ACQUISITION OF PROPERTY
What is property?
Legal definition of property includes 2 parts: (1) rights among people (2) that concern things.
Property as a bundle of rights: right to possess and use, exclude, and alienate.
Property is a system of rules governing access to and control of scarce material resources.
Property consists of real property (rights in land) and personal property (rights in chattels and intangibles)
Theories Justifying Private Property
First-in-time / First Occupancy / First Possession [see Discovery and Capture]
Serves as a low-cost, quick, and clear method to resolve competing claims to property rights
Encourages the waste of natural resources because individuals act in their own self-interest
Labor theory [see Creation]
People are entitled to the property that is produced by their labor.
Critics observe the theory should permit a person to receive the value that his labor adds to a thing, not title to the thing itself.
Private property exists in order to maximize the overall happiness or “utility” of all citizens. So property rights are allocated in the manner that best promotes the general welfare of society.
Because it is impossible to measure happiness, this theory offers no guidance about how property rights should be allocated. However, the theory does point out that property rights will change as social, economic, or political conditions change.
Law and Economics Utilitarianism
Private property exists in order to maximize the overall wealth of society. Law enforces property rights in order to motivate individuals to utilize resources “efficiently” (maximize value).
Coases Theorem holds that property will eventually be devoted to its highest value use, regardless of how property rights are initially allocated, if no transaction costs exist.
Critics argue not all human desires can be quantified in dollars and even if they could be, this theory perpetuates the existing unequal distribution of wealth. Also, this theory presents profound moral questions on whether the allocation of resources is socially or ethically desirable.
Harold Demsetz in his article “Toward a theory of property rights,” points out that a primary function of property rights is that of guiding incentives to achieve a greater internalization of externalities. “Internalizing” refers to a process, usually a change in property rights, that enables the externalities to bear (in greater degree) on all interacting persons. Externalities arise from interactions or conflicts among people in the use of resources and lead to misuse or misallocation of these resources. Private property is the best way to conserve and allocate scarce resource because it has lower transaction costs and better internalizes externalities than communal property.
ACQUISITION BY DISCOVERY
Based on Christianity and European civilization superiority
Johnson v. Mc’Intosh (1823)
Two Native American tribes sold land to private buyers and part of this property was later conveyed by the federal government to D. The private buyers leased the tract to tenants P and P sued to eject D from the land.
Issue: Did Native Americans have the power to convey title that would be recognized by the federal courts?
Holding: Marshall held that under law of the U.S., only the federal gov’t held title to the land before the conveyance to D, while the Native Americans merely held a “right of occupancy” that federal gov’t could extinguish.
Who owns North America and why?
Justice Marshall held that the Europeans discovered North America and the discovery gave full title to British, who passed it to the U.S. after the Revolution. He held that there is international consensus on the doctrine of discovery—based on Christianity and European civilization superiority. Only nation states, not individuals, can utilize discovery.
“Property rights are defined by the society in which they are at issue.”
Discovery gave the federal gov’t the exclusive right to extinguish the Indian title of occupancy, either by purchase or by conquest. Thus, Indian tribes cannot alienate their land except to the federal government.
Certainty: Chaotic/uncertain to try and apply Indian property rules and give notice of them.
Reliance: All titles granted by gov’t depend on this chain of title, investment in good title.
Otherwise, people will be coming out of the woodwork forever with old Indian titles.
Judicial enforcement competence: What army enforces a rule protecting Indians’ property rts.
ACQUISITION BY CAPTURE
A person who first captures resources is entitled to the resources.[capture is required; mere pursuit is not enough]
Pierson v. Post (1805)
Post was hunting a fox on unpossessed land. Pierson, knowing this, killed the fox himself and carried it off. Both parties agreed that property rights in wild animals were obtained only by occupancy, which is first possession. Pierson maintained that only killing or other capture of the animal constitutes occupancy. Post argued that a probable capture is sufficient “possession” to create ownership.
Issue: What amounts occupancy?
Court adopted the actual capture test and ruled for Pierson. Actual capture awarded successful hunters, ensured certainty in property rights, and minimized quarrels.
Livingston dissent: criticized the majority in failing to view the law as an instrument of social change. Since foxes damage farmland, we should encourage fox hunting by adopting the probable capture standard.
Does it matter that Post engaged in mere sport rather than a trade? Does it matter that Pierson captured the fox as opposed to just scaring it away?
Ghen v. Rich (1881)
Rich purchased a whale at auction from a man who found it on the beach. Whale was killed by the crew of Ghen’s ship which left an identifying lance in the whale.
Here, two major considerations modified the application of the capture rule from Pierson to this situation.
The court reasoned 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.
Trade usage said that custom determined ownership, the nature of the whaling industry was that animals could only be killed without acquiring immed
e game found thereon. Even if a trespasser killed a wild animal on another’s land, the owner of that land also owns the animal. The policy is related to denying title to one who takes game unlawfully.
3. It is not necessary that the pursuer of a wild animal in all cases reduce the animal to his actual physical possession. When an animal has been mortally wounded so that actual possession is practically inevitable, a vested property interest in it accrues. This is regarded as constructive possession. Policy considerations:
· Who was first to reduce the wild animal to the stock of the world’s usable goods?
· Who best observed the custom of the hunt?
· Whose effort to gain possession is most closely related to his livelihood?
· What is the best way to avoid future quarrels?
ACQUISITION BY CREATION
Rule of accession
Title is awarded to the laborer if the improvement was made in good faith and the laborer is obligated to compensate the original owner for the value of the property in unimproved condition.
Where A, in good faith, adds labor to B’s raw material, B will usually get the final product unless A’s efforts have sufficiently increased its value to make it unfair to award the final product to B.
If A trespassed and it would be grossly unjust for B to appropriate A’s labor to himself, A will get compensation for his labor and B will get damages for A’s trespass.
Law of MisappropriationàTries to answer question of when an imitation is permissible and when it is not because it will destroy the incentive to create.[Labor and investment protected from unfair competition]
Int’l News Service v. Associated Press (1918)
Court held that a AP has a quasi-property interest in news it has gathered and can prohibit competitors from disseminating the news until its commercial value as news has passed away.
INS was “attempting to reap what it had not sown.”
Cheney Brothers v. Doris Silk Corp. (1930)
P, unable to patent or copyright a garment pattern, sought damages for the copying thereof. Court held since P cannot obtain a patent or copyright on its pattern, it cannot recover for the copying of it by others.
Copying 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.”
Imitation of fabrics is not subject to misappropriation.