber, alienate her estate inter vivos. Can only transfer the life estate and no more

Baker v. Weedon P (LE) v. D (remainder in FS) judicial sale if in best interest of all parties White v. Brown where will clearly state intent FSA (to
have my home to live in and not to be sold)

reversion

remainder executory interest?

Life Estate pur autre vie

To A for the life of B. A (life tenant) transfers to B for As life.

Until the end of measuring life.

None

Ends the moment the measuring life dies.

reversion

Defeasible Life Estate Determinable

to A for life
so long as A remains

So long as A lives and the condition continues

None

Terminates and reverts to O the moment that the condition ends

reversion

Defeasible Life Estate Condition subsequent

to A for life but if upon


condition provided that

So long as A lives and the condition does not occur.

None

A alive: terminates when event occurs and O reenters A dies O gets it.

right of reentry reversion

executory interest

Equitable Life Estate Gives life tenant or a trustee of the life tenant full powers of fee ownership during that tenancy.

to X in trust
for A for life

X owns legal fee simple. A can get all profits from land during his lifetime. A can also be named trustee and act as a fee simple owner during his life tenancy.

None

Term of Years NON-FREEHOLD

to A for X years

X years

Ends automatically after X years

reversion

remainder

A. HISTORY - ORIGINS & TAXONOMY OF FREEHOLD ESTATES

1.

ESTATES (GENERALLY)
A legitimate possessor of landreal propertyowns an estate in land rather than the land o Possessory Estate a legal right to occupy the land immediately. Divided into:

itself.

Freehold estates various types of what nonlawyers think of as ownership Nonfreehold/Leasehold estates possession subordinate to owners rights of ownership. o At CL, distinction b/w freehold and nonfreehold freeholder had seisin and nonfreeholder had possession but not seisin. o May be of perpetual duration or for some shorter period.

Future Interest the right (and sometimes only the possibility) to possess the land at some time in the future. o A presently existing estate, but no right of possession until some future event(s) occur.

2.

FEUDAL TENURES

Feudal Incidents: A tenant was owed duties and was subject to several liabilities benefiting his lord. Feudal incidents gave the lord possession of the land or its equivalent. They included: o Homage and fealty military tenants swore support to his lord in a solemn ceremony. o Aids entitled a lord to demand help from tenants in case of financial emergencies. o Forfeiture if tenant breached oath of loyalty or refused to perform feudal services, his land was forfeited to the lord. Lords accepted principle of heredity succession by 13th century, but insisted in incident of revocability or forfeiture. Upon death of tenant, there were a cluster of incidents: o Wardship and Marriage: When a tenant died leaving an heir under 21, the tenants lord was the heirs guardian, entitled to possession of tenants land, w/ its rents and profits, but w/ obligation to provide the heir subsistence and not commit waste. o Relief: When a tenant died, the heir had to pay the lord an appropriate sum (perhaps a years rent) to come to his inheritance. o Escheat: If a tenant died w/o heirs, land returned to the lord from whom it was held. (Similar if convicted of a felony). Modern form person dies intestate w/o heirs, property escheats to state. Feudal Death Tax Avoidance (usually by the rich) - Two ways to transfer possession of land. o Substitution A tenant in demesne could substitute for himself some new tenant who would hold the land from his lord; required lords consent and homage to lord from new tenant. o Subinfeudiation Tenant could, w/o lords consent, add a new rung to bottom of the feudal ladder, becoming a mesne lord and having a tenant who rendered him services.

B.

FEE SIMPLE
Most common freehold estate. Two types: o Fee simple absolute complete ownership until the end of time; can endure forever o Fee simple defeasible can be terminated upon the happening of some specified future event. (see below) Words of purchase describes person(s) who are the takers of the fee simple absolute (To A) Words of limitation words limiting the duration of the estate (and her heirs)

1.

CREATION OF FEE SIMPLE ABSOLUTE

Common Law o To A and her heirs. at CL meant A was granted an estate capable of inheritance and, thus, of potentially infinite duration. Did not mean As heirs (who would not be known b/c A, being alive, had no heirs) had an interest in the estate. o If grant didnt include words of limitation, only a life estate was created, even though grantors intentions might be clear.

Modern View o To A In every jurisdiction, not necessary to use the words of limitation (and her heirs) to create fee simple absolute. By statutory change or judicial decision, the usual rule is that a grantor conveys her entire estate unless the grant is to the contrary.

2.

ALIENABILITY, DEVISABILITY, AND INHERITANCE

A fee simple absolute is freely alienable, devisable by will, or inheritable in intestacy (dying w/o a will).

ALIENATION owner of fee simple absolute (FSA) can convey the entire FSA to another person. o If O conveys his FSA to A, the FSA continues w/o interruption. It just has a new owner. o O can also split his FSA into lesser estates, but the sum of the estates will add up to a FSA. o If O conveys to A for life life estate in A; reversion retained by O. If O later conveys reversion to A, reversion and life estate will be merged and their sum is FSA in A. o Standardization of estates. Numerus clauses principle prohibition of new/customized property interest. Applies to all types of property interests. Fee simple can have no limitations put upon its inheritability. Reduces measurement costs. (DK186) Example: Royal Whiton devises land to my granddaughter Sarah and her heirs on her fathers side. Sarah takes a fee simple; can be inherited by her heirs on her mothers side. Cant create a new type of inheritancethis would put it out of the power of the owners to give a clear title for generations. (Holmes in Johnson v. Whiton, Mass. 1893, DK185)

DEVISE In England, estate couldnt be devised (transferred by will) until Statute of Wills in 1540. Until then, estate could pass at death only to ones heirs. Heirs are prescribed by law; devisees can be anyone testator specifies in his will. o Today, owner of FSA can send it under his will to whomever he pleases, or split it up into pieces that, when added together, equal FSA.

INHERITANCE HEIRS

Transfers of property owned by a person dying without a will = a condition of intestacy, dealt w/ by statute that specifies the heirs. o Person with a will does not have heirs; she has devisees (of her real property) and legatees (of her personal property). Only a person dying intestate has heirs. o We dont know what someones heirs are till they die. ISSUE

o
kindred.

If decedent leaves issue (descendents), they take to the exclusion of all other

At CL, heirs were the decedents issue, and the rule of primogeniture applied: Estates in land went to decedents first born son; daughters inherit only in absence of sons. o Child out of wedlock (filius nullius) could inherit from neither mother nor father at CL. Today, inherits from mother and (if paternity acknowledged or proved) from the father. Adopted children inherit from their adoptive parents and sometimes natural parents as well. o Statutory Scheme Today: Sets aside some portion of decedents property for surviving spouse, distributes remainder to children. Ancestors: In absence of issue (spouse/children) parents. Collaterals: If no children, spouse, or parents heirs are collateral kin, or all persons related by blood to decedent who are neither descendents nor ancestors (brothers, sisters, nephews, nieces, uncles, aunts, and cousins).

At some point these people become so remotely related that theyre not treated as heirs Escheat: If intestate decedent has absolutely no heirs property will escheat to the state.

C.

FEE TAIL (FEE SIMPLE CONDITIONAL)


Virtually extinct. But fee tail problems mostly occur, if at all, w/ modern methods of destroying this

estate.

1.

ORIGIN & OPERATION OF THE FEE TAIL

Fee Simple Conditional Prior to 1285, A, the estate holder, was empowered to convey FSA if and when she should sire a child. To A and the heirs of her body Fee Tail Created 1285 by Statute de Donis Estate automatically passed from one generation to the next, expiring only when the lineal bloodline ran out; followed by reversion or remainder. To A and the heirs of her body(meaning her lineal descendants) o Purpose was to permit the landed nobility to keep their power over land centralized in their families bar descendents from alienating it. o Every fee tail was followed by either a reversion in the grantor or a remainder in a third party. These future interests (reversion or remainder) became possessory estates when lineal bloodline of FT holder runs out. Upon expiration, estate reverted to original grantor and through inheritance or devise (b/c grantor would prob be dead then) to the grantors presently living remote heirs or devisees.

2.

ELIMINATION OF THE FEE TAIL

History: Edward IV sought to undermine FT; court developed a means to allow the FT tenant in possession to obtain a court decree awarding him a FS (Taltarums Case, 1472, DK187). Today: Fee tail has been largely abolished by statute. Attempt to create FT leads to one of the following (most states fall into categories 2 or 3): 1. FT that can be ended by a simple conveyance 2. fee simple absolute (FSA) 3. fee simple subject to an executory limitation (FSSEL) 4. a life estate followed by a remainder in the issue of the life tenant 5. a fee simple conditional (FSC)

i. Fee Tail and Disentailing Conveyance

Fee tail is destroyed by a disentailing conveyance an ordinary conveyance of FSA. Exception to the usual rule that a grantor cant convey more than he owns. About 4 states permit the creation of CL FT (RI, DE, ME, and Mass) FT tenant can convert a FT into FS by a deed executed during life, but cannot bar the entail by will. Rarely encountered.
Example: O conveys to A and the heirs of his body.

A has a FT. If A wants to keep possession but wishes to own it in FSA, he must use a straw conveyance. A would convey to his lawyer in FSA and the lawyer would immediately reconvey it to A, thus giving A possession of and a FSA in the estate.

i. Statutory conversion to Fee Simple Absolute

Many states have, by statute or state constitutional provision, converted FT into FSA. Some statutes declare that an estate that at CL wouldve been FT is a FS. If creator of the purported FT owned FSA, grantee would also own FSA. Other states declare that FT shall not be recognized and a purported FT is a nullity (Texas Const. Art. 1, 26). These states then apply the presumption that a grantor intends to convey the largest estate he owns. Thus, if grantor owns FSA and purports to create FT he conveys FSA.
Example: O owns Blackacre in FSA and conveys it to A and the heirs of her body. A has FSA either because,

a) a state statute converts the purported FT FSA, or because b) the purported FT is a nullity and the presumption that O intended to convey his entire interest will send his FSA to A.

1. Statutory conversion to Fee Simple Subject to Executory Limitation


Creates in the 1st taker a fee simple subject to an executory limitation (FSSEL). An executory limitation, or executory interest, is a future interest in a transferee from the grantor that becomes possessory by either cutting off another transferees estate or cutting off the grantors estate at some future time. Some states provide that attempt to create FT will create a FS in the 1st taker under the grant, BUT if the purported FT has a remainder, the purported remainder will be given effect if and only if the 1st taker dies w/o surviving issue. (Cal. Civ. Code 763-4)

Example: O, owner of Blackacre in FSA, conveys to A and the heirs of her body, then to B and her heirs. A receives FSSEL the executory interest in B. As FS doesnt die w/ her; it either: a) becomes absolute (if she is survived by X), or If A is survived by her son (X), As successors in interest will own Blackacre in FSA. B will get nothing; her executory interest will lapse or expire. b) shifts over to B (if A dies w/o surviving issue) and becomes absolute in B. If A dies w/o surviving issue definite failure of issue Bs executory interest will become possessory and she own Blackacre in FSA. Bs interest is an executory interest b/c she is a transferee from O and her interst becomes possessory (if at all) but cutting off the FS held by A. Note: At CL, A would have a FT and B would have a remainder (which would become possessory when As bloodline expires indefinite or general failure of issue)

2. Life Estate and Remainder in life tenants issue


A few states permit FT to persist for one generation, then convert it to FSA. Treats the 1st holder of the FT as owner of a life estate, and recognizes a remainder interest in the issue of the life tenant.

Example: O conveys Blackacre to A and the heirs of her body. A has a life estate. Her issue owns a remainder in FSA. BUT this remainder is contingent upon A having issue. If A has a child (X) upon As death X will own Blackacre in FSA. If A dies childless the contingent remainder in As issue will fail and Os reversion will become possessory. O or his successors will own Blackacre in FSA.

3. Fee Simple Conditional created


Three states (South Carolina, Iowa, Tennessee) treat FT as creating FSC. These states dont recognize Statute de Donis as part of the CL received from England. The holder of a FSC has a life estate, but if a child is born to the holder she may convey FSA.

Example: O conveys Blackacre to A and the heirs of her body. A has a FSC and O retains a reversion. If A never has a child estate will expire on her death, and Os reversion will become possessory, creating FSA in O (or his successor to the reversion). If A has a child (X) A now has the power to convey a FSA (destroying Os reversion), but she must make the conveyance in order to create the FSA.

D.

LIFE ESTATES
1.

NATURE OF A LIFE ESTATE

Life estate = possessory estate that expires upon the death of a specified person (usually upon the death of the life estate holder). LE is always followed by some future interesteither a reversion in the grantor or a remainder in a 3rd party. o Reversion may only be created in the grantor o Remainder may only be created in a transferee.

Example: O, owner of Blackacre in FSA, grants it to A for life. o A has a life estate that expires on her death. o O has a reversion, which will become possessory upon As death. Example: O, owner of Blackacre in FSA, conveys it to A for life, then to B and his heirs. o O no longer has any interest in Blackacre. o A owns a life estate and B owns a remainder.

Judicial recognition of life estate had 2 important consequences: 1. Grantor of LE could control who takes the property at life tenants death. Supplanted FT as device to control inheritance. 2. As land/stocks/bonds came to be viewed as income-producing capital, trust management for life tenant developed. (One person, usually a bank person, manages property for benefit of the life tenant, paying life tenant income therefrom.

WHITE V. BROWN (Tenn. 1977, DK190) [Beneficiary (P) v. Heir at Law (D)]
Facts: Lide died and left a will stating, I wish P to have my home to live in and not be sold. Lides niece, D, claimed the will created a life estate and she obtained a remainder interest. P sued to quiet title, contending the will created a fee estate. Rule: Unless the words and context of a will clearly evidence an intention to convey only a life estate, it will be interpreted as conveying a fee estate. Holding: Decedent didnt evidence a clear intent to pass only a life estate in a sufficient way so as to overcome the strong presumption that a fee simple was conveyed; her attempt to restrain alienation was declared void as inconsistent with the estate and contrary to public policy.

Statutory presumptions against intestacy

Unless the words and context of the will clearly evidence her intention to convey only a life estate, it should be construed as passing in fee. If expression in will is doubtful, doubt resolved against the limitation and in favor of the absolute estate (Meacham v. Graham, in White, 1897, DK192) Cases construe language seemingly conveying LE, w/o provision for gift over after termination of LE, as passing FS instead. to be used by him for his support and comfort during his life (Green v. Young, in White, DK192) for and during their natural lives (Williams v. Williams, 1933, DK192) for her maintenance, support and comfort, for the full period of her natural life (Webb v. Webb, 1964, DK192) Court relies on TN statutory canon of construction that the testator intends to give away everything she owns in her will Legislation reflects policy preference for minimizing transaction costs by choosing straightforward regime that avoids conflict between different interest holders (i.e. fee simple vs. life estate) Strahilevitz: Court should be more honest and recognize that this is their rationale rather than passing it off as their attempt to figure out what the testator wanted o Ex post concerns about this law governing unsophisticated testators Dissent: Express language of the will indicated an insurmountable constraint on alienation, indicating a clear intent to create less than a fee estate.

i. Life estate pur autre vie


When the duration of a LE is measured by the life of a person other than the estate holder, it is a life estate pur autre viefor the life of another.

Example: O, owner of Blackacre in FSA, conveys it to A for life. If A then conveys his life estate to B, B will own a life estate measured by As life. If B dies during As lifetime, LE passes to Bs heirs or devisees until A dies (Collins v. Held, 1977, DK190). Example: O grants to A for the life of B.

A owns a life estate lasting as long as B remains alive.

4. Defeasible life estates

Life estates may be defeasible. Same rules apply to defeasible life estates as to defeasible

fees.

Example: O grants Blackacre to A for life, so long as he never farts. o A has a determinable life estate o O has both a possibility of reverter (which will become possessory if A farts) and a reversion (which will become possessory on As death if he refrains from farting). Example: O grants Blackacre to A for life, but if he ever farts, O retains the right to enter and retake possession. o A has a life estate subject to condition subsequent, and O has both a right of entry and a reversion. Example: O grants Blackacre to A for life, but if she ever farts, Blackacre goes to B. o A has a life estate subject to executory limitation in favor of B.

5. Life estates in a group or class of people


Life estate may be created in a group of people. Problem: some of the life tenants will die before others, and uncertainty whether surviving life tenants take the deceased life tenants share or whether the remainder(wo)man or reversion holder is entitled to possession.

Example: Snow White conveys Blackacre to all the dwarves for their lives, and then to NAMBLA. o If Doc dies, most courts hold Docs interest is absorbed by the remaining life tenants, rather than permitting NAMBLA to take Docs interest. Example: Snow White conveys Blackacre to all the dwarves for their lives, and upon the death of each one, to NAMBLA. o NAMBLA entitled to possession of Docs share upon Docs death.

6. Ambiguous grants
Courts try to follow the grantors intent, but that itself is often indeterminate. Other factors are often relied upon to decide whether a life estate or some other interest is created. White v. Brown court relied on three Tennessee statutes to presume FSA, being no clear ev to the contrary: o 1 common presumption that every grant or devise of real estate shall pass the entire interest of grantor/testator unless clear ev to contrary o 2 presumption that a will conveys the entire interest of testator in his real property unless contrary intention in will o 3 presumption against partial intestacy

7. Valuation of Life Estate and Remainder

Life estate is freely alienable during life, but the transferee receives the transferors life Market value of a life estate is thus a fraction of the value of FSA. o Determined by multiplying the life expectancy (in years) of the person whose life measures the duration of the estate by the annual value of possession and discounting the product to reflect the fact that payment must be made now to receive value over time. (DK197)

estate.

2.

MODERN LIFE ESTATE

EQUITABLE LIFE ESTATE property interest, owned for life, in the assets of a trust. Common and important modem estate.

LEGAL LIFE ESTATE estate for life in the assets themselves. Uncommon and a bad idea. o Person creating a legal LE can draft it to give the life tenant a power to sell/mortgage a fee simple or to lease beyond duration of the LE. (But should consider the proceeds, etc.) o Life tenant under no duty to insure buildings on the land. If life tenant does so, and theyre destroyed by fire, life tenant held entitled to whole proceeds and the remaindermen nothing (Ellersbusch v. Myers, DK 203) Judicial responses to inflexibility of legal life estate 3 principal devices courts use to avoid its fx:

Construction courts try to implement grantors intent, but if grant is sufficiently ambiguous, courts may interpret it to create a more flexible estate (e.g., FSA). 2. Judicial Sale Courts sometimes order sale of LE and remainder and either divide proceeds b/w life tenant and remainderman, OR order the proceeds held in trust w/ income payable to life tenant and trust corpus preserved for remaindermen. Rarely done. 3. Statutory Solutions to Avoid Waste in some states Pennsylvania holder of legal LE treated as trustee of personalty NY Legal life tenants of personalty required to account to a court periodically as though they were trustees Connecticut Permits courts to order legal life tenants to post a bond. In absence of statutes, courts have a lot of discretion (DK204-5) o .Life tenant and remainderman can always agree to sell their interests as a package. If they fail to agree, courts are reluctant to impose agreement. But 2 situations where courts might order sale: 1. Equitable Necessity: Can be proved that sale is in the best interests of all parties and is only practical method to effectuate grantors intention to provide material comfort for life tenant and preservation for asset value for remaindermen. Court may invoke equity powers and order sale of all or part of property. Court may also order sale when remaindermen are incompetent (minors, insane) but only when sale is in best interest of the parties.
1.

BAKER V. WEEDON (Miss. 1972, DK 197) []

Facts: Weedons will gave his property to his wife (P) for life, remainder to his grandchildren (D). The land was rapidly increasing in value, and D opposed its sale. P was aged and destitute and sought an order permitting her to sell part of the farm property, contending it was necessary for her support. Rule: A court may order the sale of property which is held subject to a future interest, but only if a sale is necessary for the best interests of both the life tenant and the remaindermen. Holding: Deterioration/waste of property is not the exclusive and ultimate test to be used to determine whether sale of land affected by a future interest is propery, but ALSO that consideration should be given to whether a sale is for the best interest of all the parties (life tenant and remaindermen). Sale for Ps reasonable needs, but ONLY if parties cant unite to compromise and fulfill Ps needs. Waste Avoidance: Power of court to sell when it is necessary to avoid waste the deterioration or destruction of the underlying property. (Beest interest of all parties to sell the asset before its value is dissipated or destroyed). (Kelly v. Neville, in Baker, DK200)
2.

TRUST Trustee holds the legal fee simple and as the manager of the property may be directed to pay all the income to the life tenant or to let the life tenant into possession. The life tenant can be made trustee. o More flexible, usually more desirable property arrangement than a life estate.

3.

WASTE

Waste = actions of the life tenant that permanently impair the propertys value or the interest of the future interest holders. A should not be able to use the property in a manner that unreasonably interferes w/ the expectations of B. o Older cases waste as derived from grantors desire to give life tenant reasonable use of land, consistent w/ its preservation in the same character as when received.

o Newer cases waste as device to prevent one person from unfairly repeaing economic benefits from land possession and imposing economic losses on another who shares an interest in the land.

Affirmative Waste when a life tenant acts affirmatively to damage the land permanently. Sometimes called voluntary waste. Permissive Waste when a life tenant fails to act reasonably to protect deterioration of the land, permissive or involuntary waste has occurred. Essentially a question of N failure to take reasonable care of the property. o Ex: Life tenants allowing water pump to fall into disrepair, w/ resulting loss of lawn, shrubs, and trees (Kimbrough v. Reed, DK 202) o Ex: Life tenants failure to pay real estate taxes is waste, resulting in forfeiture of LE. (McIntyre v. Scarbrough, DK 203) Ameliorative Waste when the life tenant acts affirmatively to change the principal use of the land, and thereby increases the value of the land.

E. RESTRAINTS ON ALIENATION OF FREEHOLD ESTATES

Three types of restraint: 1. Disabling Restraint: Withholds from the grantee the power of transferring his interest. (O conveys to A and his heirs but any transfer hereafter in any manner of an interest in Blackacre shall be null and void.) Disabling restraint was involved in White v. Brown. 2. Forfeiture Restraint: If grantee attempts to transfer his interest, it is forfeited to another person. (O conveys to A, but if she ever attempts to transfer the property by any means whatsoever, then to B and her heirs) 3. Promissory Restraint: Grantee promises not to transfer his interest. (O conveys to A and his heirs, and A promises for himself, his heirs and successors in interest that Blackacre will not be transferred by any means.) If valid, is enforceable by the contract remedies of damages or an injunction. Rare, except in landlord-tenant context. Attempts to prevent alienation of a freehold estate are generally void (2nd Restatement, DK196). o Partial restraint is valid if, under all circumstances of the case, the restraint is found to be reasonable in purpose, effect, and duration. o For life estates, absolute disabling restraint is void, but forfeiture restraint is valid. (Forfeiture induces life tenant to pay debts; disabling restraint, allowing life tenant not to pay but keep the property, doesnt.) Court strongly disfavors dead hand restraints on alienation b/c: o Makes property unmarketable. Particular land might be made unavailable for its highest/best use. o Perpetuates the concentration of wealth since its impossible to sell the property and consume the proceeds of the sale. Restrained owner cant dissipate the capital and, perhaps, fall out of ranks of the rich. o Discourages improvements since owners wont bother improving the land if they cant sell it. o Prevents creditors from reaching the property, working hardship on creditors who rely on the owners enjoyment of the property in extending credit. o Numerus clausus

F.

DEFEASIBLE ESTATES

1. 2. 3.

FEE SIMPLE DETERMINABLE FEE SIMPLE SUBJECT TO CONDITION SUBSEQUENT ?

A. Fee simple defeasible = a fee simple that may come to an end upon the happening of an event in the future. There are 2 major
types:

1. Fee simple determinable = a fee simple that will end automatically when a stated event happens. i. Language: A f.s. determinable is created when language connoting that the property is only being
transferred until an event happens. (e.g. so long as the premises are used for. . ., while used for. . .) Language indicating the motive of the transfer do not create a f.s. determinable. (e.g. to X for Y purposes creates a f.s. absolute) 2. Fee simple subject to condition subsequent = a fee simple that may end when a stated event occurs, but does not automatically do so. A future interest (specifically a right of re i. Language must be something indicating a right of reentry. (e.g. to X, but if the premises are not used for Y purposes, granter has a right to re-enter and retake the premises.) B. The difference between the two types of defeasible fees is subtle but important. This usually is an issue only when a right to reentry (f.s. subject) is created by an event but is not acted upon before a time limit expires. C. MAHRENHOLZ V. COUNTY BOARD OF SCHOOL TRUSTEES, 417 N.E.2d 138 ( Ill. App. Ct. 1981): demonstrates the importance of the difference between the two f.s. defeasibles. 1. Ps transfer f.s. defeasible to school, it is unsure whether it is f.s. determinable or f.s. subject. 2. The court holds that based upon the clear intent of Ps to get the land back if it is not used for school purposes and based upon how other courts have interpreted similar language, the deed created a f.s. defeasible. D. Situations where the distinction is important: 1. Transferring the interest i. The common law held that neither the possibility of reverter nor the right of reentry were transferable inter vivo to anyone other than the owner of the possessory fee (called a release) ii. Some states (the modern trend) are allowing both to be transferred inter vivos. iii. Some states draw a distinction between the two, and possibility of reverter (stemming from a f.s. determinable) is transferable, but right of reentry is not (stemming from a f.s. subject). 1. Some states are so harsh that the mere attempt to transfer a right of reentry destroys it 2. Statute of limitations i. The clock starts ticking when the defeasible fee ends. ii. Determinable fees end as soon as the condition occurs. iii. F.S. subject creates a right of reentry, and the statute of limitations should not begin until they attempt reentry and are rebuffed. 1. In many states, the clock starts ticking when the condition occurs. 2. Analogizing to laches (which bars relief when delay works injury, prejudice or disadvantage to the D), some courts may require that the right of reentry be exercised within a reasonable time (sometimes defined as the period of the statute of limitations. See Mildram v. Town of Wells. 3. Unwilling to allow the law to rest on precise linguistic formulas, KY and CA have abolished the f.s. determinable, and language that may have been interpreted to create one instead creates a f.s. subject. E. Distinguish defeasible estates from covenants: 1. When the condition of a covenant is broken, the breacher may be sued in equity or at law. 2. When a defeasible estates condition is broken, a right of reentry or a possibility or reverter is created. This is much more onerous!

G. FUTURE INTERESTS (MOVE TO HEADING 1? MAYBE?)


1. HAPPY CHART OF FUTURE INTERESTS

Type of Future Interest

Language

Certain recipient

Transferable

Grantors Future Interest Remains

Indefeasibly Vested Remainder

To A for life,
then to B

Yes, B.

Yes, B can transfer his remainder during life and per a will, after his death.

None B is certain to get possession in the future and retains that possession permanently.

Vested Remainder Subject to Open

To A for life,
then to As children. A has children

Yes, class of potential peopleAs children.

Yes, As children can transfer their remainder.

None, As children are to get the remainder.

Vested Remainder Subject to Partial Divestment

To A for life,
then to B, but if B dies before A, to C

B- has vested remainder subject to divestment if he dies. C- has vested remainder subject to divestment if B outlives A

B- can transfer his remainder if he outlives A. Not at death, because then it goes to C and b is divested.

None- either B or C will get the land, regardless

Contingent Remainder Follows a contingent remainder in fee simple. *subject to rule of perpetuities (only one)

To A for life then to an unascertained person.

No

No, no one exists to transfer it.

Yes- if A has no children, the grantor gets the land back

To A for life, then to B if B outlives A (condition)

Yes.

Yes- B can transfer during Bs life, but not if he dies before A.

Yes

Executory Interest Follows a vested remainder in fee simple.

To A, but if B returns, to B. (reserves interest to B but gives it temporarily to A)

Yes. A gets it. B gets it if he comes back

Yes

No

To A for life, Then to B, But if B dies before A, to C. (A gets a life interest, but if theres no one to pass it on to, C gets an executory interest)

Yes. A gets life estate B has interest in fee simple unless he dies first. If B dies first, C gets fee simple.

C can transfer executory interest at all times.

No.

To A upon her marriage.

Yes- A, life estate.

Yes

No- grantor possesses it until she is married.

2. THE INTERESTS THEMSELVES (SIDE NOTE: I WANT TO DIE RIGHT NOW)

A. Future interests = rights to the enjoyment of property at a future time. They are divisible into interests retained by the transferor
and interests retained by the transferee. B. Interests retained by the transferor: 1. Reversion: a future interest remaining in the transferor or his heirs when a smaller estate (e.g. a life estate or a leasehold) is carved out of a larger one (e.g. a f.s. absolute usually) 2. Possibility of reverter: a future interest remaining in the transferor or his heirs when a f.s. determinable is created. 3. Right of entry: a future interest remaining in the transferor or his heirs when a f.s. subject is created. C. Interests created in a transferee 1. Remainders in fee simple: future interests created in a transferee that are capable of becoming possessory upon the termination of a prior estate. It cannot be divested, and it can only follow a life estate, fee tail, or term of years. i. Vested remainders = a remainder created in a living, ascertainable person, and is not subject to any condition (except for the natural termination of the estate it is created with) 1. Indefeasibly vested remainder = a remainder created in a living, ascertainable person not subject to any condition. E.g. to A for life, and then to B and his heirs. 2. Vested remainder subject to divestment = a remainder created that is subeject to divestment based upon a condition. E.g. to A for life, and then to B and his heirs, but if B does not outlive A, to C and her heirs.Bs interest is a vested remainder in fee simple subject to divestment

3. Vested subject to open/partial divestment = a remainder created in a class of people that becomes
vested when at least one of these people is living and ascertained.

ii. Contingent remainders = remainders that have an element of uncertainty


Contingent remainder subject to condition precedent a. e.g. to A for life, and then to B if he reaches the age of 65. b. We dont know whether the condition will be fulfilled until it is fulfilled. 2. Contingent remainder in unascertainable persons a. e.g. to A for life, and then to Bs heirs. b. Living people do not have heirs until they die, so this class of people is uncertain until Bs death. iii. Courts prefer vested remainders, and when there is ambiguity, they choose them. iv. Differences between contingent and vested remainders: 1. Vested remainders accelerate into possession. Contingent remainders remain subject to divestment until the condition is met. 2. At common law, contingent remainders were not assignable during the remaindermans life, and thus were unreachable by creditors. Today they are transferable and viewed as legitimate property interests (rather than the common law understanding that they were things that could possibly become so.) 3. At common-law, vested contingent remainders were destroyed if they did not vest upon termination of the preceding life estate. 4. Contingent remainders are subject to the rule against perpetuities. Fee simple subject to an executory interest = a future interest in a transferee that must, in order to become possessory either i. divest or cut short some interest in another transferee (a shifting executory interest) or 1. e.g. to A and her heirs, but if B becomes married, to B and his heirs. ii. divest the transferor in the future (a springing executory interest). 1. e.g. to A if A returns from Iraq. 1.

2.

H.

THE RULE AGAINST PERPETUITIES

A. No interest is good unless it must vest, if at all, no later than 21 years after some life in being at the creation of the interest. B. Approach RAP problems with a 5 step process: 1. Define the interest and figure out if its subject to the rule. The following are: i. Contingent remainders ii. Executory interests iii. Vested remainders subject to open iv. Options, See Symphony Space. v. ****Future interests retained by the transferor do not apply. 2. Define the time when the perpetuitys period begins: i. For grants, the clock begins immediately. ii. For wills, the clock begins with the death fo the testator. 3. Decide what must happen for the interest to vest or fail to do so: i. For contingent remainders, what is the condition? Identity the people who can affect the vesting of the property interest e.g. the grantor, recipients, anyone mentioned in the instrument, someone implicated by the instruments terms. 4. Mechanically go through each validating life, and figure out if the interest must vest before their death + 21 years. C. THE SYMPHONY SPACE, INC. V. PERGOLA PROPERTIES INC., 669 N.E.2d 799 (N.Y. 1996): Ds predecessor sells P a building while retaining an option to repurchase at any time. D tries to exercise but is blocked because the repurchase option violates the RAP (i.e. since there is no validating life, it could have possibly reached further than 21 years). 1. If D were smart, they could have structured the agreement as a right of entry or right of first refusal. D. Uniform Statutory RAP: accepted by many states (but not NY, so it wont help Pergola) and says that if an interest fails the common-law RAP, then they will wait 90 years, and if uncertainty still exists, they will reform the contract (i.e. the cy pres

doctrine manipulate the contract so that it becomes legal while still conforming with the wishes of the grantor).

III. PROPERTY RIGHTS


(1) Replevin seeks to establish a right to possession and not legal title. (2) Trover seeks payment for significant interference with Ps property. This is principally equivalent to a forced sale for the value of the (3)
property at the time and place of the interference. Conversion describes loss of an immediate right to property. Moore v The Regents of the University of California (no action for conversion when, without Ps permission, D used cells from Ps spleen to develop a billion dollar pharmaceutical) There was no precedent for a right of action for conversion under these circumstances and various policy reasons weighed against allowing P to bring the action: (1) balance of patients right of autonomous medical decision with the encouragement of socially useful research weighs against allowing the action, (2) the complexity of the facts suggest that regulation is better left to congress, (3) patient has an alternative cause for breach of fiduciary duty. Trespass to land is absolute: action is available for any use without permission. Trespass to chattels is not absolute and must deprive the owner of some material interest in the property in order to support an action. Bailment: rightful; possession of good by a person (bailee3) who is not the owner. a. Voluntary bailmentowner of the goods (bailor) gives possession to bailee b. In voluntary bailment situations, as in The Winkfield (1902, DK97), the courts usually bar an action by the true owner against the present possessor if the bailee has recovered from the present possessor. c. In the case of found goods, the bailment is involuntary from the standpoint of the owner but not from that of the finder, who has, after all, chosen to take possession; by doing so, the finder assumes the obligations of a bailee. i. What are those obligations? Traditionally, the answer has turned on an elaborate scheme of classification according to which some bailees were held to a standard of great care, some (such as finders) to a standard of minimal care, and the balance to an ordinary negligence standard of reasonable care under the circumstances. The modern view is that the latter standard should apply across the board.

(4) (5)

A. THE RIGHT TO EXCLUDE


(also recall Pile v. Pedrick) Summary of 3main cases:

A. Jacque v. Steenberg Homes, Inc., 563 N.W.2d 154 (Wisc. 1997): if someone cuts across your land to deliver a mobile home to
your neighbor after you tell them not to, a jury award of punitive damages is valid. 1. D had a mobile home to deliver, easiest path was across Ps land, ask to use it, are denied, cut across it anyhow. 2. Recognizing that the right to exclude is one of the most important rights that landowners have (validating personal autonomy and faith in government) and that self-help may be encourage if this right is not protected, punitive damages are appropriate. State v. Shack, 277 A.2d 369 (N.J. 1971): the right to exclude is subordinate to important public policy interests like some human rights e.g. the rights of occupants of the land to obtain legal and medical counsel. 1. D enters upon a farmers land to provide legal and health services to migrant farm workers against conditions set by farmer (that were designed to hamper the efficacy of legal services provided).

B.

BAILEE Person holding property in trust for another party. Finder is in a similar position to that of a baileefinder does not obtain absolute ownership, but does have the right of ownership against everybody but the true owner.

C.

Property rights are limited by human values. Migrant workers have rights to obtain legal counsel and medical treatment. When the right to exclude comes into conflict with this right, it trumps. Ragin v. NY Times Co.: newspaper advertisements that feature only blacks or whites violate the FHA, and may be regulated to prevent exclusionary vibes from being projected.

2.

JACQUE V. STEENBERG HOMES (Wis. 1997, DK87)


Facts: S asks for right to cross Js land to deliver mobile homes b/c crossing land would be most direct and safest way to their destination. J refuses -> S intentionally trespasses against Js wishes. J turns down $$, says it is not about money (maybe paranoid about trespassers and adverse possession). TC says there was intentional trespass but awards only $1 to J for the violation (compensatory) + $100,000 in punitive damages. District court overturns the punitive damages, but the Supreme Court overturns, allows the punitive damages. Holding: A landowners right to exclude others from his land is one of the most essential elements of the bundle of rights called property rights. The right to exclude is fundamental and trumps worker safety/public policy concerns!! o compensatory damages are insufficient to protect right to exclude from privately owned land (changing property rules to liability rules, but then not imposing liability for trespass) Gives liability rule to P: $100k in punitive damages, and $1 in nominal damages Nominal damages only creates a liability rule with a really low penalty. A right without a remedy. The punitive damages enforces the right to exclude, with teeth. (punishes SH for their action) Public policy issues: o Facilitate bargaining among neighbors and discourage self-help o Encourage people to invest & improve property o Vindicate psychological interests in autonomy o a right is hollow if the system provides insufficient means to protect o a rule like this may create an incentive for parties to negotiate, but still leaves right to exclude with land owner We assume the outcome would have been different if the delivery men had had an emergency and needed to cross the land quickly. Strahilevitz: This case is about the right to preserve social order and not about the right to exclude Why not take payment? Risk-averse (lost some property previously to adverse possession, trespassing) and has strong feelings about the ownership of his land.

STATE V. SHACK (NJ 1971, DK88)


Facts: A government lawyer and a health provider wanted to help migrant workers on Tedescos farm. Tedesco would only allow them to see the workers in his office. He didnt want the lawyer on his property, possibly concerned about illegalities in his camp, civil rights violations or health and safety violations. Holding: The right to exclude has to give way because of health and safety concerns, protection of the migrant workers. The right to exclude cannot trump absolute human/personal rights! o Concern that the migrant workers are socially isolated, not knowing what help is available. Easy for Tedesco to take advantage of these workers. Federally funded workers providing services to migrants on private land cannot be excluded. The migrants did not the leave property, but if they had lived elsewhere, the federal workers would not have been permitted on the property. o Property rights serve human values. They are recognized to the end, and are limited by it.

Title to property does NOT include dominion over the destiny of all persons who come on the premises; property rights are a means to an end, not an end in and of themselves Employer may NOT deny workers their privacy and may NOT interfere w/ their opportunity to live w/ dignity and to enjoy associations customary among the citizens. While

right to exclude will make everyone better off on the whole, there may be circumstances where its enforcement will create tragic consequences Parallel to Nuisance Law: Where there are substantial negative externalities for abuse, the law will limit resource owners use o Under Blackstone land O has exclusive right of possession (part of bundle of sticks) that is absolute in ownership, but in Shack the right becomes diluted. The holding in Shack didn't invoke the necessity doctrine, only an exception to an O's absolute property rights (exception of the owners right to exclude). Renters normally do have a right to visitors, but this can be waived by contract (e.g., dorm, substance abuse facility). But not clear that Tedesco had any such contract with the migrant workers. o Probably the court would say that such a contract is contrary to public policy. Tension between JACQUE & STATE is a central theme in property law (like tension between Pile v. Pedrick and Golden Press) Can both Jacque and Shack be right? o In Jacque, the court is very protective of the right to exclude, upholding a $100,000 award despite no real damage. In Shack, there is no award. Court rules that Tedesco didnt have the right to exclude the government or health workers because of the public policy concerns. o In Shack, court emphasizes the externalities, while in Jacque, emphasizes rights rather than external concerns. o Jacque is not about the right to exclude but about preservation of social order. A trespass that is likely to result in violence. o Could also say that Shack shows us that Jacque is wrong. When someone who has property is using his power as a monopoly, thats not justified.

Policy Concerns: Fairness and economic efficiency; Property must serve human values. o Arguments in favor of right to exclude:

Incentive for people to develop/improve their land We like to see people bargainassume the most valuable use will win out if we delegate exclusion to private land owners, we save on costs of governance and enforcements of these types of disputes (too much complexity) Jacque dispute really about how individuals and not government should exercise right to exclude Arguments against owners right to exclude:

Refusal to grant right of use (hold-outs like in Jacque) can block highest value use of that landwhat do we value more? Efficiency and safety (safety risk for guys delivering home), or exclusive rights of ownership at all costs? can create negative externalities as in Shack (illness, uninformed of legal rights and unable to make contracts to protect their own rights)

B. THE RIGHT TO DESTROY


While living, you generally have the right to destroy your property, unless its been protected by a historical or architectural designation. Lose this right upon death (Eyerman)

EYERMAN V. MERCANTILE TRUST CO., 524 SW2d 210 (1975): when you die, your will may not direct that things be
destroyed if it is against public policy to do soright to destroy ends at death! Facts: Woman directs that her house be demolished upon her death. Neighbors complain that having a vacant lot would decrease their property values, and heirs complain that destroying the house would decrease the value of the property from about $40,000 to $650. Holding: The house is not to be leveled because doing so would conflict with public policy. Court rejects the razing provision. Several reasons why her will should not be enforced: Reasonableness Test: o Historic value/significance (& city trying to landmark the neighborhood) house built around 1904 Worlds fair, but homes not declared historic until after her death (something suspicious about that time dissent discusses this). Some historical value but not extreme. o Loss of value to other homes neighbors would lose about $10K if the neighborhood is blighted by destruction of #4. Can also create a nuisance (imposing economic harm on neighbor) but probably doesnt here o Waste of scarce resource cant tolerate waste and destruction of resources when interests of others are at stake (huge waste of money big private loss, falls on beneficiaries). $40K -> $650 o Housing shortage pretty weak argument! Plaintiffs contend destruction would work against the growing housing shortage problem in St. Louis Majority distinguishes between what you can do with your property while living (apparently giving rights to destroy) and what you can do in your will. o We trust living owners more than we trust dead owners, because the living owner is willing to put their money where their mouth is. Once she dies, though, she loses that right because she no longer has anything to lose. But when she signs the will, she turns her fee simple into a life estate. Previously, she could have sold the remainder (live in the house until her death, but get paid now) so did she lose something after all. The decedent could have evaded this ruling by either: Transferring the property with a condition subsequent i.e. The property to A. If A does not destroy the house within one week, the house will go to Destructo Corp, a non-profit corporation whose purpose is to smash things. State in her will that destroying the property was to benefit a demolition company. Why does she make this request? Dont really know, can speculate: o Because she loved the house so much, doesnt want anyone else to live in it o Very spiteful action against the neighbors What if Johnston were a famous performance artist, who wanted to destroy her home as a last piece de resistance? Probably this would be allowed. o When the artist destroys something, we might see some benefit, or at least the court may not be able to distinguish between destruction as art and destruction as spite o Recognize the artists right to destroy, but make sure that its for real artistic reasons, not for spite. Kafka: we need to worry about ex ante incentives in enforcing a rule like Eyerman. Kafka instructed that his papers be destroyed upon his death. If he knew before so that they would not be, he may never have wrote.

Arguments for permitting dead hand control:

o Protect motives of grantor: she may have paid a lot of money (or at least given up value of property) to protect sentimental value or the value of being spiteful o assuming someone is of sound mind, maybe we should treat the living person writing the will the same as the dead person when others are executing the will o intangible value in writing the will in some way, knowing you are excluding people from the property or will have it destroyed or protecting private feelings o expressive interests she is willing to sacrifice a lot of money to protect these interests. Maybe we respect that and carry out her will accordingly! Also, some people may destroy things to make a statement!

Arguments for denying dead hand control: o done, would only satisfy the caprice of a dead person o waste to a socially valuable resource (maybe some things are so valuable that we dont tolerate their destruction) o aesthetic ham to neighbors/neighborhood/community o nothing gained from destroying, nothing lost by not destroying o reason to question her motives? Driven by prejudice?

C. THE RIGHT TO SELL/TRANSFER


the right to transfer property, and conditions that the state or community may impose on such transfers. Caveat EmptorLet the buyer beware (New Yorks rule) o Under a strict caveat emptor rule, seller has no obligations to disclose anything to the buyer, so long as seller doesnt engage in active concealment or make misleading statements. Stambovskycaveat emptor liteseller does have an obligation to disclose material information that wouldnt have been revealed through a careful inspection of the premises or title documents, particularly where the seller is himself responsible for creating those material facts o Stambovsky is all about what kind and quantity of information we demand the seller to disclose in a residential real estate transaction. Trend in the law: states are rejecting a strict rule of caveat emptor; mandated disclosures by seller (Stambovsky illustrates this) o Some of them are doing caveat emptor-lite, o but a lot more are imposing disclosure requirements on sellers of homes. Johnson v. Davis

SHIFT GOOD (Caveat Emptor Bad) What explains this trend away from caveat emptor? o It seems that in many cases, the seller is going to be the lowest-cost information collector (better access to info). The seller has usually lived in the house, and is familiar with its unforeseen downsides loud noises, annoying neighbors, and the like. o in some cases, the seller may be a repeat-player, so there are economies of scale in gathering information. Avoid duplication: A new condominium developer might deal with 200 different buyers, and so it makes a lot of sense for him to make the same disclosure to 200 different people, instead of having 200 people hire 200 different inspectors to evaluate the same elevator. o Concern that a weakening of neighborliness norms may make it harder to get information from the neighbors. SHIFT BAD (Caveat Emptor Good):

o o
o

Introduces uncertainty into the law Engenders extra litigation CE reduces litigation and provides a clear B/L rule (almost impossible for buyer to win) Once we move away from caveat emptor, were inevitably inviting litigation over whether facts were known by the seller, whether they were material, and the like. Buyers may believe their own information rather than the sellers inspector

DISCLOSING DEFECTS

STAMBOVSKY V. ACKLEY, 572 N.Y.S.2d 672 (1991): when the seller creates conditions unable to be discovered through prudent exercise of care that create a condition affecting habitability or ability to resale, the seller has a duty to disclose this to the buyer. Seller widely publicized the haunted nature of the home. Did not disclose that to buyer. At the time, NY followed caveat emptor. NY is really using a caveat emptor lite. When the information is a material condition the buyer couldnt normally find out on their own, and/or the condition is something the buyer created, then the buyer has to warn the seller. Who is the lowest cost damage avoider (information discoverer) for each types of information? For physical conditions, the buyer may be better able to find the information, and for some the seller may be better able.

Johnson v. Davis, 480 So. 2d 625 (Fl. 1985): when a seller knows of facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. Nonfeasance is no longer a shield. Here, the seller falsely represented that the roof was sound, when in fact it was not. Im not sure how the court jumps from facts of malfeasance (falsely representing that the roof is sound) to saying that nonfeasance is no longer a shield.

Harding v. Willie, 458 N.W.2d 612 (Iowa App. 1990): when a seller says that something is absolutely no problem e.g. a crack in the ceiling, and if it turns out to be a problem, rescission of the contract is allowed. Either the seller knew that it was a problem and lied (malfeasance) OR they didnt know (mutual mistake), but under either circumstance, the contract can be invalidated.

Sellers have a duty to disclose the existence of bad neighbors which will affect the ability to resell the house. See Alexander v. McKnight, 9 Cal. Rptr. 2d 453 (Ct. App. 1992). However, if the neighbors are nuisances, they are liable to the seller, so they end up paying for it in the end.

If a statutory disclosure form requires that you disclose noisy neighbors and you dont, you have to pay. Shapiro v. Sutherland, 76 Cal. Rptr. 2d 101 (Ct. App. 1998). In response to the erosion of caveat emptor and increasingly more invasive disclosure requirements, some sellers are requiring mandatory arbitration. This practice is enforceable in general. See Johnson v. Siegel. BUT, if the arbitration clause is buried in a huge contract, it is unenforceable. See Villa Milano Homeowners Assn. v. Il Davorge.

DELIVERY

To be effective, a deed must be delivered with the intent that it be presently operative. This rarely is a problem in commercial transactions, but donative transactions are harrier.

