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Property I
University of California, Hastings School of Law
Crawford, John

Professor Crawford_Property_Spring 2014

EXCLUSION AND GOVERNANCE

v Consider Trespass/Nuisance as 2 diff. strategies for resolving disputes about how scarce resources are used

1. Exclusion (Trespass) à Decisions re: resource use delegated to owner who acts as gatekeeper (Jacque)

2. Governance (Nuisance) à Courts determines how property to be used (Hendricks)

COASE THEOREM

Coasean World

1. World w/o transaction costs

2. How Ks reassign prop rights in diff. ways from original assignment

3. Rule à If 0 transaction costs, efficient outcome occur regardless of choice of legal rule

Transaction Costs

1. Once taken into account, mkt will control itself only when increase in value of production upon rearrangement > costs involved in bringing it about

Efficient Outcome

1. Amount or # of X maximizing the value/minimizing costs of aggregate activities from a social perspective

Legal Rule

1. Which party is going to bear the liability for losses

1. Overarching Principles

a. Articulation (1)

i. Invariance proposition à If NO transaction costs, efficient allocation of resources results regardless of initial allocation of rights

b. Articulation (2)

i. Positive transaction costs, efficient outcome may NOT occur under every legal rule

1. B/c of this, courts should pay attention to where initial legal rights lie

ii. Preferred legal rule = One that minimizes distorting effect of TCs

c. Agnosticism as to which way the arrow of causation points

i. Hendricks à Both parties making incompatible demands on the use of the land

d. Coase = Thought experiment to show importance of TCs in design of legal institutions

2. Critiques of Coase

a. (2) Assumptions necessary for framework to apply

i. (1) All values capable of being expressed in monetary terms

1. Why Coase works better in commercial contexts vs. issues like bodily integrity

ii. (2) People = Rational maximizers

b. Endowment Effect

i. (1) Assumes people’s valuation of items stays the same

1. Effect is stronger when there’s not an easily available substitute

ii. (2) Each party must view legal right consistently

1. Jacque à For Coase to guarantee that exclusion of Steenberg or right of Steenberg to cross in a transactionless world would be the same whether or not Jacque started w/legal right or not MUST assume that Jacque would’ve been willing to pay to give up right to exclude

3. Is Nuisance Law Coasean?

a. Hard to reach agreements among themselves b/c not clear who owns right in the 1st place

i. Courts will do a semi-Coasean analysis: Which use is more valuable (governance)? à Not purely Coasean since it doesn’t allow for idiosyncratic views

RESOLVING PROPERTY DISPUTES W/COASE THEOREM

1. Compare alternative institutional arrangements and try to determine which one will deviate the least from the unattainable ideal of the (mythical) world of zero transaction costs

a. “Coasean bargains” à Contractual modifications of property rights

i. Should be explored as an alternative to litigation since they may be cheaper

2. To reassign rights, initial property rights must be clearly defined in the 1st place

a. Problem in nuisance cases à We aren’t sure who owns the rights

b. Exception à Hinman where efficiencies were so clear that it didn’t matter there was no initial property right to airspace in the first place

3. Why Coasean solutions aren’t utilized:

a. Parties may not think of them; OR may think of them but too expensive; OR wait too long to think of them and TCs prohibitive

4. Problems in Achieving Coasean Bargain

a. Assembly Problems

i. When someone wants to assemble property rights from a large # of owners (highways)

ii. Communication problems & holdouts (Hinman)

iii. Avoid assembly problems à Disneyworld shell companies prevent holdout

b. Bilateral Monopoly

i. Only 1 seller and 1 buyer for a contested resource

ii. Bad relations could = High TCs (neighbor disputes)

1. Ex: Hendricks; Jacque à Steenberg had only 1 route controlled by Jacque

2. BUT could be low TCs if parties clearly identified and can negotiate amicably

PROPERTY & EQUITY

1. Equitable Relief & Trespasses à Usually equity won’t apply to trespass cases subject to exceptions

2. Advantages of Equitable Relief (Injunctions)

a. Prevents adverse behavior from occurring again

b. Makes trespassers answerable to the court if they trespass again

3. Maxims of Equity:

a. (1) P must come into equity with “clean hands” AND

b. (2) Remedy at law must be inadequate

i. Intangible harm incapable of measurement OR

ii. Threat of repeated trespass

Building Encroachments

1. Equitable Relief à Injunction will be issued only if a weighing of interests b/t parties favors giving P the extraordinary relief of an injunction rather than damages (otherwise just $$ damages)

2. Good faith vs. Bad faith violators

a. Bad faith à Courts all agree injunctive relief against this encroachment IS appropriate

b. CA Good Faith Improver Act

i. Heightened requirement à Looks at

spotting and chasing is NOT sufficient to establish possession (Pierson)

c. Trapping and Mortally wounding à Almost certainly deemed to have possession (Pierson)

d. Business Competition à Courts more sympathetic to interfering D if acting out of business competition w/P, rather than out of spite or malice = wasteful (Keeble)

e. Ratione Soli à Exclusive privilege on landowner to hunt/license others to hunt game on land

i. Pierson ct. couldn’t use this b/c only applies to game ≠ foxes

2. Occupancy à Where possession & ownership come together

a. Act of taking possession of something that has no owner so as to acquire legal ownership

b. How property in wild animals is acquired

3. Pierson v. Post

a. Maj. (Tompkins) relied on public policy factors

i. Actual capture/mortal wounding strd rewards successful hunters, ensured certainty in property rights and minimized quarrels

b. Dissent (Livingston)

i. Ex-ante à Pick rule that encourages foxhunting (since they’re noxious beasts)

1. Disincentivizing hunting if someone can free ride and take prize

2. Pursuit of foxes should be enough for occupancy

3. Maj. undermined custom in area – What Post did WAS enough for possession

ii. Similar argument in Brazelton, but diff. efficiency argument

iii. Must balance 2 ex-ante concerns:

1. Incentivizing early investment (Pierson – Livingston dissent)

2. Promote diligence à Put resources to optimal use and finish the job (Brazelton)

3. Note, this rationale rests on a policy encouraging resource extraction while in some cases we may want to discourage overuse of certain open access resources

4. Locke’s Labor Theory à Person mixes labor w/unclaimed thing, has better claim to it than anyone else as long as he doesn’t waste resources

Whales: 3 different

1. “Fast-fish” rule (default rule) à Slow moving whales

a. Whale belongs to 1st harpooner as long as whale connected to boat by rope

2. “1st-iron” rule à Sperm whales b/c hard to hunt and fast

a. 1st harpooner gets exclusive rights to the whale as long as he is in fresh pursuit (mortally wounding and continuing pursuit)

b. Same as what maj. in Pierson would hold