Freyermuth
Property
Spring 2014
I. THE NATURE AND MEANING OF PROPERTY
Introduction
1. What is Property??
a) What roles does the concept of property play in regulating relationships between persons?
b) How do those roles make property distinctive from tort law, contract law, and criminal law?
c) What is/are the essential characteristic(s) of “property”?
d) What are the sources of law? What role do courts and legislatures play, respectively, in establishing property law?
(1) Western View–this is mine, that is not mine–the notion of the exclusive right to possess, privilege to use and the power to convey the thing.
(2) Legal View–ownership of property as the aggregate of many component property rights- “bundle of sticks.”
e) In essence though, Property is what the law defines as property. If a claim to a resource is not recognized by law, it is not property in a legal sense.
2. Policies/values behind property law.
a) Property as Efficient Resource Allocator – Posner: “Invisible Hand”
(1) Maximizing society’s wealth via the marketplace.
(2) Rests upon the legal recognition of private property rights, that are both exclusive and transferable.
(3) Served by a universal system
b) Property as Guardian Of Individual Liberty – defining boundaries of each owner’s freedoms
(1) Bulwark against threats posed by others-separates public and private power
(2) Protection from government, but also depends upon the government to enforce.
c) Property as Socio-Political Structure – feudalism, capitalism, slavery, condominiums
(1) Defining position within social hierarchy–market versus feudal manor.
(2) backbone of social and political structure
d) Property, Individuality, and Community: Personal identity and community in the face of property based capitalism. – plays a role in individual personhood (e.g. wedding ring)
(1) Commodification
(2) Standardization and specialization.
(3) Alienation of personhood
Right to Exclude
1. necessary characteristic of property; most fundamental [“Right to Exclude is one of the most essential sticks in the bundle of rights that are commonly characterized as property” ]
Jacque v. Steenburg Homes
a) D delivers mobile home across land of Jacques, over their objections. P sues for intentional trespass to land. TC awards $1 nominal, $0 compensatory (no actual harm/damage to land), $100K punitive. Trial court reverses punitive damages award.
b) Sup. Ct. holds jury can award punitive damages, even if jury does not award compensatory damages (nominal damages sufficient to provide foundation for punitives).
(1) This protects Ps interest–the ability to say no–w/a “property rule”
(2) Award of punitive damages implicitly affirms that Jacques’ entitlement is protected by property rule (i.e., the land is their “property”). The same as if the Ct had issued an injunction b-4 the Ds began to move the mobile home.
(3) If the Jacques had no “property” interest, they would have no legitimate expectation that they could absolutely exclude Steenburg; thus, punitive damages would have been unwarranted.
(4) Jury’s decision awarding no compensatory damages was wrong: Although the land itself may not have been harmed, the Jacques’ “property” right to exclude was ignored.
(a) Jury should have awarded compensatory damages = FMV of a one-time right to cross the Jacques’ land.
(5) Retroactively apply is good in this case – Steenberg didn’t rely on Barnard’s Rule, plus knowingly trespassing anyway. “Sunbursting” – (applies prospectively) exception to traditional Blackstonian Doctrine (apply retroactively). If it would be inequitable to Steenberg, then use sun-bursting and apply prospectively, Court says no inequity.
3. Calabresi-Melamed Framework
a) Under what circumstances would the law protect your claim to property?
b) Property Right Defined
(1) A property right is protection by the state of a claim to valuable resources.
(a) May be held by an individual, a group, or in common by people at large
c) Your claim of entitlement is protected by:
(1) Property rule – sale on your terms OR injunctive/spec. perf. (Ex: your Property book – you can get it back)
(a) Control right over property that society/government is prepared to recognize w/an injunction.
(i) Absolute control.
(ii) You buy a book and someone takes it. The law returns the book in the manner of the owner. Cost or form.
(2) Liability rule – ex: if order the book but it never arrives, you get expectancy but not that book back – no property rule
(a) Ct. protects expectations—“benefit of the bargain.”
(i) You order/pay for a book from Amazon
(ii) Amazon fails to deliver;
(iii) You may recover damages = price paid + “lost bargain.”
(iv) The state takes property through eminent domain–pays fair market value for it.
(3) No entitlement at all
(a) Control or possession without the state’s recognition: no right/protection.
(i) you steal book from a classmate
(ii) Ct orders you to return it or pay damages
(4) Illustrates that entitlements are situational and relative.
4. Calabresi framework applied to Jacques:
a) Property rule?
(1) Jacques would have exclusive veto over use by Steenburg, except with Jacques’ permission.
(2) Right generally protected by injunctive relief
b) Liability rule?
(1) Steenburg could cross land (even over Jacques’ objection) if it pays objectively-determined market value for right to cross land.
c) No entitlement at all?
(1) Jacques cannot obtain any legal relief
5. Why Protect the Jacques?
a) Steenburg’s behavior imposes external costs (“externalities”) that society wants to avoid.
b) Society wants to avoid externalities that Steenberg’s behavior is imposing: social order (self-help), security/certainty, investment (why invest if not protected)
(1) Jacques may feel less secure in control of land
(2) Permitting trespass may result in higher risk of confrontation/violence
(3) Permitting trespass may discourage investment and efficient reallocation of economic resources
(a) Externality: a social or monetary consequence of one’s economic activity, causing another to benefit without paying or to suffer without compensation
6. Property Rule vs. Liability Rule
a) Objectively determined damages may not sufficiently “internalize” those external costs.
b) Liability rule wouldn’t work bc Jacques may have idiosyncratic value not reflected in fair market value of the land (1) If Jacques aren’t compensated for this value, Steenburg has increased incentive to trespass
c) A “liability” rule would require judicial valuation of the entitlement, not valuation by party agreement (1) The risk of erroneous valuation in this case would be quite high when no market valuation available.