SWEENEY V. SWEENEY, 11. A.2d 806 (Conn. 1940): (THE PREVAILING VIEW) no matter the intent, if a deed
is delivered, it is active even if it is not intended to be until a condition is met Facts: Maurice Sweeney wants to disinherit his estranged wife, who would be entitled to a mandatory share of his estate under Connecticut law. He therefore transfers his land to John, but executes a second deed so that if John pre-deceases Maurice, the land will be conveyed back to Maurice. Maurices plans are thwarted by the court. M deeds land to J. That deed is recorded. To protect M should J die before he does, J deeds the land back to M but does not record it. The second deed is valid, and M retains ownership. This is not a conditional grant because that requires transferring the deed to a third-party to be held until a condition occurs. Holding: Maurices taking physical possession of the second deed (conveying the land from John back to Maurice) amounts to an actual delivery that transfers title back to Maurice, even though Maurice intended that title would not be transferred back to him until Johns death. The court uses Maurices possession of the land and his payment of property taxes on it as a further nail in Maurices coffin. ct ignores what seems to have been Maurices intent because the safety of real estate titles is considered more important than the unfortunate results which may follow the application of the rule in a few individual instances. To relax it would open the door wide to fabrication of evidence. ct also notes that Maurice had an alternative available having John deliver his deed to a third party, to be kept by him until the happening of the event, upon the happening of which the deed is to be delivered over by the third person to the grantee. Strahilevitz: The safety of real estate titles argument is about protecting a subsequent bona fide purchaser of the land. It tries to avoid the situation where a buyer relies on the deed as written, but then someone else later reveals a previously executed deed. This is a legitimate concern, but the court could have limited its rule to say that in a suit between a grantor and a subsequent bona fide purchaser, evidence of an oral condition is inadmissible. There was no evidence of reliance by Maria here. The fraud prevention rationale is more persuasive. Note, though, that oral evidence is admissible to show that a deed is a nullity because the grantor was drunk. Dispute between Sweeney (the majority rule), and Chillemi v. Chillemi, (also below) a Maryland case cited on DK 535. That case criticized Sweeney for its formalism and emphasis on the involvement of a third party in the process. Perhaps the best explanation of the holding is the courts antipathy toward Maurices slapdash efforts to circumvent Connecticuts forced share law. (There may be some connections to cases like Unsel v. Meier in that regard)

PREVAILING VIEWSweeney no matter the intent, if a deed is delivered, it is active even if it is not intended to be until a condition is met. (MINORITY VIEW) When there is evidence that the deed was delievered but was not intended to take effect until some condition is met, the deed is invalid until the event occurs. (ANOTHER MINORITY VIEW) Delivery is good and the condition is enforceable. Chillemi v. Chillemi, 78 A.2d 750 (Md. 1951). (RECENT DEVELOPMENT) Physical delivery creates a rebuttable presumption of a present transfer. Blancett v. Blancett, 102 P.3d 640 (N.M. 2004).

D. THE RIGHT TO BUY

County recorders offices exist all over the country to solve the problems that arise when multiple people believe theyve bought the same piece of land. Luthi v. Evans is about the level of notice thats required in order for a first-in-time purchaser to prevail over a second-in-time purchaser. Mother Hubbard clausesclauses that dont specific a transfer in specific terms but do so generally Suppose a government recorder fails to record a deed. They are not liable for the above circumstances because of the doctrine of governmental immunity. See Antonis v. Liberati. Indexing under hyphenated last names is insufficient notice. Teschke v. Keller. The common-law rule was the race statute. The first party to record is the party whose right takes precedence. Lawyers or agents in charge of recording can be held liable for delay. Antonis v. Liberati.

LAND RECORDING BACKGROUND The common law approach was a race system The first person to record gets priority. Whether a subsequent purchaser of the property had actual notice of a prior purchase is irrelevant. o This was deemed harsh, and race statutes have been abolished for deeds in all states save North Carolina and Louisiana. The first type of reform was a notice system. Under a notice statute, a subsequent purchaser would not prevail over a previous purchaser if the subsequent purchaser had actual knowledge of the prior purchase. So good faith second purchasers win against unrecorded first purchases, but bad faith second purchasers lose. The second type of reform is a race-notice system. This is a hybrid approach. Under it, a subsequent purchaser prevails if the subsequent purchaser (1) lacks notice of the prior instrument; and (2) records before the prior instrument is recorded. The remaining 48 states are roughly split between notice and race-notice systems.

LUTHI V. EVANS, 576 P.2d 1064 (Kan. 1978):


Facts: Tours obtains all of Owens interests in oil and gas in a county. They are transferred in general terms. Tours does not record the specific transferences in the property recorders office. Owens subsequently transfers a lease to Burris. Burris checked the records, and there was nothing recorded specifically about this property.

o On February 1, 1971, Grace Owens assigns to Tours Corporation her interest in oil and gas leases on seven tracts of land. The assignment contains a Mother Hubbard clause conveying to the assignee, Tours, all Owenss interest in all Oil and Gas Leases in Coffey County, Kansas, owned by [Owens] whether or not the same are specifically enumerated above. Owens owns the Kufahl lease, which isnt specifically enumerated. Tours records the assignment on February 16, 1971. o On January 30, 1975 Grace Owens assigns to Burris her interest in the Kufahl lease. Burris personally checks the records, and secures an abstract of title from a professional title researcher. Neither Burris personal search nor the abstract of title turns up the prior assignment to Tours of the Kufahl lease under the Mother Hubbard clause. o Burris wins in the trial court, with the trial court holding that the instrument recorded was not sufficient to give constructive notice to a subsequent innocent purchaser for value. The Court of Appeals reverses, holding that the general description contained in the assignment to Tours is sufficient, when recorded, to give constructive notice to a subsequent purchaser for value.

Rule: Recording title documents that do not explicitly reference a particular interest in land provides insufficient notice to a second-in-time purchaser. Mother Hubbard clauses are valid means of transfer, but they are not valid means of providing notice. Holding: Thus, whereas the conveyance from Owens to Tours via a Mother Hubbard clause gave Tours superior rights against Owens, Tourss failure to either record a more specific document or take possession of the land mean that Burris, the second purchaser, prevails. o The fact that the deed was recorded in general terms is insufficient to impart constructive notice to Burris. o If Tours wanted to retain the property, they should have either occupied it or, once they ascertained exactly what their interest is, filed an affidavit with the recorder of deeds. Owens does not get away with it. Under principles of restitution, Tours can place a constructive trust upon her to prevent her unjust enrichment. They get any profits she made even though they cant have the interests back.

KEY QUESTIONS RE: LUTHI: Why didnt the assignment to Tours mention the Kufahl lease? Probably the parties didnt contemplate transferring it. Maybe Owens forgot about it, or didnt realize the lease was in Coffey County. This is consistent with her transferring it four years later to Burris. Also, the lower court opinion emphasizes that the clause was buried in the warranty section of the instrument, rather than in the section where the leases sold were described. Mother Hubbard clause is probably in there to assure against some of the enumerated properties being incorrectly identified. What evidence might be particularly useful in discerning whether Owens intended to transfer the Kufahl lease to Tours in 1971? We might look at who acted like a true owner between 1971 and 1975. Who paid taxes on the property? Who got the revenues from any oil extraction? The court strongly implies that Tours didnt take possession of the property, (DK 570). Note, though, that all the Owens conveyed was a lease to oil and gas, and its possible that someone else owned the surface rights (maybe Owens, maybe a third party). In that case, its not clear that a prudent owner would immediately take possession of the oil or gas. With respect to the type of error that occurred in this case, who is the cheapest cost avoider, Tours or Burris? Tours. If the court had held that the Tours assignment had given constructive notice of the Kufahl lease to Burris, then a title searcher would have had to read all prior leases made by Owens to other tracts and, finding a Mother Hubbard clause, would have to search to find what property Owens then owned in the county. This would be a costly search a search that every subsequent title searcher would have to repeat. It would be much cheaper to impose a onetime cost on Tours, by requiring them to search for all the properties owned by Owens and listing those properties in its assignment. It therefore appears that Tours is the cheapest cost avoider, and the court reaches the efficient result.

ORR V. BYERS, 244 Cal. Rptr. 13 (Cal. 4th 1988):


Facts: Orr obtains a judgment from Elliott. Orrs attorney places a lien on Elliots property. Elliott sells the property to Byers, who searched the record for liens.

o James Orr obtains a judgment against William Elliott. The written judgment, prepared by Orrs attorney, identifies Elliott incorrectly as William Duane Elliot (one missing t). An abstract of judgment recorded in the recorders office identifies Elliott as William Duane Elliot and William Duane Eliot. The clerk indexes the judgment under those names only. o Subsequently, Elliott obtains title to a tract of land that was subject to Orrs judgment lien. Elliott sells the land to Rick Byers. Byers performs a title search, but the title search doesnt turn up the abstract of judgment. Byers pays Elliott, and Elliott doesnt pay Orr with the proceeds. Orr now sues Byers to obtain the land (via foreclosure) that Byers just bought.

Rule: burden to ensure constructive notice of a lien on property is on the judgment creditor because they are the least cost party, most interested party. The burden is on the creditor to make sure that constructive notice of liens. Holding: rejecting the doctrine of idem sonans as applied to the recording system, holds that the recordation of the abstract of judgment under the names Elliot and Eliot did not give Byers constructive notice of the lien, and Byers was a subsequent good faith purchaser, so Byers interest in the land is superior to Orrs. o Idem sonans is a legal doctrine whereby a person's identity is presumed known despite the misspelling of his or her name.

Strahilevitz: We know that Byers must have recorded his instrument because California is a race-notice state. See page 687, where the statute is excerpted. A subsequent purchaser is protected against prior unrecorded interests only if the subsequent purchaser (1) is without notice of the prior instrument and (2) records before the prior instrument is recorded. Effectively, then, the court is holding that the judgment lien was unrecorded as to William Duane Elliott, and Byers lacked notice of the prior instrument and recorded before Orr recorded a proper lien against William Duane Elliott. Orr seems like the lowest cost avoider here. The burden placed on Orr by the court (filing under the correct record name) is very small compared to the burden that would be imposed on subsequent purchasers by idem sonans. Nevertheless, most courts actually follow the Green v. Myers case, and apply idem sonans, at least where the first letter is the same.

Maybe this majority trend will make more sense in a few years than it did in 1988, when Orr v. Byers was litigated. By 2020 we expect that all relevant documents will be recorded electronically, and fully text searchable. Title search software might easily be adapted to implement a Soundex-type system into its search algorithms. This technology is already available on search engines. If Google can do it, then title-search software can certainly do it. At that point, the Byers of the world will become the lowest cost avoiders (some human error is inevitable). The only way that technology wont be introduced is if the vast majority of the states follow Orr v. Byers. But note that there may be a false positives problem. Technology can eliminate the problem of missing possible purchases, but it may also make the title searcher read through too many title documents. This will raise the costs of searching. So that concern pushes against the Google technology argument on behalf of idem sonans.

IV. MANAGING COMMON AND DISPUTED RESOURCES


A.

THE COMMONS (AND ITS RESPECTIVE TRAGEDIES)


Property regimes are usually some combination of 1) private, 2) open access, and 3) communal. o Property regimes form a spectrum, with private property on 1 end and collective property regimes on the other o In the real world, peoples organize somewhere in the middle to avoid the problems at the spectrum extremes

TRAGEDY OF THE COMMONS (Hardin) ERA 119-135 Occurs when an individuals rational interest in consuming a common resource conflicts with a collective interest in not having that resource consumed. Individuals rational choices, when aggregated, have the potential to completely destroy common resources. o Negative externalities. Use of resources has negative fx on 3rd party, but user isnt forced to bear all the cost of her actions ToC o 1 additional cow hypo: The individual gets all the benefit of the extra cow, but only a small portion of the harm. An individual is rationally motivated to graze as many cows as possible, since her private marginal benefit (per additional cow) exceeds the portion of the harm she will

bear as a result of depleting the common resource (which is shared by all who graze their cows in the pasture). Problem: People Resist to Squo. Individuals locked into the logic of the commons are free only to bring on universal ruin (p. 127) o People avoid reforms because of 2 unconscious assumptions: 1. the status quo is perfect; 2. the choice is between reform and no action, so its better to wait for a perfect alternative o Instead, must realize that maintaining the status quo itself is action must reform Possible Solutions: Hardin suggests government regulation, but also considers: 1) Private property rights - (divide up the commons into individual fenced lots) a. Benefits: each person would absorb her own costs (instead of distributing them across the community) and would therefore have incentive to preserve the resource. b. Costs: fences 2) Communal property regime restrict the use of the commons (mutual written agreements between the users) a. The problem is that both micromanagement and enforcement are costly. b. Costs: law enforcement; research to figure out optimum number of cows 3) Community norms no fixed rules, but social pressure to conform; limits scarcity. / limited commons exclude some people; limits scarcity.

TRIBUNE CO. V. OAK LEAVES BROADCASTING (IL Cir, 1926, SM27)


Facts: Court grants P an exclusive right to a radio wavelength Rule: Priority in time creates a superiority in right 1st in time private property regime Although there was not a scarcity of wavelengths when the suit was litigated, the court wisely anticipated a tragedy of the commons in the absence of regulation, as well as general chaos for consumers (who wouldnt know what radio station played what), and disincentives for investment.

LICENSING. A year later, Congress established a licensure system for radio wavelengths (Radio Act of 1927), in which individuals could acquire renewable licenses but not buy radio wavelengths. Possible reasoning: Distribution Congress didnt want to assign property rights at risk of one party acquiring all of the signals, thus costing us public discourse and diversity of ideas. Expertise Congress didnt want to delegate technical questions to the courts; better to let the FCC deal with it. Greed members of Congress wanted to get in on the regulation of a lucrative market. (Haslip footnote) Coase Ks licensing; favors auctions advocated a system of private property rights that can be bought/sold in a secondary market o Believed it would produce a more efficient allocation of the broadcast spectrum

THE LOBSTER GANGS OF MAINE (Atcheson) SM 26-34.

Choosing a property regime: must factor in the nature of the resource o A (pure) private property regime wouldnt work because lobsters move around, and so there would be incentive to snatch them up before theyre mature just because theyre in your water. o An open regime would lead to over-fishing b/c lobstermen want to snatch lobster while they can o A communal property regime works well because the community is small, limited, and has high social capital. Result: a private-communal hybrid o Consists of harbor gangs who collectively protect their own turf. Traps are individually owned; older men have rights to prime areas; revenue is private As a community they own the water, and they can exclude people from the gangs o Prevents a tragedy of the commons without formal law or strict property rights.

o Not purely communal traps are individually owned; prime areas are designated; revenue is private. Problem of inefficiency (exclude outsiders = exclude new ideas/dev): they exclude people from the outside who may have new ideas; and the community is so small, there are no super-nodes who know other people outside the community

B.

THE PUBLIC TRUST DOCTRINE

DKAS 701-709; ERA 536-548. Public Trust Doctrine replaces a private property regime with a collectivist framework in order to allow the public to enjoy certain lands, such as waterfronts/ beaches, navigable waters, transportation, and commerce. Scope. PTD extends to all land covered by ebb/flow of the tide and all navigable lakes and rivers. Phillips Petroleum Co v. Miss. (US, 1988, DK708) o For all land bordering the Great Lakes in Michigan, public easement applies between ordinary high water mark (point on shore where water leaves a mark) and edge of the lake. Glass v. Goeckel (Mich, 2005, DK708) Markmans Dissent: Argued public access should end at waters edge (where wet sands give way to dry sands); distinct mark is unclear. Source in Roman and English lawnature of property rights in the rivers, sea, and seashore. o Certain interests (e.g., navigation and fishing) were sought to be preserved for the public o While dedicated to the public, never clear whether the public has an enforceable right to prevent infringement of those rights. Reasons for Public Trust: o Gifts of nature, such as national parks, should be enjoyed by everyone. o Some interests, such as water, have an inherently public nature, or are so important that they should never be off-limits - makes their adaptation to private use inappropriate (e.g. water) o Checks political abuses of private land Certain interests are so intrinsically important to every citizen that a particular group shouldnt be allowed to control them 3 effectiveness criteria. 3 criteria to meet if Public Trust Doctrine is to provide a satisfactory tool of general application for citizens seeking to develop a comprehensive legal approach to resource management problems (Sax, ERA 537): 1. Must contain some concept of a legal right in the general public 2. It must be enforceable against the gov 3. It must be capable of an interp consistent w/ contemporary concerns for environmental quality 3 types of restrictions imposed on gov (Sax, ERA 539): 1. Property subject to the trust must not only be used for a public purpose, but it must be held available for use by the general public 2. The property may not be sold, even for a fair cash equivalent 3. The property must be maintained for particular types of uses.

MATTHEWS V. BAY HEAD ASSOCIATION (NJ, 1984, DK701)


Facts: Government advocate sues on behalf of area residents and tourists for access to dry sand (on private beaches) that adjoins (public) water and wet sand (previously, beachgoers had to stay in the water). (Note: the suit was filed by a public advocate/non-profit who can aggregate tax revenues as a solution to the collective action problem in which one litigant would have to bear a cost that would benefit everyone.) Rule: The public must be given both access to and use of privately owned dry sand areas of the beach as is reasonably necessary.

Holding: The Association (D) was a quasi-public entity (more like a municipality than private owner) given its purpose, communal characteristics, activities, and monopoly over the beachfront; as such, must be open to the public at large. The public has a right to 1) access the water and wet sand, 2) reasonable access to the wet sand, including by means of traversing privately owned dry sand, and 3) rest on dry sand. A public right to land is meaningless if the public cannot access this land. However, the court does not open the land to the public; it merely mandates that the owners association allow anyone to join (possibly for a fee) and gain full access. It thereby creates a quasiproperty interest (open-communal property regime) by liberalizing eligibility, but not allowing open access. Concern about tragedy of the commons/ value and cleanliness of the beach Justifications: o History/ custom: People have always had access to beaches (traced back to Roman jurisprudence) o Networking effects: Certain types of resources become more valuable the more people have access to them (e.g. fax machines); benefits tourism o There are negative externalities associated with exclusion to resources that people psychologically think of as open to all/ fundamental human freedoms.

CLARIFICATION OF MATTHEWS o Relevant factors of Matthews reasonableness test include: National Assn. of Home Builders v. NJ Dept of Env. Prot., NJ, DK707): 1. Location of the dry sand area in relation to the foreshore 2. Extent and availability of publicly owned upland dry sand area 3. Nature and extent of the public demand 4. Usage of upland sand area by owner o Clarification of reasonable access. Where long history of public access prior to restrictions, and where owner didnt provide any services (e.g., cabanas), private beach club must permit the public access or intermittent recreational use of its private dry-sand beach; barred from charging fees to transient users but permitted to charge reasonable fees for its beach maintenance services to those who remain on the beach and partake of their services (e.g., showers). Raleigh Avenue Beach Assn v. Atlantis Beach Club (NJ, 2004, DK706)

CONSTITUTIONALITY/TAKINGS o Private owners taking? Possible that Matthews rule, applied to privately owned beaches where owners arent quasi-public, would be a taking of private property requiring just compensation. o Statute taking. If the NJ legislature had passed a statute giving the public the right to cross privately owned land or use it for recreational purposes, this would be a taking of private property for public use. (DK707) o Not unconstitutional, but questionable future for PTD. SCOTUS has not yet held these decisions burdening privately owned beachfront land unconstitutional. But recent SC rulings have cast doubt on the future of the PTD. Successful 5th Am challenge. SC held CCCs refusal to grant P a development permit unless P agreed to an easement across his property = unconstitutional taking under 5th Am Takings Clause. Nollan v. CA Coastal Commn (US, 1987, DK707) California public beach access crated heated disputes. 1976 CA Coastal Act allows the state to create and monitor easements that allow the public to pass over private land to reach the wet sand area. o Limits on private ownership rights. If the sovereign conveys such property to a private owner, it remains encumbered by the trust, and the rights of the owner are accordingly limited. (UPL 516) State A conveys parcel of ocean-front land to B. When B acquired property rights, he didnt get all the sticks. Bs title subject to publics preexisting rights under PTD, including right to use wet-sand beach. B cannot exclude the public. PTD for enviro preservation? O purchases wetlands bordering a river; County rezones. If rezoning leaves O w/ no economically viable use for the land, does it constitute a regulatory taking?

No taking if C never gave it to O in the first place. Assuming (a) Os wetlands are subject to PTD and (b) doctrine includes the preservation of lands for open space and wildlife habit as National Audubon v. Superior Court (UPL 517) indicates, Os title never included the right to develop the wetlands for a non-natural use. Because the law never gave this right to O in the first place, the rezoning took nothing from him. INALIENABILITY Inalienability Rule public trust properties can never be sold o Chicago Il Central version: Public trust land is inalienable can never be sold; there must always be public access (extreme; less widely accepted, except in New Jersey) o Does a good job defending against legislators who are inclined to compromise the public interest for a special interest. o It also relieves judges of having to figure out when a violation takes place something not necessarily in their expertise. Alternatives to the inalienability rule/Interps of PTD: o Super-majoritarian PTD (Sax) Public trust land can be sold with a supermajority vote (get a large enough $ number, and it will improve the community) (majority view) o Procedural protection (Sax) more flexible, but still intended to safeguard against corrupt legislators. 2 models: 1) PTD is a check on political abuses; vs. 2) PTD protects inherent liberties o Subject matter approach: court identifies acceptable uses in advance.

IL CENTRAL RAILROAD V. ILLINOIS (ERA 542)


Facts: State legislature granted P a huge portion of land then under Lake Michigan (today, everything east of Michigan Ave.); it subsequently realized its mistake and revoked the grant. Holding: The land was held in the public trust b/c it had been under water, and it is beyond the power of the legislature to convey land in the public trust. P must return the land and gets no compensation for its loss, because the sale was not valid. o Establishes the inalienability rule public trust properties can never be sold Questionable whether this ruling actually benefited the public; easy transportation makes for easy commerce.

C.

COASE THEOREM & BEHAVIORAL K

Coase Theorem In a world of no transaction costs, it doesnt matter where you assign legal entitlements, because the parties will bargain to the best economic outcome. But: There are always transaction costs These transaction costs alter outcomes As transaction costs increase, fewer deals get done. So, the clearer the legal entitlements, the lower the transaction costs are going to be. (E.g., reasonable is ambiguous) Coases model doesnt look anything like the real world, but it tells us a lot about the real world. In a world without transaction costs, there would be no inefficient pollution. Therefore, its because of the transaction costs that we have these negative externalities. Post-Coase, economists get together to talk about reducing transaction costs. When you have high transaction costs, you must be careful about getting the legal entitlements right. If the courts get the decision wrong, the parties will not be able to bargain.

Behavioral Economics (Critique of Coase Theorem) Behavior economics (bounded rationality, bounded self-interest) causes us to modify the Coase theorem. Classic economic theory is based on the idea that each person is making judgments about whats best for themselves and are trying to do what is best for themselves. But people dont always behave that way: people are generous, or vindictive, or stupid. Behavioral economics attempts to systemize these differences and ultimately to create formal models of behavior that will better predict actual human behavior than classic economic models. There are a number of factors (besides transaction costs) that prevent parties from bargaining to the most efficient outcome: Bounded rationality o availability heuristic. o People are irrationally optimistic, and they overestimate their own importance. o People will drive across town to save $20 on jeans, but not a car. o People dont ignore sunken costs (i.e., selling a stock at a loss) o Loss aversion People get really attached to the items they own (including legal entitlements). Bounded willpower lack of ability to completely control our own behavior Bounded self-interest People are willing to sacrifice their own self-interest to punish the other parties, i.e., spite (as seen in ultimatum game). After an acrimonious trial, people are generally not open to bargaining.

o Strong version: Legal rules will have no effect on the allocation of resources o Weak version: This is an efficiency proposition In a world of no transaction costs, it doesnt matter where
you assign legal entitlements, because the parties will bargain to the best economic outcome o Reality: If the law minimizes transaction costs, it encourages Coasian bargaining Criticisms: There are always transaction costs These transaction costs alter outcomes As transaction costs increase, fewer deals get done So, the clearer the legal entitlement, the lower the transaction costs will be, and the easier it is for deals to get done Also, bounded rationality/willpower/self-interest causes people to overestimate their bargaining position; or ill will comes into play

D. SOCIAL NORMS & INSTITUTIONS (AND MAYBE SOCIAL CAPITAL)


benefits to social associations: 1. develop participants collective identification We instead of I 2. resolve collective action problems; reduce incentives for opportunism; increase success of collaboration 3. Robert Putnam says few Americans engage in social associations and argues this impacts levels of trust, reduces neighborly behavior, has economic impact, and general sense of involvement 4. More Americans engage in small social groups or tertiary associations clubs that demand little actual involvement to claim membership 5. In reality, people are shifting away from some associations but moving toward others (maybe new in our modern era)

maybe more far-reaching associations have benefits fewer geographical restrictions to group association good for dialog of ideas, but bad for other things (less trust) no idea how positive or negative these newer kinds of associations will be in the long-run

1. NORMS OF NEIGHBORLINESS
ERA 210-221; DKAS 23-27; SM 36-46.

ELLICKSON, SHASTA COUNTY (ERA210) Peoples behavior in Shasta County governed by a norm of neighborliness rather than the law. Hypothesis: Members of close-knit social groups who are repeat players may develop an extra-legal set of wealth-maximizing conflict resolution norms which allow them to minimize transaction costs and forego costly litigation The law doesnt matter very much o These norms can only take hold when 1) the participants are repeat players (and thus have reason to believe that minor gains and losses will equalize over time, ensuring reciprocity), and 2) the participants have personal investments in social capital and in each others opinions (so that gossip can deter bad conduct). o The law matters when: a) Very costly one-time eventsthere arent repeat-player interactions, i.e. in transactions with outsiders (e.g. motorist accidents) b) there are ranchers who dont care for norms or other peoples opinions (people, in/outside the community who are impervious to gossip) Observation: A law of cooperation among close-knit neighbors governs conflict resolution, independent of legal entitlements o Law of open/closed range displaced by norm that minor losses are ignored b/c assumption that accounts will even out over time Although there are different legal rights associated with being an open range rancher (no liability for damage done by trespassing animal unless negligent) and a closed range rancher (liability for damage done by trespassing animal), they employ the same norms for both. The difference is only recognized when an outsider motorists come onto the land. In an open-range system, the driver is liable if he hits a cow. In a closed-range system, he is not. o Gossip has tremendous economic importance in deterring bad conduct o By essentially ignoring the law, ranchers save social capital by foregoing litigation o Shasta County ranchers may be happier.(?) o When trespass is out of control, self-help is the preferred way of dealing with infractions o In the event of harmful deviation, the ranchers penalize each other by sequentially 1) threatening reputation through gossip, 2) killing the errant animals, 3) talking to a county supervisor (a legal but non-litigious solution), 4) talking to an elected official who has the power to close a ranch, and 5) suing in court. Ellicksons account of norms is extremely optimistic o While norms may sometimes make everyone better off, some groups may develop norms that are destructive o Welfare-enhancing norms may develop despite the lack of repeat players In contrast, urban environments dont breed binding social norms, because people dont see themselves as repeat players (but instead as strangers). There is a general population trend towards cities, where people can preserve their anonymity.

2. NORMS V. LAW
ROLE OF CUSTOM Custom may help to define capture Following custom makes for easy enforcement, but it isnt always the wisest decision Should courts defer to social norms when litigating questions? o Enforcing the law is costly if law reflects custom that people already adhere to, then enforcement costs are low because people self-enforce

GHEN V. RICH (Mass. 1881, DK23) ALSO, SEE ABOVE!


Court upholds local custom Holding: Wounding the whale is taking possession of it this is the established industry custom, and there is no legal reason to change it o If a fisherman does all that it is possible to do to make the animal his own, that would seem to be sufficient o If rule changed to finders keepers, then no incentive to hunt whales To what extent should the law enforce social norms? o Whale-killing custom requires notifying a whaler when a whale he killed comes ashore. Should this norm be legally enforceable? Court holds that yes, it should; otherwise, the whaling industry would collapse. o Or would it foster innovation? Burkean argument changing rules is costly and difficult; standing rules should be favored and enforced (corroborated by high cost of enforcing a law contrary to standing custom)

TERNANT V. BOUDREAU (La. 1844)


Court ignores local custom. Facts: Valuable jewelry stolen from tomb. Boudreau, the only son claims jewelry, as does the second wife of the womans second husband. The womans second husband purchased the sons hereditary rights for a very large sum ($30,000, worth about $700,000 today). The court recognizes an incredibly powerful social norm against removing items from the grave, but instead recognizes his legal right to take the jewels (and that, therefore the jewelry was part of the estate that he signed away). Issue: D sold his inheritance from his mother to P; his mothers tomb was robbed; who owns the spoils? Holding: If a purchaser knows that certain items exist, then they are an integral part of a lump sum sale, even if entombedeven though D didnt know the item existed, it was part of the lump sale and belongs to the purchaser P wins Strahilevitzs criticisms: o Social norms against grave-digging drove D actions (i.e. he didnt think he had a right to take those jewels), not the law o By treating these jewels as ordinary property, the court is undermining a powerful norm against grave robbing it is not likely that D would have sold the right to disturb his mothers remains. The court could have instead used the social norm to create an inalienability rule with respect to property interest in tombs (i.e. even if jewels belonged to D, they were inalienable), or a rule that unearth property went to the state (both of which would reduce the incidence of pillaged tombs). o Generally, a judge in a contract case would try to discern the intention of the parties to the contract. Here, it is possible to turn to the norm to get a sense of the communitys consensus. D could have taken the jewels before selling his mothers estate, but he was barred by the same norm that the court failed to uphold.

3. NORMS AT LAW FIRMS

What rules will divvy up common resources so as to maximize efficiency and prevent a tragedy of the commons? o Governance structures spectrum from market (adaptive) to hierarchy (safe) o Firm-specific capitol the amount by which the total value of the firm exceeds the sum of the individual attorneys values; may include goodwill, synergy from teamwork, and different areas of expertise Correlated to reputation, caliber of clients Incurs potential collective action / free-rider problems o Portfolio theory economic diversification maximizes long-term economic benefits (essentially an insurance policy; variety minimizes risk of complete failure). o Law firms are based on the development of money & prestige o Different members of the firm contribute different amounts of each and use different incentives to get partners/associates to generate each o Firms police to keep slackers from free-riding on the firms public capitol o Firm-specific capitol will rise & fall with things like reputation, high profile clients, etc.

Portfolio Theory: diversification of economic investments is likely to maximize long-term economic benefits/returns. o In the legal context, portfolio theory means that law firms typically have lawyers who do different things (e.g. mergers and acquisitions in good times, bankruptcies and reorgs in bad times) o Allows firms to survive the lean times b/c of a variety of specialties o Cravath the egalitarian law firm

Self-perpetuating people are socialized into the norms Self-selecting only people who share the norm come or stay Lock Step: within a partnership class, everyone is rewarded equally. Each partners compensation depends on class at the firm; promotes partners from within from the best of the associates; no laterals; only hire lawyers of a certain type (WASP males); lack of new ideas; high loyalty; security of top firm; everyone works hard; high profits at partner level; very strong firm culture; slackers get weeded out; no flexibility (e.g. half-time partners, etc.); doesnt reward social/familial connections or brining in clients Strong collective culture, high firm-specific capital (means little flexibility in order to avoid free riders) grass stays on the commons; social norms, rather than rules, govern. Recruits are highly screened to conform to social norms; in-house training strengthens collective productivity; no lateral hires because being jumped over might be demoralizing cultivated the powerful social norm of sharing resources & wealth through exclusion, even if it was at the expense of innovation Costs of homogeneity lack of innovation, lack of incentive to excel, incentive for the best to move to different firms, excludes ppl and ideas Incentives to stay are largely non-monetary prestige, camaraderie, quality of life and also have to do with the fact that internal training goes farther in the firm than outside it.

Agency Theory: An agent is likely to act in his own best interest, not in the best interest of the firm o The agent is likely to maximize his own welfare at the expense of the clients interests. The agent will never have the clients interests completely at heart, always considers himself. Two competing models for compensation: Eat what you kill and lockstep (seniority) o Finley Kumble the anti-egalitarian law firm a meritocracy that placed a premium on bringing in clients. They valued charismatic people who can bring in business and tolerated very big egos Marginal product compensation regime/pure productivity approach: individuals are inclined to act in their own selfish interests Making rain is the prime motivator at the firm: commission for fees; no concern about free-riders, b/c no clients, then no money; norms of competition:

individualism, egoism, bottom-line oriented; no neighborliness; no incentive to put collective good above individual good; no firm-specific capital; no workhorse partners b/c they dont get well-compensated; vote with their feet; go where theres money Highly competitive, no firm-specific capital (less productive attorneys simply make less money; no free rider problem) Theoretically allows for more flexibility; if you want to take time off, youre free to do so at your own cost o However, because of pressure from rankings, firms of this ilk often end up firing lower-performing attorneys Pulls people in from places like Cravath, where people are not rewarded for being superstars promise long-term care Why did FK collapse? Problem is an inefficient formula for determining valuable contribution; rainmaking is rewarded but actually maintaining the clients is not. o A better system would reward all kinds of good work, just rainmaking / bringing in business. However, people trained to go where the money is eventually turned away from Kumble when they started to sink. Essentially, Finley Kumble is the commons gone awry. Unlike lock-step (strong disincentive to jump ship), a to each his own mentality makes partners disloyal Strong incentives to bring in new clients, but no strong incentive to keep clients happy = lots of malpractice suits Compensation system does not reward the people who actually do the work They got people to come to their firm for more money, so as soon as problems started, people quickly jumped ship to other opportunities Little firm-specific capital they didnt know each other very well, they didnt have a good reputation Essentially commons gone awry in that winning trumps loyalty.

E. TRESPASS, PROPERTY RULES & LIABILITY RULES, AND THE EX-ANTE/EX-POST PROBLEM
1. ENCROACHMENTS & TRESPASS
(SM74-80) (SM80-86) (SM86-90) Nuisance (663-4), AP (Note 5 on 128-9), Servitudes (Note 1, p792) . Common Law Approach - At common law, any intentional and unprivileged entry onto land owned or occupied by another constituted a trespass. A trespasser is strictly liable, good faith, knowledge, and fault are irrelevant Minor Encroachments Alternative methods of resolution: o De minimis Rule: if the encroachment is really small, then courts wont address it Doctrine hinges on good-faith; otherwise, it encourages incremental trespassing

o Party wall: Make the encroachment a party wall


Could lead to positive transactions; however, trespass tends to foster animosity, and forcing 2 opposing parties to share ownership may be setting a scene for conflict o Temporary trespass to alleviate a permanent trespass: Allow encroacher to temporarily come onto land to correct encroachment e.g. Golden Press: chip away underground foundation PILE V. PEDRICK (Pa. 1895, SM 74-5) [Encroached v. encroacher] Facts: D (Pedrick) built a wall on his property that included small encroachment (an extremely minor trespass1 3/8 inches underground), underground, onto Ps (Pile) land. P insisted D remove the part of the wall encroaching onto their property, but P refused to let him come and chip off the offending piece. Court held D had to remove entire wall and rebuild it at great expensebut, after P v. P II, he is given one year to do it. Holding 1: Property rule Pile o Would anticipate that Pile would take a large amount of money, all the way up to just less than the cost of tearing down and rebuilding the building. He shouldve asked for an amount lower than the expense required to tear down the wall Holding 2: Property Pedrick for 1 year o Cooling off period or more time to negotiate o Gives Pedrick a bit more bargaining power Pedrick can tell Pile that, if he really wants the wall gone, he has to let Pedrick on the property to chip away the trespassing inch; otherwise, Pedrick is riding out the year The extra time gives Pedrick more leverage (more time to find ways to lower the costs) the extra year may enable the trespasser to discover new technologies to remove the encroachment in a less intrusive way (make Pile worry about losing the big side payment if there are other, cheaper ways to remove the source of the conflict) The idea is that the parties would negotiateif P is rational, he will settle on some sum less than the rebuilding cost. Doctrinal justification for automatic injunction approach in Pile: encroachment began as unintentional trespass, but continued presence of the encroaching structure is an intentional trespass o once you know you are encroaching and fail to remove the encroachment, you are now intentionally trespassing Pile was the lowest cost damage avoider and was acting unreasonably Strahilevitz says court shouldve given Pile the liability rule (i.e. Pedrick can have the wall and must compensate Pile for damages) since assessment costs were really low o OR, can argue that liability rule should go to Pedrick (i.e. Pile has to pay Pedrick to kick him off the land b/c Pile should be punished for being so unreasonable) Seems like spite is involved. However, why might even rational actors have difficulty negotiating? o Loss aversion or entitlement effect o Bilateral monopoly problem. Two people who are forced to deal with one another, and there are an enormous range of possible outcomes that will make both parties better off. Parties will spend a large amount of time bluffing Other ways to settle the case o Giving Pedrick a liability rule -- Making Pile accept a reasonable payment o Pile had a right to insist on property rule prevention, but he is clearly the lowest cost damage avoider. Hes being really unreasonable to refuse to allow Pedrick to come on the land to remove the stones.

GOLDEN PRESS, INC. V. RYLANDS (Co. 1951, SM75)

Facts: similar to P v. P. Here the court finds D is liable but offers P no injunctive relief. The court wants to avoid waste when the value of the land encroached upon is low, and there was no bad faith or willful, intentional encroachment. Holding: Where the encroachment is truly minor and the trespasser wasnt negligent, the court wont grant property rule protection to the owner will order monetary damages/property transfer instead Doctrinal justification for outcome (no injunctive relief): there was no need to balance the equities through injunction and Ps injury can be remedied by relief entitled to at law (damages). from ex ante perspective, gives land owners incentive to hire surveyors. Provides less incentive to steal land from their neighbors. most jurisdictions (for similar facts) will follow the Golden Press rule for minor trespass, courts will not protect ownership but will give damages for the encroachment Do we prefer a de minimus rule: if the encroachment is really small, you dont have an action in the courts (property rule protection forever for the encroacher)? a. This would keep some ridiculous cases out of the courts b. But we would have to draw some lines the court wont hear case unless value of encroachment is over $X This is a better rule than in Pile v. Pedrick: less wasteful, more efficient (we are most concerned about this factor ex post)

A. Doctrine of Lateral Support: support provided to one piece of land by the parcels of land surrounding it a. One who withdraws the naturally necessary lateral support of land in another's possession or support that has been substituted for the naturally necessary support, is subject to liability for a subsidence of the land of the other that was naturally dependent upon the support withdrawn. b. One who negligently withdraws lateral support of land in another's possession, or of artificial additions to it, is subject to liability for harm resulting to the other's land and to the artificial additions on it. B. Doctrine of Subjacent support: neighboring lands provide support that the land in question would receive from natural sources a. liability is at issue when one person owns the surface rights and another owns subsurface rights for a cave or mineral deposit or something. See Pennsylvania Coal v. Mahon (1922) b. where the surface estate is, by deed or otherwise, severed from the underlying mineral estate and the two are owned by different persons. c. Unless the surface owner has parted with or waived his right in the matter, he is entitled to have the mining done in such a way as to leave sufficient support for the surface in its natural state

2. PROPERTY RULES & LIABILITY RULES


Starting point Identify lowest-cost damage avoider & highest-cost damage avoider, the goal being to eliminate the conflict between the 2 parties o Grant entitlement to the highest-cost damage avoider (i.e. for whom it will be most costly to eliminate the conflict), and put the legal burden on the lowest-cost damage avoider (See also: REMEDIES for NUISANCE)

ENTITLEMENTS: private land owner has entitlement to sell/bargain for your property a) PROPERTY RULE: Gives holder the absolute right to sell or not sell at any price he chooses, thereby promoting Coaseian bargaining between buyer & seller subsequent voluntary (bilateral) transactions between the parties will enable movement of entitlement from one party to another Best when transaction costs are low, b/c negotiation will produce the most efficient outcome

When there are low transaction costs & high assessment costs, the market will correct for

mistakes In the property rule situation, there are transaction costs: i. Less affected people dont want to pay as much ii. Holdouts person behaving strategically to mask their true valuation (person who would be willing to pay $1, but pretends they only want to pay $.25) iii. Freeriders person who tries to avoid paying their fair share even though they benefit (professor who wont pay because of the rule) b) LIABILITY RULE: Court sets the price (e.g. when law entitles a single concurrent owner to force a partition sale of co-owned real estate; eminent domain) subsequent involuntary (unilateral) transactions involve compensation for damages incurred by one party in moving entitlement Best where there are high transaction costs & low assessment costs, b/c state can most efficiently figure price out i. Responding to high transaction cost world impose liability rules but! the judge might get it wrong, not have the information, and so the liability rules have assessment costs. Advantage: prevents hold-outs & free-rider problems b/c there are no negotiations government may be entitled to restrain your property by eminent domain Alternatively, your entitlement may be inalienable under some circumstances Calabresi & Melameds RULE 4 (entitlement in Polluter protected by damages) opens up vast new frontiers for liability rules: a. Lets us once again accommodate high-transaction-cost cases, but at the same time it allows us to act on a justice preference for Polluter, or take advantage of asymmetric information b. Paradoxical in that it reintroduces the very problem it is meant to solve i. Litigation arising from enviro pollution (and like problems) involves not a single P and R, but a single P and multiple Rs. Rule 4 asks those multiple Rs to agree on a choiceeither pay Ps damages (avoidance cost) as set by the court, or be quiet and go away. ii. But in posing such a choice to a group of choosers, Rule 4 gives rise to the same probs of free-riding and strategic bargaining (the same transaction costs) that were the reason for opting for a liability rule in the first place!

CALABRESI & MELAMEDS FOUR RULES (SM83)


(ASSUME P SUES X TO ENJOIN X) (ASSUME A NUISANCE SUIT B/W POLLUTER P AND RESIDENT R)

METHOD Injunction/Property Rule


property rule gives the holder the absolute right to sell or not sell at any price they choose

OF

PROTECTION Damages/Liability Rule


liability rule means that the transfer will occur at a price set by the court.

RULE 1 (property rule)


P has the right to be free from X D must pay P to continue X P sets the price (or can refuse to deal) P can get injunction to shut down nuisance (or sell it to D)if the injunction is violated, D faces fines or jail time

RULE 2 (liability rule alt to property rule


1) D has the right to continue X D must pay P to continue X (damages) Judge sets the price damages to compensate P for harm caused by nuisance

Plaintif f/ Reside nt

INITIAL ENTITLEMEN
T

court finds a nuisance issues an injunction against P in favor of R (P, in order to keep on polluting, would have to buy off R in a subsequent, postinjunction transaction)

court finds a nuisance permits P to go on polluting upon payment of damages to R

RULE 3 (property rule)


D has the right to continue X P must pay D to stop X D sets the price (or can refuse to deal) common law nuisance regime (D required to make no changes) court finds the pollution not to be a nuisance permits P to continue (R, in order to bring a halt to the pollution, would have to buy off P in a subsequent transaction)

RULE 4 (liability rule alt to property rule


3) P has the right to stop D from doing X P must pay Ds costs for stopping X Judge sets the price Calabresian insight! (rarely used) R can force P to stop polluting, provided R pays compensation determined by the court, as damages for which R is liable

Defend ant/ Pollute r

TRANSACTION AND ASSESSMENT COSTS 4 RULES HIGH ASSESSMENT COSTS HIGH TRANSACTION COSTS LOW TRANSACTION COSTS neither rule likely to be efficient if Property rule, market will correct for mistakes (property rule best when low transaction costs) LOW ASSESSMENT COSTS Liability Rule best when high transaction costs and low assessment costs Both Rules likely to be efficient (property rule best when low transaction costs)

3. EX-ANTE / EX-POST PROBLEM

Ex ante analysis an analysis of the situation before some critical event (like an accident, or a contract, or a commitment to a particular use of resources) takes place o More likely to think about incentives for the future Ex post analysis an analysis of the situation after such a critical even takes place o Tends to focus on fairness and distributional concerns o Courts naturally drawn to ex-post analysis b/c thats how controversies are presented to them. Court naturally takes the situation as presented, and looks for the solution that makes the most sense (efficient and fair) given what transpired and the circumstances. But this doesnt mean the ex-post perspective is the correct perspective for thinking about such problems Analysis of both efficiency and justice may differ dramatically, depending on whether we consider a particular situation from an ex-ante or ex-post perspective o Property rules might be inefficient from an ex-post perspective, and yet still be the more efficient rule in the long runfrom an ex-ante perspective that stresses incentives for future behavior

o Encroaching wall example (like Pile v. Pedrick)

F.

NUISANCE LAW

Nuisance: A special type of harm (e.g. dust, fumes, gases, light, noise, vibrations i.e. other than physical entry) that interferes with the interest of an owner, tenant, or other land occupant in the use and enjoyment of land o Sic utere tuo ut alienum non laedas (sic utere) One should use ones own property in a way so as not to injure the property of another o The utility of Ds conduct is increasingly considered in determining whether nuisance liability exists PUBLIC V. PRIVATE NUISANCE Public Nuisance: Any activity that interferes with the rights of the public in general, usually by threatening public health, safety, or morals o Whether the conduct involves a serious interference with public health, safety, peace, comfort, or convenience o Whether conduct is prohibited by statute, ordinance, or regulation o Whether conduct is continuing or permanent and has a significant effect on public right Typical P is city/govt; private parties can only sue on a public nuisance theory if there is a special injury Underlying bases of liability are the same as those for private nuisancesubstantial H caused by intentional and unreasonable conduct or by conduct that is negligent, reckless, or abnormally dangerous o Unreasonableness turns heavily on considerations of gravity and utility (like private nuisance) Private Nuisance: Arises when 1 uses his land in a manner that injures a private owner/occupant in the use or enjoyment of that persons land o Nuisance per se: Act or condition that is always considered a nuisance regardless of the surrounding circumstances. This is typically an activity that is prohibited by law o Nuisance per accidens: A nuisance that is only a nuisance b/c of the surrounding circumstances, such as its location & manner of occupation. This is the bulk of nuisance law Some nuisances can be both public and private (Spur) Distinction b/w public and private important: o Since private nuisance arises from interference w/ use/enjoyment of land, only owners of interests in land can bring suit o Since public nuisance arises from interference w/ public rights, any member of affected public can sue, but usu. only if the person bringing suit can show special injuryinjury or damage of a kind different from that suffered by other members of the public Justifications: it is needed to protect D from multiplicity of actions redress of wrongs to the general public should be left to public officials any harm or interference shared by the public at large will normally be, if not entirely theoretical or potential, at least minor, petty and trivial so far as the individual is concerned. Criticism (esp by environmentalists) response liberalized by statute, judicial decision, and the Restatement o Abatement actions may be brought by those same persons, by public officials, and by any person who has standing to sue as a representative of the general public, as a citizen in a citizens action or as a member of a class in a class action. [Restatement 821C] Restatements objectiveleave courts free to proceed w/ recent developments expanding access to courts Special injury can be difficult to prove (esp if H is only threatened and has not yet occurred) Public prosecution can be inhibited by political pressure, inertia, and lack of resources

NUISANCE POSSIBILITIES? Halfway Housesapprehension abt criminal activity & declining property values sometimes sufficient, sometimes not (DK644) o D liable b/c Ps had substantial grounds to feel insecure, property values had gone down. Arkansas Release Guidance Found. v. Needler (Ark, 1972) o Apprehension about future criminal activity and mere depreciation of property values give rise to nuisance liability. Nickolson v. Connecticut Halfway House (Conn, 1966) o Nuisance damages brought by property owners in vicinity of toxic waste dump. Prices declined, but contamination occur. Negative publicity resulting from unfounded fears significant interference w/ use/enjoyment of Ps land. Adkins v. Thomas Solvent Co. (Mich, 1992, DK644) Light and Air o No nuisance, conflict arose not from unreasonable conduct by D but from abnormally sensitive nature of Ps useoperator of drive-in theater sued owner of amusement park whose bright lights interfered w/ use of drive-in. Amphitheaters v. Portland Meadows (Or, 1948, DK644) o May be a nuisance if gravity of the H to P o/w the utility of Ds conduct. Prah v. Maretti (Wis, 1982, DK644) o Ks Prah as unjustified departure from established law and holding that blocking light to an neighbors property constitute nuisance, except where malice is motive. Sher v. Leiderman (Ct App, 1986, DK644) Spite and SpamCourts commonly find nuisance liability where a landowner builds a structure (a spite fence) of no use whatsoever other than to vex a neighbor. Lateral & Subjacent Support o Law of private nuisance regarded as defining one of a number of so-called rights incident to land ownershipfreedom from trespass, water rights, the right to support. o Lateralthat provided to one piece of land by the parcels of land surrounding it Duty on neighboring land to provide the support that the subject parcel would need and receive under natural conditions; no right to support of structures on the land. Cause of action for interference w/ right arise until subsidence actually occurs or is threatened, and then it runs against the excavator (may be predecessor of present possessor). Liability is absolute; need show negligence. BUT if supported land had been built upon in a way that subsidence would occur but for the improvements, liability w/o negligence, at least so long as excavator gives notice of his plans. w/o negligence, liable if subsidence of (un)improved land is shown to have been caused by w/d of fluids or their release as result of excavation Right of lateral support can be waived; expressly abandoned as by grant of a right to additional support Many jurisdictions enlarge/modify the CL right, recognition of its unsuitability to modern, dense, high-rise building practices o Subjacentsupport from underneath as opposed to the sides These issues arise when 1 person owns surface rights and another owns subsurface rights (mineral interests) Analogous to lateral support (see above)

1. ELEMENTS OF PRIVATE NUISANCE

Intentional, non-trespassory, unreasonable,& substantial interference with Ps use & enjoyment of 5 elements required to establish liability for a private nuisance 1) Intentional 2) Nontrespassory 3) Unreasonable 4) Substantial interference

his land

5)

With the use and enjoyment of Ps land

i.

