Property
Vars
Spring 2015
Physical Invasion: Intentional trespass
• Trespass is the unprivileged entry onto land.
• Punitive damages are rewarded to deter people from trespassing and does not require actual harm.
• Enabling punitive damages for trespass deters self-help, protects privacy, and protects the right to exclusion. It vindicates owner autonomy by protecting property interest.
• Some jurisdictions require more than intent (AL) for punitive damages, such as rudeness, wantonness, insulting manner, or fraud and malice, oppression, aggravation, or gross negligence.
Airspace
• The principle of ad coelum states that the landowner owns the airspace to the heavens.
○ Alternatives to the Ad Coelum rule include:
1. Protect only those in possession (Hinman approach)
2. Give claim only for actual harm (Hinman approach)
3. Trespass without remedy beyond benefit of free access; planes come to people’s benefits, so the benefit compensates the injury
4. Navigable airplane is public, not private;
□ Supreme Court adopted this approach in Cosby;
□ Under this approach, cannot build structures high, onto the public airspace.
• The Hinman court only granted ownership of the airspace as long as it is being used, and there must be actual harm.
Juxtaposition of Hinnman and Jacque
• When it comes to people coming on land, the right of exclusion is dominant, while the balancing approach is considered more proper for airspace.
• The bundle of rights approach is the majority view. One can take away a right, including the right to exclusion, and still call it property.
Conflicting Neighbors: Nuisance Law and Coase Theorem
Private Nuisance. Private nuisance is the act or condition that causes [1] substantial and [2] unreasonable interference with the private use and enjoyment of another’s land.
• Private nuisance is generally limited to an individual or small groups. Once there is a large group (10-20), it becomes a public nuisance.
• Private nuisance is not physical invasion, but the material interference with the use of property.
• Nuisance cannot be won where there is no actual harm. For trespass, there is no harm needed.
Reasonableness. Reasonableness may be determined by weighing the gravity of harm against the social benefits of the activity causing the interference. Additional considerations might include malicious or indecent conduct of the actor.
Nuisance tests:
1. “Significant harm” (above threshold) [Passed, Hendricks]
2. Not a “normal use”
○ Broadly think about it; neighbors use it? Town? City? Must it be bizarre?
3. Second-in-time
○ What is first? Calling the sanitation first, or putting the well in first?
4. Inconsistent with “neighborliness”
5. Unreasonableness [Failed, Hendricks]
Exclusion is a type of control, but physical invasion is different compared to interference. Physical invasion is a challenge to the critical right to exclude. For wells and airspaces, it is only an issue where there is actual harm.
Coase Theorem
• Without transactional costs, the more optimum business will always exist, since he can compensate harmed businesses. However, there may be a distributional difference, depending on who has the right.
• With high transaction costs, the more optimum business may not exist without assistance from law, since the costs may make trade infeasible, preventing the compensation of harmed businesses.
• Establishing a clear rule can reduce transaction costs.
Main takeaways:
• Initial entitlements have to be clear and certain in order to promote bargaining among the parties.
• There are always transaction costs.
• As transaction costs increase, fewer deals get done.
• The choice of legal rule affects distribution and overall social welfare.
• The psychological effect, sunk costs phenomenon, may discourage parties from wanting to negotiate because of their irrational reluctance to accept past losses. Therefore, the chances of reaching settlement is much higher before money is sunk, or bickering occurs between parties.
1. Transaction costs should be reduced because it encourages profitable businesses to stay open.
2. Lower transaction costs would encourage businesses to find an optimal solution.
3. The choice of legal rule will affect the distribution and overall social welfare.
4. Clear and certain rules promote bargaining among parties by reducing transaction costs.
5. Because there are always transaction costs, the free market cannot be left alone to determine the best outcome.
Repeated Encroachments
Injunctions. Baker provided that an equitable injunction is available only when 1. the remedy at common law is inadequate and 2. the party who comes into equity must come with clean hands. An injunction may not be appropriate where there are few trespasses.
Bilateral Monopoly. Where there are few parties to deal with, a transaction may be defeated because the parties may haggle endlessly, bargain strategically, or may get off on the wrong foot with each other and reach no deal.
Building Encroachments. There are two ways to address a building encroachments for trivial intrusions.
Pile. The Pile approach could be used, treating the right to exclusion as absolute. An ex ante analysis would favor this approach because a bright line rule establishing property rights, minimizing future encroachments. On the other hand, it may lead to overinvestment, and waste, on surveying to prevent accidental trespasses.
Golden Press. The Golden Press approach would attempt to reduce waste by forcing the sale of property for de minimums, good-faith encroachment cases, where the cost of removal is great, and the damage is small. This approach reduces wastes at the expense of trivial property rights and prevents unfair bargaining using trespass as leverage. However, this approach may allow parties to be careless whe
he survival of the industry
§ When the custom “works well in practice”
○ Why was the court so suspicious of custom?
§ The custom of the industry will be formulated for the benefit of the industry, not for society as a whole.
§ The custom may benefit the industry, but may be dangerous to those employed in it.
§ Customs can waste resources.
§ Customs can lead to overinvestment in technology.
○ Why favor norms?
§ The standards are already in place, so people know and follow the norm. Thus, less litigation and research is required, reducing costs.
Actionable Interference. A property owner has the right to use his property for pleasure and profit. A person may be liable to the landowner for hindering his use of land.
Keeble. Social welfare is best preserved by promoting the capture of ducks. Discouraging illegal activity that scares away ducks best serves social interests.
§ Keeble is about unfair competition, not about hindering livelihood.
Tragedy of the Commons. Two main solutions to the tragedy of the commons are:
(1) Government ownership selling permits to apportion the use of the commons, taking into consideration all of the costs.
(2) Private property: divide up the acres, so they get the benefits, but also the costs, so there is incentive to keep it viable long-term; costs are internalized through private ownership.
Unfair Competition. With unfair competition, if everyone engaged in the unfair strategy, society would be worse off.
Discovery. Original title to property can be established through discovery. Whereas first possession requires that one be the first actually to possess an unclaimed thing, discovery establishes a unique right to possess a thing.
• M’Intosh
○ Dominion vs Occupancy.
○ US government claims trumps foreign entities
○ Lockean Labor theory
• Lockean Labor. A theory of natural law that holds that property originally comes about by the exertion of labor upon natural resources. Furthermore the laborer must also hold a natural property right in the resource itself because — as Locke believes — exclusive ownership was immediately necessary for production. The proviso maintains that appropriation of unowned resources is a diminution of the rights of others to it, and would be acceptable only so long as it does not make anyone worse off than they would have been before.
Monopoly vs Monopsony