7. Damages – Property vs. Liability Rule Hypo (Mr. Smith’s $1,000 Bill)
a) Police arrest Smith; $1,000 bill in his wallet; Police inventoried the bill; When they later return Smith’s belongings. Bill has been replaced by $1,000 check,
b) What should happen? – Should his entitlement be protected by a “property” rule or a “liability” rule?
(1) Three Options
(a) Return a $1,000 bill (property)
(b) Damages in the amount of $1,000 (what city did) (least appropriate)
(c) Damages in the amount of the FMV (liability)
(2) Possession of the bill can be returned to him, not as if in circulation b/c deposited in the bank.
(3) Concerned w/non-monetary value of the bill
(4) Even if replaceable/negotiable—the city should not have the right to step in and replace for him.
State v. Shack
a) Tejeras (Dr.) and Shack (atty.) work for nonprofit serving migrant farm workers.
(1) They entered Tedesco’s farm (w/out his permission and over his objection) to assist migrant workers living/working on the farm. Tejeras/Shack convicted of criminal trespassing.
b) Convictions reversed; Tejeras and Shack did not commit trespass when they entered Tedesco’s farm.
c) They “invaded no possessory right” of Tedesco.
d) Under state law, a property right does not include the right to bar access to government/or other services to migrant workers.
(1) Authority in state common law
(a) References the Economic Opportunity Act, but statute does not dictate the result.
(b) It does provide evidence of legislative judgment that strong public interest exists in migrants receiving these services.
e) Property right is not an exclusive right: must be balanced w/the important rights of others.
f) What services should be determined in light of the realities between the worker and owner.
9. Shack and Steenburg
a) Tedesco’s arguments mirror those of the Jacques in Steenburg.
(1) Farm most efficiently: protects investment and encourages farming.
(2) Certain, clear rule
(3) Secure in ownership.
b) Why are these argume
iving the workers a property interest in the steel plant?
(a) No: injunction doesn’t extend a property right to the employees
(b) The claim is based upon promissory estoppel, so the injunction’s effect would be to bind US Steel to a promise that otherwise wouldn’t be legally binding.
(i) Only stays if profitable “we won’t close if the plant is profitable.”
(ii) US Steel could later close the plant if it did become unprofitable (in that case, workers reliance would not have been betrayed or taken advantage of)
(4) Suppose six months pass and US Steel files a motion to dissolve the injunction. At the time, plant is showing $400K quarterly profit, but US Steel wants to move the plant to Indonesia (it projects $4M labor cost savings). Can US Steel get it dissolved?
(a) Yes, if it sufficiently compensates workers for their reliance-based expectations.
(i) The injunction binds US Steel to a promise that wasn’t otherwise a binding K. (a) Can breach as long as they pay damages
(ii) US Steel can close plant if it paid workers for their reliance by paying damages.
(5) Ct rejects Union’s estoppel argument on 3 grounds:
(a) Not definite – statements weren’t “promises”
(b) Not made by company officers – weak argument
(c) Condition precedent not fulfilled – it was never profitable (KEY POINT – main part of estoppel – saying one thing and do another) (i) Even if there was a promise, the plants were in fact unprofitable.
(6) Problems w/ Cts conclusions
(a) Inconsistent claims: US Steel talking out of both sides of its mouth
(b) Workers not have access to the same information as the company
14. Property and Transferability
a) Key in the theory that property fosters wealth maximization and efficient use of resources – b/c w/o Transfer. its hard to place resources in most efficient hands – BUT An item does NOT have to be transferable to be “property” – can be inalienable
(1) Recognizes “property” rights in resources allows for their ready transfer in bargain transactions
(2) Allows resources to be placed to their “highest and best” use and is “wealth-maximizing”
(3) Transferability is key in this model; without transferability, it becomes more difficult for resources to be placed to most highly-valued use.
b) Transferability in the market is not an essential characteristic of property.
(1) Can sell but not give (bankruptcy)
(2) Can give but not sell (body parts – donor)
(3) Inalienable – prevents the voluntary transfer of that entitlement.
II. ACQUIRING INTERESTS IN PROPERTY: THE SIGNIFICANCE OF “POSSESION”
First in Time, First in Right
a) Common law allocated and rank-ordered property claims based upon 1st in time or 1st possession principle.
(1) The first person to take possession of a thing owns it.
(a) A person who first captures resources is entitled to the resources.
(b) Whoever is prior in time WINS.
(c) “First in time, first in right.”
(i) A prior possessor prevails over a subsequent possessor.
b) Why protect the possession?
(1) Possession is a suitable surrogate for ownership.
(2) Protecting possession effectively protects ownership.
(3) Sends a signal to others, who can order their behavior accordingly.
(a) Condition behavior and avoid disputes.
(4) Former possession is relatively easier to prove than ownership, and is strongly indicative of a better claim of ownership.
(5) Prevents self-help b/c provides a clear way to trace claim of ownership.
c) Labor Theory (downfall is Tomato juice in ocean) v. Consent Theory (downfall is administrative costs)