Intentional Interference
Conduct is intentional if D: 1) acts for the purpose of causing the harm; OR act to create harm (did it to harm them?) (not applicable in Morgan) 2) if s/he knows that the harm is resulting or is substantially certain to result from his conduct know it will cause harm (plausible in Morgan) know it is substantially certain to cause harm (plausible in Morgan) o Example: Es factory routinely emits very loud noise that keeps N, owner of adjascent house, awake all
night. N complains, but the noise continues. E motivated by malice intentional E motivated by malice intentional b/c E knows from Ns complaint that the noise will cause H to N

Under limited circumstances, private nuisance may arise from unintentional conduct. o May be premised on conduct that is unintentional and otherwise actionable under the rules controlling liability for N or R conduct, or for abnormally dangerous conditions or activities. [Restatement (Second) of Torts] o Not necessary to show that Ds conduct is either intentional or unreasonable.

Example: E stores large quantities of explosives in backyard of his house abnormally dangerous condition, regardless of Es intent or reasonableness of his conduct.

MORGAN V. HIGH PENN OIL (NC 1953, DK639)


Facts: P lived and worked on some land, starting in 1945 (dwelling house and trailer park) oil refinery opened in 1950, emitted noxious fumes and soot; sickened Ps and other nearby landowners. Ps notified Ds about probs and demanded they stop. D continued to operate. TC said : Refinery was a nuisanceBox II Liability rule. NC Sup. Ct. affirmed and granted injunctive relief. Rule: Lawful conduct which is non-negligent may constitute a nuisance if it is intentional and unreasonable under the circumstances. Holding: D is a nuisance per accidens and is thereby enjoined o Threshold test of substantiality: Does it cross the threshold to substantial harm? If so, then injunction o Restatement: 2 possible interpretations 1) Ordinary person test 2) How abnormal the use is (if everyone is doing it, probably not a nuisance) Rationale: o D intentionally and unreasonably released gases and odors to substantially impact the air quality and negatively harm Ps ability to enjoy his private land. o the injunction was not unreasonable to prevent further continuing harm to the plaintiffs o Intentionallycaused noxious gases and odors to escape onto the nine acres of the Ps to such a degree as to impair in a substantial manner the Ps use and enjoyment of their land. Court doesnt consider whether the costs of shutting down D outweigh the benefits

8. Unreasonable Interference

Outcome usually hinges on whether interference was unreasonable (UPL490) Things that have been considered nuisance Noise, odors, smoke (Morgan v. High Penn Oil) Spite Fences

Blocking sunlight so neighbor cant use his solar collectors Fear caused by construction of halfway house, parole facility Bright lights next door interfered with operation of drive-in movie theater

Traditional Approach: many states still follow this. States follow one of the following approaches: o Gravity of H approach. Unreasonableness = serious injury to P (North Carolina, Texas) o Multi-factor test. Factors vary from state to state, including things like: (Massachusetts, New York, South Carolina) Character of the neighborhood Nature of the wrongful conduct Its proximity to Ps property Its frequency, continuity, and duration Nature and extent of resulting injury to P Utility of Ds conduct (a number of states) RESTATEMENT APPROACH Few courts have followed the Restatement explicitly Basic Test: Balance of Utilities Unreasonable if the gravity of the H o/w the utility of the actors conduct. Case-by-case determination. Court compares: a) utility of the Ds conduct, with Restatement lists 3 factors to assess utility of Ds conduct: 1. social value of the primary purpose of Ds conduct 2. suitability of the conduct to the character of the locality 3. impracticability of preventing or avoiding the interference b) gravity of the H that this conduct causes P. Restatement lists 5 factors that bear on gravity of H: 1. extent of the H (degree and duration) 2. character of the H (physical damage or personal discomfort) 3. social value of Ps use and enjoyment 4. suitability of the particular use/enjoyment invaded to the character of the locality 5. burden on P of avoiding the H

Example: A operates a cement factory in a rural and uninhabited area. Regularly emits large quantities of cement dust into the atmosphere; no technological method of preventing these emissions. B purchases tract of land next to the factory, builds a home, plants a flower gardensoon discovers cement dust stunts the growth of one particular type of flower. Not unreasonable. Gravity of H to B is low. Extent of H is minor b/c B can grow other types of flower. Though nature of H is physical damage, its almost trivial; B still has almost all use/enjoyment of property. Area appears unsuitable for residential flower garden; B might be better off trying to grow this flower in his home or greenhouse. Utility of As conduct is high. A is unable to prevent emissions w/o closing the factory.
1/3 of states Alternative Test: Severe Harm 1977 added a 2nd test that seemed to turn law back toward traditional approach, generating a lot of controversy. Unreasonable if the H caused by the conduct is serious and the financial burden of compensation for this and similar H to others would not make the continuation of the activity not feasible. [Restatement (Second) of Torts 826(b)] Utility of Ds conduct is irrelevant.

Example: Ns steel factory produces noxious fumes that reach Fs nearby farm, killing his entire corn crop. This H sufficiently severe to trigger alt test for unreasonableness, entitling F to relief if the other nuisance elements are established, as long as N can bear the cost while remaining in business.

Wisconsin has used this test; Idaho has rejected endorsing it (Carpenter v. Double R Cattle Co., Idaho, 1985, DK643) o Level of interference, not utility of conduct. Court upheld exclusion of ev offered by D to show the utility of its operations o/w gravity of H caused to Ps. Jost v. Dairyland Power Coop. (Wis, 1969, DK642)

UNREASONABLENESS: NUISANCE V. TRESPASS

Intentional tort usu. results in liability w/o regard to amt of H or reasonableness of activity causing it Trespass like other intentional torts Nuisance usually subjected to inquiries abt reasonableness and amt of H Unless P can show a physical invasion by a tangible thing (contaminated water trespass), D can escape liability for intentional conduct on grounds of reasonableness or amt of H that would be irrelevant if there had been a physical invasion by a tangible thing (polluted gas nuisance) Some tort scholars thought the system of rules was insensible, and at their urging the Restatement added a provision that an intentional invasion is unreasonable for purposes of nuisance law if: 1) As before, the gravity of the H caused o/w the utility of the actors conduct 2) The H caused by the conduct is serious and the financial burden of compensating for this and similar H to others would not make the continuation of the conduct not feasible. [Restatement (Second) of Torts 826(b)] (see alt test above) Idaho court rejected 826(b) moves intentional nuisance in the doctrinal direction of intentional trespass, though there are still differences Sometimes court takes opp approach, treating intentional trespass like intentional nuisance o Trespass and nuisance harmonized, but by subjecting both to the util calculus of intentional nuisance. Trial court found D liable on trespass theory; court rejected arg on appeal that trespass was inappropriate b/c no physical invasion of Ps land. Trespass = any intrusion, whether by visible or invisible pieces of matter or by energy. Court then applied a balancing test of reasonablness to determine liability. Martin v. Reynolds Metal Co. (Or, 1959, DK643) o Intangible intrusions must be approached on a nuisance theory. Excessive noise alone support trespass action absent some kind of physical invasion/damage to property. Wilson v. Interlake Steel Co. (Cal, 1982, DK644)

9. Substantial Interference
Slight inconveniences or petty annoyances insufficient to establish nuisance liability. there must be a real and appreciable invasion of the Ps interests o aesthetic concerns usu. insufficient

BUT junkyard in residential area might be a nuisance if unreasonably operated and unduly offensive. Allison v. Smith (Colo, 1984, DK645) Feuding neighbors mounted toilet seats in their yards, visible to lot next door. Not nuisancesmerely an aesthetic annoyance. Wernke v. Halas (Ind, 1992, DK645) Reasonableness: if a normal person living in the community would regard the interferences as strongly offensive or seriously annoying, substantial to impose liability. Does not protect hypersensitive persons. o Radiation emitted by Ds computer interfered w/ TV reception at Ps appliance store; case remanded to consider whether appliance store was an unusually sensitive case. Page Cty. Appliance Ctr. v. Honeywell, Inc (Iowa, 1984, UPL492) o No nuisanceconflict arose not from unreasonable conduct by D but from abnormally sensitive nature of Ps useoperator of drive-in theater sued owner of amusement park whose bright lights interfered w/ use of drive-in. Amphitheaters v. Portland Meadows (Or, 1948, DK644) o BUT May be a nuisance if gravity of the H to P o/w the utility of Ds conduct. Prah v. Maretti (Wis, 1982, DK644) o Ks Prah as unjustified departure from established law and holding that blocking light to an neighbors property constitute nuisance, except where malice is motive. Sher v. Leiderman (Ct App, 1986, DK644)

10. Interference w/ Use & Enjoyment of Land

Clearly met when Ds conduct: o Causes physical injury to the land itself (e.g., if fumes from Ds plant destroy Ps apple orchard) or to tangible personal property located on the land (e.g., if the fumes ruin the paint on Ps truck) o Causes death, bodily injury, sickness, or substantial discomfort or annoyance to persons physically present on the land

2. REMEDIES

4 rules for resolution of nuisance claims: abate the activity in question by granting injunctive relief (like in Morgan and Estancias cases; property rule) 2) let activity continue and D pays permanent damages (Boomer; liability rule) 3) let activity continue and deny all relief 4) abate the activity in question if P pays damages (Spur; Del Webb pays to indemnify defendant for loss or move of operation; liability rule)
1)

Why do we follow liability rule when transaction costs are high? Helps us actually avoid the transaction costs. o when transaction costs are low (parties can get together easily and handle transfer of title even when the judge gets it wrong, strong incentive to behave well to avoid risk of losing title), we want to favor property rules. o also, we favor property rules when the court has a hard time determining what damages are appropriate (depends on structure of litigation class action lawsuit? Many parties involved?)
o o o o

Collective action problems: Hypothetical: loud nightclub opens next to a condo building. Condo residents may want to shut down the club or get some kind of injunction to stop noise late at night. some people in community will care a lot about reducing noise (bothered more by noise) and some wont care that much (and wont want to pay anything to negotiate or buy out the offender). This latter group will have an incentive to hold out and the condo group on the whole may have a hard time gaining enough strength to challenge the club May encounter free rider problems as well another party may free ride off interested partys efforts to shut down nuisance and gain the benefit without participation or costs

i.

Injunction: grants the entitlement to the , enjoins


1. and can then bargain and transfer the right to the - polluter 2. is made richer by the entitlement and can now benefit from sale of the entitlement 3. In the end, not very efficient, it puts and in bilateral monopoly, with high transaction costs, and creates holdout problem, because you know the other side has limited alternatives. 4. Estancias Case/ property rule- P lives in building next to apartment building built by D, which had a loud AC. Court awarded 10K and granted injunction. o Balancing Equities is proper even once a nuisance is established we need to know what remedy we want to give o Considerations what injury is given to the and the public by granting the injunction and what is the benefit that the gets for having the nuisance abated? o Rule of Necessity says that we dont force Ps to go for damages if we can give

an injunction. The would have to show a compelling need to continue or an ability to easily abate the nuisance. Substantial Continuing Damages trigger injunction.

ESTANCIAS DALLAS CORP V. SCHULTZ (TX 1973, DK646)


Facts: homeowners brought suit against apartment complex for noise nuisance: massive air conditioning unit for the 115-unit apartment complex. Ps had suffered $10k damages up to date of trial. Before granting injunction in Texas, the courts have to balance the equalities (is the benefit of relief to P greater than negative effect of relief to D). Rule: Even though a jury finds facts constituting a nuisance, court must balance the equities to determine if an injunction should be granted. Holding: Property rule protection for neighbors (fairness) o landowners were entitled to injunction against operation of air-conditioning equipment despite failure of jury to give affirmative answer to proximate cause issues related to damages. o there is no major public benefit at stake, but the sharp decrease in property values after installation of the air conditioning unit indicates the nuisance level o better justification: were real harms suffered by Schultzes that were difficult to monetize (public values at stake?)intangible harms? o it is not possible for Schultzes to buy out the apartment complex to arrive at dollars and cents efficient solution

Efficiency and Fairness (Coase!)Granting of injunction to Schultzes isnt necessarily the final resolution since P can sell injunction to D if D is willing to pay a good price for Ps consent to its dissolution o Why not limit Ps remedy, and Ds liability, to damages? Presumably D would then (as to the future) abate the noise if that were cheaper than paying damages, OR pay damages and continue w/ the present system if that proved the less costly alt. Conflict b/w P and D would be resolved at the least cost, and Psat worstwould be compensated for any hardship caused by the noise. The result would be efficient (cost of conflict minimized) and fair (injury would be redressed). But would Ps be then relegated to a series of lawsuits for damages? o BUT! Might not the injunction affirmed by the court be equally (if not more) effective than damages in accomplishing the ends of fairness and efficiency? Granting of injunction to P need nto represent the final resolution of conflict b/w them and Dparties can bargain over whether injunction will be enforced. Injunctions are for sale by the P; the P expects to demand enforcement of the injunction only if the D refuses to pay a good round price for the Ps consent to its dissolution. (Keeton & Morris, DK649) Enjoined party may, and often will, attempt to buy off the injunction. (Injunction Negotiations, Stan. L Rev, DK649) In two-party situations like Estancias, parties will likely bargain to efficient outcomes; in many-party situations like Boomer, post-litigation bargaining difficulties could well arise. (DK655) o Balancing the equities has an apparent efficiency objectiveto avoid the greater H (or social cost) Balancing the EquitiesProblems & Possibilities o Unequal comparison of H. Problem w/ this is that it compares the general loss to the public (e.g., loss of jobs), while it only considers specific loss to the private land owner (i.e., specific $ damage to his property), notwithstanding he may be damaged in many general ways which cannot be translated to specific damages. Mahoney v. Walter (W.Va, 1974, DK654) o Air pollution. Most cases seeking injunctions involve injury to only 1 or a few ppl, but in air pollution many are being injured. If P were to bring a class action, weighing benefit would include all members of the class. But class actions are sometimes difficult to bringthus seems appropriate as general rule that if judge can recognize H to 3rd persons from granting an injunction, he should be able to consider H to 3rd persons from not granting the injunction. (Equity and the Eco-System, Mich. L. Rev., DK654)

11.Damages to : where an injunction is too costly


1. Gives the entitlement to but forces its sale to -polluter 2. Balances the equities by allowing to continue beneficial activity but compensating 3. Does not induce good behavior in , because there is no future suit allowed (permanent damages) 4. Boomer / liability rule- D is CementCo near community, neighbors sue for injury to land. Nuisance found and temporary damages granted, no injunction. 1. Balance Equities find that substantial nuisance does not automatically injunction. Must consider economic benefit that the nuisance gives to the community. 2. How to avoid injunction grant injunction in the future to allow tech development, or condition the injunction on Ds payment to P of permanent damages.

BOOMER V. ATLANTIC CEMENT CO. (NY 1970, DK649)


Facts: Group of land owners (P), complaining of injury to their property from dirt, smoke, and vibration emanating from a neighboring cement plant (D), brought action to enjoin continued operation of the plant and for damages. Trial court held plant was a nuisance Rule: Though the rule in NY is that a nuisance will be enjoined even when there is a marked disparity shown in economic consequence b/w the effect of the injunction and the effect of the nuisance, an injunction should not be applied if the result is to close down a plant. Permanent damages may be awarded as an alt. Holding: Rather than award property rule protection (i.e. injunction), court ordered permanent damages since loss is small in comparison with cost of removing a continuing & recurring nuisance Reasoning: o Since injunction denied, P can sue repeatedly as further damage is incurred o Threat of injunction would pressure D into paying in private litigation o Environmental problems arising from cement-making are universal, and R & D into new technologies is beyond Ds control o Permanent damages to P will spur research for better technologies Significance: o Traditionally, courts have 2 options: no nuisance vs. issue injunction o Boomer adds 3rd option: payment of permanent damages in lieu of an injunction, thereby shifting the balancing standard from a liability to remedy analysis Note: Reasoning carried one step further by courts. In Pennsylvania Coal v. Sanderson (Pa, 1886), a suit for damages was frowned upon by SC, which said, To encourage the development of the great natural resources of a country, trifling inconveniences to particular persons must sometimes give way to the necessities of a great community.

Same facts, different result. NY Ct. App. confronted facts essentially identical to those in Boomer and found no nuisance. Claimed to follow the Restatement. Considered the liability category of abnormally dangerous conditions to be inapplicable and concluded neither intent nor negligence was established. Copart Indus., Inc. v. Consolidated Edison Co. (1977, DK654) Distinguished Boomer on the ground that it involved an intentional and unreasonable invasion.

12.Enjoin and give damages to go away (preexisting use)

1. Pays -polluter to stop polluting 2. Give -polluter the entitlement and then force the polluter to sell that entitlement to the for $. 3. Efficient: and cant bargain, but this is better solution because have to back up forced transfer with cash. 4. Problem: Holdouts- multiple potential s- they may not be willing to purchase the entitlement, solved by having the court set the price. 5. Allows to relocate without any financial outcome (no worse off). is better off because no longer have to put up with decline in property values (Pareto Efficient) 6. Spur / liability rule- D is cattle lot owner, P then builds housing near the cattle lot. P wants to enjoin feedlot b/c it is a nuisance. D claims no injunction is fair and that it will accept damages to move. 1. Come to Nuisance Pay it to go away- preexisting lawful use is no longer lawful because it poses a hazard, you cant just make it leave for the new party. 2. If the nuisance is injurious to the public no coming to nuisance doctrine damages and injunction instead.

SPUR INDUSTRIES, INC. V. DEL E. WEBB DEVELOPMENT CO. (Ariz. 1972, DK656) Facts: D owned cattle feedlots prior to the construction of Ps nearby residential development. P sued D, claiming that the feedlots were a public nuisance because of the flies and odor that drifted toward the development. The trial court permanently enjoined defendant from operating the feedlots. Issue an injunction against the nuisance, but require P to compensate D for cost of compliance. Rule: The doctrine of coming to the nuisance does not prohibit granting injunctive relief against the nuisance. Holding: Feedlots are a public nuisance Spur is permanently enjoined, but b/c DW brought people to the nuisance to the foreseeable detriment of Spur, DW is required to indemnify Spur for shutting down/relocating o The court affirmed the judgment of the trial court permanently enjoining the feedlot operations, holding that the feedlots were both a public and private nuisance. A populous neighborhood was affected by the odor and flies, and the public's health was affected. o Held, however, that P, having brought people to the nuisance to the foreseeable detriment of D, was required to indemnify D for his costs of relocating or shutting down the feedlots. We can understand Spur as a liability rule protecting the polluter. .The court says that the polluter is a nuisance, but makes Del Webb pay damages to make them move. o Gives the neighbors an option to force the polluter to shut down if theyre willing to pay the court-ordered fee. COMING TO THE NUISANCE Prevailing viewmoving into the vicinity of a nuisance does not completely bar a suit for damages or injunctive relief, but it is a relevant factor Coming to the Nuisance a claim may be weakened when a P moves to Ds established locale Concerned w/ fairness or efficiency? both concerns have played a role in doctrinal development Compare: Piggery; injunction granted but time provided for D to make new arrangements. Pendoley v. Ferreira (Mass, 1963, DK663) Alt to Spur suggested by right to farm statutesno nuisance action may be brought against agricultural operation if its been lawfully ongoing for 1+ years prior to the action AND if the conditions complained of have existed substantially unchanged since date operation began. o 35 have enacted such legislation since 1979 o Iowa SC subsequently found its states statute unconstitutional. Bormann v. Board of Supervisors (Iowa, 1998, DK663)

G. MARKET-BASED SYSTEMS FOR POLLUTION CONTROL


MERRILL, ENVIRONMENTAL PROTECTION: EXPLAINING MARKET MECHANISMS (ERA521) Command & Control Pollution Regulation: Top-down govt regulation that imposes uniform standards of performance on pollution sources, micromanaging (E.g., all plants must install scrubbers, or 10% reduction in emissions across the board) o All sources are required to comply unless granted a variance o (new/old distinction) favors older businesses because new ones have harsher standards to meet o requires adoption of a certain regulations o top-down system to enforce new technology o mandate all plants -> some flexibility exists now with variety of options

Market Mechanism Pollution Tax: System (e.g. tradable permit system) that impose a money charge on a quantity of emission over a given unit of time; permits can be purchased or given, so firms can choose whether to pay the pollution charge or not pollute. grandfathered permits allowed o no specific requirements, but forces them to incur the costs that the pollution inflicts on others. o favors newer businesses because older, out-of-date factories will want to buy permits (giving them right to pollute, right not to upgrade facility) o Downside for labor unions is that this can result in closing of older, inefficient, high-polluting, laborintensive plants. economists view this as system most likely to be efficient (lead to allocative efficiency) o choice between paying to pollute or reducing pollution through technology o Trading not good for pollution that causes localized harm (hot zones); good for global/widespread problems (e.g. CO2 emissions causing global warming) o where do the efficiency gains come from? some polluters can easily reduce pollution costs and other cannot (need flexibility) old plant more likely to buy credits rather than update with new technology new plant will have incentive to keep up technology within cost-benefit analysis, companies choose best financial option for them parties who can lower their emissions easily will do so, while those that cant will buy emissions credits instead In environmental policy, theres been an attempt to replace command & control with market mechanisms Unions prefer C&C b/c less efficient polluting factories are also the most labor-intensive Environmentalists prefer C&C b/c MM, by sanctioning fee-based pollution, undermines moral message that it is wrong to pollute

SANDEL, ITS IMMORAL TO BUY THE RIGHT TO POLLUTE (SM91) Michael Sandel presents arguments against tradable permits: Moral argument that its wrong to create the right to pollute, for the same reason that we dont want to commodify kidneys. o On a global scale, the US and the rest of the developed world have created the global warming problem. Though we developed in an environmentally dirty way, we now want the developing world to develop in a clean way. Not enough to throw money at those countries, need everyone to do their share. Removes the moral stigma that is properly associated with it o Consequences -- When you create a right to pollute, you undermine social norms that pollution is a bad thing. Going from a fine to a fee undermines the social norms. o Makes pollution just another cost of doing business, like wages, benefits, and rent. Creates loopholes that could enable wealthy countries to evade their obligations (US could pay Russia, which has already reduced emissions 30%, to meet Kyoto treaty obligations) o Allows wealthy nations to buy their way out of global obligations Undermines the sense of shared responsibility that increased global cooperation requires

o The market works, and pollution is reduced, but w/o the spirit of shared sacrifice that might have been produced had no market intervened o Come to regard the thing you pay for (in the example, bonfires; but in reality, pollution) as a statuts symbol that can be bought and sold. o Resentment makes future, more demanding forms of cooperation more difficult to achieve

CA CARPOOL STUDY Consequentialist argument might be wrong When drivers paid for privilege of using carpool lanes, carpooling & whistle-blowing increased Assigning monetary value strengthens social norms by drawing attention to the activity and setting a monetary value to it Introducing a price may help society take activity more seriously

V. CONCURRENT OWNERSHIP & MARITAL INTERESTS


A. CONCURRENT OWNERSHIP
1.

TYPES OF CONCURRENT ESTATES

The common law has known at least five types of concurrent interests. Coparceny is unimportant because it is part of the English system of primogeniture which never took hold in America, and partnerships are so important that they will be treated elsewhere. This leaves 3 types:

i. TENANCY IN COMMON
CHARACTERISTICS The Default Rule. The simplest and most common concurrent estate

Example: A and B are TiC in FSA in Blackacre, a 100-acre far; A holds 75% undivided interest and B holds the remaining 25% interest. B is entitled to possession of all 100 acres; so is A. Their respective fractional ownership shares are quite different, but each has an = right to possession of the whole parcel. Rather than viewing B as effectively owning 25 acres, the law views B as owning an undivided share of the entire 100-acre tract.

A and B can be TiC even if they acquired their interests at different times and by different instruments, and even though the fractional size of their shares is different. Unity of Possession. Each co-owner holds an undivided, fractional share in the entire parcel of land; and each is entitled to simultaneous possession and enjoyment of the whole parcel.

Inheritable: Tenants in common have no right of survivorship. The interest of each is descendible and may be conveyed by deed or will.

Example: Thus, if A and B are TiC in Blackacre and A dies, As TiC interest will pass to his devisees or heirs, not to B.

Expanded in recent decades w/ advent of the condominium

Example: If K owns a condo, she actually holds 2 related sets of rights. Title to her individual unit, which includes the air space w/i the unit (as bounded by the floor, ceiling, and common walls) and may also extend part way inside the exterior or common walls. Condo owner (like K) is normally also a tenant in common in the remaining parts of the building structure and in the underlying land.

If tenants in common cant S their probs by mutual agreement, any one of them can bring an action for judicial partition. In a partition action, a court will either physically partition the tract of land into separately owned parts or order the land sold and divide the proceeds among the tenants. WAYS TO CREATE TENANCY IN COMMON TODAY 1. Any conveyance to 2+ unmarried ppl (to A and B) is presumed to create a TiC (absent clear language expressing an intent to create a Joint Tenancy) o This rule stems from state statutes that repudiate the traditional English pref for JT, where under English CL a conveyance/devise was presumed to create a JD b/c its right of survivorship tended to vest ownership in 1 person, rather than manyfacilitated collection of feudal services and incidents. 2. When someone dies intestate w/ multiple heirs

o
3. 4.

Example: D, holding Blackacre in FSA, dies intestate and leaves 3 children (E, F, G) as her only surviving relatives. The laws governing intestate succession will award each child a 1/3 interest in Blackacre as a TiC w/ the others.

When severance ends a Joint Tenancy When divorce ends a Tenancy by the Entirety Language used: a conveyance to A and B creates a tenancy in common, but draftsmen often insert as tenants in common for safety in cases of ambiguous language, the presumption nowadays is that the language creates a tenancy in common unless the language clearly creates a joint tenancy or if the grant is to T, U, and V as trustees o O -> A and B and their heirs = now creates a tenancy in common (at common law it created a joint tenancy)

TRANSFERABILITY Each tenant in common has the right to alienate all or part of his interest without consent of the other tenants in common. Transfers do not end the tenancy in common. Right to sell, mortgage, lease, or otherwise transfer all or part of her interest w/o the consent of other co-tenants; such a transfer does not end the TiC. No right of survivorship, so co-tenant may devise her interest or allow it to descend by intestate succession.

i. Joint Tenancy
CHARACTERISTICS Each joint tenant has a right of survivorship.

By CL fiction, JTs together are regarded as a single owner; each tenant is seised per my et per tout (by the share or moiety and by the whole). In theory, each owns the undivided whole of the property. o When one JT dies, nothing passes to the surviving joint tenant(s). The estate simply continues in survivors freed from the participation of the decedent, whose interest is extinguished.

Example: C and D are joint tenants in FSA in Redacre. If C dies, D now holds FSA in Redacre.

If joint tenants cant S their probs by mutual agreement, any one of them can bring an action for judicial partition. In a partition action, a court will either physically partition the tract of land into separately owned parts or order the land sold and divide the proceeds among the tenants. What if o D murders C. As a matter of public policy, the murderer cannot profit from the crime; the murder severs the JT. D receives a interest as a TiC, and the remaining interest passes to Cs devisees or heirs other than D. o C and D die simultaneously (e.g., in auto accident). The joint tenancy is treated like a TiC, w/ no right of survivorship. C and D are deemed to own a interest in the property that passes to their respective heirs or devisees. CREATION The 4 unities a)

At English common law 4 unities were required to create a JT. . If one was missing, no joint tenancy could be created (and instead a tenancy in common is created). 1. title all joint tenants must acquire title by the same instrument or by joint AP 2. time the interest of all joint tenants must be acquired or vest at the same time 3. interest the shares of all joint tenants must be equal, undivided, and identical in duration (i.e. one cannot have a f.s. absolute when the other one only has a life estate). 4. possession all joint tenants have equal rights to possess the whole, in the absence of express agreement to the contrary b) Today, the 4 unities are not always required to create a joint tenancy and many states permit an owner to create a joint tenancy through a direct conveyance, because the common law bar (cant convey to self & others) could routinely be avoided by a sham transaction with a straw man

Example: Straw ManA, owning FSA, conveys her entire interest to B, who then conveys to A and C as JTs w/ right of survivorship.

Language used: States vary widely on phrasing. In most jurisdictions, language such as to E and F as joint tenants or to E and F as joint tenants with right of survivorship will suffice. o BUT phrases like to E and F jointly may be insufficient. TRANSFERABILITY a joint tenancy interest is virtually inalienable (because alienation severs the tenancy) and cannot be devised or descend by intestate succession They may be unilaterally severed into tenancies in common. any inter vivos conveyance of joint tenancy interest will break the unities of time and titlesevering the JT. Grantee receives merely a TiC interest. Authorities are split as to whether a lease, mortgage, or other transfer of a lesser interest will sever a JT.

if there were two tenants, the estate became a tenancy in common if any of the unities was destroyed (e.g. by one tenant conveying the property) if there were more than two joint tenants and one tenant acted so as to destroy the unities, the tenancy continued between the others, but a tenancy in common was created between the grantee and the rest

HARMS V. SPRAGUE, 473 N.E.2d 930 (Ill. 1984):


Facts: 2 brothers own property in joint tenancy. One brother cosigns for a loan, and the borrower defaults. Cosigner dies. Holding: Court holds that the mortgage on the property was a mere lien on the decedents property, and when he died, the property no longer existed, and thus the mortgage-lien had nothing to attach to. o Had the mortgage been judged to be an actual transfer of title, the joint tenancy would have been converted into a tenancy in common, and the bank and the surviving brother would each have access to the property. Most jurisdictions embrace the lien theory. Most jurisdictions do not agree with the court here in ruling that death of a joint tenant severs the lien from the land.

a)

Severance of Joint Tenancy

i. Tenancy by the Entirety


CHARACTERISTICS Can be created only in husband and wife. Required the 4 unities (time, title, interest, possession) plus 5th unity of a valid marriage. Right of survivorship. No party can unilaterally break it without divorceCan be terminated only by divorce of the couple, death of one spouse, or the agreement of both spouses (and thus more durable than JT). One spouse cannot unilaterally break the required unities and thereby transform the estate into TiC. o BUT if one spouse murders the other, the TbE is severed and the murderer cant enforce the right of survivorship. Historically, the law viewed husband and wife as a single legal unit controlled by the husband. Under this logic, a married couple could not hold title as TiC or JT b/c a wife had no existence as a legal person. o Thus, at CL, every conveyance/devise to a husband and wife TbE that vested title in the spouses as a unit, w/o any individual shares. o Originally gave the husband exclusive possession of the land and sole right to the rents/profits it produced. o Husband could transfer this possessory right to a 3rd party over his wifes objection, but could not defeat the wifes right of survivorship. o In most jurisdictions, therefore, the husbands creditors could levy on property held in TbE to satisfy his debts. One court admitted: it is possible that a wife might receive no benefits at all from land held by the entireties if she predeceases her husband. (Dearman v. Bruns, UPL134). The Married Womens Property Acts largely redressed this imbalance by vesting control equally in both spouses.

CREATION Recognized in about the states. o Many of these states still follow the CL presumption that any conveyance of devise to a married couple TbE. o In others, the intent to create TbE must be clearly expressed (to A and B as tenants by the entirety). Most jurisdictions still require the traditional 5 unities (time, title, interest, possession, and marriage). o Principal exception to this rule permits 1 spouse to create TbE by a direct conveyance to both spouses, even though unities of time/title are absent. W, married to H, holds FSA in Blueacre as her sole property. She can create TbE by conveying to W and H as tenants by the entirety. Attempts to create TbE in 2 unmarried persons o Some states consider resulting estate to be JT (best approximates the grantors intent). o Others apply the default standard, construing it as TiC. TRANSFERABILTY Neither spouse possesses a separate sharethe couple as a unit owns the entire estate. o Under traditional theory, the consent of both spouses required to convey the estate. o Given his historical control, husband could transfer his right of survivorship & right to lifetime possession (including rights to future income), subject to the wifes right of survivorship. Married Womens Property Actsadopted in all CL marital property stateshave eliminated husbands right of exclusive control. Under these statutes, either spouse has the power to manage/control marital property, including property held in TbE.

13.Presumptions
English CL favored JT over TiC (disliked division of land into smaller parcels). o If instrument conveying was ambiguous JT. Today the situation is reversedthe presumption favoring JT has been abolished in all states (with an exception in a few states where the conveyance is to husband and wife). o Abolition usu. accomplished by statutes providing that a grant/devise to 2+ ppl TiC, unless an intent to create a JT is expressly declared. To A and B as JTs and not TiC JT To A and B jointly ? (maybe not JT) o Some states require an express provision for survivorship to create JT. Need to say to A and B as JTs with the right of survivorship. Hoover v. Smith (VA, 1994, DK277) BUT in a few states its dangerous to expressly include right of survivorship. Michigan & Kentucky a grant to a and B as JT w/ right of survivorship or to A and B as JTs and to the survivor joint life estate in A and B, with a contingent remainder in the survivor. Albro v. Allen (Mich, 1990, DK277); Sanderson v. Saxon (KY, 1992, DK277) o A few states have done away w/ the JT entirely. For H&W, CL presumed intention to create TbE, absent some clear indication to the contrary. o Presumption still has considerable force in states that retain TbE, though in some of them a conveyance to H&W will be presumed to create TiC or JT. Modern examples of interpretation:

Deed created a JT b/c it provided for survivorship. Germaine v. Delaine (AL, 1975, DK278)

Deed to grantees jointly, as TiC, with equal rights and interest in said land, and to the survivor thereof, in fee simple to have and to hold the same unto the said parties hereto, equally, jointly, as tenants in common, w/ equal rights an interest for the period or term of their lives, and to the survivor thereof at the death of the other. o Granting clause given priority over habendum clause, unless language of the former is ambiguous (court thought it was). It expressed a JT, but also implied TiC b/c of the words heirs and assignes forever. The additional language suggested upon death of one of the grantees, grantees share should go to his/her heirs/assigns. Kipp v. Chips Estate (VT, 1999, DK278)

This would be inconsistent w/ right of survivorship, hence the ambiguitywhich the court resolved by resort to TiC language in habendum clause, coupled w/ modern presumption in favor of TiC. Granting clause of deed (part that serves to transfer ownership) said joint tenants, and their heirs and assigns forever, but habendum clause (part that seeks to describe the type of title granted) referred to grantees as tenants in common, their heirs and assigns. Court held TiC.

14.Avoidance of Probate

P278

15.Unequal Shares

2. INEFFICIENCY OF CO-OWNERSHIP & PARTITION

The rules governing concurrent estates attempt to reconcile three conflicting policies that underlie American property law: autonomy, efficiency, and equity. From the law/econ standpoint, communal ownership is inherently inefficient and does not maximize the productive use of property. o Concurrent ownership is economically inefficient and unfair for the parties involved. See Mastbaum v. Mastbaum, 9 A.2d 51, 55 (N.J. 1939), (stating Two men cannot plow the same furrow.). o Posner: Cotenants such as A and B are formally in much the same position as the inhabitants of a society that does not recognize property rights.

Example: If A spends his own $ to repair buildings on the common property, B will share in the enhanced value stemming from repairs, butdespite the equities of the situationhas no obligation to compensate A.

Ultimately, A can escape the cotenancy through partition, but at the expense of disregarding Os (conveyor) autonomy to dispose of his property has he wishes.

PARTITION, YO Partition may be used to ease these burdens on concurrent owners. o Available only to tenants in common and joint tenants; tenancy by the entirety may only be severed by death or divorce.

DELFINO V. VEALENCIS, 436 A.2d 27 (Conn. 1980):


Facts: P and D are tenants in common. Holding: Ps intended use of the property, developing it and selling it, is incompatible with Ds use, a garbage dump, so partition in kind (the preferable solution) is preferred. Partition in kind is ordered.

Rule: Partition by sale should only be ordered when 2 conditions are satisfied: a. the physical attributes of the land make it (partition in kind) impracticable/inequitable, or b. the interests of all owners would be furthered by it.

Although partition in kind is preferred, courts largely choose partition by sale due to its simplicity. Partition by sale may be denied if it would be forcing a family from their homestead. See Ark Land Co v. Harper, 599 S.E.2d 754 (W. Va. 2004). o But see Johnson v. Hendrickson, 24 N.W.2d 914 (S.D. 1946) (ignoring idiosyncratic homestead concerns and forcing sale when partition in kind cannot be made without great prejudice to the owners.); accord. Gray v. Crotts, 2293 S.E.2d 626 (N.C. 1982) (ignoring homestead value and choosing to divide land into equally valuable plots and drawing lots to determine who gains possession of what).

3. RELATIONS AMONG CO-TENANTS!


a) cotenants may not exclude the other cotenants from enjoying the right to possession of the whole; if
they do, the ousted cotenants may sue in ejectment to recover possession and rents from the property b) cotenants may sue each other for waste, e.g. for extracting natural gas w/o the consent of all the cotenants c) when one cotenant purchases title to property at a tax sale or foreclosure of a mortgage, the title inures to the benefit of the others, but they must compensate him for removing the encumbrance d) a cotenant who pays for repairs or improvements to the common property is not entitled to contribution from the other cotenants, absent a prior agreement

B. MARITAL PROPERTY & DIVORCE


o 10 states have a community property system for marital assets: AK, AZ, CA, ID, LA NV, NM, TX, WA, WI. o The rest are influenced by the common law and the system that allocated ownership interests to the individual spouse
that came into the marriage in possession.

o This distinction is less important in the event of divorce than in the event of death. Also, the distinction becomes
important when the couple moves from a state using one system to a state that uses the other system.

1. TRADITIONAL COMMON LAW SYSTEM


HISTORICALLY, CL GENDER BIAS (ITS MY HOUSE. NOW MAKE ME DINNER, WOMAN) iure uxoris - during a wifes lifetime her husband had the right to control of all the real property to which she had legal title - he could spend the rents and profits of the land as he wished and alienate his interest in the property during the marriage, even without her consent o Except for the wifes paraphernalia, all property is owned by husband. He gains a reciprocal duty to support her for life. o Title to real property was not taken from the wife, but during the marriage, the husband had right of possession. womans being and existence suspended during marriage - husband controls property and holds all legal power

coverture doctrine: wife becomes femme covert entitled to protection and support in return for marital duties/domestic services

RIGHTS DURING MARRIAGE a. personal property owned by the wife at time of marriage became Hs property b. income earned by both H and W were owned by H c. land held by W at time of marriage -> H given life estate by estate jure uxoris, which means he had sole possession of the land during marriage and wife would only regain control upon divorce or Hs death RIGHTS UPON DIVORCE d. property divided between spouses according to who held title e. alimony only paid to wife if she was blameless in the divorce (did not commit adultery) f. Divorce ends the possibility of dower. RIGHTS UPON DEATH g. Hs fee simple absolute title to property would pass, not to surviving spouse, but to oldest child (a widow was not considered an heir) h. at early common law, at the death of the spouse, the surviving spouse got a life estate in a portion of the real property the other had held during the marriage: i. widow was to support herself by dower: special life estate in 1/3 portion of deceased spouses real property (all fee simple estates and most fee tail states were subject to dower); she could lease the land or farm it herself to support herself financially (often impractical then and essentially obsolete today!!) ii. widower got a curtesy: special life estate given to husband when predeceased by wife; life estate given for any real property held by wife in fee simple or fee tail (not a portion of land -> all land) 1. curtesy initiate: upon birth of issue, wife blocked from transferring any interest in land without consent of H 2. curtesy consummate: upon Ws death, H given full curtesy life estate 3. curtesy arose only if the marriage produced issue capable of inhering the wifes lands 4. curtesy attached to equitable interests 5. curtesy has been abolished in almost all jurisdictions by married women property acts

2. MODERN COMMON LAW SYSTEM

A. the common law of marital estates has been subject to extensive statutory reform and now increasingly resembles the community property system a. Community Property is property earned by either spouse during marriage. Property acquired before the marriage, through inheritance, device or gift remain separate. Upon the death of either, the property is treated as common tenancythe dead spouse able to dispose his or her 1/2 by will, and the other half remaining with the surviving spouse. It is the accepted rule that property acquired under community property doctrine retains that character even if the couple moves to a common law state. B. Statutory Changes in Marital Estates Common changes include (a) surviving spouse heir upon intestacy, (b) including both personal and real property, (c) equalizing male and female rights, (d) restricting the property subject to them to that held at death, (e) change from life estate to fee simple in a percentage of decedents estate, (f) choice between will of first to die or statutory share as heir. a. Uniform Probate Code Dower and curtesy are abolished, giving the surviving spouse the right to take between 3 50% depending on the length of the marriage in both property held and assets subject to inter vivos transaction functionally equivalent to probate transfers. b. Connecticut Statute Surviving spouse may elect to take a statutory share. That right shall not be defeated by any disposition of the property by will to third parties. If the decedent has granted a portion of the property to his spouse before death, that provision is taken in lieu of the statutory share unless the contrary is clearly stated in the will. C. Married Womens Property Acts a. By the end of the nineteenth century, all states had enacted Married Womens Property Acts that gave married women ownership b. reform legislation: i. gave married women legal rights to enter into contracts and to acquire and control property ii. spouse not liable to creditors for non-marital debts incurred by other spouse (shields family property from Hs creditors) c. property is owned by the spouse who acquires it! d. still an equality issue if you consider W does not work outside the home and H does: he essentially owns all wages earned during the marriage and she owns nothing unless he makes a gift to her e. While not perfect, this system shielded the wifes property from her husbands creditors, and gave her legal autonomy. f. Although women could now retain property they earned, they were afforded little opportunity to do so because the law assumed a bread-winner/homemaker dichotomy

.
D. Rights upon Death a. elective share is a right to take against the will (meaning that the surviving spouse cannot ordinarily take the elective share and what is allotted under the decedents will) b. elective share: surviving spouse can either i. abide by terms of deceased spouses will, or ii. repudiate the will and take a share (normally 1/2 or 1/3) of all property owned by H at time of death c. inter vivos gifts to 3rd parties complicates thingspossible W will be left with nothing if H gives away all property shortly before his death (she only gets what property he owned at the time of his death)

3. RIGHTS OF CREDITORS
The IRS may reach the interest of the debtor spouse in tenancy by entirety. See United States v. Craft. N.B. that this does not mean necessarily that the USFG may reach property owned as tenancy by the entirety under other federal statutes.

Under forfeiture laws (RICO or drugs), the government may seize only the criminal defendants interest when property is held by the share. The balance of the cotenancy interest remains unaffected. See United States v. Pacheco. When non-homestead property is held by the whole in tenancy by the entirety, the government may only seize the criminal defendants survivorship interest. See United States v. 1500 Lincoln Avenue. When a homestead may be subject to seizure, and if it is held as tenancy by entirety, the government may not attach to it because they would be a bad cotenant. See United States v. Lee.

SAWADA V. ENDO, 561 P.2d 1291 (Hawaii 1977): creditors may not reach property held in tenancy by entirety to
satisfy the debts of one spouse (but they may to satisfy joint debts) Facts: Husband crashes car into Ps. Ps go after real estate held by the Endos in tenancy by entirety. o plaintiffs Sawada bring suit to block conveyance of property between D and his sons o the suit is brought to have money available to collect damages against Endo for a car accident for which D was liable o the property was conveyed by D and now-deceased wife after the first tort claim was filed against D Issue on Appeal: is the interest of one spouse in real property, held in tenancy by the entireties, subject to levy and execution by his or her individual creditors? Holding: No. Under the Married Womens Property Acts, the interest of a husband or a wife in an estate by the entireties is not subject to the claims of his or her individual creditors curing the joint lives of the spouses. The conveyance of the marital property by Kokichi Endo and Ume Endo, husband and wife, to their sons, was not in fraud of the husbands judgment creditors. Even if it was fraudulent, the judgment creditors still could not attach to the tenancy by the entirety. Rule: IN HAWAII: an estate by the entirety is not subject to the claims of the creditors of one of the spouses during their joint lives. Rationale: 1. Group I - Coverture Model - (Massachusetts, Michigan, and North Carolina) a) MWPA does not affect the C/L tenancy by the entirety, husband may convey entire estate. b) both spouses can alienate property c) The possession and profits of the estate are subject to the husbands exclusive dominion and control. d) subject only to the possibility that the wife may become entitled to the whole estate upon surviving him. e) The obverse of the wife does not hold true: (1) In Mass., the estate in entirety is subject to levy by the husbands creditors (2) In NC and Mich., the use and income from the estate is not subject to levy during the marriage for the separate debts of either spouse. f) Doesnt really exist anymore. 2. Group II (Alaska, Arkansas, New Jersey, New York, and Oregon) a) debtor spouse can alienate his share; he cannot alienate his wifes share b) The interest of the debtor spouse in the estate may be sold or levied for his or her separate debts, subject to the other spouses contingent right of survivorship. Ex. In this case, if the husband dies, they debtors cant attack the wifes interest, but if she dies first, they can attach to the husbands interest. Creditor would have a defeasible interest. c) Alaska: the interest of a debtor spouse in any type of estate, except a homestead as defined and held in tenancy by the entirety, shall be subject to his or her separate debts. 3. Group III (Delaware, D.C., Florida, Indiana, Maryland, Missouri, Pennsylvania, Rhode Island, Vermont, Virginia, and Wyoming) a) *neither spouse may alienate joint property b) An attempted conveyance by either spouse is wholly void, and the estate may not be subjected to the separate debts of one spouse only. Creditors cant attach to this! (Hold as this court did). 4. Group IV (Kentucky and Tennessee) a) debtor spouse can give away his right of survivorship b) Contingent right of survivorship of either spouse is separately alienable by him and attachable by his creditors during the marriage. The use and profits may neither be alienated nor attached during coverture. Creditor has a defeasible interest.

Appellate court ruling: The court selected rule #3, that neither spouse may alienate, because there was a shortage of single-family housing at the time and because the interests of protecting family homesteads trumps interests of creditors. Under the Married Womens Property Acts, the interests of a husband or a wife in an estate by the entireties is not subject to the claims of his or her individual creditors during the joint lives of the spouses. 1. The tenancy by the entirety is predicated upon the legal unity of husband and wife, and the estate is held by them in single ownership. 2. A joint tenant has a specific, albeit undivided interest in the property, and if he survives his cotenant he becomes the owner of a larger interest than he had prior to the death of the other tenant. 3. BUT, tenants by the entirety are each deemed to be seized of the entirety from the time of the creation of the estate.

