PROPERTY (LESHY) – FALL 2013
§ Property (CA Civil Code § 654): “The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others. In this Code, the thing of which there may be ownership is called property.” – Derived from NY Field Code.
§ Property system: means of distributing/redistributing wealth of society.
§ What is property?
§ Property is the relationship between people and other people regarding the things they use.
§ Property itself has no intrinsic value: only that which people and their institutions assign to it.
§ Property is created by common law; it is what the court says it is. Increasingly, property is regulated by statutes.
§ Legal Realists: Property is a contrivance of humans that creates an organizational social institution.
§ Property can be held through:
§ Individual ownership;
§ Concurrent ownership;
§ Rights of landlord v. rights of tenant; and
§ Rights acquired over time (present owners v. future owners).
§ How is property created?
§ Common law (courts):
§ Can stick to the old rule and leave change up to the legislature;
§ Can overrule the old rule and apply the new rule only to transactions made after the date of the court’s decision;
§ Can overrule the old rule, apply the new rule to the transaction before it and all transactions made after the date of the court’s decision, but apply the old rule to other past transactions; or
§ Can overrule the old rule and apply the new rule to all transactions, including the one before it and all those transactions made before the decision.
§ By statute (legislature).
§ States generally control real and personal property.
§ Zoning and use regulations are usually local/municipal.
§ Federal law can control how property is held and used (intellectual property is exclusively federally regulated).
§ What are property rights?
§ Property rights are a mental construct (cultural legal phenomenon imposed on the world).
§ Property rights are a multi-faceted “bundle of sticks” of rights and responsibilities, including (but not limited to) the right:
§ To possess;
§ To use;
§ To exclude others;
§ To alienate; and
§ To convey.
§ You only need some of the sticks (sometimes only one or two) to have a right.
§ Demsetz: Private property ownership evolved out of common property ownership to reduce the number of “externalities” by transferring many “external” costs and benefits to “internal” ones; requires cooperation within a society.
§ Private property rights curb society’s tendency to act contrary to its collective best interest by avoiding large “transaction costs” in securing agreement for managing communally-owned property.
§ De Soto Theory: Capitalism flourishes where government protects private property rights through a formal, transparent system.
§ Jefferson: Free transferability subjects individuals to the market. Common welfare would be subordinate to the limitless pursuit of self-interest. Therefore, transferability should be limited.
§ Tragedy of the Commons: Resources owned in common will always be abused, absent coercive intervention by government.
§ Tragedy of the Anticommons (Heller): If too many people own parts of a valuable asset, gridlock and underconsumption can result because each owner has a veto over use of the asset. Capture is limited, but the land is economically less productive.
§ Utilitarian Theory of Property (Modern View): Property systems are a means of distributing and redistributing wealth of society to promote efficient use of resources.
§ This marks the break of property philosophy from natural rights foundations.
§ Private property nourishes individuality and healthy diversity, maintains independence, dignity, and pluralism in society and is essential to political freedom.
§ Classical and Modern Liberal Theorists v. Modern Civic Republicans.
§ Theorists: Free transferability of property is important.
§ Promotes political freedom, reduces concentration of wealth and privilege.
§ Republicans: Tensions arise from unfettered alienability (such concerns run throughout property law).
§ Property should be stable/non-transferable to avoid being reduced to a commodity.
§ Historical Property v. Modern Property.
§ Historical: Land was the most common indicator of wealth, followed by livestock.
§ Modern: Non-tangible goods are now the most common indicator of wealth (EX: stocks, bonds, etc.)
§ Possession v. Title (common law favors either/or results, not a shared interest).
§ Possession: Usually dominion and control.
§ Title: Ownership.
§ Rules v. Standards (Crystal v. Mud)
§ Rules: Absolute, crisp, easily ascertained, with non-controversial interpretation.
§ Standard: More vague, broad range of interpretation and other considerations factor in.
1. Right to Exclude—————————————————————————————————–
§ Right of property: The sole dominion which one claims and exercises over external forces in the world.
§ Reliance interest in property: The underlying moral principle of right to exclude/right to transfer.
§ When owners grant to others rights of property access, they are not unconditionally free to revoke such access.
§ When people create relations of mutual dependence involving joint efforts, and relationship ends, property rights must be redistributed among the parties to protect the legitimate interests of the more vulnerable persons.
§ Cohen: The essence of private property is the right to exclude others, but it is not inviolable.
§ The “right to exclude” is just as essential to property theory as is a “right not to be excluded.”
§ Epstein: There is nothing wrong with an absolute right to exclude and admit.
§ Establishes conditions for subsequent market transactions.
§ If you poorly exercise the rights, you lose your markets.
§ Narrow limitations occasionally important when precondition to make absolute rights workable does not exist.
