Prof. Mandel, Property Spring 2011
1. Theoretical underpinnings
a. Policy assertions require empirical evidence; without empirical evidence, it can be impossible to determine which policy assertion is correct
b. Property is the legal relationships between entities (people) and things relative to other entities; it is distinguished from civil rights (relationship to government and society) and contract (relationships between private entities)
i. Real property – land
ii. Personal property – everything non-land
1. Tangible property
2. Intangible property
a. Intellectual property
b. Other intangible property
c. There is no such thing as absolute ownership; all title is relative.
d. Property is a bundle of rights; you can have some of the bundle but not the entire bundle yet still have property; just because you own property does not mean that you can do whatever you want with it; for example, you cannot batter someone with your property
i. Right to exclude
ii. Right to include
iii. Right to transfer (right to transfer = right to exclude +right to include)
iv. Right to possess
v. Right to use
vi. Right to destroy
vii. Many more rights, but those are the most common
e. Goals of property law – property law by its nature is utilitarian
i. Promote the most productive use of property
ii. Reduce transaction costs
iii. Place costs on the least-cost avoider
iv. Maximize total social welfare
f. Theories of property- there is no one theory of property that justifies all of property law
i. First possession– first in time, first in right; explains how original acquisition of private property occurs; very popular in early American property, but not as important now that most things are property already now; is still important in determining relative title of real property; it explains why/how property exists, but does not justify the existence of property ; encourages the waste of natural resources (hunters will shoot all the animals they can bc otherwise others will); first in time is a low cost solution
ii. Labor-desert theory- people are entitled to the property that is produced by their labor; most clearly seen in accession (receiving title if you in good faith apply labor to another’s chattel), but also present in adverse possession and good faith improver; flawed in that it only justifies ownership of the value that labor adds, not the entire value of the object; it is also premised on unlimited supply of natural resources, which is unrealistic
iii. Utilitarianism- property is a means to and ends; this is the primary theory of property law; private property exists in order to maximize the overall utility, and property rights are allocated and defined in a way that reaches this goal; “Property and law are born together, and die together”; problem is that it is hard to measure utility, and it means that property rights are subject to change if it will increase utility
iv. Law and economics- private property exists to maximize the overall wealth of society; in order to be efficient, all property must be owned, transferable, and excludable; transaction costs must be minimized; most influential in analyzing externalities such as nuisance; flaw is that it equates money with utility
v. Liberty – property breeds responsible citizens; promoted by Thomas Jefferson as a civic ideal; led to the distribution of land by patents to Americans for very cheap; repudiated by the civil rights movement when even poor members of society stood up to fight for enfranchisement and by the rise of wage-earners instead of agricultural workers
vi. Personhood- certain items hold strong attachments to people; these items are so attached to the people that there must be some property rights; for example, a wedding ring is a symbol of a marriage and a love letter is a symbol of romance; does not justify the existence of property rights over fungible items such as money. Often used in real property transactions dealing with family homes since they are considered so fundamental to personhood.
2. Original acquisition
a. Possession – possession changes based on the specifics of the situation; there is no one way to define possession; a wild animal is possessed differently than land, for example; questions of original acquisition often are decided by first possession
b. Discovery and conquest – you grab onto something so it becomes yours
i. Johnson v. M’Intosh – Plaintiff bought land from Indians. Defendant was subsequently granted the land by the US government. Held: Defendant is the rightful owner of the land. Only the US government can grant ownership of land to private owners. Indians were not owners even though they occupied the land prior to the government/defendant. Natives believed in usufructory rights, that you can use land as long as you need it, but cannot change it or prevent other people from using it. Thus, the Indians occupied the land without possessing it.
c. Capture- when something comes into your undisputed possession it becomes your property. How do you define undisputed possession?
i. Certain control is undisputed possession
1. Pierson v. Post – Post was chasing a fox for hours. When he was very close to catching it, Pierson stepped in and killed the fox and took it. Held: The actual capture of the fox is what reduces it to property. There must be certain control; first certain control determines ownership. Mortal wounding or killing of a wild animal produces ownership. The majority opinion is very formal and relies on precedent. Dissent: Foxes are pests, and the goal is to get rid of foxes. A reasonable prospect of capture suffices to establish possession. This rule achieves society’s goal. Note: The dissent does not justify its assertion with empirical evidence. Reasonable prospect is a much less clear standard than the majority’s rule. On the other hand, the majority’s rule does not necessarily promote peace and order since it might encourage people to get bigger guns or shoot earlier
ii. Role of custom – sometimes, a local custom can be used to determine possession. When a custom and society’s interests align, the custom is more likely to be adopted. Problem is that allowing a custom preserves existing power balances; why should someone be bound by a custom which he had nothing to do with?