AT COMMON LAW, for all practical purposes, the wife had no right during coverture to the use and enjoyment and exercise of ownership in the marital estate. All she possessed was her contingent right of survivorship. THUS, the effect of the MWPA was to place the wife on a level of equality w/ him. The husband could no longer convey, lease, mortgage or otherwise encumber the property w/out her consent. The wife became insulated in the estate from the separate debts of her husband. Neither husband nor wife has a separate divisible interest in the property held by the entirety that can be conveyed or reached by execution. The tenancy by the entirety may only be divided through joint action by the tenants by the entirety. Cases cited: o Jordan v. Reynolds: No lien could attach against entirety property for the separate debts of the husband, for that would derogate the title in the spouses and would be like a conversion of the tenancy into a joint tenancy or tenancy in common. o Hurd v. Hughes: Each spouse owns the whole while both live; neither can sell any interest except w/ the others consent, and by their joint act; and at the death of either the other continues to own the whole, and does not acquire any new interest from the other. There can be no partition b/w them. The creditors of either spouse cannot during their joint lives reach by execution any interest which the debtor had in land so held.

Creditors Argument: It would be unfair to the creditors of either spouse to hold that the estate by the entirety may not, w/out the consent of both spouses, be levied upon for the separate debts of either spouse. Tort creditors v. Financial creditors. o COURTs rationale: If the debt arose prior to the creation of the estate, the property was not a basis of credit, and if the debt arose after the creation of the estate, the creditor should have known of his limited right to reach the property. o ** BUT, the creation of a tenancy by the entirety may not be used as a device to defraud existing creditors. The tenancy in the entirety may be used as collateral when both husband and wife sign off on it. *So long as the property remains whole during the joint lives of the spouses, it is always available in its entirety for the benefit and use of the entire family. =loans for education and other emergency expenses may be obtained on the security of the marital estate. *Interests of families are favored over those of creditors. THUS, tenancy by the entirety involves unilateral indestructible rights of survivorship, an inability of one spouse to alienate his interest, and a broad immunity from claims of separate creditors. Disposition: AFFIRMED DISSENT: The application of MWPA should be read as it is in NJ, that the wife, who has half interest in the tenancy by the entirety, should keep her half of the estate, while the other half, or the husbands half in this case, at the right of survivorship, is alienable, and subject to attachment by his separate creditors and used to pay the debt. o so that a voluntary conveyance of the husbands interest should be set aside where it is fraudulent as to such creditors.
o o o

Today, tenancy by the entirety is recognized in personal property as well as real property. Remaining Question: This is a tort collection, so why cant they get a lien on land in order to pay debt for a civil wrong? Tenancy by Entirety can exist only between husband and wife. They hold as one person unlike estates in dower and curtesy. There is a survivorship right as with joint tenancy. Severance and partition can take place acting together but not alone. Language: to A and B, husband and wife, as tenants by the entirety. A divorce severs a tenancy by entirety automatically but not a joint tenancy. Under common law, the husband had many more rights than the wife under tenancy by entirety because he was seen as the representation of their single legal identity. First, the husband could convey possession of the land to a third person and exclude the wife from possession. Thus the husbands creditors could reach the property because he could sell his right of survivorship whereas the wifes could not because she could not sell her equivalent right. Note however, that creditors interests who reached the property under the husbands control could be destroyed by the wifes right of survivorship later on. Under modern law, the husbands right were diminished to accord with those of the wife. A better reform might be to elevate those of the wife to those of the husband. Still with the right of survivorship if only one or the other alienated, creditors would be subject to the survivorship of the non-conveying spouse, in which case their interest in the land would disappear. But this is not a bad thing as creditor shelters seem like manipulation of the law without true foundation in public policy. It is true that individuals need a place to live and that it might be considered inhumane to toss families out onto the street because one spouse has played fast and loose with the family home. But this happens all of time anyway. First I doubt that most homes are owned under tenancy by the entirety. Second, people face economic realities all of the time that have harsh consequences.

But our belief in individual autonomy allows these actions generally to go forward for fear of preventing a preferred deal. On these grounds it makes sense to allow husband or wife to bargain away the home if they need to. Denying relief to creditors is a form of fraud and provide owners of property under tenancy by entirely with perverse incentives to take out mortgages they know will be no good for example. Enough said.

UNITED STATES V. 1500 LINCOLN AVE. (1991) US Court of Appeals 3rd Circuit
Facts: husband and wife owned a housetenancy by the entirety. H was convicted of using the home for illegal sale of prescription drugs and sentenced to 10 yrs. W was innocent o Pursuant to 21 USC 881(a)(7), the govt sought to seize the property by forfeiture because of the criminal drug activity on the premises district court: dismissed govt complaint seeking civil forfeiture of the property because W was an innocent owner with tenancy by the entirety with her husband. Govt tried to amend the complaint, asking the court to allow forfeiture of the property with the exception of the interest of the innocent owner BUT the court denied the motion to amend and the government appealed. Rule: The governments amended complaint offers the best solution In a situation where illegal activity on property is taking place where the interest in the property is in tenancy by the entirety, the forfeiture should be immediate except for the innocent owners interest in the property, who retains full use and possession (exclusive) of the property during their lifetime. The innocent owner is also protected against any conveyance without his or her consent or any attempt to levy upon the interest formerly held by the guilty spouse. In addition, the innocent owner retains the right to obtain title in fee simple absolute if he or she is predeceased by the guilty spouse. Issue on Appeal: Under federal property law, does one tenant in the entirety have the right to interpose a valid innocent owner defense in order to maintain her interest in property when the husband is sent to prison for his illegal activity on the same property? Conclusion: Judgment reversed. The district court erred in dismissing the complaint. Holding: Yes. But the District Court erred in dismissing the complaint in this case. On remand the D.C. should determine whether wifes interest is subject to forfeiture irrespective of her innocent owner defense. If so, then she would then be limited to a full share of what interest was hers, and she would be protected (sheltered) from any other third party claims or conveyances regarding the property. Rationale: statutory language and legislative history help identify the overarching goals of 21 USC 881 but do not address how to handle this kind of situation

The court figured there were three ways to interpret the statute: tenants by the entirety have the entire interest in the property, so illegal activity by one party either results in entire forfeiture b/c one is acting for both, or that one isnt acting for both, so there is no forfeiture, or there is an intermediate solution, and to split the interest as much as each tenant by the entirety holds in the property. lis pendens (used by the district court and 11th Circuit) is not ideal because the government is forced to seek forfeiture at the a later dateinefficient and difficult to prosecute after time has passed. There are also practical concerns for the innocent owner who will be unable to make decisions about the house without consent of all parties

4. TERMINATION OF MARRIAGE BY DIVORCE


Under common-law, the husband would have been owner of everything. Under no-fault divorce statutes (ubiquitous), property is distributed by a rule of equitable distribution. o The court divides property, in its discretion, on equitable principles (which sometimes include fault). Life-long alimony has been replaced w/ rehabilitative alimonythe spouse that receives it only gets it for as long as they need to reenter the job market and support themselves.

IN RE MARRIAGE OF GRAHAM, 574 P.2d 75 (Colorado 1978): educational degrees are not joint property
Wife supports husband while he earns an MBA, they divorce. In divvying up marital assets, the MBA is not considered property, and thus she is not awarded an interest in it. Had she qualified for alimony (and she didntshe was not only able to support herself but also a spouse in school), she could have received greater support based upon his increased future income.

In every state but NY, either the approach in Graham is followed, OR they reimburse the spouse that paid for the advanced degree for all contributions used by the supported spouse in obtaining his or her degree or license. This theory has been called reimbursement alimony. See Mahoney v. Mahoney, 453 A.2d 527 (N.J. 1982). New York follows the rule that an investment in higher education is like any other investment, and the spouses remain partners in it both due to a share of its returns. o Reimbursement has been specifically rejected as inadequate. See OBrien v. OBrien, 489 N.E.2d 713 (N.Y. 1985).

C. LANDLORD-TENANT LAW
1. THE LEASEHOLD ESTATES

traditionally based on common-law principles in post-feudal era leasehold estate: conveyance of nonfreehold estate, establishing a landlord-tenant relationship o gives immediate legal possession of the property o a legal interest that entitles tenant to possession for a period of time, subject to limitations by law or by terms of lease lease as conveyance: transfer right of possession to tenant Caveat lessee: tenant accepts property as it is when possession is accepted by lease with the landlord. Objective test. Constructive eviction: promise to pay rent is dependant upon tenants ability to have possession of the property undisturbed by the landlord; exists when disturbance is so great that the tenant essentially evicts himself and no longer has to pay rent to LL. Tenant has right to move out and not pay any rent. Objective test.

Tenancies, or leaseholds, are nonfreehold estates. Types of leasehold estates: 1. Term of years: estate lasts for a fixed period of time computable by a formula that results in fixing calendar dates for the beginning and end. 2. Periodic tenancy: a lease for a period of some fixed duration that continues for succeeding periods until either party decides to give notice of termination. At common law, the amount of notice required varied from half a years notice to terminate a year-to-year tenancy to a term equal to the period of tenancy for periods of less than six months. 3. Tenancy at will: tenancy has no fixed period and endures so long as both parties desire. Although no period of notice was required at common law, modern statutes have drafted a period on, usually 30 days. 4. Tenancy at sufferance: this is created when one of the above leaseholds expire and the tenant refuses to give possession to the landlord.

Definition

Creation

Termination

Tenancy for Term of Years

Lasts for a fixed period of time.

to A for 10 years

Ends at the stated period without either party giving notice.

Periodic Tenancy

Some fixed period of time that continues for succeeding periods until either party gives notice of termination.

to A from month to
month to A, with rent payable the first day of every month L binding holdover tenant for another term

Ends by notice from one party equal to the length of the time period. If it is a 1 yr tenancy, a 6 month period of notice is good

Tenancy at Will

No stated duration Lasts as long as both parties desire

To T for and during the pleasure of L. (either can terminate) To T for as many years as T desires (reserve right to terminate to L)

Usually ends after one party displays intention that the tenancy come to an end.

Tenancy @ Sufferance

Tenant holds over after termination

Lease expires but wont leave

Terminated by eviction or holdover proceeding.

i.

Term of Years Tenancy (ToY)

NATURE OF TERM OF YEARS TENANCY fixed lease period (agreed upon in advance); lasts for a period that is either: a) Fixed in advance from 1/1/2008 to 2/2/2028 b) Computed using a formula that is agreed to in advance for a term of 10 years after construction complete can begin upon occurrence of some future event can end upon occurrence of future event -> creates term of years determinable (defeasible estate)

Example: L leases Greenacre to T for 25 years, so long as Greenacre is used as a farm. defeasible estate (term of years determinable) BUT if L leases Greenacre to T for the balance of Ts life termination date is uncertain not ToY

CL had no limit on # of years; some states limit the duration o Californiaagricultural cant exceed 51yrs, urban 99yrs (if any rent/service of some kind is reserved) o BUT Yale University has a 999yr lease; 1st Presb. Church in Penn. has a 999yr lease (DK363)

TERMINATION OF TERM OF YEARS TENANCY

automatic termination when agreed period ends (no notice required) -> from X until midnight on Y often have language specifying termination in event of non-payment of rent, waste, illegal use of premises

16.Periodic Tenancy (PT)


NATURE OF ESTATE PERIODIC TENANCY initial fixed period and then automatic renewal of period unless either T or LL terminates by giving advance notice o classic example: month-to-month tenancy -> if no notice, term renews for another month indefinitely o year-to-year tenancy -> must give 6 months notice of termination to avoid renewal o a period of any duration may be used American default: month-to-month presumed if there is ambiguity (in most courts) o Example: T leases Blueacre from L in return for $800 per month in rent (no agreement
about term of lease) month-to-month tenancy (based on presumed intent of parties) o Example: BUTT leases Blueacre for $9,600 per year, payable $800 per month (no agreed termination date) most courts interpret at year-to-year Though some cts would find a month-to-month tenancy if residential property is involved

may arise by implication based on conduct of the parties, even in the absence of any express agreement o Example: L permits T to move into Redacre (house owned by L) w/o any agreement. T later

gives L a $700 check for rent which L accepts and cashes; this pattern continues each month periodic, month-to-month tenancy in T o Example: T takes occupancy of Redacre pursuant to an invalid term of years lease w/ L, but nonetheless pays rent monthly periodic, month-to-month tenancy in T

TERMINATION PERIODIC TENANCY at CL, oral or written advance notice required (either T or LL) o year to year 6 months notice o shorter tenancies notice = to period involved (30 days for month-to-month) o notice terminated tenancy on last day of the fixed period, not in the middle of the period by statute, written notice required, delivered in a particular manner timing can vary by state o traditional standardmonth-to-month30 days (Ohio); other states can range from 7 (N.C.) to 60 (Delaware) days (UPL223) o in some states, timing turns on the nature of the property involved (e.g., longer for residential/agricultural land) or identity of the party giving the notice (e.g., longer period if LL) Arizona10-day notice for commercial; 30-day for residential month-tomonth

17.Tenancy at Will (TaW)


NATURE OF TENANCY AT WILL

no fixed duration; only continues by will of both parties (if one terminates, the will or desire of both is broken) o at CL, estate ended immediately (w/o advance notice) on the day T abandoned premises or LL delivered notice of termination often arise by implication (not express agreement) o Example: T occupies Redacre w/ Ls consent, but w/o agreement on duration of tenancy or

payment of rentTaW (b/c some form of leasehold estate was intended, but requirements for ToY or PT are not met) o Also TaW where T enters into possession either (a) under an unenforceable lease (violates statute of Frauds) or (b) before any lease has been negotiated

sometimes LL and T will form leasehold estate terminable by will of only one party o is this a tenancy at will? -> for as long as he wants o if right given to LL, courts will presume reciprocal right of termination in T and TaW (Lord Coke and common law! Imply reciprocal rights) o if right given to T alone (for as long as T wants), some say this is tenancy at will and some say it is determinable life estate T entitled to possession until death or decides to terminate lease

TERMINATION OF TENANCY AT WILL at CL, immediate termination when either party chooses o even absent notice, any conduct by LL or T that demonstrated intent to terminate sufficed some states require advance notice of some length

18.Tenancy at Sufferance: Holdovers


NATURE OF TENANCY AT SUFFERANCE not a true estate, not create LL/T relationship but still akin to leasehold just holdover from previous, terminated tenancy (tenant wrongfully remains on the premises after termination of lease) also arises where mortgagor retains possession after the mortgage is foreclosed, or vendor remains in possession after conveying title to a vendee LL may either evict T or elect to renew tenancy under the Holdover Tenant Doctrine TERMINATION OF TENANCY AT SUFFERANCE T may be evicted at any time and, by statute, may have to pay double rent alternatively, holdover tenant can be held to new tenancy -> max. term today 1 year o Widespread reform from CL (duration defined by length of original tenancy) (UPL225-6) LLs choice usually implied from conduct and circumstances In many states (Massachusetts) LL can recover damages for period of wrongful occupancy, measured either by fair rental value or prior rent SEE HOLDOVERS

2. HOLDOVERS

Holdover Tenant Doctrine: at common law, LLs choice of remedies when a T overstays his lease is to start eviction proceedings immediately (holdover is ejected; LL may be awarded damages), OR treat

the holdover as an extension of the lease (LL unilaterally creates a new tenancy for the period of the original tenancy)

Pro o Discourages a T from wrongfully holding overfaced w/ risk of future rent liability, T will vacate the premises on time. Thus, incoming T can be assured the presmises will be available when new lease term begins o Allows LL to receive comp for the damage caused by holdover when new T cant take occupancy and cancels lease Con: o Often imposes a penalty far out of proportion to the Ts offense or LLs damages o Serves as a deterrent only if T is aware of its existencebut average Ts are unfamiliar Modern tendency to curtail the holdover tenant doctrine o If T holds over for very brief period, or b/c of circumstances beyond Ts control, most courts wont apply the doctrine o Many jurisdictions have flatly abolished the rule, requiring instead that the holdover T pay a fixed amt to LL (e.g., 3mo rent, treble damages, or 2x rent during holdover period) Reform of length of new tenancy o CL: duration of new tenancy defined by length of original tenancy o Today: max term is 1 year, regardless of original lease term

According to the Restatement 2d of Property, holding over results in the creation of a periodic tenancy, measured by the way rent is computed, up to a maximum of one year Split of authority as to when a shorter term/period is applicable B leases Greenacre from C for 1yr term; rent payable monthly, and holds over after year ends. C elects to hold B to new tenancy. Most jurisdictions view Bs tenancy as periodic, some finding relevant period to be 1yr, some 1 month Minority of jurisdictions find B has term of years tenancy, either for fixed 1yr term (like original lease term) or 1mo term (based on rent payment interval)

How should LL exercise this option? o Can expressly notify T of choice o More commonly, LLs decision implied from conduct and other surrounding circumstances Thus, LL conduct inconsistent w/ an intent to treat the holdover t as a trespasser, such as demanding/accepting rent payments, normally indicates intention to bind T to a new tenancy BUT When a landlord elects to treat a tenant as a trespasser and refuses to extend the lease on a month-to-month basis, but fails to pursue his remedy of ejecting the tenant, and accepts monthly checks for rents due, he in effect agrees to an extension of the lease on a month-to-month basis. Crechale & Polles, Inc. v. Smith. (Miss, 1974, UPL227) where LLs letter manifested intent to treat holdover T as trespasser, LLs later acceptance of rent entirely new periodic tenancy, not tenancy based on the holdover tenant doctrine. STATUTORY ways to deal w/ holdover tenancy o Some statutes spec length of holdover tenancy (California--not exceeding 1mo when rent is monthly, nor in any case 1yr) o Others convert holdover tenancy tenancy at will and provide that T liable for reasonable value of use and occupation. Fairly common! Even though this may be less than rent agreed upon in the original lease. Townsend v. Singleton (South Carolina, 1971, DK372) o Others provide LLs may demand 2x rent from holdover Ts.

Shouldve been mentioned in Crechale, b/c Mississippi had such a statute

SC of Mississippi acknowledged it had been inconsistent in dealing w/ states double rent statuteimplicitly held in 32 decision that statute didnt abrogate the CL rules on HO tenancies, explicitly held in 37 that it did, implicitly held in Crechale that it did not. Mississippi State Dept. of Pub. Welfare v. Howie (Miss, 1984, DK372) court endorsed view that if LL neglects to evict HO T and to demand 2x rent, choosing to accept month rent payments instead, lease is extended on month-to-month basis. o In many states (Massachusetts) LL can recover damages for period of wrongful occupancy, measured either by fair rental value or prior rent

EXCEPTIONSwhere T liable for holdover: o Leaving office equipment behind no holdover, b/c equipment didnt interfere w/ LLs use of premises. Caserta v. Action for Bridgeport Community (Conn, 1976, DK373) o Holdovers must be voluntaryillness/medical reasons: T stays b/c dangerous to leaveno holdover b/c T did not stay on voluntarily, doctor advised her it would be dangerous to move her very ill child. Herter v. Mullen (NY, 1899, DK373)

CRECHALE & POLLES, INC. V. SMITH (Miss. 1974, DK369)


Facts: Crechale ( LL) planned to sell building and refused to extend s lease. There is a series of correspondence demands quit premises but continues to collect money monthly. Plaintiff wants to pay 5 years rent as a holdover tenant. paid his rent on a monthly basis after the lease term, thereby creating a tenancy at will. Equitable action for specific performance but TC awards damages, rent owed, and fees. Issue(s): Under MS property law, did the holdover create a renewal of the lease when LL cashed the first rent check appellee sent in to him? Holding: Acts as such manifested an acceptance of the month to month agreement. Once a landlord chooses a remedy (i.e. eviction or lease extension), he cant go back and change his mind. Once a landlord elects to treat a tenant as a trespasser and refuses to extend a lease on a month to month basis, fails to pursue his remedy of ejecting the tenant, and accepts monthly checks for rent due, he in effect agrees to the extension of the lease on a month to month basis. Had one of two options: eviction or acceptance & create new tenancy. o In accepting rent from the holdover tenant, the landlord consented to a renewal or extension of the lease (usually month-to-month, but never longer than a year) Statutory double-rent provision: Allows landlord to charge double-rent for the holdover period o Gives the tenant an incentive to move out so incoming tenants can move in o Can avoid harshness of a holdover regime, where you may be liable for a years rent by holding over for only a few days

3. THE LEASE
The heart of the LL/T relationshipsets forth the agreed-upon terms that will govern the tenancy, including amt of rent, duration of tenancy, location of leased premises. Rules of Law affect lease in 2 ways: o If parties reach agreement on a particular issue, law will provide util default rule to fill the gap. Most CL principles in this area were historically oriented toward this gap-filling function. o Law will supercede parties freedom of contract on partic issues when necc to fulfill imp public policies. Most of major LL/T developments since the 60s fall into this category.

CONVEYANCE V. CONTRACT At CL, lease exclusively seen as a conveyance, subject to property law. In recent decades, lease increasingly viewed as a contract, governed by contract law.

Today, lease continues to be in transitionpart conveyance, part contractsubject to both bodies Contract law principles for questions like: Are covenants in leases mutually dependant such that a material breach by 1 party excuses further performance by other party, even if lease doesnt so provide? If leased premises destroyed, is T still liable for rent? If T wrongfully abandons premises, must LL take steps to mitigate (reduce) damages (searching for new suitable T)? Is a warranty of qualitythat leased premises are habitable or fit for their purposeimplied in leases?

of law.

STATUTE OF FRAUDS Almost all states have Statute of Frauds that requires that a lease for 1+ year be in writing o Applies primarily to ToY tenancy. o Automatic continuation is irrelevantif T and L enter into oral month-to-month periodic tenancy that continues over a year, Statute triggered. To comply w/ Statute of Frauds: o writing must set forth the basic lease terms: the parties, description of premises, the term, and the rent. o must be signed. Some states only requiring the signature of lessor; others both parties; largest group of states requires signature by party against whom enforcement of lease is sought.

RESIDENTIAL/COMMERCIAL & BARGAINING POWER Courts/legislatures increasingly distinguished b/w residential leases and commercial leases o Residential lease used in renting a home (usu. apt, condo, single family residence) o Commercial lease renting property for nonresidential purpose (retail store, factory, church, school) Legal rights of residential tenants dramatically expanded by judicial decisions and statutes o Based in part on perception that ordinary T unable to protect his/her interest in lease negotiations b/c of superior bargaining power of LL Typical prospective T given preprinted lease form on a take-it-or-leave-it basisLL-drafted form heavily biased in favor of LL. T effectively forced to acquiesce to LLs terms w/o opp for meaningful nego BUT, seller trying to avoid costs of nego and drafting a separate agreement w/ each purchaser Courts intervened to redress this imbalance major changes in LL/T doctrines for res Ts o Led many courts to interpret lease terms in favor of res T Aversion to the standard form leaseThough lease forms stacked in favor of LL, LLs lost over 60% of cases o Alt: statutory leases setting out prescribed terms/conditions Pro-LL doctrines still largely govern commercial leaseslaw presumes commercial Ts can adequately protect their interests thru nego

4. SELECTION OF TENANTS (HEREIN OF UNLAWFUL DISCRIMINATION)


(ALSO SEE RIGHT TO EXCLUDE; COVENANTS) Racial and Ethnic Discrimination

Fair Housing Act If covered under FHA, then covered under Civil Rights Act i.e. there are no exemptions for discrimination on these bases Other Discrimination Fair Housing Act Dont have to prove discriminatory intenteffect is sufficient! Award of Attorneys fees in some cases (DK383) o To D: only if complaint is frivolous or in bad faith o Defendant LLs may recover in some cases (except where gov position is substantially justified or special circumstances make an award unjust) Subject to Exemptions Proving Discrimination requires burden shifting must show must be member of statutorily protected class Applied for and qualified to rent in the designated dwelling Denied the opportunity to inspect or rent the dwelling Housing opportunity must have remained open for others after s application Then, must show that refusal to rent was motivated by legitimate considerations having nothing to do with the protected status. Then, the must show that the legitimate considerations were pretextual Burdens of Proof for advertising under 3604 Ordinary reader/listener that the race is preferred/dis-preferred. Things like having kids are harder to determine discrim about because it may be a valid inquiry. Race is never a valid inquiry Context in which the statements are made Facially non-discriminatory statements/ads: Sometimes someones clarification of a statement might intimate impermissible preference Must examine intent State legislation: New York legislation prohibits discrimination on the basis of: race, creed, color, national origin, gender, sexual orientation, disability, or marital status.

No protection for discrim against laywers/employment Kramarsky v. Stahl Management (DK382) NYC passed law that prohibits discrim based on employment

RACIAL COVENANTS

example of an enforcement problem comes into play when the 14th amendment is invoked. You can be a racist douchebag and exclude blacks from your apartment building, but you cant enforce it in court, b/c it goes from private action state action, and once the gov is involved, they are bound by the Equal Protection Clause of the 14th Amendment o Although racist covenants forcing property owners not to transfer to non-whites are not unconstitutional under the 14th amendment (which only applies to state actors), government enforcement by injunction would be, so it is unenforceable. Shelley v. Kraemer. o Awarding monetary damages, too, would be government action. Barrows v. Jackson. Strahilevitz: a popular way around violating the FHA is to build within developments costly amenities that are only appealing to wanted population elements; e.g. playing golf is a better proxy for whiteness than salary. See Exclusionary Amenities in Residential Communities.

SINGLE-FAMILY RESIDENCE COVENANTS AND THE GROUP HOME

For an example of enforcing covenants, see Hill v. Community of Damien of Molokai (holding that a covenant only to use property for single-family housing was met by comparing the group of AIDS

patients to local statues defining that term and concluding they meet the definition, and even if they did not meet the definition, upholding such a covenant would violate the FHA). o Single family residence refers to architectural type and character of structure; interpreting covenant to prevent 6 retarded ppl from using it violates FHA. Deep East Texas Regional Mental Health & Mental Retardation Servs. v. Kinnear (DK782) o For-profit home for elderly ppl not a single-family home; FHA violation not raised. Mains Farms Homeowners Assn. v. Worthington (DK782)

5. LLS DUTY TO DELIVER POSSESSION


Unless specifically implied in the lease, it is not the obligation of the landlord to deliver physical possession of a property, only legal. Hannan v. Dusch. (holding it was not the landlords duty to evict a prior holdover).

Covenant of quiet enjoyment: right to occupation of the rented property without disturbance, implied in all leases.

English Rule - There is an implied covenant to deliver actual possession of the landimplies covenant that the landlord shall open the premises for the entry of the tenant, on the day the lease term begins, limited to the date term begins o Under English rule, LL would have incentive to create space between leases (to avoid holdover issues with movers not showing up or something affecting prior tenant moving out) -> creates waste!! o LL has incentive to write contracts to shift liability off of himself while still acting as best referee between parties (bargain around the rule) o Policy rationaleUPL248

American Rule - The landlord must only provide legal possession, NOT actual possessionno implied duty by covenant to establish quiet possession; tenant must pursue cause of action with 3rd party directly to recovery damages o state provides LL with a statute to remedy the holdover situation o Under American rule, tenant has incentive to ask for express terms about facilitating actual possession (more at stake for the tenant) o tenants problem is with the holdover tenant and not the LL, so it makes sense for them to work out dispute o Policy rationaleUPL247

HANNAH V. DUSCH (Va. 1930, DK384)


Facts: Hannan lessee & found it occupied. Hannan sued landlord for breach of Ks defense is that he agreed to lease the property, not make it vacant by the move-in date. There was no express covenant in the lease as to the delivery to the premises, nor was there any express covenant for the quiet possession of the premises. maintains he gave the legal right to possession and therefore had no other duty. Issue(s): Under VA property law, is landlord who (w/o any express covenant as to delivery of possession) leases property to a tenant, required to oust trespassers and wrongdoers to deliver quiet possession of the property to the new tenant? Holding: No, such a covenant is not implied in a lease, because the lessee has a statutory remedy. According to the American rule, state provides with a statute to remedy the situation. s cause of action was against the holdover tenant but he chose not to utilize this remedy. Rule: A taking of both the American and English rules: there is a statutory method for lessees who did not have delivery expressly stated in their agreement. There is an implied covenant in such cases on the part of the landlord to assure to the tenant the legal right of possessionthat at the beginning of the tenants term there is no legal obstacle to the right of possession.

The court embraces American rule (legal right of possession rather than actual right of possession) despite inefficiency. o English seemed to have more going for it (efficiency, familiarity with prior tenants, more knowledge, rule better comports with what people expect when they rent an apartment). BUT, majority of states have adopted the English rule because the landlord is the lowest-cost damage avoider: o Efficiency! o Familiarity w/ prior Ts He has more information about whether the previous tenant will holdover o More knowledge He may be a repeat player who knows more about the law/procedures in this area o He can give incentives to the holdover to leave (e.g. double-rent) and/or leave a gap between leases to cover potential holdovers, cleaning, etc. o He can start eviction proceedings sooner than a new tenant o Better comports with peoples basic expectations (norms) that the premises will be empty and ready for move-in, b/c people tend to stick with the defaults

6. REMEDIES WHEN T DEFAULTS: SELF-HELP EVICTION


Self-help: when a party tries to remedy a perceived wrong through some way other than legal process or contractual agreement with the wrongdoer (common to property law we saw this in Keeble v. Hickeringill with duck problem)

When a tenant defaulted (either by failing to pay rent, holding over or breaching the lease in some other way), at common law, a landlord entitled to possession could resort to self-help without fear of civil liability so long as she uses no more force than reasonably necessary (i.e. if the means are peaceable). A modern trend is because allowing self help could incentivize violence, even if the landlord knows that the premises will be vacant, forcible reentry is always non-peaceable. See Berg v. Wiley, 264 N.W.2d 145 (Minn. 1978). Although the Berg prohibition is gaining steam, it is not yet the majority rule. o In most jurisdictions, some type of self help is allowed depending on whether it is commercial or residential property. See e.g. Watson v. Brown (allowing self-help for a commercial lease but remaining silent on residential leases). The lack of a prior hearing is the weakest part of the self-help remedy because it may run afoul of the 4th amendment when used in conjunction with government aid. See Soldal v. Cook County (4th amendment protects against unreasonable seizures of tenants property prior to eviction order required under state law. Summary proceedings have served to ease the difficulties on landlords of drawn out eviction proceedings while satisfying the fourth amendment.

BERG V. WILEY Self-help not permitted unless peaceable, and tenants consent is required for peace!
Facts: Berg (tenant) took assignment of a lease of a building which she subsequently used for her restaurant (a prior lessee entered into written lease agreement with defendant-appellant Wiley for 5 year term)the lease included a right of re-entry clause, requirement for lawful use of the property while a tenant, and provision requiring B to obtain permission before remodeling or making structural changes. Tenant violated health codes and shut down after making repairs. LL claims he saw her trying to remove wall paneling and then decided to change the locks. Rule: the only lawful way to dispossess a tenant with a valid possessory interest by lease is to use judicial process Issues on appeal:

Was there sufficient evidence Berg abandoned or surrendered the rental? Has she violated the lease in some way? (if Berg abandoned the rental and therefore her lease, Wiley was free to repossess the property and his actions were not illegal) o Did Wiley use forceful and wrongful methods to reclaim possession of the building? (common-law approach is to permit landlords peaceful self-help means to repossess rental property but modern approach prohibits self-help means to repossession -> must go to judiciary) Holding: there was insufficient evidence to indicate Berg abandoned the property or surrendered her possessory rights and Wileys actions (in changing the locks in Bergs absence) violated the peace and were unlawful. (not peaceable) Modern rule: NO SELF-HELP permitted - run risk of violence and aggression if you permit landlords to take whatever means are necessary to dispossess a tenant who is claiming rightful possession of the property in question. o If the tenant didnt consent, it wasnt peaceable and therefore not allowed.

Policy concerns: o It becomes more difficult to evict a holdover tenant. o Constraint of landlords rights to self-help can have negative impactsmay lead to greater screening of tenants up front (risk of biased scrutiny of potential tenants). o 4th amendment?

7. LLS DUTIES TO THE T: IMPLIED WARRANTY OF HABITABILITY


Implied warranty of habitability: LL will deliver and maintain premises that are safe, clean, and fit for human habitation. Violation of this warranty is grounds for compensatory damages and willful, wanton disregard of warranty makes punitive damages appropriate in some situations. Right to unilaterally withhold rent if warranty has been breached! No need to move out.

HILDER V. ST. PETER: Implied Warranty of Habitability!


Facts: Tenant paid all rent for 14month lease term and paid damage deposit of $50 but apartment was in terrible condition and while LL promised to make repairs, no requested repairs were done. sued for rent, deposit, and damages. Rule: every residential lease contains an implied warranty of habitability that LL will deliver and maintain premises that are safe, clean, and fit for human habitation. Violation of this warranty is grounds for compensatory damages (expectation damages) and willful, wanton disregard of warranty makes punitive damages appropriate in some situations. Holding: old common law approach to LLs responsibility to leasing tenant (caveat lessee) does not make sense anymore (traditionally, you just rented a place as is and LL had no duty to maintain the property in any particular state) o LL breached implied warranty of habitability and for that H is owed damages Because the average tenant has shifted from someone capable of making repairs to a city-dweller ignorant of handywork, courts have begun to enforce an implied warranty of habitability in leases. This makes sense because landlords are more familiar with the buildings, and tenants are looking less for land (as they were in the case of the tenant farmer) and more for habitation. Hilder (holding that in the rental of any residential dwelling unit an implied warranty exists in the lease, whether oral or written, that the landlord will deliver over and maintain, throughout the period of the tenancy, premises that are safe, clean and fit for human habitation).

Tenants who withhold rent due to preexisting unsafe and unsanitary conditions (which are in violation of codes) do so without breaching the lease: it was illegal to begin with. Brown v. Southall Realty Co.

o Thus, the tenant may not be evicted for breaching the lease. The illegal lease defense for tenants does
not apply if the conditions develop after making the lease. Saunders v. First Natl. Realty Corp.

o Instead of being bound to the terms of the lease, when a lease is deemed illegal, the tenant becomes
a tenant at suffrage, and the landlord is entitled to the reasonable rental value of the premises. William J. Davis, Inc. v. Slade. o the ability to withhold rent seems like self-help remedies for tenants, when not allowed for landlords. At common law, leases were very hands offif the landlord transferred possession of the property, their only remaining duty was to stay away and collect rent. o This system was acceptable when the average tenant was a jack-of-all-trades farmer who could repair the relatively simplistic buildings on the property. o This duty means more than keeping the building in non-slum conditions. See Millbridge Apts. v. Linden (noise from broken A/C unit) and Ludlow Properties, LLC v. Young (bedbugs).

Advantages of implied warranty of habitability: The burden of evidence for injured party is lower, and the warranty can be used as a defense or for an affirmative cause of action gives tenant a variety of options and can give punitive damages for especially horrible actions by LL Arguments against implied warranty: The mandatory repair requirement put on landlords by the Restatement of Property may not have the result of improving the balance of power because the rich landlord might simply avoid building less profitable housing complexes. The resulting economic consequences are likely to be: Some proportion of the substandard housing will be upgraded, and the landlord will pass the cost onto the tenant. Thus, some tenants will be unable to afford the increase, and be forced out, increasing the demand for low-income housing. Some of the housing will be upgraded without passing on the cost to the tenant, but low income tenants as a class would not be benefited. Some of the housing will be abandoned by the landlord in cases where it would be more economical to abandon the property than to make the required repairs. Are we willing to make some people homeless to protect tenants like Hilder from living in squalor because of her bad landlord?

8. TENANTS REMEDIES
1. Sue for damages. Hilder. 2. Withhold rent and remain in occupation. Landlord sues for evictment, and breach of the implied warranty
serves as a defense.

3. Make repairs, deduct cost from rent. Marini v. Ireland.

D. MORTGAGES
To borrow money from the lender, the borrower must ive the lender a note and a mortgage. The note creates the debt obligation on the borrowers, and the mortgage secures the note by giving the creditor primary access to the property if the borrowers default. Title theory of mortgage: In English common law, if the borrower did not pay exactly per the terms of the mortgage, the lender received the property in f.s. absolute. In practical terms, this meant that morgagee gets fee simple with a condition subsequent title to the house when they lend money. If the condition subsequent (paying off the note at exactly the correct time) was not met, the title would convert into fee simple absolute. Courts of equity, objecting to the windfall, allowed borrowers to redeem the property i.e. pay

off the note after the date and take back the property. Because lenders did not like having a cloud over their title, they were permitted to move for foreclosure, which foreclosed the mortgagors right of redemption after a certain period of time. If the mortgagor defaults, the house is often sold by the mortgagee or in a judicial sale. If the sale price for the home does not satisfy the note, the mortgagee may receive a deficiency judgment against the mortgagor for the remainder. Although these judgments are not universally enforceable, they often are if the house either received a fair price during the sale (i.e. the price did not shock the conscious of the court or if the sale was conducted by the court). When the mortgagors have equity built up in the house, the mortgagee is a trustee of that money when they are selling the home in a foreclosure sale. Murphy v. Fin. Dev. Corp. (holding that because the seller was the only buyer at the foreclosure sale, because they purchased the home for just enough to cover the note, and because they knew that they could turn around and make substantial profit in a sale, they are liable to reimburse the mortgagor for the difference between fair market value and what it was sold for).

o Virtually all large transactions are financed w/ borrowed $--lender in such a transaction will demand that the borrower post security for the loan. o Mortgage law oriented towards dual utilitarian goal: shielding the borrower against unfair/inequitable treatment by lender while ensuring an adequate supply of credit. o If mortgage law were skewed toward complete borrower protection interest rates would rise dramatically and credit would be less available o Under a free market approach lender could dictate virtually any terms and borrower might receive harsh treatment

1. WHAT IS A MORTGAGE?
A mortgage is the conveyance of an interest in real property as security for performance of an obligation. This obligation is almost always a loan of money evidenced by a promissory note. In general, if borrower (mortgagor) fails to make the payments required by the note or otherwise defaults on the obligation, the lender (mortgagee) may caused the secured property to be sold and apply the sales proceeds to satisfy the unpaid debt. This process is called foreclosure. Ranking of mortgagesestablishes which mortgagees (lenders) have the first right (priority) to any sale proceeds should the property be sold Junior mortgage/lienmortgages and liens of a lower priority Senior mortgage/lienthose of higher priority Secured debt - A debt that is backed by real or personal property is a secured debt. Unsecured if have not pledged any real or personal property to collateralize the debt. Three separate theories concerning the nature of mortgage: 1) Lien Theory 2/3 of states Mortgagee (lender) must wait until foreclosure proceedings are completed to possess the property. Mortgage is seen as a mere lien on the secured property. Mortgagee (lender) merely holds a security interest, not title; the mortgagee (lender) is entitled to foreclose on the property if a default occurs, but is not entitled to possession before foreclosure. 2) Title Theory some states Mortgagee (in some states) can go into possession of the property as soon as there is a default and remain in possession during the foreclosure proceedings. Common law concept that the mortgage is the transfer of title to the mortgagee (lender) until the debt is repaid The mortgagee (lender) has the theoretical right to take possession of the secured propertyand thus obtain its rents and profitsw/o foreclosure. In practice, however, this right is rarely exercised until a default has occurred. 3) Intermediate Theory a few states Mortgagee (lender) is entitled to possession of the property only upon the mortgagors (borrower) default but before foreclosure is completed.

2. EVOLUTION OF THE MORTGAGE


EARLY DEVELOPMENT Medieval English mortgage conveyance of fee simple subject to condition subsequent

B (mortgagor) transferred title to his property to L (mortgagee), subject to the condition that if B repaid the loan on a specified day (the law day), L would transfer title back to B. If B failed to repay the entire loan precisely on time, his interest in the property automatically ended, leaving L w/ fee simple absolute. Even though L was entitled to possession of the property during the loan period, he would customarily allow B to retain possession.

Rigid system sometimes produced harsh results, mortgagers petitioned the Kings Chancellor for

redress. o If fairness and equity warranted, Chancellor ordered the mortgage to reconvey the property after receiving full payment. o Mortgagors equity of redemption. By 17th c., Chancellors court routinely allowed mortgagor to recover or redeem the property if the entire loan was repaid w/i a reasonable period after the due date, regardless of reason for late payment. Judicially created right to redeem from the mortgagee (equity of redemption) Statutory right to redeem from the purchaser at foreclosure saledoes not come into play until the borrowers equity is extinguished at foreclosure sale o Put the mortgagee in a dilemma! Every defaulting mortgagor might some day seek to redeem, thereby nullifying mortgagees title to the land. o Solution: Foreclosure Action. Mortgagee could petition chancery court to end or foreclose the mortgagors equity of redemption. Court would establish a final date for payment of the loan. Strict Foreclosure: If mortgagor failed to meet this deadline, equity of redemption ended. Later transplanted to the U.S.allowed L to retain the entire parcel, even if worth 10x the debt. Judicial ForeclosureDuring the 19th c., most states adopted legislation that imposed a new requirement on mortgagee seeking a judgment to foreclose the equity of redemptionunder court supervision, foreclosing mortgagee forced to sell the property @ public auction, distribute surplus sales proceeds to junior lienholders and mortgagor. Evolution of the power of sale mortgage (mortgage w/ power of sale)result of English mortgagees attempts to avoid chancery courtcontains express provisions by which mortgagor consents to foreclosure of the equity of redemption by a public auction sale, but w/o any judicial involvement. Method was called power of sale foreclosure. MODERN CHANGES The constrained single market. Until the mid-1980s, borrowers would go to a local savings and loan association and borrow $ to purchase their home. o They would make the loan money from money in customer savings accounts, would secure the loan w/ a mortgage, and would hold the promissory note and mortgage until the loan was fully repaid or otherwise terminated. o The flow of mortgage $ was geographically constrained w/ some areasparticularly rapidly growing areasfacing shortage of funds and relatively high interest rates. Growth of an efficient secondary mortgage market. Congress established the Federal National Mortgage Association (Fannie Mae) in 1938 and Federal Home Loan Mortgage Corporation (Freddie Mac) in 1970 o established a secondary market in which mortgages could be bought/sold much like stocks, evening out credit flows across the nation. o Fannie Mae and Freddie Mac were instrumental in creating mortgage-backed securities (MBS)

o guaranteed by Fannie Mae and Freddie Mac, these securities appealed to many investors who

would otherwise have found home mortgage loans unattractive investments supply of capital and interest rates. Change in type of mortgage loans offered to borrowers. o For years, all that was offered was a fully amortizing fixed interest rate mortgage borrowers make a constant payment each month which includes both a component for interest and one for principal. Amount of each payment stays the same for the life of the loan (15 to 30 yrs usu), but as the principal is gradually paid off, the part of each payment attributable to interest declines and the part attributable to principal increases. At end of loan term, debt is completely paid off. o In early 1980s, interest rates on home mortgage loans to 16+%, financial institutions began experimenting w/ adjustable rate loans. Initial below-market interest rate that gradually according to an index based on debt issued by Federal Reserve Bank. Typically, can go up/down by a limited amt each year and has a lifetime cap o Now there are mortgage loans that postpone principal payments for several years, or provide for negative amortization (featuring below-market interest rate payments, w/ the difference b/w market rate and lower rate added to the principal) Unlike conventional, fully amortizing loans, these not paid off at maturitythus requiring either a balloon payment by borrower at end of loan period, or refinancing of debt. Expanded array of products due to: o Growth of secondary mortgage market o Automation o Increased competition among lenders o Rapidly escalating prices in the real estate market o Gov incentives to expand homeownership among low- and moderate-income families.

3. CREATION OF A MORTGAGE
THE LOAN PROCESS To borrow $ from the lender, borrower must give L a note and a mortgage. Average loan transaction: B, prospective borrower, completes a written loan application and supplies to L, prospective lender. L reviews application, investigates Bs financial condition, commissions an appraisal of the property offered as security. If L wishes to make the loan, L will probably issue a loan commitment to B that states the terms/conditions L will require. Loan commitment usually viewed as an acceptance of Bs offer (embodied in the loan app), and creates an enforceable contract that binds both parties to the loan transaction. Increasingly regulated by federal laws that govern banks, savings and loan associations, and other institutional lenders o Truth-In-Lending Actrequires extensive disclosure to prospective residential B concerning the true costs associated w/ the loan o Fair Housing Actbars lenders from discriminating in the financing of residential real property based on race, color, religion, sex, familial status, national origin, or handicap. Problem: redliningdenial of mortgage financing b/c the property involved is located in an older, low-income neighborhood.

EXECUTION FORMALITIES Mortgage viewed as the transfer of an interest in real property. Thus, formalities required for an effective deed also apply to mortgages in most states. Required at a minimum: a) The material provisions of the mortgage (names of parties, description of secured property, words manifesting intent to use property as security, etc.) must be set forth in a written document executed by the mortgagor AND

b) The mortgage must be delivered to the mortgagee. Until recently, little standardization of mortgage forms. But secondary market pressure for uniform national law. o Today almost all residential loans made by institutional lenders utilize standard forms from Fannie Mae and Freddie Mac. These entities will only purchase loans made w/ their forms. An unrecorded mortgage is fully valid and binding. However, it is customary to record mortgage in order to provide notice to the world of mortgagees interest, and preclude later purchasers, mortgagees, and others from claiming that their interests take priority.

4. FORECLOSURE OF MORTGAGE
FORECLOSURE IN CONTEXT Two methods of foreclosure commonly used in the U.S.: 1. Judicial Foreclosure available in all jurisdictions; dominant method in about states 2. Foreclosure by Power of Sale predominates in the remaining states. CL remedy of Strict Foreclosure still permitted in only 2 states (Vermont) Broad outline of the foreclosure process similar for both judicial foreclosure and foreclosure by power of sale, despite the very real diffs b/w them. 5 points of similarity can be identified in most jurisdictions: 1. The mortgagor receives written notice that foreclosure is beginning, and thus has the opp to either pay off the debt or to contest the foreclosure thru litigation. 2. The mortgagor retains the right to redeem the property by repaying the entire debt until the end of the process, when the equity of redemption is eliminated. 3. The foreclosure process culminates in a public sale, where the property is sold at auction to the highest bidder, usually the mortgagee. 4. Any surplus sales proceeds are paid to junior lienholders or the mortgagor. 5. If the sale fails to produce enough $ to satisfy the debt, the mortgagor may be liable for a deficiency judgment. In many states, mortgagee can obtain judgment against mortgagor for the remaining $, which can be satisfied thru levy on mortgagors other assets Some states restrict the mortgagees ability to secure a deficiency judgment if L is interested in obtaining a deficiency judgment against B, judicial foreclosure is the prudent route Foreclosure thru a judicial proceeding sale price ordinarily not challengeable (unless shocks conscience of the court) and amt realized is applied to the debt. Mortgagee entitled to a deficiency judgment for the difference, collectible out of the general assets of the borrower. Foreclosure by private sale courts may scrutinize sale more closely to assure mortgagee acted fairly, and may deny a deficiency judgment when there are sufficient grounds to set the sale aside. Invalidating a foreclosure sale (DK551) o Mere inadequacy of foreclosure sale price wont invalidate a sale, absent fraud, unfairness, or other irregularity. o Courts generally articulate 2 main standards for invalidating: Many courts state that inadequacy of the sale price is an insufficient ground unless it is so gross as to shock the conscience of the court, warranting an interference of fraud or imposition. Another significant group of courts require that, in the absence of some other defect in the foreclosure process, the price must be grossly inadequate before a sale may be invalidated. o Where other factors are present, such as chilled bidding, unusual hour of sale or any other indicia of unfairness, courts do set aside sales.

JUDICIAL FORECLOSURE & POWER OF SALE FORECLOSURE UPL366

MURPHY V. FINANCIAL DEVELOPMENT CORP (NH, 1985, DK546)


Facts: Murphy (P) was mortgagor of his residence, mortgagee being Financial (D). P defaulted on loan payments and attempted several teimes to renegotiate and refinance the debt. D cooperated by postponing the foreclosure sale at least once, but subsequently held the sale after proper notice. No one other than P appeared at the sale, at which D pledged its mortgage and obtained title to the property. P sued to set aside the sale on the basis that D failed to use due diligence in obtaining a fair price for the property. A special master was appointed who held for P and awarded atty fees. D appealed. Issue: Does compliance w/ foreclosure sale statutes fulfill the mortgagees duties to mortgagor? Rule: Mere compliance w/ statutory requirements may nto discharge a mortgagees duty to exercise good faith and due diligence in selling the property at foreclosure. Holding: A mortgagee has an affirmative duty to act as a fiduciary toward mortgagors equity in the home. The base notice requirements did not discharge mortgagees duties, where property sold for its value. But no bad faith was present, so no atty fees recoverable.