§ Jacque (P) v. Steenberg (D): A private landowner has a property right to exclude others from his or her land. (p. 87).
§ F: P barred D from trespassing to deliver mobile home. D trespassed to avoid a longer, more expensive route. P prevailed.
§ A: The right to exclude, like the right to possess, is “one of the most essential sticks in the [property rights] bundle” since individuals have an interest in excluding trespassers. The right to exclude precludes a landowner’s use of self-help.
§ The State must protect the right to exclude with punitive damages of $100K, since the jury’s nominal damages of $1 does not deter trespassing or constitute state protection.
§ Economically efficient outcome?
§ Macro: Yes. It protects economic efficiency by offering economic incentives with right to exclude.
§ Micro: No. Compliance may require prohibitively expensive costs or unrealistic actions.
§ Prof: This is analogous to capitalistic v. communistic concepts of ownership:
§ Capitalist: assign individual value to property, so individuals have a stake in how effectively it is used.
§ Community: assigns collective value to property, so there is no incentive for it to be effectively used.
§ State (P) v. Shack (D): Exceptions to the right to exclude include necessity to secure health, safety, and general welfare. (p. 88).
§ F: D barred P, two non-profit workers funded by Congress, from visiting a migrant worker employed at D’s farm. P prevailed.
§ A: A landowner has exclusive rights, but “should so use his property as not to injure the rights of others.”
§ Title to real property does not include dominion over the destiny of the person the owner permits to come upon his premises.
§ Necessity or public policy may justify entry upon private property; property law must serve human values.
§ Economically efficient outcome?
§ Yes. It offers more rights to the migrant workers (morality argument).
§ No. More rights reduce migrant workers’ productivity and costs D more time and money.
§ Constitutional Rights v. Property Rights: The right to exclude promotes economic efficiency, but there are limitations:
§ Emergency situations;
§ Civil rights limited the right to the landlord to evict;
§ Adverse possession (AP);
§ Public access to private beaches;
§ Legislating protecting homeowners who have defaulted on the mortgage payment.
§ Fashion Valley Mall (P) v. NLRB (D): Right to exclude may vary in scope depending on a private property’s public use. (p. H-3).
§ F: P barred D, a group of union workers, from protesting in front of P’s shopping center to protect P’s business operations. D prevailed.
§ A: The right to exclude may be trumped by the right to free speech if the private property in question has a public nature.
§ Majority: Today’s malls are a public forum similar to yesterday’s public squares.
§ Protesters can exercise free speech on private property open to the public: reasonable “time, place, and manner.”
§ “[T]he more an owner, for his advantage, opens up a property for use by the public in general, the more do his rights become circumscribed by the statutory an constitutional rights of those who use it.”
§ Dissent: the decision in Pruneyard allowing free speech on private property has been rejected in other jurisdictions.
§ Prof: A tiny take-away of property rights “is not so bad.”
2. Property in One’s Person————————————————————————————–
§ Accession: when one person adds to the property of another (applies in conjunction with Locke’s Labor Theory of Value).
§ Traditional Rule: person who owned original property is the owner, but if the improver changes it so much that it is a completely different thing, it belongs to the improver (e.g., grapes into wine).
§ Modern Rule: if value of improvement is disproportionate to the value of the materials, the improver gets it.
§ Locke’s Labor Theory of Value: every man has property in his own person. What is removed from the state of nature, and matched with one’s effort, is that person’s property.
§ Society wants to encourage people to invest productive labor and so recognizes the value of labor invested into property.
§ Moore (P) v. U.C. Regents (D): Property rights in one’s person do not extend to materials excised from the body. (p. 69).
§ F: Without disclosing to P, D used P’s hairy leukemia cells to create a cell line patented by the university (accession). D prevailed.
§ P’s claim based on the tort law theory of conversion (trespassing on personal property) and D’s failure to inform. For a claim of conversion, P needed to establish his property right to the cells.
§ A: P had a property interests in his cells until they were excised (even if excised without P’s consent).
§ Majority: Conversion requires actual interference with ownership rights or possession rights; where there is neither title nor possession, there is no conversation.
§ Under the UAGA and Health and Safety Code, the excised cells were not P’s property once they were removed from his body, and D claimed the cells through accession (the creation of the patented cell line).
§ Policy: Recognizing P’s property rights would (1) entail right to sell one’s own tissue for profit, (2) create uncertain moral and ethical ramifications, (3) “chill” scientific research, and (4) invite lawsuits from prior donors.
§ Dissent: The majority misread the UAGA’s “[no] valued consideration” clause; it only applies to transplantations/transfers.
§ The legislature did not cover research use, as in P’s case. The negative implication is that P is entitled to profits.
§ Not all rights in the “bundle of sticks” have to be available for P to claim ownership.