1. Ghen v. Rich – Plaintiff was a professional whaler. He harpooned a whale and killed it. He presumed that it would either float ashore or out to sea. The customary method was to do this and have the person who finds it on shore paid salvage. Defendant found the carcass and sold it as his own. Held: The proper rule for ownership of a whale is that the person who kills the whale owns it. Without this rule, whaling will be almost impossible. The holding is narrow and applies only to whaling. Damages are the value of the oil obtained less the amount that defendant saved plaintiff by converting the property. Note: If the societal goal is to save the whales, then this rule is bad!
iii. Malicious interference- malicious interference cannot be used to hinder another person’s acquisition of property by capture if the acquisition of property is socially beneficial. Allowing this to happen would decrease the total social benefit. The question remains whether someone can interfere with a whale hunt to save the whales, etc. It is also questionable as it looks at the interferer’s intent rather than viewing them neutrally; might it be a question of intentional tort rather than of property?
1. Keeble v. Hickeringill – Plaintiff and defendant operated nearby decoy ponds to catch ducks. Defendant shot a gun near plaintiff’s pond to scare away ducks. Defendant knew that it would scare the ducks away. Held: Defendant is liable for decrease in value of plaintiff’s property caused by defendant’s actions. The reason for this is to punish the defendant rather than to compensate the plaintiff. The owner of property has the right to use his property to produce profit, and others do not have a right to maliciously interfere with that use. Note: The plaintiff did not own the ducks since he had not captured them yet; this is clearly demonstrated by the fact that they flew away.
d. Creation- by putting work into something, it becomes your
price must be included. Part performance and estoppel can avoid SoF under R2K § 129, but only if there is detrimental reliance and unconscionable injury.
1. Hickey v. Green – Plaintiff gave a deposit check for a specific piece of property to defendant. There was an oral agreement, but no memorial. Plaintiff then sold his property. Defendant found a purchaser willing to pay a higher price than plaintiff, so backed out of the original transaction. Held: Plaintiff reasonably relied on defendant’s oral promise. Defendant knew about plaintiff’s reliance. This is sufficient to establish promissory estoppel/part performance since there would be unconscionable injury to plaintiff without it.
ii. Specific performance – specific performance is routinely granted in land transactions under the theory that each piece of land is unique; both buyers and sellers have this remedy for certainty or reciprocity
iii. Merger doctrine –Once the buyer has accepted the deed, the contract for sale no longer exists separately. The deed alone is considered the final agreement between the parties. Stuff in the contract for sale does not apply anymore. Fraud is usually exempted from the merger doctrine. Some courts are finding contractual clauses to be collateral to the deed because they cover different things.
iv. Equitable conversion – When there is a contract for sale, the buyer holds equitable title and the seller holds legal title in trust for the buyer. This allocates the risk of loss (due to fire, etc.) onto the buyer. This is a default rule. Some jurisdictions allocate risk onto the seller as the least cost avoider (he could more easily buy insurance).
v. Warranty of marketable title- An implied condition to every sale of land is that it has “a title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent, and intelligent person, one which such persons, guided by competent legal advice, would be willing to take and for which they would be willing to pay fair value.” It is only relevant between the contract for sale and closing.
1. Encumbrances – every right to or interest in the land that diminishes the value of the land but is consistent with the passing of the estate
a. Mortgages, liens, etc
b. Estates or interests less than fee simple like leases, life estates
c. Easements or servitudes such as rights of way, restrictive covenants
2. Zoning ordinance – public restriction on land use; is not an encumbrance
3. Restrictive covenant – privately entered into restriction on land use; majority rule is that existence of a restrictive covenant is an encumbrance; marketable title can only be created for the rights which do exist in the bundle, and the others must be disclosed
4. Lohmeyer v. Bower – Plaintiff entered a contract to buy a lot with a house on it. The contract specified that the defendant would convey marketable title free of encumbrances but that plaintiff waived all restrictions. Plaintiff discovered a violation of a restrictive covenant and a violation of a zoning ordinance. Defendant offered to buy a couple extra feet and convey them to correct the zoning defect. Held: The warranty of marketable title takes precedence over the waiver. There was a reasonable threat of litigation in this case due to the violations of the restrictions and the zoning ordinances. The violations violate the warranty, not the existence of the restrictions and ordinances themselves. The offer to purchase additional land is not acceptable bc the plaintiff did not contract to buy that land, and adding this land makes it a different property.