The distinction is between a fair price and fair market value. The second may be higher, but cannot be lower. A fair price is the price that would be arrived at if the mortgagee exercises due diligence to sell the property. DK 551. Fair market value would be the price fetched if the property were marked by a real estate agent in the ordinary course of business. The court seems to be saying that a mortgagee need not invest the same effort in marketing a property that a real estate agent typically would. For example, the mortgagee can sell quickly, and can auction off the property even if not all buyers have been notified. Where a duty arises under the facts of Murphy, the standard for determining whether a lender has met its fiduciary duty would be whether the property was sold for a fair price, as defined by the court.

DEEDS IN LIEU OF FORECLOSURE where B cannot repay its debt, it can frequently avoid foreclosure by tendering its deed to L in lieu of foreclosure in most instances, L will agree to give up any claim for a deficiency judgment when a mortgagor cannot pay its debt & the propertys value > amount of the loan can always sell the property and pay off the loan when debt > loan can offer a deed in lieu of foreclosure TRANSFER BY THE MORTGAGOR Mortgagor can transfer his interest in the land by sale, mortgage, or otherwise o Transfer will not shake off the mortgage o Land remains subject to the mortgage in the hands of the transferee Purchaser of the equity may buy the mortgagors equity either subject to the mortgage or assuming the mortgage. In either situation, initial purchaser remains secondarily liable to the mortgagee for any unpaid amounts. o Subject to the mortgagepurchaser doesnt assume any personal liability for mortgage debt, for which mortgagor remains liable. But purchaser agrees, as b/w self and mortgagor, that the debt is to be satisfied out of the land; if debt not paid, land will be sold and debt paid from proceeds. (Lender cant go after subsequent purchasers nonpledged assets. o Assuming the mortgagepurchaser promises to pay off the mortgage debt. Does not relieve mortgagor of duty to pay mortgagee, unless lender consents to this change in the contract, but gives mortgagor the right to pay the debt and sue the assuming purchaser for reimbursement. Mortgagee can enforce the promise made by the purchaser of the equity in assuming the mortgage. If underlying property not sold for enough $ to satisfy the secured indebtedness, lender usually has recourse to the subsequent purchasers other assets for deficiency. Mortgage contract may contain an acceleration clause that enables mortgagee, upon transfer of mortgagors equity, to declare the whole amt of the mortgage debt due and, upon failure to pay, to foreclose. o By enforcing, thus requiring new purchaser of equity to refinance, lender may use a due-onsale clause to increase the loan interest rate to current rates upon transfer of the property.

(Due on sale might require the entire note balance be paid before seller can deed the property to a new purchaser)

5. SPECIAL MORTGAGOR PROTECTION LAWS


ANTI-DEFICIENCY LEGISLATION Some states prohibit if mortgagor has used the proceeds of the loan to purchase a residence Other states prohibit only when a particular type of foreclosure process is utilized, usu. power of sale foreclosure. A number permit mortgagees to sue mortgagors for DJs, but regulate how the judgment can be obtained and the amt of the judgment Some require that mortgagees seek DJs at same time they foreclose a moretgage Others limit amt of DJ to difference b/w principal balance and propertys fair market value at time of foreclosure, rather than diff b/w principal balance and high bid at foreclosure sale This is like insurance against the adverse fx of default and foreclosure! (DK546) PROMOTING GREATER ACCESS TO CREDIT Fair Housing Act of 1968outlawing discrimination in housing based on race, sex, national origin, religion, color, disability, or familial status Home Mortgage Disclosure Act of 1975requiring regulated mortgage lenders to disclose info about applicants for home mortgage loans Community Reinvestment Actmandating that federally regulated financial institutions meet the credit needs of their communities Federal Housing Enterprises Financial Safety and Soundness Act of 1992establishing affordable housing goals for Fannie Mae and Freddie Mac Subprime Loanshigher interest rate/fee loans given to individuals w/ higher than average expected risks of default Home Ownership and Equity Protection Act of 1994regulates certain high cost home mortgage loans. Certain protections are triggered when a home loan has particularly high interest rates/fees. o b/c large proportion of home mortgage loans are sold into secondary-mortgage market, most equitable defenses are unavailable to homeowners are a result of the holder-in-due-course doctrine

6. OTHER FINANCING DEVICES


DEED OF TRUST way for L to sell the land and be paid soon after default. o B conveys title to the land to a person (usually a 3rd person, but may be L) to hold in trust to secure payment of debt to L. Trustee is given power to sell the land w/o going to court if B defaults. Though virtually all states that recognize power of sale foreclosures specify procedural safeguards including notice and public sale, this method of foreclosure is quicker and less costly than judicial foreclosure. Except for power to foreclose w/o resort to judicial sale, deed of trust is treated in almost all significant respects as a mortgage. INSTALLMENT SALES CONTRACT Seller retains legal title and does not deed the property to the purchaser until the purchaser pays full purchase price. In the interim executory period, purchaser takes possession and parties act pursuant to the sales contract. Payment period may be as long as the normal deed and mortgage years

Purchaser has an equitable interest in the property, but unless purchaser records the installment sales contract or memorandum of contract in local deed records, purchaser risks losing the property to the sellers creditors or to bona fide purchasers for value. At one timeif a purchaser missed a payment, purchaser forfeited his interest in the property and seller kept the property no matter how wide the disparity b/w propertys FMV and amount of the remaining outstanding indebtedness. Todaycourts treat installment sales like a deed and mortgage transactionrestricting seller to proceeds of sale equal to the amount of remaining debt obligation.

VI. RELATIONS AMONG NEIGHBORS: SERVITUDES & ZONING


THE LAW OF SERVITUDES

There is considerable functional overlap among interests bearing different labels. From a strictly functional perspective, all servitudes fall into 5 types: 1) A is given the right to enter upon Bs land; 2) A is given the right to enter upon Bs land and remove something attached to the land; 3) A is given the right to enforce a restriction on the use of Bs land; 4) A is given the right to require B to perform some act on Bs land; and 5) A is given the right to require B to pay $ for the upkeep of specified facilities.

A. EASEMENTS
HISTORICAL BACKGROUND Communal land - People farmed and resided on strips of land. Tenants on the strips worked communally there were shared resources, common rights including rights to resources/goods taken off the land, and tenants made communal decisions about farming for everyones benefit Rise of markets shifted agriculture for survival of neighbor-tenants to agriculture for commerce (increase price of wool = more land dedicating to sheep raising and not farming) 16th century enclosures made, boundaries negotiated among small cultivators o rural tenants pushed off land, breaking up village o diminishing common resources o some farms consolidated Industrial Revolution commons nearly gone, replaced by surrounding growing villages and enclosed plots of privately owned land

RESERVATIONS & EXCEPTIONS LICENCES

Oral/written permission given by the occupant of land allowing the licensee to do some act that would otherwise be a trespass. A license is revocable, whereas an easement is not. 2 exceptions: 1. License coupled w/ an interest cannot be revokedthis is one that is incidental to ownership of a chattel on the licensors land.

2.

Example: O grants to A the right to take timber from Blackacre, owned by O. A has an interest (a profit prendre) and an irrevocable license to enter the land and take the timber.

Bears some resemblance to the doctrine of easements by necessity. License that becomes irrevocable under the rules of estoppel. An irrevocable license is treated as an easement in Restatement (Third) Of Property

1. CLASSIFICATION OF EASEMENTS & TERMINOLOGY


i. Defining the Easement
Easement a nonpossessory right to use land in the possession of another; less than fee simple ownership, more like right of access across someones land or for some resource on someones land!! Quasi-easement: easement is implied on the basis of an apparent and continuous (or permanent) use of portion of the tract existing when the tract is divided

a.

Easement by necessity: implied when it is necessary to the enjoyment of the claimants land and that the necessity arose when he claimed dominant parcel was severed from the claimed servient parcel. i. requires an implied grant or implied reservation and cannot exist without evidence of former unity of ownership of the dominant and servient estates. ii. when no easement implied from prior use is available iii. usually apply to landlocked parcels of land iv. endures only as long as the necessity remains v. servient owner often able to designate placement of easement vi. The test: 1. unity of ownership of dominant and servient estates -> this is true! 2. easement is a necessity, not a mere convenience -> this is not true. a. H could have accessed the road in other wayscrossing Rs land just easier b. H still owned the 16 acres and you cant have an easement in land you own 3. necessity existed at time of severance of two estates -> no necessity b. Easement by prescription: - similar to doctrine of adverse possession, subject to tacking and tolling. Required elements: i. open and notorious use: sufficiently visible that diligent owner could discover it ii. adverse and under claim of right (implied) 1. objective test: claimant needs to use land as reasonable owner would use it 2. subjective test: (minority view) claimant must have good faith reason for using the land 3. fulfilling other elements creates presumption that use was adverse and under claim of right 4. burden falls on owner to show consent was given (usually impossible) iii. continuous and uninterrupted for the statutory period (not constant): as frequent as appropriate for nature of land and nature of easement 1. if owner is able to stop use for a while, this interruption breaks continuity iv. some courts require exclusive use (shared use implies consent of owner, so no easement necessary) 1. exclusivity means claimants use is independent of uses by others 2. different than any public use c. Easement by estoppel: similar to promissory estoppel

existence of license for access (opposite of non-permissive element in prescriptive easement test) ii. licensee expenditure of money or good faith reliance on license iii. licensures knowledge or reasonable expectation that licensee will rely on that license

i.

1. Affirmative or Negative?

Incorporeal hereditaments: interest given to single person (usually eldest son), usually intangible rights like official position or right to appoint parson

Affirmative easements: gave neighbor right to enter or perform some act on servient land

a.

Example: Easement that allows C to cross Ds landpermits the holder (C) to do something on (to travel across) the servient land (Ds land).

b.

Example: Power lines, railroads, drainage, hunting, or boating.

c. Most easements are affirmative. Negative easements: entitled the dominant owner to forbid the servient owner from doing a particular act on the servient land that might hurt neighbors land interests a. English courts recognized 4 negative easements (which American courts accepted, and added 3 more): i. right to light (duty not to block light or the easement holders windows) ii. right to airflow (duty not to interfere w/ airflow) iii. right to channeled water flow (duty not to interfere w/ water flow in artificial streams to the dominant estate) iv. right to lateral support (duty not to remove support from a house on the dominant estate) v. view easements (duty not to block view) vi. solar easements (protect access to solar energy) vii. conservation easements (usu. given to gov or charity to protect/maintain historical/scenic areas) Falls under Statute of Frauds (requires written instrument, created by implication or by prescription)

2. Easement Appurtenant or In Gross?

Appurtenant = benefits the easement holder in using the dominant land (benefit attaches to the land, not the holder himself) o runs with the land- giveaway language! o Exists only when there is both dominant land and servient land o Law construes in favor of this facilitates the productive use of land

Cant determine intent appurtenant o Law school apple tree example -> apartment dwellers can get easement to pick apples from law school yard and can then sell them for his own benefit o Does not have to be perpetual! We can put a condition or limit on the easement! o Dominant tenement: the land benefited by the easement o Servient tenement: the land burdened by the easement o Automatically transferred when the dominant tenement is transferred o
Example: Cs right to cross Ds land (Greenacre) is presumably an easement appurtenant, attached to Cs land (Redacre)

In Gross = benefits the easement holder without regard to ownership of the land (benefit attaches to the holder, not to the land) o Does not run with the land -> remains with easement holder and should go away if holder is replaced by another entity (like different churches on the church lot hoping to use the parking lot easement) o Involves only servient land; by definition, no dominant land exists.

Example: Utility company U holds an easement that allows it to maintain power lines that cross Os land. Does not benefit U in Us use of any particular parcel of land. Instead, it benefits U regardless of whether U owns land at all.

o Remains with the holder of the easement, even if dominant tenement is transferred

2. EXPRESS EASEMENTS
i.

Nature of Express Easements


The express easement is voluntarily created in a deed, will, or other written instrument. o The vast majority of easements are express easements. May arise either by grant or by reservation. o The distinction b/w the two methods turns on who is obtaining the easement: the transferor or a transferee. Easement by Grant typically created when a grantor conveys or grants an easement to another

person.

Example: A owns Whiteacre and her neighbor B owns Blackacre. If A conveys an easement to B that allows B to install and maintain a water pipe across Whiteacre, this easement arises by grant.

Easement by Reservation arises in a special situation: when the grantor conveys land to another, but retains or reserves an easement in that land.

Example: C owns both Greenacre and Blueacre; C conveys Greenacre to D, but reserves an easement for access across Greenacre to reach Blueacre. Cs easement arises by reservation.

i.

Creation of Express Easements

BY GRANT OR RESERVATION The deed conveying the easement must comply with the same Statute of Frauds requirements applicable to all deeds. o To create an express easement (by grant or reservation), it must: 1. be in writing, 2. identify the grantor and grantee, 3. contain words manifesting an intention to create an easement, 4. describe the affected land, and 5. be signed by the grantor. The usual exceptions to the Statute of Fraudsnotably estoppel and part performanceapply here as well. BY RESERVATION TO 3RD PARTIES The only controversial issue concerning the express easement is whether it can be created in a 3rd person o Common Law: easement could only be reserved in favor of the grantorrejected possibility that a reservation could vest an interest in a 3rd party Most states follow this! (Maine, New York)

Where it can reasonably be assumed that settled rules are necessary and necessarily relied upon, stability and adherence to precedent are generally more important than a better or even a correct rule of law. Estate of Thomson v. Wade (NY, 1987, DK676) Modern view: conveyances are construed to give effect to the grantors intent

California, Montana Many courts have followed Willard and abandoned the old CL rule against them

WILLARD V. FIRST CHURCH OF CHRIST, SCIENTIST (Cal. 1972, DK672)


Facts: Though when Petersen bought a lot from McGuigan, the deed reserved an easement on the lot for the use of the Church (D), Petersen then sold the lot to the Willards (P) w/o the easement. Rule: Parties can make easements for 3rd persons when it was their intention to do sothe easement for the 3rd party (not a party to the deed) is valid where there is no reliance on the old common law rule, there is no concealment of true interest in the property, and the parties intended to create the easement when conveying the property. Court said to throw out old rule and go with what the parties intend to do! Holding: The CL rule arose in England during a transitional era when freehold estates could be transferred either by historic ceremony of livery of seisin or by the newly-authorized deed. CL courts refused to allow a reservation in 3rd person in order to discourage use of the deed (and protect livery of seisin). But livery of seisin became obsolete centuries ago, and w/ its demise, the rationale for the rule ended. Today the deed = standard method to transfer interests in real property, and no justification for ignoring grantors clear intent to create an easement. parties way of reaching decision is kind of weirdboth possessed incorrect understanding of prevailing law we must make assumption that they both intended something other than what the law could really provide

In modern times, clever lawyers get around CL rule by restructuring the transaction so as to be 2 land sales instead of just 1 (ease of circumvention explains why most jurisdictions got rid of it)

Example: McGuian 1st sells the property to the church, and then the church sells to Peterson, reserving the easement for itself o Example: McGuigan grants the land to Peterson on the condition that Peterson separately grant an easement to the church

ii.

Policy Rationale for Express Easements


Enforcement of an express easement respects the personal liberty of landowners to act as they wish The law presumes that honoring such easements will facilitate the efficient use of land.

3. IMPLIED EASEMENTS FROM PRIOR EXISTING USE


i.

Nature of Easements Implied from Prior Existing Use

occurs when, even though A & B never expressly agreed to create an easement, the court may infer such intent from the presence of an existing use and impose an easement by operation of law The Statute of Frauds is inapplicable to this type of easement. If the parties affirmatively express their intent not to create an easement, an implied easement cant arise May be created either by grant or reservation. Some states impose more rigorous requirements for the implied easement created by reservation.

o Reason: a reservation of an easement is inconsistent w/ the words of grant in the deed executed by the grantor. o Usu., such states demand a heightened showing of necessity for an easement by reservation.
Example: A purchases from B a parcel of industrial land that receives its electric power thru lines that cross Bs retained adjacent land. The B-A deed, which is duly delivered, makes no reference to an easement. Even though A and B never expressly agreed to create an easement, the court may infer such intent from the presence of an existing use (the power lines crossing Bs land) and impose an easement by operation of law. Easement in favor of grantee implied more readily than in favor of the grantor (conveyance is to

be construed most strongly against the grantor) Quasi-dominant tenementproperty whose owners benefit from the use of anothers property Quasi-servient tenementproperty that is burdened in some aspect for the benefit of a dominant estate

ii.

Creation of Easements Implied from Prior Existing Use


3 elements are required for an easement implied from prior existing use: 1) severance of title to land held in common ownership,

a. 2) 3) a. a.
land.

Example: (In hypo above) B conveyed part of his land to A, thus severing title.

an existing, apparent, and continuous use when severance occurs, and


Example: At the time of conveyance, Bs retained land was already burdened w/ visible power lines that were used to benefit the portion he transferred to A.

reasonable necessity for the use at the time of severance.


Example: The easement for power lines is reasonably necessary for the use of As industrial

(1) SEVERANCE OF TITLE


A tract must be divided into at least 2 parcels, with at least 1 transferred to a new owner and 1 retained by the original owner
Example: S owns Greenacre, a 100-acre tract of unimproved land that adjoins a public highway on its southern border. For years before the sale, S regularly reached the northern half of Greenacre by using a gravel road that runs from the highway across the south half of the land. S conveys the northern half of Greenacre to B. The severance of title requirement is met b/c S divided Greenacre into 2 parcels, selling 1 to B and retaining the other.

(2) EXISTING, APPARENT, & CONTINUOUS USE


Existing: use was in place before the parcel was severed Apparent & Continuous: must be so apparent and continuous that the parties presumably intended it to continue. o Expanded interp of apparentOnce limited to visible uses, it now includes uses that are discoverable through reasonable inspectioneven if not readily visible (See Van Sandt)

Example: Problem of the underground sewer pipe: Gs home serviced by serer pipe that crosses underneath an adjacent unimproved lot also alned by G. G sells lot to H who has no actual record notice of the pipe; the G-H deed doesnt expressly reserve an easements.

o Most courts also require continuous or permanent use

Many courts reason that, though the pipe isnt visible, its connected to visible utilities at Gs house and therefore is discoverable by H (Van Sandt) o Little connection to the main rationale for the implied easementreflecting parties mutual intent. Servitudes simply treats underground utilizes as a special case [Restatement (Third) of Property]. Easements for such utilities regardless of whether they are discoverable, largely based on efficiency rationale, not intent.

Example: For years before sale, S used the gravel road across part of his land (S. Greenacre) to benefit another part (N. Greenacre); the road is readily visible to any observer; Ss use had been continuous over the years. o Ss use before severance of title does not create an easement as such; cant obtain an easement in ones own land. This type of use existing before severance is often described as a quasi-easement. o Before severance of title, N. Greenacre is the quasi-dominant tenement, and S. Greenacre is the quasi-servient tenement.

VAN SANDT V. ROYSTER (Kan. 1938, DK682) Creates standard for granting an easement by necessity!

Facts: P found his cellar flooded w/ sewage and discovered for the first time the existence of a sewer drain across his property. Ds refuse to stop using the drain. Rule: Whether there is an implied easement on certain property will be inferred from the intentions of the parties, and such an inference will be drawn from the circumstances under which the conveyance was made. Parties to a conveyance will be assumed to know and to contemplate the continuance of reasonably necessary uses which have so altered the premises as to make them apparent upon reasonably prudent investigation. o Where one grants a parcel of land to another, by a deed containing full covenants of warranty and without any express reservation, there can be no reservation by implication, unless the easement claimed is one of strict necessity. (?) Holding: The implication of an easement can be implied from circumstances surrounding conveyance of land, including prior use of the land o The standard for discovery under this rule is a known or should have reasonably known with reasonably prudent investigation. Each party will be assumed to know and to contemplate the continuance of reasonably necessary uses which have so altered the premises as to make them apparent upon reasonably prudent investigation o basis for distinction -> grant of easement adds something that grantee was not expecting, but reservation of easement takes something away from the grantee that he should have known (will only write into deed if strictly necessary) (?) o An easement may be implied for grantor/grantee on basis of necessity alone Easement was necessary to the comfortable enjoyment of the grantors (who conveyed to P) land o Factors to consider: whether claimant is grantee or grantor terms of conveyance the consideration given extent of necessity of easement extent to which the use (the subject of the easement) was or might have been known to the parties o Degree of necessity to imply easement in grantor > grantee rules v. standards: if we are OK with some inherent uncertainty then we like the Van Sandt v. Royster decision American approach: Factor balancing If the easement is apparent, continuous, & reasonably necessary, then the court will assume that the parties implied its existence, even thought he deed makes no mention of it

(3) REASONABLE NECESSITY


Must be convenient or beneficial to the use & enjoyment of the dominant tenement, but strictly necessary o Usually met if the owner of the dominant estate would be forced to expend substantial money/labor to provide a substitute for the easement
Example: Under S-B road hypoSuppose B already has express easement to reach N. Greenacre via a narrow, steep road over land owned by X. Its not absolutely or strictly necessary that B secure easement over Ss retained land b/c B has legal access to N. Greenacre. But b/c this route is narrow/steep, it would be more convenient for B to use the wide gravel road over Ss property, and accordingly reasonable necessity exists.

iii.

Policy Rationale of Easements Implied from Prior Existing Use

Party intentif sufficiently apparent and continuous, parties were on notice of the use and presumably expected (or shouldve expected) that it would continue. o Failure to grant/reserve an express easement is merely an oversight that the law rectifies by recognizing an implied easement.

o Based on theory that when one conveys property she includes, or intends to include, (in the conveyance) w/e is necessary for its beneficial use/enjoyment and to retain w/e is necessary for the use/enjoyment of the land retained. Utilitarian theoryserves the policy goal of promoting productive use of the land. Reflects a bias in favor of continuing land uses that already exist, absent an aff ob by a party. o Ensuring that As parcel receives the electrical power that is critical to continuing the industrial use. But! The law favor implied easements b/c: o they are in derogation of the rule that written instruments speak for themselves o they retard building and improvements o they violate the policy of recording acts

4. EASEMENTS BY NECESSITY
i.

Nature of Easement

Virtually all decisions finding easements by necessity involve road easements to reach landlocked property. 2 special rules minimize the burden that easement by necessity imposes on the servient land: o Servient owner usually permitted to select the location for the road easement, so long as the route is reasonable. o Easement endures only for so long as the necessity itself. Once the necessity ends, easement terminates. All jurisdictions require payment to be made for the land taken by the owner of the benefited property. (CaseBriefs)

ii.

Creation of Easement

2 elements required: 1) Severance of title to land held in common ownership; and Requires unity of ownership and that the severance caused the necessity 2) Strict necessity for the easement at the time of severance.

(1) SEVERANCE OF TITLE


A tract must be divided into at least 2 parcels, with at least 1 transferred to a new owner and 1 retained by the original owner o Requires unity of ownership and that the severance caused the necessity (and thus that the grantor intended the easement) (CaseBriefs)

(2) NECESSITY AT TIME OF SEVERANCE


a) The parcel must be entirely surrounded by privately-owned land, without touching any public road; AND b) The owner must not hold an easement or other legal right of access to cross the adjoining land to reach a public road. o If the owner has any legal means of reaching the land, even if inconvenient, expensive, or impractical, no strict necessity exists o Early decisions held water access precludes strict necessity, but unlikely a modern court would follow this antique approach. Necessity is measured at the time when the common ownership is severed, NOT later

o In Othen, severance of title in 1896; it was clear Ps parcel had been


landlocked since at least 1900. But b/c P could not meet his burden of producing ev about the access situation in 1896presumably b/c the potential witnesses diedthe court refused to find easement by necessity. o Not apply to parcel that becomes landlocked only after severance of title. However, statutes in many states authorize a private landowner to condemn an easement by necessity across surrounding lands, regardless of when necessity arose. Minority view: requires only reasonable necessity o Must be convenient or beneficial to the normal use/enjoyment of the dominant land. o Might support recognition of easements by necessity for non-road purposes (utility lines). (UPL538) As technological change converts luxury necessity, scope of easements will correspondingly enlarge.

OTHEN V. ROSIER (TX, 1950, DK689) Formalist standard for determining if easement by necessity or
prescription Facts: P and D own tracts of land which were formerly part of one larger parcel. To reach any public highways, P must cross over someone elses property. P had used a road which ran over Ds property, which D kept in repair. As a result of encroaching surface waters, D erected e levee on his property which made the road so muddy that for weeks at a time it was impassible except by horseback. P filed suit for injunctive and declaratory relief, and damages. TC found P had acquired easement by necessity, but appellate court reversed (affirmed) holding P acquired neither easement by necessity nor prescription. Rule: To create easement by necessity (a) necessity must have existed at the time that the estate was created, (b) evidence of unity of ownership of dominant and servient estates, (c) roadway must be a necessity and not mere convenience o The easement of necessity requires an implied grant or implied reservation and cannot exist without evidence of former unity of ownership of the dominant and servient estates. o The easement by prescription does not exist unless use has been adverse to owners use of his land and exclusive to claimant (not dependent on others use of the same property). Holding: Othen had neither an easement by necessity nor a prescriptive easement o Easement by necessity: 1) Severance of title Y here, easy to show that the dominant & servient estates at one point had the same owner 2) Necessity at the time of severance N here, at the time of severance, Othens land not landlocked The original owner did not reserve such an easement when he first sold the property now owned by D o P could have accessed the road in other wayscrossing Rs land just easier o P still owned the 16 acres and you cant have an easement in land you own o Easement by prescription: 1) Open & notorious Y D knew that P was crossing his land 2) Adverse (claim of right) N Ps use was permissive and not adverse because of the gate that gave him a license to use the land Ps use not under a claim of right o Ps use of the path was merely permissive, giving rise only to a license for use and not a prescriptive right to use for own purposes license could not and did not ripen into a prescriptive right Strahilevitz: this is ambiguous 3) Continuity N No evidence that the road remained the same over time 4) Exclusivity N Theres no exclusivity b/c other people are using the land

iii.

Policy Rationale
Utilitarian theory: interest in encouraging productive use of land Parties presumed intentthe dominant influence today.

5. EASEMENTS BY PRESCRIPTION

i.

Nature of Prescriptive Easement


Closely related to doctrine of AP o Both share central concept that property rights in land of another can be acquired by conspicuous, long-term use o Under majority American view, both involve specialized applications of the SoL o Most of modern law borrowed from AP (including list of required elements and principles of tacking and tolling) o Main difference is the result. The APor receives title to the land. Prescriptive easement holder merely receives an easement in land still owned by another. Almost any type of affirmative easement can be acquired by prescription. o Most cases involve easements for access over a road/driveway. o Can also be acquired for uses including power lines, drainage, encroaching buildings, bathing, and airplane overflights. Negative easements cannot be established through prescription

ii.

Creation of Prescriptive Easement


Elements vary from state to state, but generally: 1) Actual use (only a few courts) 2) Open and notorious use 3) Hostile use (adverse use) (claim of right) 4) Exclusive use (in a minority of states) 5) Continuous and uninterrupted use 6) For the statutory prescriptive period No requirement that claimant pay property taxes, even in states that mandate that the APor pay

taxes

(1) ACTUAL USE


Function is to prohibit negative easements by prescription. That is, only affirmative easements can be implied by prescription. o Thus, a claimant cannot compel his neighbor to take down a fence, wall, or building b/c the claimant has an implied negative easement to light and air. Only a few courts expressly require actual use o Certainly, claimant must make some actual, physical use of a defined area of land (see Othenfinding testimony about location of easement was too vague and uncertain to allow tacking on prior use); but most courts seem to subsume this requirement w/i open and notorious use

(2) OPEN & NOTORIOUS USE

Claimants use must be sufficiently visible and apparent that a diligent owner who was present on the land at the time would be able to discover it (the landowner will or should notice the use) o Must not be concealed/hidden from view But not necessary that owner had actual knowledge of the use o Almost always satisfied in typical case (driveway, path, or road) where there is something observable on the estate that would give notice to the landowner o Permanent occupations of land surface or airspace usually satisfy. o Underground use not necessarily open and notorious.

Example: C owns adjacent lots 1 and 2; sewage from Lot 1 crosses under Lot 2 before connecting to main sewer line. Nothing on ground surface (signs, manhole covers, gratings) that would give anyone notice of subsurface pipe. D purchases Lot 2, 10 yrs later (after SoL period run) C claims a prescriptive easement. On these facts, pipe is not O&N. (UPL541)

BUT see Van Sandt (lot buyer was charged w/ inquiry notice of sewer pipe easement)

(3) USE THAT IS ADVERSE & UNDER A CLAIM OF RIGHT / HOSTILE


The claimant uses anothers property w/o permission. Most commonly litigated issue in prescriptive easement cases Mirrors the split in AP doctrine b/w the majority objective test and minority subjective test o Objective testclaimant need only use the land as a resasonable owner would use it, w/o permission from the servient owner; claimants subjective intent is irrelevant. o Subjective testa handful of states follow itclaimant must have a good faith belief that s/he is entitled to use the land When no ev about whether O consented to the use o General ruleproof of other elements (O&N, continuous, and interrupted) creates a presumption that the use was adverse & under a claim of right. This shifts the burden to the O to prove consent, which is impossible in the common scenario (use of path as driveway) o Many states: refuse to apply this presumption when the land is wild and unenclosed, assuming that the O allowed the use as a neighborly accommodation o Minority of states: reject the doctrine entirely, presuming that all use is permissive. A person who receives permission from landowner to be on the property cannot gain an easement by prescription, no matter how long the claimant uses the property. A person who enters pursuant to a defective deed enters by claim of right and not by permission. His use is hostile and adverse.

(4) EXCLUSIVE USE


Some courts list exclusive use as a required element. Exclusivity means the claimants use is independent of uses by othersmerely requires that the use must be separate and distinguishable from uses by the general public. o Courts that follow this view dont demand exclusivity in the AP sense of the terma claimants use may still be considered exclusive even though he is not the exclusive user (e.g., shares use w/ O and others) o Special, narrow meaning when applied to prescriptive easements, and rarely becomes important.

(5) CONTINUOUS AND UNITERRUPTED USE

Continuous usefocuses on the conduct of the claimant. o Does not mean constant useneed only be as frequent as is appropriate given then nature of the esasement and the character of the land

o Particularly in rural areas, occasional seasonal use of an easement may be sufficient Uninterrupted usefocuses on the conduct of the owner. o If the O succeeds in stopping the useeven for a short period of time continuity ends (and possibly a new prescriptive period begins to run).

(6) FOR THE STATUTORY PRESCRIPTIVE PERIOD

Between 10 and 20 years of continuous use are typically required to obtain a PE o In almost all jurisdictions, the statutory period for AP applies to the PE

iii.

Policy Rationale of Prescriptive Easements


Utilitariansame policies that underpin AP o Facilitates the productive use of land by protecting the industrious claimants use o Serves the goals of the SoLminimizing the risk of judicial error and allowing repose

6. SCOPE OF EASEMENTS

The scope of an easement may evolve over time

i.

Location or Dimensions of easement

Easements must be locatedon an identifiable part of the servient estate. Once established, easement owner must remain w/i the located easement. The location/dimensions of an easement may be changed only if the owners of the servient and dominant lands all agree o Servient owner allowed to make reasonable changes in the location/dimensions if necessary for the normal use/development of the property, so long as the easement holder is not prejudiced. [Restatement (Third) of Property]

3. Manner, Frequency, and Intensity of use of easement


Scope turns on the intent of the original parties. Factors to determine this intent include: 1) circumstances surrounding the creation of the easement; 2) whether the easement is express, implied, or prescriptive; and 3) the purpose of the easement. Law relies heavily on presumed intentlaw presumes the parties to an express/implied easement intended that the easement holder would be entitled to do anything that is reasonably necessary for the full enjoyment of the easement, absent ev to the contrary. o Reasonable changes in the manner, frequency, or intensity of use to accommodate the normal development of the dominant land are permitted, even if this somewhat increases the burden on the servient land. Scope usually expands to accommodate technological change (access easement originally created for horse-drawn wagons before invention of cars later extends to include trucks) o The easement holder cannot change the scope of the easement so as to impose an unreasonable burden on the servient land

When parcel is subdivided o When dominant land subdivided, every lot owner in the subdivision is entitled to use any easement appurtenant to the dominant landbut easement cannot be expanded so far as to unreasonably burden servient land. Courts are reluctant to permit expansion of prescriptive easement b/c it has little connection to party intentpresumption that parties intended the easement to expand to meet future needs is unavailable

4. No Benefit to Nondominant Property Allowed

In general, easement holder cant use the easement to benefit any parcel other than the dominant

land

o cannot benefit adjoining property (even if the owner of the dominant land also owns the
adjoining property, and even if the adjoining property is used in an integrated activity w/i the dominant estate) o the normal remedy for violation of this rule is an injunction. But! Modern decisions have begun to erode this traditional standard. o The Brown court converted the traditional bright-line rule into a rather mushy standard that requires case-by-case analysis. On balance, it may be a more efficient standard. This approach parallels developments in the law of private nuisance, where many courts have softened traditional liability rules in the interest of efficiency by restricting some successful Ps to damages instead of injunctive relief.

BROWN V. VOSS (Wash. 1986, DK716) Use of easement to benefit more than original parcel is misuse, but
no injunction where no H! Facts: D granted easement to P to allow ingress and egress to Ds property. P subsequently obtained title to 3rd parcel and attempted to use the easement to gain access to it. P sued to establish the right to use the easement; D sough injunction to forbid such use. Trial court denied injunction, CtApp reversed, SC reversed again. Rule: Easement appurtenant to one parcel may not be extended by owner of dominant estate to other parcels owned by him but not listed in grant. But, injunctive relief is only appropriate where facts, circumstances, and equities favor the moving party because of damages and hardship caused by the improper use and extension of the easement.. Holding: Court determines there is easement misuse as a matter of law, but that it didnt adversely affect D (i.e. there was no increased burden on the easement). Receives no greater use as a result of Ps acquisition of 2nd parcel; P reasonably developed his property, so injunction was correctly denied. o [Court enforces the terms of the express easement based on its literal terms] o Applies the Balancing of the Equities doctrine:

Court refuses to issue the injunction b/c: Burden wouldnt increase traffic on the land D waited a year to complain about easement misuse (retaliatory) P would suffer considerable hardship if he lost the easement Instead, order $1 in damages Easement Misuse: Burden on servient owner increases, or The increasing number of parcels of land using the easement is a proxy for the expanded burden of the easement

5. Improvements, Maintenance, and Repair

B. COVENANTS & EQUITABLE SERVITUDES


o o o Covenants and equitable servitudes are restrictions on the use of land arrived at by agreement Developers set restrictions on uses, and buyers must agree to the covenants in order to buy the land Interestingly, there is little difference between covenants and equitable servitudes

A. Policy reasons for permitting promises on land use:


1. 2. ensure efficient land use (can enhance productive use or limit negative impacts on neighboring land owners individual liberty (autonomy of land owner; presumption that market will drive decisions)

A. Real covenant: a promise concerning land use that: 1. benefits and burdens the original parties to the promise AND their successors 2. is enforceable in an action for damages (runs with the estate) a) successors in title are bound to perform the promise (this duty is the burden) b) successors in title are able to enforce the promise and can seek compensatory damages if promise is broken (this right is the benefit) 3. may be an affirmative covenant (promise to perform a particular act) or a negative covenant (a promise NOT to perform something) B. Equitable servitude: a promise concerning the use of land that: 1. benefits and burdens the original parties to the promise 2. is enforceable in equity! 3. essentially a tool that allows a promise to be enforced by or against a successor party under some circumstances 4. Distinguished from real covenant based on 3 factors: a) standard easier to meet than parallel standard for real covenant b) broader array of defenses available c) traditional remedy for violation of equitable servitude is injunction (not damages) C. Personal covenant: treating a personal promise like a contract not to do something with parcel; not burden or benefit passes to successors of the property so pretty useless as a land planning device.

REAL COVENANT

EQUITABLE SERVITUDE

Definition

Promise to use or not use land in a specified way. Much like negative easements (but American courts, like English, recognize only a few types of negative easements) Run with the land RemedyDamges

Covenant that is enforceable at equity against assignees of the burdened land. It does not have to run with the land- whoever shows up on the land has to deal with the servitude Remedy Injunction

Creation

WritingEnforceability- it is enforceable by the parties to it. Enforceability depends on whether or not the benefit runs with the land or the burden does. Requirements harder to satisfy than ES; narrower range of defenses against RC than for ES.

Writing- most courts require it because it is an interest in the land. In CA you have to specify the burdened lot Implication from devt scheme- restrictive and reciprocal servitudes only, like in Sanborn the reciprocal negative easement to not build a gas staton on the property is implied from the scheme, also Neoponsit allowed for an affirmative requirement to pay money to a property owners association Enforceability- third parties can enforce the servitude against the parties who made it. Requirements easier to satisfy than RC; broader range of defenses available against enforcement of ES.

Running of Burden

1. Intent: to make the burden run with the land. 2. Horizontal: there is privity of estate between the two parties creating the covenant 4. Vertical: there is privity between the promisor and his successors (all courts require it)

1. Intent Parties making the ES must intend that it be binding on assignees 2. Vertical privity required 3. touch and concern requirement Aff Covenants: Less likely to be enforced by the court because it requires constant oversight by some entity to make sure the requirements are being performed (ie maintain a golf course next to your house). Do not run to lesser estates.

Running of benefit

1. Intent: to make the benefit run with the land 2. Vertical: privity of estate between promisor and beneficiary 3. Touch and Concern requirement must be met -must enhance the value of the benefited land and decrease the value of the burdened land -must affect use, occupation, enjoyment of premises -goal- want the court to be able to put an end to the covenant when it loses all social utility. -Neoponsit: subeq purchasers bound by aff covenant to pay money for use in connection with their land.

1. Prior Buyers can enforce the equitable servitude against subsequent buyers, as long as the servitude was in effect at the time the purchase was made. 2. the prior buyer receives an implied reciprocal servitude in the remaining land that subsequent purchasers wont do undesireable things with the land 3. subsequent purchasers take with notice 4. prior buyer can enforce the cov as a 3rd party beneficiary.

Cases

Reciprocal Negative Easement- Sanborn-O of multiple lots that relate to one another placed restriction on Lot A for the benefit of Lot B. Reciprocal negative easement arose on lot retained and ran with the land to purchasers who had notice / assumed the easement when they bought the land. Aff Covenants: Neoponsit- Fixed annual charge to maintain common property in subdivision considered acceptable and binding upon those who purchase land in the subdivision. The Property Owners Association is considered a common grantor of land who can create the covenant. The covenant touches and concerns the land, and because it represents all property owners, the corporate entity represents the Os and is in privity with them.

740-755 DKAS 755-767, 773-786

1. REAL COVENANTS: ENFORCEABLE AT LAW

Real covenant: a promise concerning land use that: (1) benefits and burdens the original parties to the promise AND their successors (2) is enforceable in an action for damages (runs with an estate in land) promisors successors in title are bound to perform the promise (this duty is the burden) promisees successors in title are able to enforce the promise and can seek compensatory damages if promise is broken (this right is the benefit) may be an affirmative covenant (promise to perform a particular act) or a negative covenant (a promise NOT to perform something) o Under CL, (subject to a few exceptions), an affirmative covenant did NOT bind successors and did NOT run with the land, whereas a negative covenant did Affirmative acts are more costly, whereas omissions arent Disputes involving real covenants fall into 1 of 3 basic scenarios, based on the identity of the P and D; the requirements for enforcement differ in each scenario. 1) Original promisee seeks to enforce the covenant against the promisors successor issue: does the burden run? 2) Promisees successor tries to enforce the covenant against the original promisor issue: does the benefit run? 3) Promisees successor seeks to sue the promisors successor does BOTH the burden AND benefit run? Restatement 3rd of Property: repudiates the 1st restatementsays horizontal privity is not required for covenant to run to successors

REQUIREMENTS OF T&C, HOR/VER PRIVITY: DEBATE Touch & Concern o Anti-requirements: Led by Epstein! This requirement is vague and unpredictable Furstrates the intention of the parties Fails to serve any useful function o Pro-requirements: Uriel Reichmanrequirements both Promote the efficient utilization of land (by preventing burdens that impair marketability), and Protects the long-term expectations of owners (by ensuring that there is at least a minimal relationship b/w benefit and burden) o Opponents: Individual owners are best able to determine whether their covenant promotes efficient land use, while the notice requirement already prevents unfair surprise to owners of burdened land. Horizontal Privity: Agreement that horizontal privity is obsolete and should be eliminated o Courts traditionally feared that RCs would impair productive use of landthus, HP served a function: made the creation of RCs more difficult, reducing the # of covenants that could arise. But given modern recognition that private land use restrictons can provide social benefits, reason for this requirement no longer exists o Easily circumvented thru a straw transaction Vertical Privity: little scholarly support o Historic rationale ended long ago o Continued existence serves to frustrate party intent

i. Original Promisee v. Promisors Successor: Does the BURDEN run?

In order for the burden to run with the land and bind promisors successors, 1) The covenant must be in writing 2) The original parties must intend to bind their successors 3) The covenant must touch & concern land i.e. the burden of the covenant must relate to the use of the land and it mustnt violate public policy interests Bigelow test: It touches & concerns if it affects the value of the land 4) Horizontal privity must exist (i.e. relationship between original parties to the promise) 5) Vertical privity must exist (i.e. relationship between original party and his successor) Strict vertical privityi.e. the entire property interest of the original party must have been transferred. e.g. a lease would not be bound unless the original property interest was a lease. 6) The successor must have notice of the covenant (actual, record, inquiry, or imputed notice)

(1)

COVENANT IN WRITING A writing that complies w/ the Statute of Frauds is required A diff technique is commonly used to impose covenants on new subdivision projects most states allow developer to record a written declaration or a plat map that expressly imposes covenants on the entire subdivision project before any lots are sold. Citizens for Covenant Compliance v. Anderson (Cal, 1995, DK754) Even an oral covenant is enforceable if one of the standard exceptions to the Statute of Frauds (estoppel or part performance) can be proven.

(2)

INTENT TO BIND SUCCESSORS Intent usually found in the express language of the covenant o Words such as assigns or successors usually ev of this intent. Alternatively, intent inferred from the nature of the restriction, the situation of the parties, and the other circumstances surrounding the covenanteven if it contains no express language (no construction shall ever be) Intent to bind successors inferred just b/c restricts use/enjoyment? o Many courts presume that any such covenant was intended to run w/ the land, absent affirmative ev that original parties intended to create only a personal obligation in the promisor. o Under this approach, requirement of intent to bind is largely irrelevant. If covenant meets the touch and concern requirement, intent is found. TOUCH & CONCERN LAND Burden of the covenant must relate to use of the land o The promise must exercise direct influence on the occupation, use, or enjoyment of the premises Caullett v. Stanley Stilwell & Sons, Inc. (NJ, 1961, DK768, UPL561) Easy to understand/apply when a physical use is involved; loses clarity w/ not much connection to physical use of land Sliding scalecovenant less likely to touch and concern as connection to physical use of the land diminishes. o Whether a covenant is so closely related to the use of the land that it should be deemed to run with the land is one of degree, dependent on the particular circumstances of a case. Eagle Enters., Inc. v. Gross (NY, 1976, DK768, UPL562) Most influential standard (by Bigelow!) focuses on how the covenant affects the fair market value of the respective parties interest in land. endorsing this approach is: Neponsit Property Owners Assn, Inc. v. Emigrant Indus. Sav. Bank (NY, 1938, DK755) o If the covenant lessens the value of the promisors interest in land T&C o If covenant increases value of promisees interest T&C

(3)

o Circular? Only a covenant that does T&C in the first place is enforceable, and only an enforceable covenant can affect market value NEGATIVE COVENANTS Neg covenant that restricts use of promisors land usu. satisfies T&C. Runyon v. Paley (covenant restricting land to 2 residences) (UPL562, DK744, 764) Covenants not to compete o Concerned about potential monopolies, many 19th c. courts refused to endorse such anticompetitive covenants, reasoning that they didnt sufficiently T&C. o Almost all modern courts now conclude that covenants not to compete do meet the T&C requirement covenant not to sue does T&C. 1515-1519 Lakeview Blvd. Cono. Assn. v. Apt. Sales Corp (Wash, 2002, UPL563, DK744) tenants promise to pay rent falls DOES touch and concern the land!!

AFFIRMATIVE COVENANTS Traditional viewcovenants to pay $ do not T&C o Covenant to purchase water didnt T&C. Eagle Enters., Inc. v. Gross (NY, 1976, DK768, UPL562) Modern courts relaxed the traditional approach o Clear trend towards holding that $ payments related to the land do T&C o Covenants to pay homeowners association dues T&C. Neponsit Property Owners Assn, Inc. v. Emigrant Indus. Sav. Bank (NY, 1938, DK755) Otherwise, common interest communities could not function! WHAT IF BENEFIT DOESNT T&C? Running of burden and benefit usu. analyzed separately o Exception: burden doesnt run if the benefit is in gross (fails to T&C) Right to build not T&CP purchased building lot from D (developer); deed contained covenant giving D the right to build or construct the original dwelling or building on the land. P sued to quiet title, arguing restriction not enforceable covenant. Court agreed b/c benefit was in gross. Didnt T&C any property retained by Dit gave D a mere commercial advantage in the operation of his business. Caullett v. Stanley Stilwell & Sons (NJ, 1961, UPL564, DK768)

(4)

HORIZONTAL PRIVITY Horizontal Privity: Original covenanting parties must have a special relationship for the burden to run w/ the land Consider only the relationship b/w original parties to the promise; ignore successors Under English CL, only b/w LL and TAmerican courts extended the doctrine far beyond its English confines o One notable exception to this rule was that when there was privity of estate in the form of a landlord/tenant relationship, promises would be allowed to run with the land. Keppell v. Bailey (DK741). 3 competing views: o Mutual Interests: A few states insist on a LL-T relationship or similar relationship involving mutual interests in the same land Landlord/Tenant: A LL and T must have mutual interests (respectively, a reversion and a non-freehold estate) in the same property (the leased premises) at the same time (during the lease term). Easement: Owners of the dominant and servient tenements have mutual interests (respectively, an easement and FSA) in the same property (the land burdened by the easement) at the same time (during the life of the easement). o Successive Interests: A majority of states extend the doctrine farther to include all successive interests, including grantor-grantee relationship

Grantor/Grantee: When a covenant is created in a transaction


involving the conveyance of an interest in land b/w covenanting parties. See Runyon v. Paley (covenant restricting land to 2 residences) (UPL562, DK744, 764) and Sonoma Dev. v. Miller (UPL566, DK744, 750, 755) Incorporates the mutual interests approachLL who transfers leasehold estate to the T, or owner who grants a road easement to a neighbor, is conveying an interest in land. o No horizontal privity required: A number of states have abandoned the requirement altogether Condemn requirement as a meaningless anachronism Because easily circumvented thru straw transaction, poses difficulty only for unsophisticated parties. Clear modern trend toward abolishing the requirement. Restatement (Third) of Property advocates this. States are confused. (DK744) o North Carolinaboth Horizontal and Vertical Privity required. Runyon v. Paley. o OhioHorizontal Privity required. Peters v. Nelson o VirginiaHorizontal Privity required. Sonoma Development v. Miller. o WashingtonHorizontal and Vertical Privity required. Lakeview Blvd. Condo Assn v. Apt. Sales Corp

HORIZONTAL & VERTICAL PRIVITY burden side benefit side original promisee horizontal privity: relationship between original parties to promise original promisor

vertical privity: relationship b/w original party and successor successor to original promisee

vertical privity: relationship b/w original party and successor successor to original promisor

(5) VERTICAL PRIVITY


Concerns the relationship b/w original covenanting party and her successors. If the successor succeeds the entire estate in land held by original covenanting party If successor acquires less than the entire estate No VP o Ex: if only part of estate transferred, or if person acquires estate through AP

VP

States are confused. (DK744) o North Carolinaboth Horizontal and Vertical Privity required. Runyon v. Paley. o OhioHorizontal Privity required. Peters v. Nelson o VirginiaHorizontal Privity required. Sonoma Development v. Miller. o WashingtonHorizontal and Vertical Privity required. Lakeview Blvd. Condo Assn v. Apt. Sales Corp

(6) NOTICE TO SUCCESSORS

Usually, successor must have notice of the covenant o Arises indirectly from state recording statutes, not as a direct element of real covenant A later purchaser who acquires an interest for value and w/o notice of a prior adverse claim is usually protected under the recording laws as a bona fide purchaser. Notice requirement satisfied by: o Actual notice, o Record notice o Inquiry notice, OR o Imputed notice However, one acquiring interest by gift is not a bona fide purchaserdevisee, heir, or other donee is bound by prior covenants even w/o notice.