§ Prof: The majority misread the UAGA. It doesn’t prohibit all “valued consideration” transfers; the law should be balanced.
§ The majority’s concern with the conversion theory could have been remedied with damages.
§ P’s accession argument makes a good point about apportionment of interests in the patent.
§ CA Health and Safety Code § 7150 – Uniform Anatomical Gift Act (UAGA): allows organ donations but prohibits “valued consideration.”
§ Permits gifts and sales, except for transplantation (for public policy reasons).
§ Implicitly recognizes property rights in body parts.
§ CA Health and Safety Code § 7054.4: requires proper disposal of excised bodily matter.
§ 42 U.S.C. 274(e): It is unla
§ Prof: The majority’s analysis is too wooden and does not consider social policy. The dissent has a social worldview.
§ Ghen v. Rich: Respecting custom secures a commercial benefit. (p. 23).
§ A: It was whaling industry custom to award P a whale, since P’s ship killed it.
§ Popov v. Hayashi: The meaning of possession is contextual, based on prevailing custom. (p. 110).
§ F: P caught and dropped baseball, and D recovered it. The court split the ball to promote usage.
§ Haslem v. Lockwood: A party who invests his labor into worthless property and makes it of value retains the right of possession. (p. 14).
§ F: P raked manure on a street, intending to carry it away, but D hauled it off. P prevailed.
§ Ohio Oil Co. v. Indiana: Government’s “legislative power… [should secure] a just distribution [of resources],” not courts. (p. 16 – H1).
§ Greenleaf v. Francis: MA: The rule of capture for groundwater is a legitimate legal theory. (p. 19 – H1).
§ A: “Every one [can do] in his own ground whatsoever he pleases, even although it should occasion his neighbor some… inconvenience.”
§ Siprano v. Great Spring Waters of America: TX: A pure rule of capture for groundwater remains the prevailing legal theory. (p. 18 – H1).
§ A: The court was “reluctant to… [regulate] by judicial fiat.”
§ Prof: But rule of capture was first created by judicial fiat.
§ CA Civil Code § 656: Animals wild by nature are subjects of ownership, while living, only when on the land of the person claiming them, or when tamed, or taken and held in possession, or disabled and immediately pursued.
4. Acquisition: Creation———————————————————————————————
§ Accession: When one person adds to the property of another by either labor or labor and new materials.
§ Even if accession was caused through trespass, the improver may receive compensation if failing to do so is grossly unjust to the improver. Courts attempt to balance the competing claims. A person may lose title to another’s accessions.
§ Copyright: Protections for the expression of ideas (not ideas themselves) in books, articles, music, artistic works, etc.
§ Protection begins as soon as the work is set down in a tangible medium, lasting for about 70 years after author/creator death.
§ Subject of copyrights must be original, though not novel. Must be independent creations.
§ Anything expressive can be copyrighted, provided the expressive aspect can be separated from the functional.
§ Fair use doctrine: a reasonable and limited use of a copyrighted work without the author’s permission.
§ Intellectual Property: Includes copyrights, patents, trademarks, and property in a persona.
§ Prior in time rule applies for intellectual property.
§ The common law allows limited copying and imitation to avoid monopolies and encourage competition.
§ Patents: Protections for novel, useful, and non-obvious processes or products.
§ Last for 20 years from the date of the original application (approximately 12 years of real protection).
§ Effective monopoly shorter because of time to process application.
§ Trademarks: Words and symbols indicating the source of a product or service.
§ Owners of marks are protected against use of similar marks by others when such use would result in confusion.
§ Arises out of the use of the mark in commercial activity and are lost when they are abandoned or become generic.
§ General Rule: In the absence of some recognized right at common law or under the statutes, a man’s property is limited to the chattels which embody his invention. Others may imitate these at their pleasure.
§ Constitution provides limited monopolies “for limited times” and for a limited scope (to encourage further development).
§ Absence v. Recognition of Property Rights.
§ The absence of property rights can dampen production, but recognition of them can create costly monopoly power.
§ Creator v. Consumer.
§ The law attempts to balance the need to encourage innovation with the need for public access to ideas that may otherwise be limited by monopoly. Who should balance these interests: courts, legislatures, administrative agencies, or the private market?
§ Common Law v. IP Law (cannot be reconciled).
§ Common Law: impacts traditional property (tangible); works in collaboration with local and state statute.
§ IP Law: impacts idea-based property (intangible); federally and constitutionally based.
§ IP law is the realm of federal government, not state government.
§ Patent Law v. Copyright Law (both attempt to balance the needs of the consumer and the innovator).
§ Patents: Used for socially useful products that eventually should be opened to society, and provide absolute protection.
§ Copyrights: More difficult to restrain, so they last longer and do not provide full protection.