1. Promisees Successor v. Original Promisor: Does the BENEFIT run?


In order for the benefit to run with the land, 1) The covenant must be in writing 2) The original parties must intend to bind their successors 3) The covenant must touch & concern land i.e. the burden of the covenant must relate to the use of the land and it mustnt violate public policy interests Bigelow test: It touches & concerns if it affects the value of the land 4) Vertical privity must exist (relaxed!) (i.e. relationship between original party and his successor) Loose vertical privityi.e. successor gains some possessory interest that can be in whole or part e.g. a lease would receive the benefit. In most jurisdictions, neither horizontal privity nor notice is required. Standard for vertical privity on the benefit side is greatly relaxed Most courts allow suit from homeowners association under the theory that it acts as an agent for benefited lot owners. Neponsit Property Owners Assn. v. Emigrant Indus. Sav. Bank (NY, 1938)

2. Promisees Successor v. Promisors Successor: Does the BURDEN AND BENEFIT run?

Burden + Benefit!

3. Validity & Enforcement of Real Covenants


Remedies for breach of real covenants: 1. Historically -> compensatory damages set at difference between fair market value of property before and after defendants breach 2. Modern courts -> choice of remedies. almost any restriction that can be enforced as a real covenant can alternatively be enforced as an equitable servitude. If so, P can usually choose b/w (1) compensatory damages (by enforcing as real covenant) or (2) an injunction against future conduct and damages for the past violation (by enforcing it as an equitable servitude) ENFORCEMENT!

TULK V. MOXHAY (P) (England 1848)

Facts: M owned land around Leicester Square in fee simple -> sold the land in fee to Elms, with deed indicating covenant for himself, heirs, and assigns, that land will be maintained as a square garden for paying inhabitants of Leicester Square. did not uphold the promise and M sued, asking for an injunction to restrain T (D) from changing the garden. P was granted the injunction. The injunction passed to Ms heirs. (Eventually Ms heirs sold the injunction to Ts heirs who then tried to convert the garden into building land.) Issue on appeal: whether T is permitted to use the land in a manner inconsistent with the covenant in existence when he bought the land (having notice of the covenant but no mention of the covenant in his deed?) Rule: A covenant is enforceable against a purchaser of land when that purchaser acquired the land with knowledge (notice) of the covenant (privity of estate notwithstanding) Reasoning: o covenant was a contract between the P and whoever purchased the land. o If the court were to hold otherwise, then the owner of the land would have no protection from the buyer selling to another the next day to someone who would not be subject to the liability. o Thus, the covenant would be worthless to protect the value of the owners property. o Lord Chancellor introduces the equitable servitude as a way of getting around CL restrictions that wouldve prevented a real covenant from binding successors in interest o Makes promises run with the land o Remedy is either an injunction or enforcement of a consensual lien This case dealt mostly with negative covenants (not to build) instead of positive covenants equitable servitude as way to get around real covenant!! M would have lost under real covenant. Notice may be actual, inquiry, or record Real covenants fade into the background with this decision

NEPONSIT PROPERTY OWNERS ASSN V. EMIGRANT INDUSTRIAL SAVINGS BANK (NY 1938)

Facts: Original grantees, the Deyers, were conveyed deed that said land was subject to an annual charge (lien) as will be fixed by the party of the first part (grantee), which may be a Property Owners' Association to be paid the first of May every year. Same provision was in every deed on down the chain of title. Municipality condemned the beachfront property and association sued. Issue: Is a covenant to pay homeowners fees to a corporation acting as an agent of the parties in privity of estate binding, when the corporation is acting for the benefit of the homeowners (a homeowners association), even though the association has no legal interest in the property (no privity of estate)? Rule: A covenant to pay money for maintenance done in connection with, but not actually on, an area of land touches & concerns that land, and thus become enforceable against subsequent purchasers if: 1. Grantor and grantee so intended 2. It appears that the covenant is one that T&C the land 3. Privity of estate is shown b/w the benefited and burdened parties of the covenant Holding: Yes. The covenant touches & concerns the land, runs with the land, and there is privity (well, at least something privity-like), and so there is a covenant, which has been passed down to grantee who had the duty to pay but did not.

For the covenant to "touch and concern," it must affect legal relations (the advantages & burdens) of the parties to the covenant, as owner of particular parcels of land and not merely as members of the community in general o argued that the covenant did not touch and concern his land because the payment of the fee was to be used for maintenance of the neighborhood areas and not his land specifically o court relaxes touch and concern doctrine and overlooked privity concerns o the purpose for the touch and concern rule was satisfied in that the covenant provided for the maintenance of common areas which increased the enjoyment of the defendants own land o association does not own any land, but you avoid free rider problems if everyone in property has to assume costs to get benefits/added enjoyment in land Freerider problem created if each neighbor has to sue for something that benefits an entire community Solution: Representational privity permits the association to sue on behalf of all Court expands equitable servitudes to make it easier for parties to bind successors by relaxing privity requirements and touch & concern problems
o

SANBORN V. MCLEAN (1925)


Facts: December 1892: McLaughlin, then owner of the lots on Collingwood Avenue, deeded 4 lots w/ the restriction that residences would be built on the lots. July 1893: McL conveyed several more lots w/ the same restriction. P traces title to McL. Ds title runs back to a deed from September 1893, which does not contain the restrictions. No buildings other than residences were erected on any of the lots in the subdivision. P objects to Ds erection of a gas station on her lot. Rule: Doctrine of Reciprocal Negative EasementsIf the owner of 2+ lots, which are situated to bear relation to each other, sells one w/ restrictions which are of benefit to the land retained, during the period of restraint, the owner of the lot(s) restrained can do nothing forbidden to the owner of the lot sold. Issue: 1) If the owner of 2+ lots, situated to bear a relation to one another, sells one w/ restrictions which are of benefit to the land retained, during the period of restraint, can the owner of the lot(s) retained do anything forbidden to the owner of the lot sold? 2) Is a reciprocal negative easement personal to owners? Holding: 1) No. Doctrine of Reciprocal Negative Easements makes restrictions which are of benefit to the land retained mutual so that the owner can do nothing on the land he retained that is forbidden to the owner of the lot sold. McLaughlin deeded lots w/ the restriction that only residences be built on them. Such restrictions were imposed for the benefit of the lands retained by McLaughlin to carry out the scheme of a residential district, and a restrictive negative easement attached to the lots retained. Since his was one of the lots retained in the December 1892 and July 1893 deeds, a reciprocal negative easement attached to the lot which later became Ds. 2) No. Reciprocal negative easements are not personal to owners, but are operative upon use of the land by any owner having actual or constructive notice thereof. The reciprocal neg easement attached to Ds lot may be enforced by P provided D had constructive knowledge of the easement at the time of purchase. At time of purchase, D had an abstract of title showing the subdivision and the 97 adjacent lots. He could not avoid noticing the strictly uniform residence character of the companion lots, and the least inquiry would have revealed the fact that his lot was subject to a reciprocal neg easement.

Note: Reciprocal neg easements must start w/ common owners. They cant arise and fasten upon one lot by reason of other lot owners conforming to a general plan. Such easements are never retroactive, and (as here), they pass their benefits and carry their obligations to all purchasers of land provided the purchaser had constructive notice of the easement. Constructive Notice: Knowledge of a fact that is imputed to an individual who was under a duty to inquire and who could have learned of the fact through the exercise of reasonable prudence.

Reciprocal Negative Easements: An implied covenant that arises when a common grantor conveys property and fails to contain a restriction placed on prior conveyances, pursuant to a general development scheme, to the present one and the grantee has either actual or constructive notice of such restrictions.

4. Scope of Real Covenants

5. Termination of Real Covenants


Real Covenant can be terminated in the following ways: 1. Release: Set for a set/fixed period of time according to its terms 2. Eminent Domain/Other Gov Action can end covenant 3. Merger Doctrine: If 1 party acquires ownership of all land benefited & burdened by a covenant 4. Abandonment when conduct of person entitled to enforce covenant for their benefit demonstrates intent to relinquish his rights a) can a new tenant in a condo building infer from conduct of property owners that a particular restriction is not enforced? 5. Changed conditions covenant unenforceable when conditions in the neighborhood of burdened land have so substantially changed that intended benefits cannot be realized.

2. EQUITABLE SERVITUDES: ENFORCEABLE IN EQUITY

Equitable Servitude = A promise concerning the use of land that: 1) benefits and burdens the original parties to the promise and their successors and 2) is enforceable in equity upon successive owners Essentially a tool that allows a promise to be enforced by or against a successor party under limited circumstances Distinguished from real covenants: o Standard for enforcing a promise as an equitable servitude is easier to meet o It has a broader array of defenses o The traditional remedy is an injunction, NOT damages

In England, only negative covenants are enforceable as equitable servitudes. Haywood v. Brunswick Permanent Benefit Bldg. Soc. In America, both positive and negative promises are enforceable.

Requirement for the burden to run (same as for a real covenant except that no privity is required) 1. covenant must be in writing to satisfy the statute of frauds 2. parties must intend to bind their successors to the covenant 3. subsequent owners must have notice either actual, by means of inquiry, or constructive. 4. the covenant must touch and concern the land a. Bigelow test: if it affects the value of the land, then it touches and concerns a. The Bigelow test is circular - it holds that an affirmative covenant binds successors if it "affects the legal relations of the parties to the covenant." b. The common law test holds that affirmative covenants ordinarily do not bind successors. c. Neponsit (modern approach prevalent today) is less restrictive, holding that an affirmative covenant to pay dues for common amenities will bind successors if the covenant touches and concerns the land (later clarified to mean that the promise must relate to the use of the land and not violate public policy).

Covenants are enforceable against subsequent purchasers when they know that the covenant exists under the theory that there would be unjust enrichment. Tulk v. Moxhay. With Tulk, real covenants became irrelevant and equitable servitudes became dominant. 1. Even when a purchaser of land does not have actual or constructive notice of an existing negative easement, when it is plainly obvious that there may be one (e.g. in a neighborhood that is uniform), the purchaser is burdened with taking steps to discover whether a negative easement exists. Sanborn v. McLean (providing an injunction preventing the construction of a gas station in a neighborhood when there was no notice given to the landowner of the easements existence). 2. See also McQuade v. Wilcox (enforcing a restriction on land recorded in adjoining properties deeds). The requirements of privity and touch-and-concern have been relaxed. 1. A covenant to pay money for the upkeep of land that is adjacent to, but does not directly concern burdened parcels, benefiting a property owners association (outside of privity) is enforceable. Neponsit Property Owners Association, Inc. v. Emigrant industrial Savings Bank. 2. When an affirmative covenant to maintain common-use property exists, the owners of these properties are limited in liability to the value of the property. Oceanside Community Assn. v. Oceanside Land Co. (holding that the affirmative obligation was enforceable on subsequent owners, and beneficiaries could place a lien on the burdened property for loss of use, and eventually can foreclose on those liens when they become equal to the property value of a golf course). 3. The touch-and-concern requirement extends even so far as holding an agreement to pay dues to a forprofit health club enforceable because the owners have a right to enjoy the facilities. Streams Sports Club, Ltd. v. Richmond. The Rest. 3d of Property supersedes the touch-and-concern rule with a blanket assumption that a covenant is valid.

i. Original Promisee v. Promisors Successor: Does the BURDEN run? (es)


Requirements for the burden to run: The promise must be in writing or implied from a common plan The original parties must intend to bind successors The promise must touch & concern land The successor must have notice of the promise Neither horizontal privity nor vertical privity is required (1) (2) (3) (4) PROMISE IN WRITING OR COMMON PLAN INTENT TO BIND SUCCESSORS TOUCH & CONCERN NOTICE TO SUCCESSORS

1) 2) 3) 4)

1. Promisors Successor v. Original Promisor: Does the BENEFIT run? (es)


Only 3 elements are required for the benefit of an equitable servitude to run: Promise must be in writing or implied from a common plan Original parties must intend to benefit successors Promise must touch and concern land

the law increasingly allows persons other than successors to enforce equitable servitudesmost common in subdivision context where uniform restrictions are imposed on a deed-by-deed basis, but subdivider does not expressly promise to restrict all lots courts routinely permit earlier buyers to enforce uniform restrictions against later buyers, even though earlier buyers are not technically successors some jurisdictions go furtherallowing any 3rd party beneficiary to enforce a promise created for his/her benefit, even absent a common plan

2. Promisees Successor v. Promisors Successor: Does the BURDEN AND BENEFIT run? (es)

Both the burden and the benefit must run to successors.

3. The Subdivision Problem in Equitable Servitudes


CREATION OF SUBDIVISION RESTRICTIONS

IMPLIED BURDEN: IMPLIED RECIRPOCAL COVENANT & COMMON PLAN

IMPLIED BENEFIT

4. Scope of Equitable Servitudes


(see Hill v. Community of Damien of Molokai, below)

5. Termination of Equitable Servitudes


Termination: 6. Anti-Discrimination Protections 7. Changed Conditions 8. Release (Acquiescence?) 9. Abandonment 10. Merger 11. Eminent Domain 12. Estoppel 13. Laches 14. Relative Hardship 15. Unclean Hands

ANTI-DISCRIMINATION PROTECTIONS
Civil Rights Act of 1866 1982 Fair Housing Act of 1968 3604

Protects

Racial or Ethnic Discrimination Only

Racial and Ethnic (Race/Color) Religion National Origin Sex (NOT sexual orientation ) Disability/Handicap Persons with Children Familial Status

Type of Property

Sale/Rental of all property

Sale, rental of dwelling only Advertisements

Exeptions!

None

Private Clubs Religious Organizationsdoes contain a limited exception that allows non-commercial housing operated by a religious organization to reserve such housing to persons of the same religion. Qualifying owner of 1-3 single family dwellings Qualifying owner-resident of bldg with 4 or fewer units Qualifying senior citizen housing

RACIAL COVENANTS

example of an enforcement problem comes into play when the 14th amendment is invoked. You can be a racist douchebag and exclude blacks from your apartment building, but you cant enforce it in court, b/c it goes from private action state action, and once the gov is involved, they are bound by the Equal Protection Clause of the 14th Amendment o Although racist covenants forcing property owners not to transfer to non-whites are not unconstitutional under the 14th amendment (which only applies to state actors), government enforcement by injunction would be, so it is unenforceable. Shelley v. Kraemer. o Awarding monetary damages, too, would be government action. Barrows v. Jackson. Strahilevitz: a popular way around violating the FHA is to build within developments costly amenities that are only appealing to wanted population elements; e.g. playing golf is a better proxy for whiteness than salary. See Exclusionary Amenities in Residential Communities.

SINGLE-FAMILY RESIDENCE COVENANTS AND THE GROUP HOME

For an example of enforcing covenants, see Hill v. Community of Damien of Molokai (holding that a covenant only to use property for single-family housing was met by comparing the group of AIDS patients to local statues defining that term and concluding they meet the definition, and even if they did not meet the definition, upholding such a covenant would violate the FHA).

Single family residence refers to architectural type and character of structure; interpreting covenant to prevent 6 retarded ppl from using it violates FHA. Deep East Texas Regional Mental Health & Mental Retardation Servs. v. Kinnear (DK782) For-profit home for elderly ppl not a single-family home; FHA violation not raised. Mains Farms Homeowners Assn. v. Worthington (DK782)

3 distinct claims for violation of FHA for the handicapped: o (1) discriminatory intenthas D treated handicapped individuals differently from other similarly situated individuals? o (2) Disparate Impacthas Ds conduct actually or predictably resulted in discrimination or has a discriminatory effect? o (3) Reasonable Accommodationdiscrim includes a refusal to make reasonable accommodations in rules, policies, or services when such accommodations may be necessary to afford [a handicapped] person equal opportunity to use/enjoy a dwelling.

HILL V. COMMUNITY OF DAMIEN OF MOLOKAI ()


Facts: A real estate development contained a restrictive covenant that mandated use of homes as single-family dwellings exclusively. D began operating at the property a group home for ppl w/ AIDS. P and other neighbors (Ps) brought suit to enforce the covenant. Trial court entered an order enforcing it, D appealed, SC reversed. Rule: A restrictive covenant limiting the use of a residence to single-family occupancy does not prohibit the use of the residence as a group home. Issue: Does a restrictive covenant limiting the use of a residence to single-family occupancy prohibit the use of the residence as a group home? Holding: No. The covenant here does not apply as against D. Two reasons why a covenant doesnt create the limitation advanced by P: 1) Court doesnt accept notion that use as a single-family residence solely = occupancy by related people. i. The local zoning law defines family as (among other things) any group of not more than five unrelated persons living together in a dwelling. ii. Federal policy favors including small group homes as families, as USFG has expressed a strong policy toward breaking down barriers preventing ppl w/ disabilities from living together, and including a small group w/ similar disabilities livin together addresses this policy. 2) The interpretation here violates the Fair Housing Act. 3604(f)(1) prohibits discrimination in housing against those w/ disabilities. HIV has been classified as a disability, so the covenant here, if applied to D, would violate FHA.

C. COMMON INTEREST COMMUNITIES


The distinctive feature of a common-interest community is the obligation that binds the owners of individual lots or units to contribute to the support of common property, or other facilities, or to support the activities of an association, whether or not the owner uses the common property of facilities, or aggress to join the association. Restatement 3d of Property, Servitudes Sec. 6.2 Comment a (2000). Restrictions placed on property by common interest associations before the purchase are held to a high standard and are generally held to be enforceable unless it is wholly unreasonable or arbitrary. o Restrictions on pets from the point of view of the whole community are reasonable in that they are rationally related to health, sanitation and noise. Nahrstedt v. Lakeside Village Condo Assn, Inc. o The test for reasonableness considers

(1) whether the restriction is wholly arbitrary, irrational or arrived at through bias, (2) if the burden it imposes on the land substantially outweighs the benefit, and

(3) violates fundamental public policy. Pre-existing rules are held to less reasonableness scrutiny than subsequent regulations because of tyranny of the majority fears. o In making decisions about what repairs to make, common interest associations are held to a business judgment standard. Lamden v. La Jolla Shores Condominium Homeowners Assn. (giving deference to treat termites in a manner that turned out to be wrong). If a supermajority of owners agree to a policy, no reasonableness analysis will be undertaken by the court and the regulation will be presumed to be valid. Evergreen highlands Assn. v. West (holding that 75% meets this requirement). One variation of the home owners association is the cooperative apartment in NY. o Here, each apartment leasee owns stock in a corporation owning the building and they lease from it. They are afforded extensive latitude in screening potential neighbors. However, they may not screen based upon race, and if its found that they have, they pay damages. See Broome v. Biondi. Excluding registered sex offenders from common interest communities is enforceable as they are neither a protected class nor are they handicapped. Milligan v. Panther Valley property Owners Assn.

Common Interest Communities: homeowners associations and cooperatives/condominiums; enforce servitudes set forth in declaration accepted by all members; governed by a board elected from its members A. Common features: 1. each owner entitled to occupy/own a particular dwelling unit i. with condo, own fee simple title ii. also undivided interest in common area as tenant in common iii. Cooperative: tenants receive no title (owned by corporation) 2. all units subject to comprehensive private restrictions about use of land and financial obligations 3. development governed by board (private owners association) i. the board may adopt new regulations and collect fees to maintain commonly held property ii. power to raise funds reasonably necessary to carry out its functions 4. common areas are owned in common by all owners 5. title to property automatically makes owner member of the association -> now obligated to comply with restrictions and pay association fees i. A common interest community is typically created through a declaration B. Pros and cons 1. Pros: generally cheaper, uses less land per unit, automatic community, convenience of minimal maintenance/upkeep 2. Cons: surrender of personal freedom (restrictions on paint, pets, etc), can create racial, ethnic, and cultural separations C. Declaration: includes covenants, conditions, and restrictions (CC&Rs) = a document imposing binding restrictionsIn theory, by buying the unit, each owner voluntarily agrees to be bound by the declaration 1. basic components i. identifies common areas and units subject to the declaration ii. provisions enumerating associations powers iii. fees required iv. comprehensive restrictions that limit appearance, construction, etc 2. usually subject to limited judicial review unless violation of public policy/laws i. owner voluntarily agrees to be bound by declaration ii. declaration should reflect interests of all other unit owners iii. can reduce litigation D. General Rule: declaration presumed to be valid unless found to be arbitrary, in violation of constitutional right, in violation of public policy 1. 3rd Restatement: servitudes and restrictions are invalidated if: i. arbitrary ii. unreasonably burdens fundamental constitutional rights iii. or, violates another public policy 2. Amendments are by vote by unit owners

NAHRSTEDT V. LAKESIDE VILLAGE CONDOMINIUM:

Facts: plaintiff bought condo in large complexshe claimed she didnt know about it but by becoming member, accepted condo associations restrictions which included a strict pet restriction. P sued, asking court to invalidate the pet restriction because it does not apply to her indoor cats who will be a nuisance to no one in the complex Issue on Appeal: is the pet restriction contained in the condo associations declaration is enforceable against the challenge of a homeowner? Holding: No, the restriction is reasonable and should be enforced uniformly against all homeowners in the association. Rule: Covenants, conditions, and restrictions contained in recorded declarations of a common interest development are enforceable unless unreasonable. Standard applied: general definition of unreasonable Dissent: The substantial benefits derived from pet ownership, the undue burden on the use of property imposed on condo owners who can maintain pets who will neither create nuisance nor disturb the quiet enjoyment of others outweighs whatever meager utility the restriction may serve. This restriction is patently arbitrary and unreasonable!! 1. The presumptively valid rule is too restrictive since a home is supposed to be ones castle, and owning pets that dont disturb neighbors dont reasonably come within this compromise Policy concerns: We give deference to condo boards because they discourage lawsuits (upfront), promote stability, assure homeowners that they can rely on promises in declaration, and protect owners from increased fees to cover litigation costs. 1. associations use covenants/restrictions to avoid negative externalities and avert potential for conflict between neighbors up front 2. easier to resolve conflict when people know about all bright-line rules when agreeing to join the community 3. Social capital gained from bringing people together who share common interests 4. Where use is restricted, there is more certainty, which leads to fewer lawsuits Case is about how much courts should interfere with restrictions by home owners associations Pre-existing rules vs. subsequent restrictions o Restrictions in place at the time a unit was purchased should receive a higher degree of deference since the decision to purchase implies consent to the restrictions/rule o Subsequent restrictions carry the threat of a tyranny of the majority and are therefore subject to a reasonableness test In 2004, CA supreme courts says: ignore the distinction between pre-existing rules & subsequent restrictions. See Terifaj, DK 812-13 Issue isnt about when a rule was put into place Issue is about govt policy of non-interference with rules of homeowners associations Note: California Civil Code (responsibility for pets) on DK809

MULLIGAN V. PANTHER VALLEY PROPERTY OWNERS ASSN.: A gated community voted in a rule banning entry of members
registered as Tier 3 sex offendersone member challenged the constitutionality of this rule. Under NJ property law, is the property association's restriction against tier-3 sex offenders against public policy? Holding: Plaintiff had burden to establish homeowner associations restriction violated public policy. Plaintiff failed to meet this burden, so judgment given to Panther. Rationale: Other communities have passed tier-3 restrictions, even though this court does not know how many have, and under what scope they have passed such amendments. Based on those findings, it is not possible to tell if there is a discriminatory effect to such a rule, and therefore unable to tell if it is against public policy. Tier 3 sex offenders are not a protected class, so homeowner associations selection criteria are not discriminatory or unlawful. Rule: Reasonableness standard better than NY's business judgment test b/c the changes were made by a vote of the members rather than by the board of directors.

D. ZONING
Zoning is designed to reduce conflicts of use in urban areas. Before zoning, there were nuisance laws and restrictive covenants, and each proved to be ineffective for varying reasons. The basis for the power to zone comes from the local governments inherent police power to promote public health and welfare. One common zoning scheme is Euclidean zoning where zones are cumulative e.g. some areas receive the highest protection are their uses are limited to single-family housing and other similar uses, and tapering off protection until there is unencumbered property that may be used for any legal use. Zoning of such a design is not an arbitrary extension of a municipalitys police power. Euclid v. Ambler Realty (holding that nuisance laws are a reasonable use of the police power, and by analogy, so should zoning be because it preempts nuisances). Zoning laws will only be struck down on face when unreasonable or when they have no link to legit police powers. Zoning laws may still be struck down as applied to a specific party. Nectow v. City of Cambridge.

1. ZONING BASICS
Zoning = use of gov power to regulate land use. Zoning laws divide a political jurisdiction into specific separate geographic areas and impose areas and limits on the permissible uses of land w/i each area. Objectives: o To prevent incompatible uses from occurring (thus reducing the need for nuisance law) o To increase property values generally by minimizing use conflicts (thus increasing the property tax base) o To channel development into patterns that may serve larger social goals (e.g., reduce urban sprawl to conserve resources and reduce air pollution from auto commuting).

1.

2. 3.

CUMULATIVE ZONING Different zones or districts are ranked in a hierarchy. o Districts limited to residential uses are known as the higher districts/zones; districts allowing multifamily and business uses are lower districts/zones. o Uses allowed in a higher zone are allowed in all lower zones, but no use can be located in a higher zone than the zone in which it is first listed. o Applies to height and area restrictions as well. EXCLUSIVE (NONCUMULATIVE) ZONING permits only authorized activities in each district (separated). o Permits some uses and excludes all others w/i the zoned area. DENSITY ZONING seek to control the density of occupation w/I any given use district o Usually done through a wide variety of limits on the size/height of structures, their location upon the site, and the functional uses created w/I the structure (e.g., limits on # of bathrooms or bedrooms w/I a single family structure). o Density controls supplement use controls; not generally considered an alt to use controls.

2. CONSTITUTIONAL VALIDITY
In general, zoning laws are constitutionally valid, even though they restrict the uses to which a landowner may devote his property (possibly to his economic detriment).

VILLAGE OF EUCLID V. AMBLER REALTY CO. (DK828) [Tract owner (P) v. Municipal corporation (D)]
SC upheld the validity of the Ohio comprehensive zoning ordinance against a DP (5th, 14th Am) and Equal Protection challenge.

Facts: D zoned property of Ambler (P); property lost value and P lost the right to use land for otherwise legal purposes. P sought to enjoin enforcement of the zoning ordinance. Rule: A zoning ordinance, as a valid exercise of the police power, will only be declared unconstitutional where its provisions are clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare. Holding: Zoning ordinances (and similar laws and regulations) must find justification in the police power, asserted for the public welfare. Urban life used to be simple; but with population in creases, problems have developed that require new restrictions on the use/occupation of private lands in urban communities. It cannot be said that it passes the bounds of reason and assumes the character of a merely arbitrary fiat (Purity Extract v. Lynch, DK833) 1. Legitimate state interests furthered by zoning ordinances: promotes safety and security, reduces street accidents, decreases noise, preserves an environment in which to raise children, and aids in fire prevention. 2. Likened zoning ordinances to nuisance control statutes (which were constitutional) and declared the ordinance was rationally related to the furtherance of legit state goals. Ordinance didnt implicate any fundamental constitutional right. Thus only a rational relationship b/w the ends to be achieved (legit state interest) and the means chosen to achieve those ends (zoning law = means) is all that is required to uphold the law under a SDP inquiry.

ANALYZING UNCONSTITUTIONALITY CHALLENGES. Substantive Due Process addresses whether the federal or state gov can restrict individual rights through the law/action at issue. A court reviews a law challenged as unconstitutional under a SDP arg through several steps: 1. Legit state interest? The states goal in enacting the law must be the promotion of a legitimate state interest 2. Means related to state interest? Unless law infringes on a constitutionally protected right, the law will be upheld if it (i.e., the means) is rationally related to the promotion of the legitimate state interest. A court would declare the statute unconstitutional only if the provision is clearly arbitrary and capricious, having no relation to the promotion of the claimed legit state interest. As a practical matter, almost all laws pass this rational relationship test. 3. If infringe const right compelling state interest? Once a law infringes on an individuals fundamental constitutional right, the burden on the state increases dramatically. The state must convince a court the states interest o/w the individuals fundamental rightusually must show it is trying to advance a compelling state interest. If the state cannot show its interest o/w, a court will strike the statute down as unconstitutional. 4. Narrowly tailored? Even if the states interest o/w, the statute must be narrowly tailored to achieve the compelling state interest while infringing as little as possible upon the individuals constitutionally protected right. UNCONSTITUTIONALITY ON ITS FACE AND AS APPLIED ON ITS FACE: SC in Euclid considered only whether the statute was valid on its face. Because Ambler Realty challenged the zoning ordinance on its face and not as applied to any specific development on its land, the SC didnt need to address whether the zoning ordinance as applied to Amblers land was unconstitutional: o When the provisions set forth in the ordinance come to be concretely applied to the premises some of them, or even many of them, may be found to be clearly arbitrary and unreasonable. AS APPLIED: Zoning in general is constitutional but concrete applications of specific provision could prove to be arbitrary and unreasonable (Euclid). o Example: Two years after Euclid, SC concluded the zoning ordinance as applied to Ps property was unconstitutional. Relied on Euclid for a SDP arg that the zoning ordinance failed as a means to promote a legit state interest. The Court held a zoning reg cannot be imposed if it does not bear a substantial relation to the public health, safety, morals, or general welfare. Since 100-ft strip of land wouldnt promote a legit state interest,

and invasion was serious and highly injurious (no practical use), zoning ordinance was unconstitutional as applied to the 100ft strip. (Nectow v. City of Cambridge, DK838). o Zoning ordinances that openly infringe constitutionally fundamental rights (e.g., free speech) or that employ suspect criteria (e.g., race) are presumptively unconstitutional. Zoning laws that lack such damning characteristics, however, are presumptively valid Land-use regulations can still be takings. Euclid did not foreclose the possibility that gov land-use regulations may constitute a taking which requires compensation. o SCOTUS held that an anti-mining restriction, which totally destroyed the interest of the party who owned the mineral rights, was a taking for which compensation had to be paid. The diminution in value of the partys property was total, and was thus clearly a taking. (Penn Coal Co. v. Mahon, DK980) o Example: A zoning law that so severely restricts use that no economically viable use is permitted is an unconstitutional taking of property w/o compensation (Lucas v. SC Coastal Counsel, DK___) o .

3. ZONING & AESTHETICS


Does the police power permit municipalities to regulate aesthetics? Law haw evolved in three phases: 1) Early 20th century courtsPP could not be exercised based on aesthetic considerations alone; ordinances that attempted to regulate the visual impact of billboards were deemed to violate substantive due process. 2) 1960slaw progressed to where aesthetic zoning was upheld if it furthered some legit gov purpose other than pure aesthetics (traffic safety, fire safety, preservation of property values, promotion of tourism). Some jurisdictions still follow this approach. 3) End of 20th centuryaesthetics alone is an appropriate gov purpose. Justice Douglas: concept of public welfare is broad and inclusive. The values it represents areaesthetic as well as monetary. It is w/i the power of the legislature to determine that the community should be beautiful as well as healthy. Berman v. Parker (DK879) Municipalities generally now empowered to regulate billboards, junkyards, and other unsightly uses based on aesthetics alone. In recent decades, attn sifted to other constitutional constraints on aesthetic zoning1st Amendment o SC has never considered the issue, but some scholars say it should be. o Under this view, an ordinance that prohibits a certain architectural style might be seen as a form of content-based censorship, not merely a restriction on time, place, or manner of expression. o Pyramid home in Stoyanoff as a cultural or political statement?

STRUCTURES Architectural design review ordinanceusually establishes an admin board that evaluates design of proposed single-family residences and other structures in light of particular criteria. If board rejects a partic design, affected owner cannot obtain a building permit for the project. Example criteria can include: o Appearance of the surrounding area o Specified design standards o Impact on the property value of nearby parcels.

Note: A recurring problem is whether such criteria provide sufficient guidance to applicants or are void for vaguenesscompare Stoyanoff (sufficient) with Anderson v. City of Issaquah (void)

STATE EX REL. STOYANOFF V. BERKELEY (Mo, 1970, DK872) Can constrict on aesthetics b/c of police power and
due process rational basis Facts: City of Ladue, wealthy suburb of St. Louis, adopted a design review ordinancerequired all structures to conform to certain minimum architectural standards of appearance and conformity w/ surrounding structures, and that

unsightly, grotesque and unsuitable structuresbe avoided, and that appropriate standards of beauty and conformity be fostered and encouraged. After petitioners app to build a pyramid-style home in a neighborhood of Colonial, French

Provincial, and English Tudor houses was rejected, they sought a writ of mandamus to compel the city to issue a buiding permit on the basis that the ordinance violated the state constitutions DP clause. Missouri SC upheld the ordinance as a legitimate exercise of the police power, using essentially the rational basis standard applied under the federal DP clause. Following the minority approach, court refused to rest its decision on aesthetics alone. Reasoned that the proposed home would adversely affect property values and otherwise disrupt general welfare of area residence thus, decision was neither arbitrary nor unreasonable. Big Concern: is architecture a form of speech protected by 1st Amendment? Is this a form of content-based censorship? Circular logic? Pyramid house affects property values and community welfare because of its unusual appearance (its aesthetics). Strahilevitz: BUT, theres not concrete evidence that the property values would in fact be reduced o Court didnt want to say that aesthetic alone justified zoning, so it used home values as a proxy Court granted the neighbors a property rule; however, it couldve used a liability rule (i.e. owner of pyramid home compensate neighbors for any reductions in property value) There might be costs in assessing damages; but on the other hand, what if the house design ends up being popular? o Clash between individual liberty (1st Amendment concerns) and community interests What prevails is the communitys interest in conformity, perhaps to preserve social capital, or just to make the majority happy Harms: (other than freedom of expression) o Limiting the property owners freedom to do what he wants with his property o Neighbors are insulating themselves to new people, ideas, & architectural styles

ANDERSON V. CITY OF ISSAQUAH (Wash, 1993)


Facts: appellants owned land in city of Issaquah and wanted to turn property into a commercial building for retail stores. Sought permits from city, but city rejected based on appearance of buildingclaim it would not be in keeping with aesthetics of downtown. Appellant spent $250,000 making changes to his project and reapplied for the land use permit, but it was denied. Issue on appeal: was Anderson denied due process of law by being held to the municipal codes provisions for land use in the downtown area? Rule: There is nothing inherently wrong with aesthetic standards, but provisions that set guidelines must be clear and reasonable Holding: The zoning ordinance in question is unconstitutionally vague because it gave neither meaningful nor effective guidance to applicants, design professionals, or public officials who are responsible for enforcing it. Holding Anderson to these provisions was a violation of his right to due process of law. Rationale: provision was too vague to put a person on notice about what is required of them when designing his building. o The facts really mattered heretrying to build really ordinary commercial building (nothing funky or unorthodox)!! o The issue of waste probably factored into decision as well Strahilevitz: This ordinance is very similar to that in Stoyanoff, but it is deemed void for vagueness o Key difference might be that the Anderson commercial building is normal, but the Stoyanoff house is definitely out of the ordinary The judicial I know it when I see it test works for the house, bur not for the commercial building

Merits of vagueness vs. clarity/bright-line rules in architectural context: o Clarity minimizes waste; prevents arbitrary action/discretion by the govt o Clarity constrains artistic expression & innovation

4. EXCLUSIONARY ZONING

SUSPECT CLASS Suspect class ordinance unconstitutional. An ordinance based on a suspect class (race, color, religion, or national origin) will be struck down as unconstitutional on EP or SDP ground, or as illegal on a statutory basis. o Subtle racial discrimination provisions and ordinances may be invalidated as unconstitutional if the aggrieved person proves the city acted w/ a discriminatory intent or purpose. o A P class may submit statements of political leaders or associations w/ past discrimination practices as ev of the leaders discriminatory intent or purpose. A mere discriminatory impact or effect does not warrant constitutional relief. Most actions today are brought under the Fair Housing Act of 1968 or state laws. o Courts hold aggrieved Ps may prevail under FHA by showing discriminatory impact or effect rather than the harder to prove discriminatory intent. o Some state courts interpret their state constitution/statutes such that discriminatory impact or effect (esp if the ordinance continues past discriminatory practices) will be enough to violate the constitution/statute. SOCIOECONOMIC STATUS Incentive to exclude: Gov tries to offer max quality of life/gov services at lowest cost to taxpayers. o Ideal mix = high property tax base from clean industy w/ low need for public services. Education system drains a lot of resources from local gov budget; desire to keep # of schoolage kids low o Justified as serving some state interests No EP or FHA protection for poor. SES is not a suspect class, so the federal Constitutions EP Clause doesnt prohibit zoning that disfavors the poor. Neither does the FHA. 4-5 states have found their state constitututions/zoning enabling acts impose a duty to provide an opportunity for all citizens to live in every community.

S. BURLINGTON COUNTY NAACP V. MT. LAUREL (MT LAUREL I) (DK918)


Facts: Zoning ordinance aimed at keeping gov expense low and land value highminimum lot sizes/widths, minimum floor area, 1-2 bedroom max in apts, no kids in 1br apt, 2 kids max in 2br apt, if exceed kid cap developers burden to pay tuition/expenses. Rule: Municipal land-use regulations must provide a realistic opportunity for low/moderate income housing. Holding: NJs zoning enabling act and its state constitution both required zoning laws to promote the general welfare. Welfare = all citizens and ares of the region, not just w/i township. Exclusionary ordinance fx other cities and towns. Once enough facts to show ordinances presumptive invalidity for not serving general welfare, burden shifted to township to justify its practice. o Mere fiscal reasons dont justify exclusionary practice o P offered ecological/environmental justifications; court brushed them aside under facts of case (but said it could be a legit consideration in some cases) o P required to take appropriate axn to fulfill its fair share fo the regional need for low and moderate income housing. Rationale: Use of all land is controlled by the state. The state has constitutional obs to all its residents, rich and poor. Municipalities, as state subjects, must set aside a fair share of its land for lower income housingcant just allocate dilapidated land for poor and retain valuable land for the rich. o Difficulty in developing an equitable formula for determining fair share.

MOUNT LAUREL II Post Mt. Laurel I, communities and Mt. Laurel itself continued to exclude the poor. S. Burlington County NAACP v. Mt. Laurel (Mt. Laurel II) (NJ, 1983, DK935) held:

1.

All municipalities, not just developing ones, must provide a realistic opp for decent housing for poor, except where the poor are a disproportionately large % of pop 2. Must take affirmative measures to encourage construction of low- and moderate-income housing. Merely eliminating obstacles like exclusionary zoning ordinances is insufficient. Obligated to: a. Help developers obtain state and federal subsidies for low/mod income housing projects b. Provide incentives to developers to build housing c. Require developers include a minimum amt of low/mod income housing in any future project d. Utilize other aff methods for meeting the fair share requirement 3. Builders remedyif a municipality refused to allow construction of a housing project in violation of its fair share ob, trial ct could allow the project to proceed unless clearly contrary to sound land use planning.

NJ FAIR HOUSING ACT & MT. LAUREL III Two years post Mt. Laurel II, NJ enacted a Fair Housing Act o Established an administrative agency, the Council on Affordable Housing, and empowered it to identify and enforce Mt. Laurel II obligations o Provided a moratorium on the builders remedy o Provides for regional contribution agreementssuburbs may compensate cities for agreeing to absorb up to half of the suburbs fair-share obligation. Purposemake use of existing housing stock. Held constitutional in Hills Dev. Co. v. Bernards Township (Mt. Laurel III) (NJ, 1986, DK935) Courts have largely deferred to the Council on Affordable Housing

EXCLUSIONARY ZONING TECHNIQUES Minimum housing-cost requirements invalidated early on by the courts, which saw no rational relationship b/w cost and advancing public health and safety. Minimum floor-area requirements often set w/o regard to # of residents in a dwelling (thus lacking any apparent health/safety rationale) met w/ more mixed judicial reaction. Superseded in many communities by housing codes, which were required by USFG in the Housing Act of 1954 in order to qualify for urban renewal $. o Housing codes establish minimum standards for all housing w/I municipality; cover required facilities (# bathrooms, windows in bedrooms, outlets) and occupancy limitations. o Minimum sq footage requirements by private developers on a subdivision thru covenants render publicly imposed lower minimums superfluous. Minimum lot-size requirements Upheld when found justified by the conditions of the community in Q, but their exclusionary fx can provoke judicial skepticism. o Upheld 5-acre minimum in part of county w/ smaller lot sizes in other areas; low density held to help w/ municipal concerns about sanitation, traffic, protection of historic areas. County Commrs. Of Queen Anne County v. Miles (Md, 1967, DK933). o Upheld 3-acre minimum intended to conserve underground water supplies. Ketchel v. Bainbridge Township (Ohio, 1990, DK933). o Struck down 2- and 3-acre minimum as exclusionary, in face of args that they were designed to deal w/ sewage treatment and traffic and help preserve areas character. Appeal of Kit-Mar Builders, Inc. (Pa, 1970, DK933) o Struck down agricultural land preservation measure that set minimum lot sizes. C&M Developers v. Bedminister Township Zoning Hearing Board (Pa, 2002, DK933) Minimum setback requirements Upheld b/c light/air, danger from fire, and advance aesthetic concerns. Have a cumulative effect on production of low-cost housing similar to min. lot sizes. Almost universally upheld. Barring mobile homes from residential areas or entire community Almost always upheld in early cases. Today, when mobile homes must meet fed safety standards, prejudice against them persists.

Recent cases in the South appear to stand up to this prejudice held protection of neighbors property values not a sufficient justification for complete prohibition of mobile homes in all residential areas; ordinance unconstitutional. Cannon v. Coweta County (Ga, 1990, DK933).

EXCLUSIONARY ZONING IN OTHER STATES (DK936)

HARD TO BASE CLAIMS ON FED CON LAWTHANKS, SCOTUS (US, DK934) P must prove discriminatory intent if they charge that enviro regulations H minorities and violate the Equal Protection Clause. Arlington Heights v. Metropolitan Hous. Dev. Corp. (1977) Housing is not a fundamental right. Lindsey v. Normet (1972) Wealth not necc. a suspect classification for purposes of the Equal Protection Clause. San Antonio Indep. School Dist. V. Rodriguez (1973) Prohibition of boarding houses and multi-family dwellings reasonable and w/i public welfare b/c they bring more ppl, traffic, and noise, intruding on seclusion and clear air. Village of Belle Terre v. Boraas (1974) Nonresidents lack standing in fed ct to challenge municipal regulations unless alleging specific concrete facts showing the were harmed. Warth v. Seldin (1975)

EXCLUSIONARY ZONING REMEDIES 1. Builders remedy. P homebuilders often given builders remedy right to build as they proposed. o Preferable to invalidating the zoning and remitting the builder once more to balky legislative process o Aimed at giving Ps incentive to challenge exclusionary ordinance provisiosn 2. Define beneficiaries. Beneficiaries of the remedy must be definedtypically (besides P) the wouldbe purchasers of affordable housing. o Affordable housing not least-costgenerally stripped down version of what builder wouldve constructed. 3. Rezone. Mandatory duties on political subdivisions to rezone land for affordable housing. o Court must first figure out how many townhouses fulfill Ds community obs to provide its fair share o Might be based on whole metropolitan region, or land available in urbanizing areas, or land available w/i commuting distance of available jobs for those people Though may be triggered by court case or denial of rezoning, task often winds up as administrative matter handled by state urban planning dept.

VII. TAKINGS

Government

Condemnation Government Initiates Inverse Condemnation Landowner Initiates

Landowner

Conventional Condemnation Government initiates the action by identifying property and beginning proceedings to acquire the property, paying just compensation therefore before putting the property to public use. Inverse Condemnation Landowner claims the gov has physically occupied or taken some property right from the landowner w/o compensation and w/o initiating the condemnation process.

A. EMINENT DOMAIN
DKAS 941-959; SM 27

1. TAKINGS CLAUSE OF THE FIFTH AMENDMENT: NOR SHALL PRIVATE PROPERTY BE TAKEN FOR PUBLIC USE, WITHOUT JUST COMPENSATION.
SCOPE OF THE TAKINGS CLAUSE Constitution does not expressly grant eminent domain power to the USFG; it restricts the ED power. Literally only restricts the federal gov, but held equally applicable to state/local gov through 14th Am incorporation. Applies only when private property is taken. Two restrictions on ED powerGovernment: 1. May take private property only for public use 2. Must pay just compensation to the owner

ORIGIN OF THE TAKINGS CLAUSE Yay common law

MODERN RATIONALE FOR THE TAKINGS CLAUSE Bars gov from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. Dolan v. City of Tigard (US, 1994, UPL 660) combines 2 key themes reflecting Madisons concerns: 1. Seen as a check on arbitrary gov action. Gov cant capriciously single out certain individuals/groups for disparate treatment. 2. Ensures that all citizens bear their fair share of public burdens. One citizen cant be unfairly forced to assume obligations that all citizens should meet. Prevents monopoly and promoting efficiency (Posner). Prevents forcible redistribution of property by stipulating, through just compensation requirement, that when gov power is used to take private property, the public pays the property owner the value taken. Takings permitted only for public benefit. Designed to prevent any takingwhether or not compensatedforcing a transfer from one to another w/ no public benefit.

i.

Nor Shall Private Property

Any type of private property: Most cases involve condemnation of a possessory estate held in fee simple absolute All possessory estates (freehold and non-freehold) and other interests (e.g., easements, CC&Rs, and future interests) in real property may be condemned. Tangible and intangible personal property may be condemned.

16.Be Taken
State takes permanent physical possession of a parcel of land When taking process is complete, Os possessory rights are extinguished Any permanent physical occupation of property authorized by the gov is deemed a compensable taking. Loretto v. Teleprompter Manhattan CATV Corp (________________, DK____) Temporary physical invasion may be compensable in some circumstances.

17.For Public Use

PUBLIC USE PUBLIC PURPOSE TEST Old standard: implies condemnation is permitted only if affected land will be physically used or occupied by members of the public Public used defined by identity of future land users/occupiers Current standard: The Public Purpose Test: public use defined by the purpose (w/i scope of police powers) underlying government actionas long as taking is rationally related to any conceivable public purpose, the public use requirement is met.

BERMAN & MIDKIFF SIGNALED NEW STANDARD (PPT) Berman v. Parker (US, 1954, DK949) If gov has right to exercise police power for a particular purpose, it has the right to condemn property as well. Valid public purpose better balanced, more attractive community. Here, District sought to upgrade housing conditions for an entire neighborhood thru a comprehensive redevelopment plan (rather than piecemeal, structure-by-structure approach). This goal was a legit public purpose and condemnation was for a public use. Douglas suggested that the scope of the govs ED power was coextensive w/ the police power. Hawaii Housing Authority v. Midkiff (US, 1984, DK949) Facts: Hawaii legislature adopted a statute, sought to remedy disproportionate ratio of landowners/tenantsauthorized tenants to petition to have the gov condemn these properties and resell them to the tenants. SCOTUS upholds statute. Valid public purpose eliminating the social and economic evils of land oligopoly. Broadened scope of public purpose test in 2 ways: 1. Confirmed the suggestion in Berman that the public use standard is coterminous w/ scope of police power. Ps argued public use standard required gov to possess/use land at least temporarily; here, tenants had always retained possession. Court held this distinction was irrelevantno more physical use test. Public use purpose underlying gov action, not identity of land user. 2. Established that condemnation decisions are judicially reviewed under the deferential rational basis standard. Correct question is not whether in fact the condemnation serves a public purpose, but instead whether the decision is rationally related to a conceivable public purpose.

Rational approach to correcting what the Court perceived as a malfunctioning land market.

KELO V. CITY OF NEW LONDON (US, 2005, DK945) [Landowners (P) v. Municipality (D)]
Facts: City of New London (D) was designated a distressed municipality. City adopted a development plan to revitalize the local economysought to condemn 15 properties owned by 9 landowners who refused to sell their properties to the city. P contends economic development shouldnt be considered a public use. SCOTUS disagreed. Rule: A citys proposed taking of private property for general economic development qualifies as a public use constistent w/ the Takings Clause of the 5th Am. Holding: Stevens relied on Berman and Midkiff in finding that the plan unquestionably serves a public purpose. The city was economically depressedit would be improper for the Court to secondguess the Citys considered judgments about the efficacy of its development plan. Limit on extent of deference to local gov If a city transferred property of A to B just b/c B would put the property to more productive use and pay more taxes, such a one-on-one transfer would certainly raise a suspicion that a private purpose was afoot. 2 factors distinguish Kelo: o Comprehensive nature of the planmany parcels; a wide variety of uses o Careful deliberation that preceded adoption of the planminimized risk of abuse Dissent (OConnor): Significantly expands the meaning of public usethreat to private property rights, b/c taking ok even for ordinary private use as long as it generates some secondary benefit for the public

STATE CONSTITUTIONAL ALTERNATIVES States are free to interpret their own constitutions independently, and so have the power to define the public use limit upon takings differently than SCOTUS. When property is taken for transfer to another private owner, public use is satisfied only when any of the three tests is met (County of Wayne v. Hathcock, Mich, 2004, DK954): 1. Public necessity of the extreme sort requires ED to accomplish the public purpose means test 2. The property remains subject to public oversight after transfer (e.g., transfer to a publicly regulated utility) ends test 3. The condemnation itself (as distinguished from the later transfer) produces independent public benefits (e.g., condemnation of blighted property). ends test Hathcock overruled Poletown Neighborhood Council v. City of Detroit, which had upheld the condemnation of a whole neighborhood for transfer to GM for an assembly plant for the purpose of alleviating unemployment and revitalizing the economy.

MEANS V. ENDS ANALYSIS (DK953)

FUTURE OF THE PUBLIC USE STANDARD In wake of Midkiff, scholars agreed the Public Use Clause had little impact as an independent restriction on gov action. o Midkiff noted a purely private taking would violate public use requirement, but unlikely to occur b/c would presumably exceed govs police power authority in the first place Kelo changed this in two ways: 1. Led a majority of states to enact legislation that abandoned the PPT and impose greater constraints on ED. Kelo standard still governs ED by USFG, and applies directly to states w/o postKelo legislation

2. Some commentators interpret Kelo as a signal that the Court is prepared to restrict the
scope of the PPT, in which case it may be viewed as a transitional case leading to a new public use standard.

18.Without Just Compensation.


Fair market value: amount a willing buyer would pay in cash to a willing sellerdetermined by recent activity in the market or by some just/equitable standard applied by the courts ii. Sentimental attachment: house that has been in family for many generations, FMV not likely to fully compensate for loss. 1. there is no adjustment for sentimental value 2. not extra value given to replace the property in a new location either iii. should potential future use change FMV? consider these factors: 1. physical condition of land 2. current and reasonably probable future zoning of parcel 3. market demand for particular use i.

2. EMINENT DOMAIN PROCEDURE


Straightforward Condemnation: If the gov wishes to condemn private property for public use, it must comply w/ procedures designed to assure owners DP of law. Steps: 1. Must file a petition in court a. Some jurisdictions require the gov to attempt a negotiated purchse before initiating a condemnation action 2. Notice to all persons w/ an interest in the property in question 3. A trial is held, at which the gov must establish its authorit to condemn a. Which means, in some jurisdictions, the gov must show why a taking is necessary b. The court can give the gov permission to enter/inspect the property c. May require the gov to make a security deposit for the eventual condemnation, in amt based on the compensation estimated to be awarded at the end of the proceedings (though none required under the Constitution) d. If jury trial, jury usually determines compensation. Issues of public use/necessity are decided by the court. 4. After condemnation, gov must pay the compensation plus interest accrued from the time of the taking 5. Generally, condemnees may not recover attorneys fees or other litigation expenses

3. TAKINGS RULES

Does gov authorize a permanent physical occupation of land? (Loretto)


NO

Does regulation cause loss of all economically beneficial or productive use of land? (Lucas)
NO

YES

Is it justified by background principles of property or nuisance law? (Lucas)

Apply Penn Central Test: 1) Economic impact of the regulation on the claimant 2) Interference with distinct investment-backed expectations 3) Character of governmental action 4) Public nuisance exception

Loretto: Permanent physical occupations are compensable per se takings (Bright-Line Rule) Hadacheck: Regulating land to prevent or end a nuisance is not a taking (Bright-Line Rule) Mahon: Diminution in value test A govt regulation is a taking if the fair market value of the property is greatly diminished Penn Central: 3-prong standard 1) Economic impact of the regulation on the claimant 2) Interference with distinct investment-backed expectations 3) Character of governmental action **Public nuisance exception Lucas: A taking will always be found if the regulation eliminates ALL economically beneficial or productive use of land, UNLESS justified by background principles of nuisance (or property) law (like in Morgan) Tahoe: 1) There are 2 lines of regulatory takings decisions, and Penn Central applies unless there is a total diminution in value, in which case Lucas applies 2) Rejects temporal conceptual severance

4. CONCEPTUAL SEVERANCE RULE LIST


Mahon: Recognizes actual severance by splitting the underground coal interests Penn Central: Rejects severance b/c of fear of parceling off air rights Lucas: There is a conceptual severance issue, but its an open question If num=denom taking. Lucas says that when the numerator and denominator are equal, there has been a taking The strategy, therefore, is to always have the denominator be as small as possible so that you get to the Lucas rule, or pretty close to Penn Central o Conceptual severance is all about a way to lower the denominator

Basically, you want the percentage of what you lost to be very big, and for this reason, conceptual severance is very attractive Lake Tahoe: Rejects conceptual severance

B. CATEGORICAL (PER SE) TAKINGS


DKAS 959-980

1. PERMANENT PHYSICAL OCCUPATIONS: LORETTO


THE LORETTO TEST Rule: Any permanent physical occupation of land is a taking, regardless of whether the action achieves an important public benefit or has only minimal economic impact on the owner. Whether gov or 3rd party. Makes no diff whether gov occupied the property itself or merely authorized a third party to do so Compensation expected. In such an extreme case, the property owner entertains a historically rooted expectation of compensation Temporary Permanent. Not all physical intrusions are takingsthe court distinguished sharply b/w a permanent physical occupation and a mere temporary invasion o Penn Central balancing test applies to cases of physical invasion short of permanent appropriation.

LORETTO V. TELEPROMPTER MANHATTAN CATV CORP. (US, 1982, DK960) [Fee owners (P) v. State (D)]
Facts: P contends a NY law requiring apt house owners allow installation of cable TV equipment allowed a taking w/o just compensation. Rule: Any permanent physical occupation of an owners property which is governmentally authorized constitutes a taking, for which just compensation must be paid. Government authorized and permanent physical occupation of land is considered a taking without regard to public interests that it may serve. Holding: Temporary invasions are a much smaller interference w/ an owners property rightsthey dont wholly eliminate the owners right to use, or exclude others from, the land. Permanent invasions destroys each of the owners rights: 1. O has no right to possess the occupied space himself, nor the power to exclude (one of the most treasured prop rights) the occupier from possession and use of space 2. Forever denies O any power to control the use of the property 3. Occupation by stranger will ordinarily empty the right of any value, since the purchaser will also be unable to make any use of the property Blackmun dissent: The law doesnt require the appellant to permit the cable installation forever The cable might leave the landlord better off since buildings w/ cable are more valuable The court opens the door to endless metaphysical struggles over whether or not an individuals property has been physically touched There is no basis for the continuous occupation vs. transient invasion distinction in economic logic or precedent Loretto admits that she wouldnt have otherwise used the space that the cable now occupies Strahilevitz: Perhaps this isnt truly a per se taking What if, in 20 years, new technology (e.g. dishnet) comes out, and cable wires are no longer necessary and so are taken down? OR, what if something that isnt initially cast as permanent then over time becomes permanent?

THINGS THAT ARE TAKINGS Ds construction of a dam, pursuant to state authority, permanently flooded Ps property. Pumpelly v. Green Bay Co. (DK963) o Where real estate is actually invaded by superinduced additions of water, earth, sand, or other material, or by having any artificial structure placed on it, so as to effectively destroy or impair its usefulness, is a taking. Frequent flights immediately above a landowners property. U.S. v. Causby (US, 1946, DK963) o When a gov action strips all utility from an owners possession, the action may be treated as a gov invasion of property that constructively dispossesses the owner b/c Causbys loss was as complete as if the US had entered upon the surface of the land and taken exclusive possession of it. Gov has taken an easement by physical invasionplanes touching the soil is immaterial; continuous and recurring invasion affects the use/value of the land. o Loretto: Constitutionally irrelevant whether appellant (or predecessor in title) had previously occupied this space, since a landowner owns at least as much of the space above the ground as he can occupy or use in connection w/ the land. Govs imposition of a navigational servitude requiring public access to a pond, where landowner had reasonably relied on Gov consent in connecting the pond to navigable water. Kaiser Aetna v. U.S. (US, 1979, DK963) o The servitude took the landowners right to exclude, one of the most essential sticks in the bundle of rights that are commonly characterized as property. Gov compels landowner to provide a non-exclusive easement for public access. Nollan v. CA Coastal Commn (US, 1987, UPL689) o Perm physical occupation, thus governed by Loretto rule.

THINGS THAT ARE NOT TAKINGS Restricting the use of private property. Temporary dam in a river to permit construction of a tunnel, even though P was thereby denied access to their premises, b/c the obstruction only impaired the use of Ps property. N. Transportation v. Chicago (US, 1879, DK963) o Distinguished from Pumpelly, b/c no entry was made upon the Ps lot. State constitutional requirement that shopping center owners permit ppl to exercise 1st amendment rights on their property, to which they had already invited the general public. PruneYard Shopping Center v. Robins (US, 1980, DK964) o Invasion was temporary and limited in nature, and owners had not exhibited an interest in excluding all ppl from his property. Prohibition of the sale of eagle feathers as applied to traders of bird artifacts. Andrus v. Allard (US, 1979, DK964) o Didnt compel the surrender of them, no physical invasion or restraint; owner retains rights to possess and transport property, to donate or devise the artifacts. Rent control ordinance that severely restricted LLs ability to evict tenants. Yee v. City of Escondido (US, 1992, DK973) o Not governed by Loretto rule b/c tenants were initially invited onto the property by the LLs, not forced upon them by the gov.

TRIVIAL/INSIGNIFICANT OCCUPATIONS Seemingly applies to trivial/insignificant occupations. The Loretto dissent: an intelligible takings inquiry must also ask whether the extent of the States interference is so severe as to constitute a compensable taking. Cases involving de minimis occupations are unlikely to be brought b/c the small amt of damages at stake wont warrant the expense of litigation Loretto is apparently applied regardless of the nature of the public interest at stake, or culpability of the landowner. Token compensation. If the occupied land has little or no value, a token payment may satisfy the compensation requirement.

2. NO ECONOMICALLY BENEFICIAL/PRODUCTIVE USE: LUCAS

An exception to the Penn Central standard is that a regulation that denies all economically beneficial or productive use of land is a taking, unless the regulation is justified by background principles of the states law of property & nuisance THE LUCAS TEST2 FACTORS Rule: regulation that denied the landowner all economically beneficial or productive use (EBPU) of his land is a taking, unless the regulation is justified by background principles of property and nuisance. Lucas rule narrowly interpreted and applied -> applies to few extraordinary cases where all economic benefit is lost to land use regulation. Scalia carved out special exception to Penn Central standard and said there are two categories where takings are found w/o fact-specific inquiry: 1. regulations that compel owner to suffer physical invasion of his property (as in Loretto) 2. regulations that deny all EBPU of land 1) LOSS OF ALL ECONOMICALLY BENEFICIAL OR PRODUCTIVE USE OF LAND Test concerns whether land can be used in a manner thats economically beneficial/productive the meaning of which is far from clearmarket value may not be the only relevant yardstick. o Example: Suppose O purchases a tract of wild land for $100k; later, the county adopts an
open space ordinance that requires that the land be kept in its natural condition. Mining, timber harvesting, agriculture, and all other uses that might provide a reasonable return on Os investment (e.g., $5k/year) are all prohibited. But assume O could rent the land to C, a veteran camper, for $100/year; C will use the land for recreational camping. o Trigger Lucas? Presumably, no. O retains EBPU b/c land produces rental income. o On the other hand, the court suggested that requiring land to be left substantially in its natural state was a typical example of regulation that deprived an owner of all EBP options for land use.

0 EBPU Unlikely. The precise factual situation before the courta statute that (purportedly) reduced the property value to zerois highly unlikely to recur. o Even if a law now prohibits all use of a particular parcel of land, a spectator would prob. be willing to purchase it at a low price b/c the prohibition might well be lifted/relaxed in the future. Clarifying EBPU: Only permitted use on 18 acres of coastal wetlands was 1 home94% diminution in value not a taking b/c a regulation permitting a landowner to build a substantial residence on an 18-acre parcel doesnt leave the property economically idle. Palazzolo v. RI (US, 2001, UPL 692) 2) UNLESS JUSTIFIED BY BACKGROUND PRINCIPLES OF THE STATES LAW OF PROPERTY AND NUISANCE

If the first prong of Lucas Test is met, governmental taking is presumed and burden shifts to govt to show prohibited use violates background principles of nuisance law. o In order to avoid takings liability, the gov must now show that the prohibited use would violate the background principles of the States law of property and nuisance that govern land ownershipit must be proven that the right to engage in the particular use was not in the bundle of rights that the owner acquired when purchasing the land. Scope of relevant background principlesdiffer from state to state, so scope of exception varies in each state. o The exception extends to: State nuisance law All aspects of the particular states body of property law (public trust doctrine; right to destroy property w/o compensation in emergencies) Regulations based on federal law o Practical effect is transfer authority from legislaturescourts (a problem, since courts have a hard time recognizing and regulating diffuse sources of H like enviro Hs) Scope still unclear on two key points: 1. Which types of laws are considered? Only case law is relevant, NOT statutes, voter-adopted initiatives, administrative regulations, or state constitutional provisions (court refers to common law principles). In effect, a legislature cant adopt a statute that eliminates all EBPU unless courts could already reach the same result under CL principles. 2. When is the relevant date for determining the law? Restriction must be a pre-existing limitation on the owners title, presumably existing when the owner acquired title or at some undefined earlier point. Does this standard freeze the states law in the past or are courts (or legislatures) able to craft new rules in response to changing conditions? If the relevant law is frozen at the time the owner acquires title, theneven w/i a single statethe scope of the exception will vary for every owner. Scalia emphasizes narrowness. A property owner necessarily expects the uses of his property to be restricted, from time to time, by various measures newly enacted by the State in legitimate exercise of its police powers. o But regulation that eliminates all EBPU after an owner buys his/her land has an extraordinarily severe impact on the owner. Thus, it can be justified ONLY if this restriction already exists in the law when the owner acquires title.

LUCAS V. SOUTH CAROLINA COASTAL COUNCIL (SC 1992, DK1006)


Facts: Lucas purchased two lots 300ft from beachtwo years later SC adopted comprehensive statute to preserve its shoreline. Trial court determined property lost all value and SC Supreme Court reversed, saying statute was valid exercise of police power to prevent nuisance-like activities under Hadacheck standard. Holding: When the state deprives an owner of all economically beneficial or productive use of his land, its a taking, unless the regulation is based on background principles of state law Once it is shown that there is no economic or productive use for the land, the burden shifts to the govt to show that the prohibited use would violate the background principles of nuisance law Majority (Scalia): Denominator/conceptual severance: Scalia agrees to the total loss of economic value Perhaps Scalia is envisioning combining the Lucas rule with conceptual severance, in which case there will be many wipeouts o If you can sever particular estates (e.g. land vs. air rights, estates in time), then its much easier to find a total wipeout of a particular part of the property OConnors betting on the whole parcel under Penn Central

a property owner is not entitled to compensation if he purchases land and a law is subsequently enacted banning his desired land use, IF and only if that subsequently passed regulation merely codified a 'common law nuisance Kennedy concurrence: Hes not confident that the land truly has no value. Reasonable expectations must be viewed in terms of property law as a whole Blackmuns dissent: Theres almost certainly some value to the land (e.g. can exclude others, recreation & camping, can alienate) this is a sweeping new rule to decide a narrow case Police powers justify the act, so its not a taking (Hadacheck) o Govt can regulate property without it being a taking, no matter how adversely it impacts the property owner o Fundamental tenet of nuisance law: No individual has a right to harm others with use Stevens dissent: New rule is wholly arbitrary since this means that 0 economic value is a taking, while 1% economic value isnt The rule effectively freezes CL in denying the legislature much of its traditional power to revise the law governing rights & uses of property o HOWEVER, nuisance law isnt designed to deal with minor harms created by many users; its to deal with big harms created by a single user o Essentially, Lucas is a tragedy of the commons No 1 individual is contributing enough to the problem of beach erosion for the CL to find a nuisance

Strahilevitz: Is the background CL nuisance principles exception consistent with Hadacheck? o Not clear if the brickyard wouldve been found a CL nuisance o Penn Central understood Hadacheck as not just applying to CL nuisances, but as applying to any state attempts to regulate harms Lucas seems to reject Penn Centrals reading of Hadacheck, so is Hadacheck still good law? 2 ways to read Lucas: Hadachecks domain, a per se rule of non-compensation, has shrunk to include only CL nuisances [maximalist reading] A big deal, since the govt frequently acts to regulate harms that wouldnt be CL nuisances OR, the background principles exception to Lucas per se compensation rule is narrow, including CL nuisances but not other harmful uses that wouldnt have been nuisances under the CL [minimalist reading] Not a big deal, since the Lucas wipeouts rule is itself rarely implicated, so the background principles exception to the wipeouts rule wont be relevant to very many takings cases Lucas indicates that the premise for Hadacheck is false at its base, but as a doctrinal matter, Hadacheck survives Technically, Hadacheck still applies unless theres been a total loss Lucas is still good law, but its more like a footnote; case going forward is Penn Central

SIGNIFICANCE OF LUCAS Limited effects. State and lower federal courts tend to interpret it narrowly, stressing it allies only to the unusual situation where regulation eliminates ALL EBPU. Lucas saga is far from overas law continues to evolve, Lucas may be applied to wetland preservation laws or similar regulations that seek to protect environmentally sensitive lands. Conceptual Severance revisited. Signaled interest in reopening the conceptual severance debate, which Penn Central had seemingly resolved. o A lot is riding on conceptual severance (Penn says no, but Lucas says its a contested issue that will be resolved in the future)

If a regulation forces a developer to leave 90% of a rural parcel in its natural condition, the court Opined that it is unclear whether we would analyze the situation as one in which the owner has been deprived of all EPBU of the burdened portion of the tract, or as one in which the owner has suffered a mere diminution in value of the tract as a whole.

3. NUISANCE OR NOXIOUS USE EXCEPTION: HADACHECK

HADACHECK RULE Rule: Police power regulation that prevents H to the public or eliminates a nuisance is not a taking. o Eminent Domain v. Police Powers: In ED, land is taken by the state b/c it will thereby be of more use to the public. Under the PP, private property rights are impaired by the state not b/c they have become necessary or useful to the public, but b/c their free exercise is believed to be harmful to important public interests. B/L Rules Good. Calling Loretto a taking and Hadacheck not a taking may seem incongruous b/c of the disparity between the level of economic loss in each case, Strahilevitz still thinks both cases are rightly decided, in that they provide clear, bright-line rules Control Public H (no taking) v. Create Public Benefit (taking)? Ordinance regulating wetlands development did not work as a taking. Issue was whether the ordinance was designed to control a public H or create a public benefit. Just v. Marinette County (Wis, 1972, DK979) o Held the purpose and effect were to control a public H b/c simply limited land uses that were not natural and indigenous (the neutral benchmark). o Contrasted cases finding a taken when prohibited bathing, swimming, and boating, and limited building height. o See Penn Coal v. Mahon s Harm-Benefit Test Not a Taking: Prohibition of a business (a livery stable) justified b/c of health and comfort of the community. Reinman v. Little Rock (US, DK976) Even if not a nuisance per se, it was clearly w/i the police power of the state to regulate it and to that end to declare that in particular circumstances and in particular localities a livery stable shall be deemed a nuisance in fact and in law. Distinction from Hadacheckin Reinman, a particular business prohibited which wasnt affixed to or dependent upon its locality; could be conducted elsewhere. Noxious use extended to trees Upheld VA law mandating uncompensated forcible destruction of red cedar trees harboring cedar rust fungus, a killer of apple trees. Miller v. Schoene (US, 1928, DK980) A Taking: Ordinance declared invalid that absolutely prohibited the maintenance or operation of a rock/stone quarry w/i a certain portion of the city. Ex parte Kelso (CA, DK977) Effect was to deprive owners of real property over which they had property rights. Removal of rock/stone could be regulated, but absolute prohibition of removal under the circumstances could not be upheld. Distinguished, b/c in Hadacheck there was no prohibition of removal of the brick clay; only a prohibition w/i the designated locality of its manufacture into bricks.

HADACHECK V. SEBASTIAN (US, 1915, DK973) [Brickyard owner (P) v. Chief of police (D)]

Facts: Hadacheck bought land with valuable bed of clay and set up profitable brickyard in undeveloped area outside LA. Area was annexed to the city and now Hs land was subject to an ordinance banning brick manufacturing in the area. Business was emitting noxious fumes, soot, and dust. Rule: Police power regulation that prevents harm to the public or eliminates a nuisance is not a taking! The nuisance or noxious use exception! A municipality may regulate business operations to prevent H to the public. Holding: Using police power to regulate land to prevent or end a public nuisance is not a taking. There must be progress, and if in its march private interests are in the way they must yield to the good of the community. Financial loss to P was irrelevant because the government was using police power to protect the health and welfare of the community. The imperative necessity of the police power precludes any limitation on its use when its not exerted arbitrarily or w/ unjust discrimination. o Court invoking long-standing rule that, when the govt is acting to prevent a nuisance, no compensation is owed Duty not to H neighbors. CL duty not to use your property in a manner that hurts your neighbors No right to nuisance. So, by creating/maintaining a nuisance, you are exercising a property right you didnt have in the 1st place You arent owed compensation b/c the govt isnt taking anything that is rightfully yours Youre the only one regulated? Suck it up. Brick yards elsewhere might not be regulated/prohibited, but it doesnt mean they wont be. Just b/c Ps was first to be prohibited doesnt make prohibition unlawful. No physical invasion. While the govt is substantially decreasing the value of the land, it isnt physically coming onto the land and appropriating it, as in Loretto o Court doesnt see this as an issue of physical occupation but as an issue of public nuisance instead

C. REGULATORY TAKINGS
1. PAST: THE PENNSYLVANIA COAL GOES TOO FAR TEST
Mahon creates a whole new universe of govt actions that might be takings, thereby drastically expanding the takings doctrine It rejects original intent and a large body of precedent; judicial activism (like Mt. Laurel)

PENNSYLVANIA COAL CO. V. MAHON (US 1922, DK980)


Facts: Coal company (D) conveyed parcel of land (eventually bought by Mahon (P)) but retained right to remove coal beneath the surface. State adopted a statute prohibiting mining of coal under residential areas in a way that will cause subsidence of any dwelling. Holding (Holmes): If a regulation goes too far, it will be recognized as a taking

statute was a taking b/c of extent of diminution of fair market value of the property. 1) essentially left the mineral estate intact (ownership of minerals that can be removed) 2) but eliminated completely the support estate (ownership of minerals that remain in place to support the land surface) 3) Damage limited to single private house 4) Holmes assumes knew they purchased the surface rights only -> their position did not create a public interest sufficient to warrant destruction of s constitutionally protected rights o But burden might = benefit. A regulation itself might provide implicit compensation by way of an average reciprocity of advantage. The apparent losers under a gov program might not be losers at all b/c they are simultaneously benefited by the very action that burdens them. Interpretations of Holmes opinion: o Created Diminution in Value Test relevant factor in takings analysis is the extent to which the regulation diminished the value of the property. When the loss reaches a certain point, it is a governmental taking for which compensation is required. But how much diminution is too much? o Balancing test Comparing the extent of the diminution with extent of the public interest (in his opinion, affects just Ps 1 house) Dissent (Brandeis): case controlled by Hadacheck -> mining that threatens surface land caving in is a noxious use that endangers the public have to consider value of coal left in place and value of the whole property under this analysis, the overall loss is only what has to be left in place as support pillars not a total taking!! o Example: Suppose the coal company could comply w/ the statute by removing 98% of the
underground coal (the mineral estate) and leaving only 2% of the coal (the support estate) in pillars to support the surface. On these facts: Brandeis would argue that the statute diminished the value of the whole property only by 2%, which would be a minor impact. Holmes, in contrast, would argue that the statute eliminated all value from the support estate (the 2% of the coal left in place), causing a total taking: a 100% diminution in the value of the property.

The Brandeis approach to this issue has prevailed in later decisions.

Strahilevitz: Thinks Brandeis has the better argument Under Hadacheck, the case should come out the other way

AFTER PENNSYLVANIA COAL Ignored by the court. 50 years before the court revisited the takings issue in its Penn Central decision. Failed to cite in Euclid and Nectow takings/zoning decisions. During this time, the meaning of Pennsylvania Coal was unclear. Harm-Benefit Test Sucks. Weakness of the harm-benefit test was apparentalmost any regulation could be seen as either harm-preventing or benefit-conferring, depending on ones perspective. Identical case, opposite outcome.. Later Penn surface subsidence statute effectively required coal companies to leave pillars of coal in place to support the land surface. Applying the modern test (Penn Central), the Court held the statute was not a regulatory taking. Keystone Bituminous Coal Assn v. DeBenedictis (US, 1987, DK989) Statute had more justifications. The newer statute was supported by a broader range of policies than its predecessor (not just balancing private economic interests), including the public interest in health, the environment, and the fiscal integrity of the region, and prevented mining activity that was akin to public nuisance. Followed Brandeis approach to the question of defining the relevant property. The statute required coal companies to leave less than 2% of coal in place, and Court found this 2% diminution in value of the whole property to be insignificant. Rejects Conceptual Severance. Our takings jurisprudence forecloses reliance on such legalistic distinctions w/i a bundle of property rights. Keystone was a legit state interest and not subject to a takings claim; Pennsylvania Coal was private interests and thus subject.

o Rehnquist, Powell, OConnor, & Scalia Dissentedmajority had wrongly


discounted Pennsylvania Coal, the foundation of our regulatory takings jurisprudence. o (SEE CONCEPTUAL SEVERANCE BELOW)

2. PRESENT: THE PENN CENTRAL BALANCING TEST


Penn Central is the primary takings test; makes the Mahon standard less vague Post-Tahoe, Penn Central applies to temporary physical takings & regulatory takings where there is no total loss [If there is total loss, Lucas applies]

THE PENN CENTRAL BALANCING TEST

(1) ECONOMIC IMPACT

OF THE REGULATION ON THE CLAIMANTmost important factor! A. Diminution in Value BUT, court doesnt specify how much diminution of value is required When P loses a lot of money, it is more likely to be a takingpresumably, if eliminates all economically viable use of the land or reduces its fair market value to 0, econ impact is seen as extremely severe. No taking if related to public welfare. The Court made it quite clear that even when a regulation causes significant diminution in property value, it is not a taking if the regulation is reasonably related to the promotion of the general welfare. o Hadacheck: 87.5% diminution wasnt enough; Euclid: 75% diminution wasnt enough not takings b/c both met this standard o Practically everything meets this standard. But b/c almost every land use regulation meets this highly-deferential rational relationship standard, this language literally seems to mean a regulation that causes even an extreme reduction in market value (95%+) would not be a taking. Adding more confusion, the Court later suggested in Lucas v. SCCC that a 95% reduction in value might result in a taking under the Penn Central test. B. Reasonable Returnwhether the regulation prevents the owner from obtaining a reasonable return from the land. Court stressed that Penn Central could obtain a reasonable return on its investment by continuing to use the land as a terminal, regardless of any transferable development rights.

(2) EXTENT TO WHICH THE REGULATION HAS INTERFERED WITH DISTINCT INVESTMENT-BACKED
EXPECTATIONS (DIBE) Examines the owners reasonable investment-backed expectations about the use of his/her land. Expectations must be backed up by actual investment and action (Scant) case law distinguishes b/w existing uses and potential future uses o Courts seem to protect existing uses more than they protect existing rights (PA Northwestern, compared to Euclid) Present use to continue. Usually the buyer who purchases land already devoted to a legallypermitted use has a RIBE that the use will continue o The Penn Central court stressed that the landmarks preservation ordinance did not interfere w/ the owners primary expectationcontinuing the existing terminal use. o Example: Suppose B purchases 40acre shopping center complexa use clearly allowed by
local zoning ordinanceconsisting of retail stores, parking lot, and related facilities. If city counsel rezones part of parking lot into district where only urban recreational uses (skateboarding) are permitted, curtailing parking for shopping center customers, shopping center might no longer be profitable. Would be a severe interference w/ Bs RIBE.

Already zoned at time of purchase. If parcel of land is already subject to a zoning ordinance or other land use regulation at time of purchase, buyer may not have RIBE that s/he will be able to violate the law.

Example: Suppose B wants to develop a new shopping center on vacant land owned by the county, located in an open space zone where no building is permitted. Purchases the parcel and is later unable to change the zoning to allow development. Under these circumstances, presumably all courts would agree the ordinance does not interfere at all w/ Bs RIBE. B either knewor should have knownabout the use restriction.

Purchase from private ownerstill might be able to claim a taking. o Court rejected the claim that such a later buyer was deemed to have notice of an earlier-enacted restriction and was thus necessarily barred from claiming that it effects a taking. Palazzolo v. RI (US, 2001, DK1004) o Reasoned that one private owner somewhere in the chain of title should be able to bring a takings claim, whether it was the owner at the time the regulation was enacted or a successor owner. For example, original owner might be barred from suit by the ripeness requirement; thus, it would be illogical and unfair, to bar a regulatory takinsg claim b/c of the post-enactment transfer of ownership where the steps necessary to make the claim ripe were not taken, or could not have been taken, by a previous owner. Concurrence (OConnor): The existence of regulation at the time of purchase could be considered as one factor in determining the extent of the RIBE but not the only factor.

(3) CHARACTER OF THE GOVERNMENTAL ACTION Any permanent physical occupation authorized by the govt is a taking (Loretto) Penn Central court says a taking more likely to be found if gov interference is a physical

invasion than when the interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. (less important post-Loretto) Language suggests a benefit-conferring regulation is less likely to be a taking than a physical invasion. A regulation reasonably related to public health/safety/welfare is not a taking even if it substantially value of affected landirrelevant whether harm-preventing or benefitconferring. o Court seems to abandon the harm-benefit test entirelyexplained that the Hadacheck line of cases was best understood not as turning on any noxious use of land, but rather on the ground that the restrictions were reasonably related to the implementation of a policyexpected to produce a widespread public benefit and applicable to all similarly situated property. o BUT Court backs away from this broad interpretation in later cases So probably, a nuisance-prevention regulation is less likely to be viewed as a taking than one that (like in Penn Central) is mainly oriented toward benefiting the public

(4) PUBLIC NUISANCE EXCEPTION!

Hadacheck!

PENN CENTRAL TRANSPORTATION CO. V. CITY OF NEW YORK (NY 1978, DK990)
Facts: Landmarks law prohibits any change to exterior architectural features of a landmark building. Airspace about Grand Central leased to UGP Propertiesplan to build 55-story building over the terminal rejected by city commission. Penn Central sued, claiming total taking of property rights in the airspace and reduced value Holding: looking at impact of the law on the property rights in the whole parcel and not just the airspace, there was no taking. The Landmarks Preservation Law does not constitute a taking o Takings law doesnt divide rights to parcels into discrete segments o Takings law doesnt divide a single parcel into discrete conceptual segments o Euclid rejected the idea of diminished value as establishing a taking Rule: Courts in takings cases must use multi-factor balancing test, weighing: 1) Economic impact of the regulation (Mahon):

2) The extent to which the regulation interferes with distinct investment-backed expectations
(DIBE): 3) Character of govt action (Loretto): 4) Public nuisance exception (Hadacheck) Applying test, Brennan found no evidence to support govt taking: little economic impact, no interference with investment-backed expectation, and there was no physical invasion. Court concerned with preventing harm public harm of loss of tourism the city as a whole benefits from preserving Grand Central Problem with rule: Rather ad hoc and difficult to apply Dissent: o This decision enforces a benefit for others o This isnt a nuisance exception b/c other buildings in the area are allowed to be really tall o Penn is being punished for having done too god a job of designing & building Grand Central in the 1st place o Theres an affirmative duty imposed on Penn to keep Grand Central in good repair Conceptual severance problem: Is this a taking of their air rights? o Court wants to consider the parcel as a whole (i.e. the entire land down from hell up to heaven), b/c its worried that Penn will sell its air rights to another company, which would then have a stronger takings claim o BUT, even if we do conceptually sever the air rights, we dont know that all the air rights are taken (if a city allows a 50 story tower, but not a 60, maybe the developer is robbed of stories 5160, which would have market value) Strahilevitz: Is govt preventing a harm (loss of a beautiful faade) or enforcing a benefit (forcing Penn to maintain the faade for others)? o Govt action can be interpreted either way, and it seems strange to have so much ride on how we characterize the regulation Is Penn being singled out for unequal treatment? Not clear; does it matter? o Tyranny of the Majority o Takings clause is a check on the democratic process a means to protect the minority o Average Reciprocity of Advantage o If the property owner is getting some benefit from the regulation, then we dont worry so much about the situation

TRANSFERABLE DEVELOPMENT RIGHTS (TDRs) TDR approach severs development rights from other rights in land and treats them as a separate item. o The right to develop is restricted at particular sites (conservation areas), but owners of the restricted land are given TDRs that can be used for development, beyond that which would otherwise permitted, on receiving lots (transfer areas). o Depending on the method you use, recipients of TDRs may sell their rights or use them on land they own (e.g., in a transfer area). Purpose: ease the burdens of land use restrictions by providing some form of compensation. Just compensation? Seems TDRs can ease the burden of a regulation such that it will not amount to a takinga clever guise (says Scalia, in Suitum v. Tahoe Regional Planning Agency, DK1005) Other approaches exist to soften regulatory burdens (wipeouts) by providing compensation funded through assessments on gains (windfalls) occasioned by other gov actions.

3. CONCEPTUAL SEVERANCE

The next question is whether the court will allow conceptual severance If so, then the Lucas-type situations will be quite large since there will be more cases considered wipeouts Conceptual severance is the denominator problem if its the fraction that count, its a way to lower the denominator o e.g. Im not losing 1/3 of the whole, Im losing 100% of my air rights The court appears to be rejecting conceptual severance, explicitly in reference to time, but the language is so broad that its also probably referring to space The effect is to make Lucas a very small ruling Tahoe is the triumph of Penn Central over Lucas OConnors preference for standards over Scalias preference for bright-line rules Economic impact and interference w/ investment-backed expectations analyses assume we know what the property is. Major challenge in many situations is identifying the property claimed to be takenthe issue is whether the property can be conceptually severed in part. Lisker notes that the Supreme Court has yet to set forth any guidelines for making this important and often dispositive determination. (DK725) State courts reject conceptual severance; they consider the impact of a land use regulation on the value of a property owners entire parcel, as opposed to its impact on just the regulated part. The court of Federal Claims and Court of Appeals for the Federal Circuit tend to support conceptual severance.

TAHOE-SIERRA PRESERVATION COUNCIL, INC. V. TAHOE REGIONAL PLANNING AGENCY (US 2002)

Holding: There is no taking o 1) Lucas applies only if youve been deprived of a fee simple rather than a lease holding Lucas doesnt apply b/c the govt is only taking a time limited interest in the land o 2) Penn Central applies if its a temporary physical invasion, and P loses in the analysis Reasoning: o To make a temporary moratoria into a temporary taking would require compensation that would destroy govt planning o There is a clear reciprocity of advantage to landowners from good planning o Duration of the regulation is merely 1 factor to be included in the Penn Central analysis In order to grapple with older precedents, the Court says that there are 2 types of takings law: 1) a regulatory taking (Tahoe) 2) a physical appropriation of property for public use (US v. Pewee Coal where there is conceptual severance, SMW39) o So, they require 2 different categories of rules to be applied o Strong cleavage between the Loretto & Penn Central worlds, so court can reach inconsistent determinations Dissent: Rehnquist, writing for Scalia and Thomas, seems to provide a more expansive definition of background principles. He suggests there that ordinary delays in the zoning process, and indeed maybe even zoning itself, could be a background principle of state property law. We know that the state can use zoning to restrict uses that would not be common law nuisances. See, e.g., Stoyanoff. Tragedy of the Commons: o Everyone wants to build, but too much building will destroy the beauty of the lake o Because of the large number of people, Coasian bargaining would be plagued by high transaction costs o People would be prone to holdouts Average Reciprocity of Advantage: o Owners gain more from preserving the lake than they lose from the moratorium

i.

Vertical Severance
Property can be conceptually severed vertically

usually happens in eminent domain actions when a state wants to acquire only a strip of land at the edge of a larger parcel to build/widen a road. o Permanent occupation: B/c the state will permanently occupy the land, the state will purchase the strip, leaving the owner with the remaining land. The state acquires the strips surface, subsurface, and air rights. o Regulation: or, the state may pass a law/ordinance restricting the use of part of the parcel. The takings analyses differ dramatically depending on whether a physical occupation or mere regulation is anticipated. Example 1: Physical OccupationCity intends to widen street; plans to use a 20ft strip across the front of Marys lot for the expansion. o City must compensate Morrison b/c City intends to permanently occupy the stripeven though Mary retains 90% of the original lot, and even if Marys retained land becomes more valuable b/c of the widened street. Example 2: RegulationCity passes an ordinance prohibiting all improvements w/i 20ft of Street. o Mary will not receive compensation. Even though Mary cant use the 20ft strip, and as a practical matter the strips value approaches 0 since no one can develop it for any purpose, a court will evaluate the regulations impact on Marys entire lot and not just the 20ft setback. o Property will not be considered vertically severed in evaluating regulations. Instead, the economic impact analysis will be applied to the lot as a whole.

ii.

Horizontal Severance

Once horizontally severed, the surface, mineral, and air rights can be considered separate properties. Generally, courts will horizontally sever a persons interests in land only in unique cases. Rule of thumb: surface rights are critical. The regulation that prohibits all use of surface rights (fully allowing mineral extraction) likely will constitute a taking. In contrast, a restriction on mineral production that permits full surface use likely will not amount to a taking unless either: a) the property owner has made substantial improvements and can claim she was deprived of her investment-backed expectations, b) the surface is unusable and the regulation makes the mineral estate valueless, OR c) the property owner holds only the mineral interest and the regulation makes the mineral interest valueless. The majority in Keystone Bituminous Coal Association attempted to distinguish the law it applied from that of Pennsylvania Coal v. Mahon. Court noted: o Gov action in Keystone to arrest what [the state] perceived to be a significant threat to the common welfare (a legitimate state interest), BUT in Mahon the law merely involve[d] the balancing of private economic interests of coal companies against private interests of the surface owner (and thus subject to a takings claim). o The coal companies in Keystone continued profitable operations while the coal companies in Mahon could not profitably engage in coal mining operations and thus there was undue interference w/ their investment-backed expectations To be valid, this last observation requires a conceptual severance of the mineral and support estate in Mahon while refusing to accept the same reasoning in Keystone. o Keystone and Mahon are not easily reconciledperhaps both or neither should have been takings.

Example 1: U.S. v. Causby (DK963)

A gov aircraft landing approach to an airport carries planes to w/i 80ft of a private house. o This is a physical invasion of airspace affecting a landowners use of her surface area and thus constitutes a taking.

Example 2: Penn Central Transportation Co. v. City of New York City passed a landmark preservation ordinance prohibiting substantial changes to the exterior of historic buildings. Pursuant to the ordinance, O of railway terminal could not construct an office tower in the airspace above the terminal. o The law does not effect a taking b/c the terminal owner can continue operating the terminal and receive a reasonable return on its investment in the terminal. o The airspace above the terminal is not a separate property interest. The whole property (airspace, surface use, and subsurface use) is one property for takings analysis. Example 3: Keystone Bituminous Coal Association v. DeBenedictis (DK989) In State A, persons owning mineral rights in land often are not the person owning surface rights. A enacts a subsidence law requiring coal mine operators to keep up to 50% of the coal in place to prevent land subsidence, protect the enviro, insure the states economic future, and safeguard its citizens well-being. o The law will not effect a taking since the coal that must remain in place cannot be conceptually severed from all the coal in the ground. o If, however, the law as applied to any particular coal operator reduces the value of extractable coal to 0, a taking will be found unless the coal operator also owns the surface rights. Example 4: Pennsylvania Coal v. Mahon In State B, persons owning mineral rights often are not persons owning the surface rights. Bs law traditionally recognizes a separate property interest called the support estate. B enacts a law prohibiting coal owners from removing coal in the support estate w/i 150 feet of any improved property belonging to another person and applies it to a person owning a surface right w/o the right of support for that surface. o SC held that this law effected a taking. o To the Court, the B law in many cases made the coal in the support estate valueless and, contrary to the states contract and property law, took the support estate from the coal operator and gaveit to the surface owner. Even assuming the law served a public purpose, the transferring of the full support estate from one private citizen to another was a taking.

iii.

Temporal Severance

PERMANENT TAKINGS Property can be conceptually severed on a timeline If a state takes land for a highway, and the property is owned by a life tenant and a remainderman in fee simple, the purchase rpice would be allocated b/w the owners of the 2 interests. Likewise, a regulation that permanently reduced the propertys value to 0 would be compensable in part to each owner. TEMPORARY TAKINGS In Loretto, the SC concluded a permanent physical invasion constituted a categorical taking. 5 years later, the SC specifically held that gov is liable in damages for a temporary regulatory taking. First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (in Tahoe, US, 1987) While a permanent taking is akin to a purchase, the temporary taking is more like a lease or an option, w/ just compensation measured accordingly. The temporary taking may result from (a) physical occupancy or from (b) a more complete denial of use (as was alleged in First English). A temporary taking can result from bad faith abuse of the regulation or licensing process. City of Monterey v. Del Monte Dunes (US, 1999, SMW42) (the city repeatedly denied the landowner development permits, ostensibly b/c the city was interested in buying the land at issue, and not b/c the landowner failed to meet all requirements for the permit. The city owed the landowner just comp for this temporary taking.)

A temporary taking of all use comes very close to being a categorical total taking (of all economically beneficial use) as in Lucas. In Tahoe, SC decided that while a permanent deprivation of all economically viable use (prohibiting the construction of a beach house in Lucas) was a categorical taking, a 3yr moratorium on development around Lake Tahoe while the agency formulated a comprehensive plan for property abutting the lake was distinguishable. o Held the validity of the moratorium is best evaluated using a Penn Central regulatory takings analysis, not a categorical takings analysis. o This was not to hold that a moratorium could never effect a taking, but to hold that the purposes, length, and effects of a moratorium should be balanced w/i Penn Centrals 3-prong FW. o Not only distinguishes Lucas but also requires viewing First English as providing only a compensation remedy (not a substantive right) when the gov first enacts and applies, but later withdraws, a regulation. Compensation might be awarded for the period of time the regulation is in effect, but when the regulation temporarily forbids all development as a moratorium does, the taking cannot be regarded as one that involves the total and permanent deprivation of all beneficial use. o A temporary deprivation of all economically viable use is not a categorical taking, though it still might be a regulatory oneDuring the moratorium, Lake Tahoe Os still had their fee simple and the (delayed) right to build a house; their property retained both a present use and a future value that may be higher, just b/c of the moratorium. o In contrast, Lucas permanently lost the right to build his house when the gov required all coastal owners to set their houses back from the ocean behind a line that ran thru Lucas lot at its rear, thus making his lot undevelopable.

D. CHATTELS: NIXON
Webb p292 emmanuels The gov can seize personal property as well as real property

NIXON V. US (DC 1992, SMb28) physical taking in personal property (custom/practice!)


Facts: After Nixons resignation, the government wants to keep his presidential papers. Nixon makes an agreement where the papers are in the custody of Sampson, but Nixon has some ability to limit access to the papers. Congress doesnt trust Nixon, afraid he will destroy critical documents. They pass an act declaring that the U.S. owns the papers. o Holding: Nixon does have a property interest in his presidential papers and is therefore owed compensation 1) History: Presidents have always treated their presidential papers as private property; this is a concept that was created by custom/practice How does a custom get started? Washington seems to have adversely possessed his papers, same for Adams, Jefferson. AcquiescenceOver years of adverse possession, Congress never did anything. Nixon had a reasonable expectation that he would own all these papers, because historically presidents have always owned their papers. 2) Loretto rule of per se takings apply to personal as well as physical property Test: The former owner must be deprived of a definable unit of economic interest Here, all Nixon was left with was his right to look at his presidential papers
o

Property rights come from custom and practice. Criminality exception? Your presidential papers are yours unless there is evidence of crime. Midkiff-- Is there a public purpose to justify the government in taking possession of the papers? Yes, in context of the Watergate investigation and for history
o o o

Nixon is interesting because it shows the practical difficulties courts have when applying regulatory takings decision outside of personal property. Whether Hadacheck applies to Nixon, i.e., did Congress act to prevent a nuisance. What does nuisance mean in terms of presidential papers. It would be a bad thing if Nixon were allowed to destroy the papers. If you read nuisance to mean bad thing, then you can use Hadacheck. But the court says no Applying Loretto is easier. The government ordered the administrator to take and keep Nixons papers, which seems like a physical occupation. But they have to deal with the precedent that its not a taking to seize someones money. The court suggests that the difference between money and land is fungibility, but that doesnt get you very far. Some chattels are fungible and some are not. Functionally, the papers are nonfungible in terms of ability to destroy, but are fungible in that they can be copied. In 2003, Supreme Court overruled that precedent, so seizing money can be a taking.
o

VIII. INTELLECTUAL PROPERTY

A. TRANSITIONING TO INTELLECTUAL PROPERTY

B. PATENTS
Patent protection originates in the Constitutions authorization for Congress to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. [U.S. Const. art I, 8] Also like copyright, patent protection is governed exclusively by federal law, in the form of statutes and interpretive case law. However, international principles increasingly affect domestic patent law. o Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), part of the treaty f/w creating the WTO, has required all WTO members to adopt the same patent standards on various issues, such as duration of patent rights.

A patent confers the right to exclude others from making, using, or selling an invention for 20 years following the date of application. Patent law solves the tragedy of the commons/ free rider problem by stopping people from profiting from each others labor. Without it, a market competitor could copy a product and immediately undercut its price, since, unlike the inventor, the imitator would not bear the costs of research and development.

The purpose of patent law is to reward useful innovation by protecting the inventors right to reap the economic reward of her efforts. The background reasoning is primarily utilitarian (not Lockean); the central issue is whether the world will be improved if the inventor is given incentive to develop this item.

The patent system is winner-takes-all; there has to be a big prize incentivizing people to enter the race.

1. PATENT PROSECUTION
I. Patent prosecution the process by which an inventor acquires a patent. 1) An inventor submits a patent application to the U.S. Patent office. Said application may be a full application or a temporary
placeholder application. Pursuant to the disclosure requirement (section 112), it includes o A specification with a summary of the item or process Disclosure is the price for patent protection. Enablement: needs to be detailed enough for someone skilled in the art to use the information to make new, non-infringing inventions, but not so precise that a competitor could make a tiny change and thus escape liability for infringement. Definiteness: the boundaries of the legal right must be easily discernable. Best mode: the inventor must tell the public the best mode he knows for practicing the invention. o One or more claims o The inventors oath o Applicable filing fees 2) The application is assigned to an art unit for review, which takes a year or more, during which time the inventor may file supplementary materials. 3) The patent is granted or rejected. a. If granted, the patent enters the patent registry, a record of all patents granted in the U.S. It establishes priority based on first to invent (outside the U.S., patents are granted according to who is the first to file), thereby resolving any issue of multiple claims to the same invention. i. The patent registry is similar to a repository of land use documents, which prevents questions of title and allows background checks (to ensure no negative easements) before purchase b. If rejected, the burden is on the reviewer to state her reasons. i. This gives the inventor a sense of how worthwhile it would be to further pursue the patent and allows her to come up with a basis on which to seek reexamination.

2. PATENT REQUIREMENTS

i. Patentable Subject Matter

4 types of inventions can be patented: a process, machine, manufacture, and or any composition of matter. [35 U.S.C. Diamond v. Chakrabarty (US 1980)

112]

o Holding: Manmade microorganism is patentable b/c it isnt naturally-occurring and was a product of human
ingenuity, and 35 USC 101 was intended to be very broad and protect anything that ingenuity can produce o Patentable Subject Matter exceptions:

Physical phenomena Not much labor put in; no special skills required to find something, just luck BUT, in the case of something that does take effort to discover, there are alternative property regimes that provide protection (e.g. land ownership in discovery of rare flower hypo) Laws of nature They are so important that they must be accessible to everyone; they are too important to patent (akin to anti-commodification, public trust doctrine) Theres no need to have incentives to create laws of nature Abstract ideas Can be too valuable (like laws of nature) e.g. Coase Theorem Also, there are many ideas arent that valuable and dont have immediate utility, and so it would be inefficient to patent them Strahilevitz: When thinking about patent policy matters, think about alternative property regimes: o Land ownership (e.g. discovery of rare flower hypo) o Reputation (why Einstein invents, professors publish, etc.) o Grants/prizes (e.g. Nobel Prize)

o Anything made by man, specifically, any process, method, machine, manufacture, composition of matter, improvement
thereof (101). This excludes abstract ideas, laws of nature (reasoning similar to that upholding the public trust doctrine see Matthews v. Bayhead, Illinois Central v. Crail), and naturally occurring phenomena (if a patented item is later found to be naturally-occurring, the patent will be revoked). Alternative property regimes may protect unpatentable items and preserve incentive for innovation. o Reputation and prizes encourage the development of abstract ideas. o Land ownership may exclude others from using a naturally occurring phenomenon (e.g. terrain of rare flower). Diamond v. Chakrabarty (U.S. 1980) genetic engineer attempts to patent microorganisms he created. o Are man-made living things patentable? Yes; they qualify as manufacture or composition of matter under Title 35 because they are not naturallyoccurring and they are the product of human ingenuity. In deference to the legislature, the court recognizes the patent (compare to Moore, in which the court backs off for the same purpose). It holds that Congress contemplated that patent laws would be given wide scope. o The dissent employs the interpretive canon of superfluity, which states that judiciary shouldnt read statutes to contain superfluous words. 1930 and 1970 Acts delineated specific circumstances allowing patents on living things; to allow more categories would make these lists unnecessary. The state is better off recognizing fewer types of patents because they can always add to the list but cannot subtract at risk of being sued for a taking under Lucas.

1. Utility

Any new & useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof

1) General utility: Does the invention actually do anything? 2)


Vague standard the invention has to be more than a mere curiositynot aiding in the progress nor increasing the possession of the United States, but amusement, for example, is a valid use. Specific utility: Does the invention work to solve the problem it was designed to solve; does it serve its intended purpose? a. Might discriminate against revolutionary inventions b. In Newman v. Quigg, a so-called perpetual motion machine failed the utility test, because the device did not, in fact, live up to its name. Beneficial or moral utility: Does the intended purpose of the invention have some social benefit, or at least is not harmful? a. Trend is away from denying patents based on moral standards. i. Social norms change; if the scandalous consequences of the advent of the automobile had been known at the time, for example, the patent may not have been granted. 1. 1871 definition was things that poison peoplepromote debauchery, orfacilitate private assassination; used to deny patents on gambling devices in the late 1800s. ii. The PTO doesnt want to be the grand inquisitor of deceptive trade practices. 1. In Rickard, Aristo Hosiery patents were denied for imitations a. Overturned in Juicy Whip v. Orange Bang; there, the court held that there is utility in imitation. b. No basis in 101 to hold that inventions can be rule unpatentable for lack of utility simply b/c they have the capacity to fool some members of the public. 2. Different standard for medicinal products a. Courts focus increasingly on functional utility rather than on clinical safety, in order to avoid duplication of effort. a.

3)

PTO Guidelines o

Utility must be specific (requirements have risen), credible (not far-fetched), and substantially useful (non-frivolous; gourmet meals for your pet snake do not count). The goal is to avoid patenting inventions whose greatest value has yet to be realized (like gene sequences); we want to keep them in the commons so as to allow the public to develop them. Brenner v. Manson (U.S. 1966) A product must be specifically useful in its present form to an end user (previously: to human beings) to be patentable.

Brenner is the high water mark for the utility doctrine (and not readily extendable by analogy to other cases). It raises the bar of patentability from a promising process to that which has specific utility. (Patents are not hunting licenses; they reward results, not searches.) o This effectively pushes the date of patentability forward (to the point of material yield), which advantages wealthier companies. The Federal circuit dislikes Brenner, wants to recognize an earlier point of utility. Outside the ambit of biochemistry, utility is the usually the easiest element of patentability. Dissent: encouraging invention of processes whose utility is not yet known is critical to further research. It is counterintuitive to impose a heavier burden on the inventor of a process than on the inventor of a product. o Is a chemical process useful (by 101s definition) either 1) because it works, or 2) because the result belongs to a class of compounds now the subject of serious scientific investigation? o Process patents exist in case someone discovers an alternate use for a patented process and wishes to obtain a license to develop it for this purpose. Easy to design around (through reverse engineering)

SCOTUS has never embraced the view that the requirement should be that it achieves its desired result. A patent applicant cannot claim priority to an old application for a chemical when the first patent had not yet established utility (In re Ziegler)

2. Novelty/Prior Knowledge
o Not previously published, used, or marketed; an applicant cannot gain a patent if others had prior knowledge of
her invention. This requirement aims to reward the first person to have the idea, not just the first person to share it (measured from the date of invention.

o The statutory bar is patent laws equivalent of adverse possession it prevents the issuance of a patent sought
more than a year after its publication, use or sale (measured by the date a patent application is filed). Rosaire v. National Lead Co. (5th Cir. 1955) Can a patent be barred if another party has used the process, and, if so, how public does the use need to be? o Yes. The court holds that theres no reason to require publication or completion of the experiment, especially when geographical constraints prohibited its completion. The reason for lack of completion can be ones own actions or someone elses. By using his methods in the regular course of business with no effort to conceal them, Teplitz made himself eligible for the patent. o Court places the burden inquire as to whether others have have published, used, or sold the invention o See Picard v. United Aircraft Corp. (The fact that an earlier invention that was sold or used was incomplete doesnt mean it wasnt an anticipation of the prior art and doesnt mean it cant be protected.) o P loses under novelty, but D loses under statutory bar, so the invention is now in the public domain. Woodland Trust v. Flowertree Nursery court holds that in this day and age in which we document everything, oral evidence is insufficient to demonstrate prior public (non-secret) use. o Questionable because to show that the invention was used before doesnt necessarily mean commercially or somewhere with lots of visibility o This standard would apply a trade secret standard of novelty; an invention could be new even if it had been made before, so long as it was never made publicly accessible or known. Hall v. McNeale invention not meant to be visible was nevertheless public because the way in which it was ordinarily used implied its concealment (interior of a safe). Tilghman v. Proctor a patent stands even if someone else accomplished the same thing by accident. Abbott Labs v. Geneva Pharmaceuticals distinguishing Tilghman if prior art was appreciated and sold. o One line of cases holds that an inventor cant obtain a patent on a product thats known just by putting it to new use.

3. Non-obviousness

Purpose

Condition added in 1952 Ultimate condition of patentability most difficult to show Is the development a sufficiently significant technical advancement to merit the award of a patent? o The question does not hinge on economic triviality, because it is more difficult to assess (?)

1) Obvious improvements are not in line with the aim of rewarding genius. a. Bar set a little lower by Kuno 2) The incentives provided by patent are unnecessary for the promotion of obvious developments 3) Granting patents to obvious developments might compromise the incentives provided by merited patents 4) High transaction costs 5) Threat of each-step-of-the-way /perpetual monopolies 6) If the idea is so obvious that multiple actors in the field would develop it, then patent protection is unnecessary to produce the social benefits. a. the social cost, licensing fees, would exist without a social benefit - One way to tell if something is obvious is if everyone is racing to invent it. Hotchkiss v. Greenwood (Oh. 1851) an invention combining existing elements is not patentable - (Codified in 103: Developments are unpatentable if they are obvious to a person having an ordinary skill in the art) - Woodbury (dissent): some valuable discoveries are accidental rather than the result of ingenuity, so the main focus for patentability should be on whether the invention is new & useful to the public, and not whether it was the result of long experiments or accidental discovery o (Codified in 103: Process of mind doesnt matter Patentability shouldnt be negated because of the manner in which the invention was made) Graham v. John Deere Co. (US 1966) obvious improvements are not patentable. (mushy standard, like Penn Central rather than Lucas or Hadacheck) Six-factor test for non-obviousness First tier factors: 1) Scope & content of the prior art 2) Difference between the prior art and the claims at issue 3) Level of ordinary skill in the pertinent art Second tier factors: 4) Commercial success 5) Long-felt but unsolved needs 6) Failure of others to make the invention a. Simultaneity (or close race) of inventions indicates nonobviousness Courts now use the Sakraida Synergy Test instead of six-factor Graham test does the whole exceed the sum of its parts?

3. RIGHTS OF PATENTEE

4. INFRINGEMENT

C. COPYRIGHT

The purpose of the copyright is to promote arts and sciences for the public good. Copyright law aims to create an optimal balance between incentivizing the creation of art and literature and allowing its optimal use and dissemination.

US Constitution Article I 8 cl.8, which gives Congress the power to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries, is the foundation of various Copyright Acts which, in sum, give authors and artists exclusive rights to reproduce, distribute, perform, exhibit, and create derivatives of their works. While copyrights may not be perpetual, the constitution does not articulate a specific time limit.

BASIC ELEMENTS OF COPYRIGHT 1. Copyrightable Subject Matter literary and artistic expression. not ideas. 2. Threshold for Protection modicum of originality; fixed in tangible medium of expression Originality = independent creation & modicum of creativity 3. Formalities proper registration and notice required to bring infringement suit Notice of copyright required on all works created before 1989 Registration not strictly required for validity, but required for infringement suit Deposit of copies required to obtain registration 4. Authorship and Ownership right to sue/protect interests vests in author of creative work, or in person to whom rights have been transferred before bringing infringement suit 5. Duration of Copyright life of author + 70 years or 95 years from first publication for entity authors (or 120 years from creation, whichever happens first)

RIGHTS CONFERRED BY COPYRIGHT PROTECTION 1. Copying exclusive right to make copies for the purpose of promoting progress in arts and literature 2. Derivative Works exclusive right to make different/altered works based on the original 3. Distribution right to control original sales of copies, derivative works, and licensed copies (does not extend to resales like sales of used material) 4. Performance and Display right to control public performance and display

LIMITS ON RIGHTS 1) Fair Use Doctrine balancing test, allows limited use of copyrighted material (first amendment criticism, teaching, scholarship or research) with reference to a) the purpose and character of the use, b) the nature of copyrighted work, c) the amount of use, and d) the effect on the market value of the copyrighted work. There is a merger doctrine, which acknowledges the difficulty sometimes of separating facts from presentation. 2) Copyright Act establishes compulsory licensing for music and cable tv, exempting some uses from liability Owner has no exclusive right to make/use the thing copyrightedOnly right to prevent unauthorized copying and right to prevent limited types of uses (public performances).

3) First Sale Doctrine: transferee may resell a once alienated copy without infringing copyright (as long as the copy was lawfully made or acquired. First sale strikes a balance between an authors rights and the need for public access. It also permits secondary markets (rental, libraries). This comports copyright with propertys general property of alienability.

TO DETERMINE IF SOMETHING HAS BEEN COPIED, courts accept: o (1) proof that D had access to Ps work, combined w/ o (2) ev that the two works are substantially similar.

1. HISTORY OF COPYRIGHT PROTECTION

England Statute of Anne (1710) gave authors of books a monopoly over their works. o Limited to 14 years, and 14 year renewal o Government retained the right to set maximum prices for books (first compulsory license?) Continental Europe authors right in her work of authorship = fundamental moral right o Parallel means of protecting authors:

Property right similar to English statutory right, based on decree by Revolutionary gov in 1791. Series of moral rights established in judicial decisions. o These rights recently embodied in statutory form. U.S. modeled after Statute of Anne o 1783 Mass. statute defined purpose as (1) utilitarian goal of producing new creative works, and (2) securing of one of the natural rights of all men [sic]. Copyright Act of 1790 Protection for 14 years, 14 year renewal. Registered w/ local district court and notice to be published in local newspapers. Limited to books, but expanded by amendments and court decisions to include prints, music, dramatic works, photos, artistic works, and sculpture. o Extended to chromolithographs (Bleistein v. Donaldson Lithographing Co., SMb 321) Copyright Act of 1909 broadened scope to include all writings and extended duration of protection to 28 years + 28 years on renewal; notice and registration requirement retained. Copyright Act of 1976 expanded scope (all written works protected once fixed in a tangible medium of expression, even if unpublished) and duration (life of author + 50 years). Formal notice and registration requirements loosened, though not discarded. o Weakened protection: preempted state and common law copyright via codification of rights and defenses (like fair use) Codified existing judicial defense of fair use of copyrighted work. o Modified in 1980: to include computer programs (result of federal Commission on the New Technological Uses of Copyright). o Modified in 1988 when U.S. finally ratified the Berne Convention (international copyright agreement signed by many countries). Provided two tier system: foreign copyright owners need not comply w/ formalities that remained, but U.S. owners would still have to comply before bringing suit. Eliminated the notice requirement Architectural Works Copyright Protection Act of 1990 served to bring U.S. into compliance w/ Berne Convention. Audio Home Recording Act addressed concerns about piracy of music and sound recordings. Sonny Bono Copyright Term Extension Act (1992) added 20 years to copyright terms

Digital Millennium Copyright Act afforded protection against circumvention of copy protection technologies.

2. PURPOSE & PHILOSOPHIES


Copyright monopoly gives a longer term but much weaker protectionNo limitation on independent creation, weaker ability to exclude. Purpose Primarily Utilitarian, then Moral Rights o Primary objective not to reward the labor of authors (Feist, SMb 131) but to promote the progress of science and useful arts. (U.S. Constitution, Art. 1, S 8, cl. 8, SMb 125) o Designed primarily to enhance public interest and only secondarily to reward upon authors (Wheaton v. Peters, 1834, SMb 125) o To motivate the creative activity of authors and inventors by provision of a special award, allow public access to products of this genius after limited period of exclusive control expires (Sony Corp. v. Universal Studios, SMb 125). o Ultimate aim stimulate artistic creativity for general public good. Immediate effect is to secure a fair return to authors creative labor. (Justice Stewart, Twentieth Century Music Corp. v. Aiken, 1975, SMb 125). Philosophers o Locke labor theory, mixing labor o Kant natural ob to respect authors ownership of works o Lord Mansfield says authors should reap pecuniary profits of own ingenuity and labor (Miller v. Taylor, SMb 124)

3.

ELEMENTS OF COPYRIGHT

BASIC ELEMENTS OF COPYRIGHT 1. Copyrightable Subject Matter literary and artistic expression. not ideas. 2. Threshold for Protection modicum of originality; fixed in tangible medium of expression Originality = independent creation & modicum of creativity 3. Formalities proper registration and notice required to bring infringement suit Notice of copyright required on all works created before 1989 Registration not strictly required for validity, but required for infringement suit Deposit of copies required to obtain registration 4. Authorship and Ownership right to sue/protect interests vests in author of creative work, or in person to whom rights have been transferred before bringing infringement suit 5. Duration of Copyright life of author + 70 years or 95 years from first publication for entity authors (or 120 years from creation, whichever happens first)

i. Copyrightable Subject Matter


includes a range of artistic expressions, including an authors expression of an idea, but does not include ideas themselves. Defined, sort of, in 102 of Copyright Act

A federal statute lists 8 types of works of authorship, but this list is illustrative, not conclusive. a) Literary works Covers computer programs b) Musical works c) Dramatic works d) Pantomimes and choreographic works e) Pictorial, graphic, and sculptural works f) Motion pictures and other audiovisual works g) Sound recordings h) Architectural works

COPYRIGHT OF IDEAS Ideas CANNOT be copyrighted as such. All you can copyright is a particular expression of an idea o including systems, recipes, and plots.

Example: Prof. can paint a landscape of Grant Park that will be protected as his intellectual property. But others can also paint Grant Park as well.

Merger Doctrine and Scenes AFaire limit copyright protections when ideas and expression merge and no one person may hold a monopoly over an idea. Merger Doctrine: When the use of an idea requires the copying of a copyrightable expression of that idea, the idea and expression have merged such that the expression is no longer copyrightable Why not give copyrights on ideas? o Theres a finite number of ways to express the information, and we dont want to copyright the underlying idea. o Alternative compensation system Other incentives for Selden to develop the idea a job offer, first mover advantage o Ideas are analogous to fact o Concerns about free expression, free exchange of ideas, and First Amendment concerns a stronger desire for a richer public domain than in the patent context BUT, ideas may be patentable; there is a policing of the boundary between copyright & patent protection Why not allow the owner to pick copyright (weaker but longer monopoly) vs. patent (shorter but stronger monopoly) protection? o 1st Amendment concerns: The idea of a very strong monopoly in expression (e.g. preventing people from criticizing the book I publish) is inconsistent with life in a free & democratic society o By creating monopolies (whether copyright or patent), were imposing costs onto 3rd parties patenting an expression -> monopoly imposes costs on third parties and wall them off from some uses, but can impose huge costs on public (can you read a book and then discuss it with someone else if the book it patented?). Law provides for two regimes with hard walls in betweendont have to look up if expression is patented and so you cant discuss it with someone, or if it is copyrighted.

BAKER V. SELDEN (US 1879, SMb 139)


Facts: Baker copyrights a book that describes a simplified bookkeeping system. Selden publishes a book that describes a very similar system. Baker sues S for copyright infringement. Rule: The use of an art is not copyrightable (no one can have any exclusive claim/right to that art) but expression or description of the art is copyrightable. Issue: whether by obtaining a copyright Baker also obtained exclusive right to use of the system/method he describes. Holding: The system is an idea, which cant be copyrighted (though it is possibly patentable); only its expression (the explanatory text in the book) is copyrightable o the underlying method or idea isnt going to be copyrightable if its more a subject of patent law than of copyright law. Cant use copyright to make an end-run around patent law. o The forms arent copyrightable because they represent use of the system o Patents are rarely granted for written systems and forms. This polices the boundary between patent/copyright. The concern is that people will try to get the lengthier copyright benefits for their ideas. in order to avoid excessive monopolies, which incur third-party costs.

1. Threshold for Protection


Federal law provides copyright protection for original works of authorship fixed in any tangible medium of expression. [U.S. Const. art I 8] Two fundamental criteria of copyright protection (1) originality and (2) fixation in a tangible form.(1976 Copyright Act). It can be further divided into three primary elements: 1) Originality 2) Work of authorship 3) Fixation N.b. The copyright system is not the only protection in the world; it is a particular regime for encouraging particular sorts of expressions.

a) Original Works of Authorship

1st fundamental criteria of copyright protection.(1976 Copyright Act). Originality

entails: 1) Independent Creation of a work by the author not copied from someone elses work no strict knowledge of prior art requirement to if the work was originally created (unlike patents) serendipitous creation of work identical to something else is still copyrightable (Alfred Bell v. Catalda Fine Arts, SMb 127) 2) Modicum of Creativity must demonstrate at least some minimal creativity low threshold for originality just have to show author contributed something more than merely trivial to the work (Id.) artistic and literary works rarely fail the de minimis originality threshold of copyright law, but works that are mechanical, functional, or fact-based are more problematic Courts dont judge the artistic merit of a work (Bleistein v. Donaldson Lithographing Co., 1903, SMb 128) Compilations and derivative works may be copyrighted if they display sufficient creativity. See Feist.

SWEAT OF THE BROW THEORY Originality can be difficult to measure when the work is mechanical or functional The sweat of the brow theory echoes Lockes idea of acquisition through mixing labor; it forwards the idea that copyright should be granted based on effort. grant copyright based on the exertion of presumably creative energy that went into the work. (SC tosses this doctrine in Feist). Assemblage may take time/effort, but may lack creativity. Arguments in favor: it is good to encourage the creation of compilations; it would be unjust to let one person benefit from anothers hard work. o economic incentive: compilation is necessary and efficient; unless rewarded, no incentive to compile or create factual works o fairness: unfair to let someone piggyback off your labor (free rider danger!) Arguments against: it pays no attention to creativity (ergo people might start patenting ditches); it may waste resources; it does not make sense to reward or encourage a second party to expend time and resources to duplicate a compilation (see Feist v. Rural) o Protects work w/o regard for creativity o Danger in giving someone monopoly for something unoriginal/uncreative merely b/c of energy exerted in its creation o Efficiency/Wasted Resources: (for factual compilations) does it make sense to make another person spend time and resources to compile the same facts/data? easier to get information voluntarily Rural in best position to have most current data Alternatives: copyrights could protect labor-based works, but only against competing laborers o Contracts: In some cases, party can protect by contract what she cant protect by copyright, so someone copying database may be liable for breach of contract even if database is composed of unprotectable facts. Database owners have turned increasingly to contract law to protect their sweat of brow investment (ProCD v. Zeidenberg, SMb134) o New law of IP designed specifically to protect sweatworks. Such state law might be preempted by the copyright laws, since at odds w/ Feist. o Some argue theres a CL restitution-like remedy in U.S. when hard work is blatantly appropriated by a copyist.

FEIST PUBLICATIONS V. RURAL TELEPHONE SERVICE (SC, 1991, SMb 129)


Question: Is an alphabetically organized compilation copyrightable? No. Facts: P claimed copyright infringement against D, who copied Ps phone book to generate their own listings. over 1000 listings from Ps telephone book to create an independent phone book. D did its own research, but did have over 1000 identical entries to P (including some fictional ones) Ct. said P did nothing to collect the information in their book since it was obtained when people signed up for telephone service and their arrangement was not original. Hence, no copyright protection allowed and no infringement. Rule: selection and arrangement of facts cannot be so mechanical or routine as to require not creativity whatsoeverthe threshold for originality is low (but does exist) and copyright protection for fact-based works is thin. Holdings:

Sweat of brow doctrine is flawed and not valid

The Court rejects the sweat of the brow doctrine on the grounds that it would be inefficient to encourage a second party to spend time and resources creating a duplicate product. It serves the public interest for first movers to acquire licensing rights over information and to sell them to others who want the information. o Facts are not copyrightable (Harper & Row v. Nation Enterprises, SMb 130) But factual compilations are (expressly mentioned in Copyright Act of 1909 and 1976) o No copyright protection for white pages listings when simply alphabetical and showing no evidence of selection or creativity to meet originality threshold Alphabetical listing is so mechanical that it does not meet any originality threshold. Phone numbers and addresses are merely facts, which are not copyrightable. To establish infringement, must prove (1) ownership of a valid copyright; and (2) copying of constituent elements of the work that are original. (Harper & Row, in Feist, SMb132) Fictitious Facts & Copyright Estoppel prevent a claim of creativity based on a lie about a fact, so the fictional entries do not count as creative The 4 fictitious entries do not count as original/creative if they are being held out as factscant create falsehoods to be taken as facts and claim originality later. Rural is estopped from being able to claim them as original work (and there is no way to calculate damages, anyway). Equity and good morals dont allow someone falsely asserting something as a fact to change that position for profit in a lawsuit (Oliver v. Saint Germain Foundation, SMb133) Dont we value first mover protections? (INS v. AP; Doris Silks) -> want Rural to license information to Feists of the world, even if they dont have to.

Protection of Maps? o Series of real estate maps eligible for copyright protection; original in 2 ways: Mason v. Montgomery Data (SMb 135) 1. Mason exercised sufficient creativity in selection, coordination, and arrangement of the facts 2. Graphic artistry of maps sufficiently original to qualify for protection

POLICY CONCERNS W/ COPYRIGHTS 1) Why give protection to creative but socially useless works? Does it make sense to deny patents to s like Rural but then protect really bad poetry? a) We dont want the govt making decisions about whats good or bad art, so we choose to just copyright everything (exception: Visual Artists Rights Act, which only protects artists of recognized stature, thereby requiring a court to decide whether something is recognized as good art) b) scrutiny given to patents during the application process is not the best way to address literary and artistic works c) fewer concerns about overabundance of copyrights b/c search costs/burden are low d) There is adequate alternative compensation for people who produce sweat of the brow works i) 1st mover advantage e.g. if you get the phone book out sooner, you get more subscribers ii) Contractual agreements e.g. to save time & money, Feist will still prefer to contract with Rural rather than create its own compilation 2) Why arent facts copyrightable? a) More about discovery of fact and not original work b) Constitutional requirement that facts remain in the public domaincannot be owned i) public interest - 1st Amendment freedom of expression/speech

WORK OF AUTHORSHIP A federal statute lists 8 types of works of authorship, but this list is illustrative, not conclusive.

Literary works Covers computer programs b) Musical works c) Dramatic works d) Pantomimes and choreographic works e) Pictorial, graphic, and sculptural works f) Motion pictures and other audiovisual works g) Sound recordings h) Architectural works Copyright protection does not extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery. [17 USC 102(b)] Why not? o An idea or principle, like other facts, is not protected by the law. A central theme in copyright law is the idea-expression distinction. Copyright protects the form in which an idea is expressed, not the idea itself. o Functional or utilitarian workssuch as procedures, processes, systems, and so forthare governed by patent law, not copyright law.

a)

b. Fixation in a Tangible Medium of Expression

102(a) of Copyright Act: unless and until work of authorship is fixed, it does not qualify for copyright protection 106(1): D does not infringe copyright unless they reproduce copyrighted work in fixed form It does not matter what form, manner, or medium expression is fixed in as long as it is fixed (sufficiently permanent by being communicated for more than transitory duration) o Live broadcasts are copyrightable as long as they are simultaneously recorded o This medium may be one now known or later developed and that the fixation is sufficient if the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. (SMb136) It is possible to have original work w/o having a copy or phonorecord embodying it, and also possible to have copy/phonorecord of unoriginal workto be copyrightable, you must have both elements merge through fixation!! Also plays a role in determining whether a D has infringed a copyrightowner of copyright has exclusive right to reproduce the copyrighted work in copies or phonorecords. Thus, D doesnt infringe right to reproduce unless she has reproduced the copyrighted work in FIXED FORM.

2. Formalities
Formalities requires notice is required on all works created before 1989; various other registration requirements apply.

3. Authorship & Ownership


o Authorship and ownership requires that the party bringing suit be either the creator of the work, someone to
whom rights in the work were transferred, or the commissioner of the work (the employer, not the author, is the creator of a commissioned work).

4. Duration of Copyright & Term Extension

Works created after January 1, 1978 1 author lasts for the life of the author plus 70 years More than 1 author95 years from the first publication, or 120 years from the year of creation, whichever comes first Work made for hire95 years from the first publication, or 120 years from the year of creation, whichever comes first Works created before 1978need to know whether the copyright has been renewed The constitution does not constrain the duration of copyrights, except to say that it may not be perpetual.

ELDRED V. ASHCROFT (U.S. 2003)


Is the Copyright Term Extension Act (CTEA) constitutional under the Copyright and Patent Clause and under the First Amendment? Facts: With an eye towards matching European copyright laws, Congress passes the CTEA, which is the fourth major duration extension of federal copyrights. The CTEA adds 20 years to the term of all existing and future copyrights. Holding: The CTEA is constitutional because: o 1) It doesnt violate the limited time restriction of the Copyright clause since the terms are still limited and not perpetual o 2) Since expression and not ideas are copyrighted, and since fair use allows the public to use copyrighted works for scholarship & comment, the 1st Amendment isnt violated 1) Does the CTEA comply with the limited terms prescription of the Copyright Clause? Yes. a. P does not challenge the CTEAs new initial term for future copyrights, but only the extension it gives existing ones, on the basis that the word limited prevents any increase. i. The previous extension to copyrights (in 1976) made sure to extend the same benefits to present and future copyrights; the Court holds it would be illogical to allow a discrepancy between the rights afforded to the author who sells his work the day before or the day after the passing of the Act. 1. Breyers dissenting argument condemns the change in both future and present copyrights. b. P argues that the extension allows for the possibility of infinite renewals, effectively removing any limit. i. Court holds that to consider it such would also invalidate the previous three acts. 1. Breyers dissenting argument would do the same. ii. There is no indication that congress meant to circumvent the limited times constraint. c. P argues that extending existing copyright does not promote the progress of science (the aim of the Copyright Clause) but only add value to existing works. i. Court defers to Congress d. P argues that the CTEA violates the quid pro quo of exclusivity for writing.

Quid pro quo is actually more of a function of the patent law, since the goal of copyright protection is disclosure and gives the author no monopoly on any knowledge. 2) Did Congress act within its powers under the Copyright Clause when it passed the CTEA? Yes. a. The Judiciary typically defers to the Legislature on such issues absent glaring Constitutional violations. i. Congresss stated reasons for passing the Act are legitimate, and include a desire to match American copyright terms to European ones, to accommodate increased longevity and childrens ability to benefit from parents copyrights, and to create good incentives for copyright owners. 1. In his dissent, Breyers argues that an increase in copyright term would not significantly motivate authors. Furthermore, it would benefit private individuals and corporations at the expense of allowing easy public access to old works for the purposes of education and other public interests. 3) Does the CTEA violate the First Amendment? No. a. The Copyright Clause and the First Amendment were adopted close in time, and that they share the aim of furthering free expression. 1) Breyer argues that the CTEA undermines the expressive objectives of the Copyright clause, because it is the disappearance of the monopoly grant, not its perpetuation, that ultimately promotes the dissemination of works. b. The Copyright Clause contains safeguards against First Amendment violations, such as protecting expression but not ideas and accommodating fair use exemptions. c. The First Amendment is more adamant about protecting ones own speech than the right to make others. Breyers dissent: (largely an economics argument) It is effectively of perpetual duration since most works are out of print well before its copyright expires It concentrates $ (billions) in the hands of a luck few copyright holders (99% of the old copyrights are essentially valueless to the copyright holder) Its unnecessary and probably doesnt spur creativity (after all, an author can still make lots of $ with a shorter copyright duration and then invest) It increases search costs because the older the copyright, the harder it is to find the author Royalties are expensive, and those costs are passed to consumers [Like Holmes in Mahon Regardless of history, if Congress goes too far, it must be curbed]

i.

o The majority argues that its holding, which enhances licensed work, will by extension increase fair use and the
general generation of ideas. Breyer argues that the public domain will suffer more than those factors will be enhanced. Breyers dissent also communicates a paternalism and tendency away from deferring to the legislature (embraced in Moore and Diamond.)

4.

RIGHTS OF COPYRIGHT OWNERS

To prove infringement, copyright owner must prove: 1. He holds a valid copyright in the work 2. The D copied the work 3. The copying was an improper appropriation o P must show that D copied so much of the original work that the two works are substantially similar (Nichols v. Universal Pictures) Contributory Infringement: The distributor of a product capable of both lawful and unlawful use may be liable when third parties use the product to infringe copyright. (MGM v. Grokster)

P usually relies on ev to show that: 1. D had access to the work, and 2. Ds work is substantially similar to the original work to show copying. (where a lot of access, less similarity needed, and vice versa)

107-118 of Copyright Act give owner exclusive rights to do and authorize: reproduction of copyrighted work preparation/creation of derivative works distribution of copies or phonorecords of the copyrighted work to the public for sale or display public display of literary, musical, dramatic works, etc public performance of literary, musical, dramatic works, etc performing the work by digital audio transmission Violation of any of these exclusive rights gives rise to cause of action for infringement Licenses can be issued to allow someone to reproduce copyrighted material. Compulsory licenses may be obtained under narrow circumstances, allowing the use of certain copyrighted works w/o owner consent, in return for payment of royalties set by statute. (incl. non-dramatic musical works) Global copyright does not exist! Fed copyright laws only provide protection w/i the U.S. Author must satisfy copyright requirements of each nation where she seeks protection. Remedies include: Injunction against further infringement Impoundment and destruction of all infringing copies, and Damages (P can choose b/w actual damages suffered (+ infringers profits) or damages set by statute)

i. Against copying or unlawful appropriation

prohibits substantially similar reproductions.

a.

Difficult to determine whether a work has been copied rather than developed independently i. The standard is a sliding scale between access and similarity the greater Ds access, the less need there is for P to prove that the works were similar, and vice-versa. Conscious isolation from other sources reduces risk of infringement claim. Unconscious copying infringes. Demonstration of common mistakes is strong proof of copying. b. Property rights that are not vested in first in time are usually acquired by adding ones labor to something (Locke) successful defenses against infringement usually turn on the demonstration of such added labor.

o Right to make copies not limited to exact reproduction but broad protection from making exact or
substantially similar reproductions by any means may be difficult to prove actual copying also have to prove alleged infringer actually appropriated enough material to violate the copyright owners rights (in whole or in substantial part) have you appropriated the essence of an authors work?? very informal standard jury decides if the essence of the thing has been appropriated courts dont want to have a huge role in guiding the jury complicated by the fact that many copyrightable works intermingle original expression with facts, info from public domain, ideas, stock literary items subject to scenes a faire doctrine, or other nonprotectable elements

ARNSTEIN V. PORTER (2d Cir. 1946)


question of whether similarities are adequately substantial is a question of fact for the jury. Expert testimony might help the court decide issues like summary judgment, but is otherwise irrelevant. (What if we were talking about caviar, or some other esoteric material? Can the jury be trusted to decide similarity between Shostakovich and Bartok? N.b. that Cole Porter markets to precisely the kind of normal Americans the jury is (supposed to) consist of.) Facts: sued for infringement of copyrights over musical compositions. The trial court gave SJ to , and appealed. Rule: if there is evidence of access and similarities exist, the fact-finder must determine whether the similarities are sufficient to prove copying (substantial similarity?) Holding: 3-PRONG TEST! In order to prevail on a copyright infringement claim, P must demonstrate 1) Ownership of a valid copyright 2) Evidence of copying by the defendant (the more evidence of similarity, the less evidence of access is needed, and vice-versa) 3) Improper appropriation a. Factual determination for jury: Has D taken so much of what is pleasing to the ears that it amounts to improper appropriation? b. Whether the essence of the work (i.e. what makes it popular) has been appropriated c. [Since what is pleasing is in the eye of the beholder, this kind of standard creates a great deal of discretion for juries and uncertainty in infringement suits] o To establish copying, a factual inquiry is necessary based on access to material and similarities o Sliding scale for proof of copying:

The more evidence of copying you can show, the less evidence of access you need to demonstrate, and vice versa Direct evidence of access (inferential support) and actual copying Easiest case: direct evidence of copying (either by admission or witness to copying) Hardest case: question about access to materials and no admission of copying Decision: the jury should have been able to weigh facts and discern any evidence of copying b/c there was evidence of access to materialsso summary judgment was improper. Prongs 2 & 3 are at issue in this case; court determines that the similarities were not evidence of illicit copying POLICY CONCERNS AFTER ARNSTEIN Why is access relevant? Because independent creation is possible! This isnt like patent law where the first to invent wins. Expert testimony: not controlling, but can help dissect the compositions and identify common elements Dont want to give Arnstein the monopoly over the idea of using C after D-flat, etc that is crazy and violates the Copyright Act Is it right to treat copyright law as what the man on the street thinks? The court gives little guidance to the jury and limits the role of expert testimony just background info/primer for foundation upon which to compare the works. Dont want the expert to strongly influence the jurys opinions. o we always worry about incentives, so by looking to see if the jury is fooled might be the right way to assess unlawful appropriation of the essence of ones work. o example: Vanilla Ice and David Bowie/Queen songs o if we have a trial about 2 classical composers? Maybe we want expert to come in and give help to lay-persons in jury pool who may not adequately reflect interests of court.

INTERNATIONAL NEWS SERVICE (D) V. ASSOCIATED PRESS (P) (U.S. 1918)

Rule: News is property in relation to competitors, but not against the public. Facts: P sues D for selling news D copied or summarized from Ps publications on the grounds of unfair competition. Holding: Because D appropriated material P acquired thru labor, skill, and $ and was endeavoring to reap where it had not sown, SC held that P had a temporary quasi property right in its news for so long as the news retained commercial value. o The Court holds that news is of public right and not in the ambit of the Copyright Act; however, while there are no property rights for news gatherers against the public, there may be property rights among competitors associated with distribution (quasi-property right) This reflects the distinction between expression (property) and ideas (not property). Court is kind of Lockean in its allergy to INSs free-riding off of APs labor; however, it does not extend this thinking to the consumer base. o Where theres not a reciprocal/ competitive relationship between parties, INS does not apply. Remains good law but has very minor importance. Baird (article): copying should exist until the point where it eliminates any market incentive to gather news.

CHENEY BROS. V. DORIS SILK CORP. (U.S. 1930) designs are not property except when copyrighted or patented.
Facts: P dues D for copying fashion designs and undercutting prices. P argues that INS v. AP should control and grant P a pseudo-property right against his competitors. Holding: The Court refuses because to do so would create a common-law patent. To do so would be illegal, because only Congress can permit temporary monopolies, and even then only within the statutory patent and copyright (and trademark) systems. o There is a strong public interest in allowing imitation of unpatented ideas it allows competition and efficient pricing (see also Smith v. Chanel imitation is the life blood of competition). The Court reads INS very narrowly; it is only good law as it applies to the news gathering business. o This may just reflect the Courts dislike of INSs principle and potential displacement of the current property regime, or it might be because copying presents a much more substantial threat where news is transmitted in minutes whereas fashion takes months.

1. Against contributory infringement

METRO-GOLDWYN MAYER STUDIOS, INC. V. GROKSTER, LTD. (U.S. 2005) [O]ne who distributes a device with
the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties. Peer-to-peer networks are self-governed, so D does not know or control exactly which files are copied (though both parties agree that a majority are copyrighted), nor, they claim, are they able to comprehensively shut it down (the Court of Appeals buys this). o D argues that some of those are authorized; additionally, noninfringing uses are significant (if rare). However, D designed programs with the clear purpose of replacing Napster, which the courts shut down. D targeted users who had a mind to infringe, never tried to filter downloadable material, and took other active steps to encourage users to download copyrighted files, including offering guidance to users having trouble downloading copyrighted files. Case is focused on contributory infringement (although the lines between direct infringement, contributory infringement and vicarious liability are not clearly drawn and P also presses a theory of vicarious

liability liability when D profits directly from infringement, and has the ability to supervise the direct infringer (even if D wasnt initially aware of the infringement)). Elements of contributory infringement 1) Third-party infringing act 2) Knowledge 3) Inducement premises liability on the distributors purposeful conduct and affirmative steps encouraging infringement. D is liable under the inducement rule because i. D actively advertised its product to former Napster users after the courts shut down Napster; Groksters name is an obvious derivative. ii. D never attempted to filter or police users activity; this amounts to facilitation (factor not independently controlling). iii. Because Ds revenue came entirely from advertisers, D had market incentive to increase files and user base and profited from third-parties infringement (factor not independently controlling). (ii. and iii. alone would not be sufficient.) Similar to Sony Corp. of America v. Universal City Studios, Inc., (U.S. 1984)? o The Court of Appeals reads Sony to say that if a device is capable of substantial noninfringing uses, the manufacturer is never liable for secondary copyright infringement. The Court holds that Sony actually only gives a defense when theres no evidence of bad intent (there is bad intent here, despite the fact that bongs are for tobacco.) Ginsberg concurrence: If a product is only useful for infringement, there is no legitimate public interest in making it available. Conversely, if an item has substantial lawful uses (alongside its unlawful ones), it is not summarily barred. o In other words, we should care more about the device having substantial lawful uses than it merely being capable of doing things other than infringing. o Approximately 10% of Groksters use is legal; does this qualify as substantial? Lower courts erred in granting D summary judgment on the issue; they relied on Ds declarations and looked at total numbers instead of percentages.

5.

CONTRASTS W/ PATENT LAW

Contrasts with patent law A copyright is protectable the moment the work is created, and lasts for the life of the author plus 70 years (whereas a patent only lasts 20 years) Copyrightable subject matter is broader patentable material, because the standard of originality is lower. Copyright protects independent creators of the same thing; patent does not. Copyright protection offers more limited protections, against: 1) Copying a. N.b. independent development of a similar work is legal i. To distinguish between similar work (legal) and copied work (illegal), courts accept proof that 1) D had access to Ps work, and 2) that the two are substantially similar. 2) Creation of derivative works i.e. translations, movies 3) Distribution only applies to first sale; author cannot usually limit resale 4) Performance and display applies to public (but not private) performance and display Copyrights do not give their owner the exclusive right to make or use the thing copyrighted. While the inventor is accountable for all information regarding prior related art, the author can acquire a copyright as long as he can prove that he did not copy the work but instead happened to create something similar or identical. Nevertheless, his copyright does not extend to the identical work. Copyrights are limited by the Fair Use Doctrine a balancing test that allows limited use of copyrighted material.

6.

FAIR USE DOCTRINE, BABY

Fair Use Doctrine: Allows reasonable use of copyrighted material w/o owners consent. o Others are allowed to make copies of the copyrighted work for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research Reasonableness depends on: o 4 factors (by statute) [17 U.S.C. 107]: i. Purpose and character of the use ii. Nature of the copyrighted work iii. Amount and substantiality of the portion used in relation to the copyrighted work as a whole iv. The effect of the use on the potential market for the copyrighted work o Ds intent o First Amendment protection for free speech Seeks an appropriate balance b/w two goals: protecting copyright Os monopoly and allowing the public to benefit from minimal use of the work. Tries to protect transformative usesuses that rely on the copyrighted work as raw material to create new and different works o Supreme Court said the goal of copyright, to promote the science and the arts, is generally furthered by the creation of transformative works. Campbell v. Acuff-Rose SONY V. UNIVERSAL CITY STUDIOS (US 1984) Holding: The sale of a VCR doesnt constitute contributory infringement if it is capable of a substantial, non-infringing use o Private, non-commercial time-shifting in the home is a legitimate fair use It increases audience viewership, which is socially beneficial and makes broadcasting more valuable Efficient (it gives people options & flexibility) Theres no demonstrable negative impact on the potential market 3 prong test for contributory copyright infringement: o 1) There is a direct infringer (i.e. someone else is infringing on your copyrights) o 2) The contributory infringer has knowledge of this direct infringement o 3) The contributory infringer induced, caused, or made a material contribution to the infringement Didnt go after direct infringers b/c: o 1) Theyre customers (worry about generating ill-will) o 2) There are too many of them, so theyd be hard to punish o 3) There is a miniscule amount of harm from each individual instance of recording o 4) Sony can better satisfy a large judgment

While Sonys holding is well-established, the rule remains very much up for

grabs

o o

What do the words capable and substantial mean? e.g. Grockster fileswapping case: Breyer: Capable means that if the device can be used in a non-infringing manner, there is no liability Ginsburg: Substantial: Most use this technology for piracy, so it is infringing

Reconciling Sony & Harper: 1) In Sony, millions of people are infringing in the privacy of their own homes, and the court doesnt want to interpret the Copyright Act to mean that so many Americans are infringers o The copying in Harper, on the other hand, is very public; it is a more manageable case of copyright infringement 2) Right of 1st Publication o Without property protection for public figures, they will be disincentivized to create more works o [BUT, once the court recognizes the right of 1st publication, this means that public figures can choose who interviews them, and this may result in reviews that are less hardhitting, interesting, & valuable]

HARPER & ROW V. NATION ENTERPRISES excerpting unpublished memoirs in a magazine article does not
constitute fair use. Four-factor test of fair use: 1) The purpose and character of use a. The fact that the original work was unpublished voids the fair use argument; nonpublication reflects an active choice on the part of the author. Commercial use also tends to weaken fair use arguments. 2) Nature of the copyrighted work a. Not all information about public figures is news; to consider it news would kill incentive to write and market memoirs. Therefore, its protection is not nullified by fair use. i. Points in Ps favor because the work was unpublished 3) Substantiality of the portion used a. Although only a small portion of the book was published, the excerpt was (intentionally) the most powerful and substantial part. 4) Market effect (most important factor) a. There needs only be a threat of loss of revenue; there is one here ($12,500). Should copyright rights permit an author to control the way in which a work is introduced to the public so as to reduce the impact of initial criticism? Does Harper have the right to contract for initial media attention thats more in line with Schilling than it is in line with media criticism? Because the two kinds of publication are so different, why isnt this a great First Amendment argument for disseminating the information to more people?

CAMPBELL V. ACUFF-ROSE MUSIC, INC. a parody may constitute fair use.

Parody needs to mimic an original to make its point, and so has some claim to use the creation of its victims imagination Satire can stand on its own two feet and so requires justification for the very act of borrowing The four statutory factors must be considered in aggregate, with the purpose of the Act to stimulate the creation and publication of edifying matter (163) in mind. 1) Purpose and character of use a. Has the alleged infringement substantially transformed the work? Is it obvious that it is a parody? i. Yes; parody, in this case, is clearly a transformation. b. Educational / non-profit use does not necessarily constitute fair use. c. Commercial use does not necessarily violate fair use. 2) Nature of copyrighted work a. [no help in examining parodies] 3) Quantity and value of materials used a. Some memorable parts of the original work must be employed in all cases of parody (otherwise, no one will get the joke). Therefore, it is legitimate here.

4) Likelihood of significant market harm a. When second use is transformative, there is less likelihood of market substitution i. An original and a parody serve different market functions. b. The courts must distinguish between legitimate criticism that suppresses the market value of the original work and copyright infringement, which illegally usurps the market value. c. It doesnt matter that a parody may impair the market for derivative uses. Is new version a parody (protected) or a free ride (not protected)? o Parody is a variant of fair use Slightly different focus for parodies does it diminish the market? Ok if doing so is the result of mockery, but not of usurpation (people buy second instead of first version). First Amendment might lead to hurt feelings; patent rights are not there to protect peoples feelings. Continental tradition (moralistic) doesnt get much traction in the U.S.

In Web Era, Big Money Cant Buy An Exclusive (NYT) - Pictures of Shiloh Nouvel Jolie-Pitt leaked, for which People Magazine paid ~$4.1 million, leaked into the blogosphere before the magazine hit the stands. o Did the leak actually increase the magazines sales by creating excitement? Question turns on whether people care about having something in their hands, or whether they are satisfied just seeing the photos online.

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