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Property I
University of Pennsylvania School of Law
Parchomovsky, Gideon

University of Pennsylvania Law School
Prof. Gideon Parchomovsky, Property
Fall 2010
 
I.                    Information
A.           Definition 
1)             Bundle of Rights: i) right to exclude; ii) right to use; iii) right to transfer
2)             Modern Property: property law governs relationships among people which involve control over valuable resources; distribution of wealthàdistribution of political power
 
B.           Two Theories of Property
1)             First in time (temporal priority)à difficult to prove to court; need to notify third parties
2)             Labor theory (John Locke)à investment of labor changes characterization from commons to personal (pursuit not enough)
 
C.           Blackstonian Model
(a) ownership by a single person; (b) in perpetuity; (c) or territory demarcated horizontally by boundaries extending up to the heavens and down to the bottom of the earth (d) with absolute right to exclude (e) with absolute right to use and abuse the land (f) with absolute power to transfer
Today: rights much more limited (aircraft, mining, trespass by necessity, nuisance, etc.)
 
II.                  Acquisition by Capture, Creation, Purchase, FInd, Bailment, Gift, Discovery
Capture: Rule of Capture
Pierson v. Post, S.C. NY (1805)
Majority:                 1) Actual Possession: kill/trap                                             2) Certain Control: mortal wounding/maiming
Dissent:                  3) Reasonable prospect of taking: hot pursuit                    4) Pursuit with large dogs (not beagles)
 
Possession:           1) intent to possess on part of possessor                           2) actual control and holding of the property
Remedies: Post received nothing, had to pay Pierson’s legal fees
Social norms: actions disagreed with social norms of hunting
 
Capture: Social Norms
Ghen v. Rich, Dis. Mass (1881)
Did _P maintain title to the whale?     Social norm: kills whale in this manner “owns” it
 
Social norms much more readily available than law to masses; industry participants have better knowledge
Decision applies only for whaling; decision necessary to preserve industry
 
Limitations of social norms: 1) exclusionary, marginalizing                               2) vagueness—one can’t receive clarification
                                                                3) enforcement                                                       4) difficult to change social norms over time
 
[Epstein’s “The Allocation of the Commons: Parking on Public Roads”à social norms create expectations, externalities]  
Capture: Constructive Possession
Keeble v. Hickeringill, England (1707)
Rule: Constructive possession of wild animals on property until animals leave
Differences between Pierson and Keeble:
Pierson:                  Sport                                       chase on waste land (no constructive possession)             interletting (harmful)?
Keeble:                   Trade (livelihood)                  constructive possession (ducks on P_’s property)             competition (useful)
 
Acquisition, Maintenance, Termination
When wild animals (ferae nature) return to commons, ownership terminates
“animus revertendi” for domesticated animals: habit of return
                                1) encourages domestication                                                2) allows free grazing without fear of appropriation
Termination: involves loss of rights, but liability likely to continue
 
Interference: interference with a trade, when the party engaged in that trade has invested in it, may subject the interfering party to liability even if the tradesperson does not have actual possession. This is especially true if the interference is not purely competitive and the underlying trade is economically and socially beneficial.
 
[Popov v. Hayashi (CA 2002): Judge ordered that ball be auctioned off, split the difference rule:
Differences from Pierson:     1) nature of object                 2) cost of object > cost of auction (market interest)         
 
 
Capture: Gas and Oil Rights
Hammonds v. Central Kentucky, Dis. Mass (1881)
Rule: Rule of Capture because of “migratory nature” of gas and oil; termination of property rights at reinjection (also terminates liability)
                                1) application of rule of captureàloss of wealth                2) application derives industry of effective storage
Problems:               1) resources overconsumed                                                   2) overinvestment in capture (and storage) technology
 
Current Rule: Rule of capture, no termination at reinjection into ground
However, owner of above property also has right to drill, but can’t sue other drillers
 
Externality: the effect of one’s actions on other actors, the cost of which is not fully born by the actor
Tragedy of the Commonsà fully marginal benefit, minimal marginal cost
 
[Demsetz “Toward a Theory of Property,” example of Native American fur
[Commons ownership inefficient due to externalities;       Solution? Private property with a single owner when costs < costs of externalities [Costs:    1) allocation           2) demarcation       3) enforcement   [Alternative property rules for G & O (none perfect) [1) nationalization, government control             2) regulation           3) auction               4) proportional extraction    5) bottoming out rule            [6) pooling—cooperative rights                           7) unitization]   Capture: Water: Groundwater, Three Approaches 1. Minority: absolute rights (free use): every surface owner entitled to extract as much from under property even if doing so adversely affects neighbor’s extraction; limitation—no waste (high transaction costs) 2. Standard: reasonable amount: every surface owner only entitled to extract a reasonable amount of water, subject to other owner’s rights (transaction costs, bowling alley tracts of land) 3. Rule: correlative rights: each owner entitled to extract specified portion, based on percent of aquifer underlying land; make rights transferable, creates secondary market   Capture: Water: Streams and Lakes East Coast: Stratton v Mt Herman Boys School, MA (1913) Rule: each riparian owner has the right to extract a reasonable amount subject to other riparian owners’ right to do the same   West Coast: Coffin v Left Hand Ditch, CO (1882) Rule: first appropriation for productive uses (provides assurance that water is yours; encourages investment) CO Constitution: priority of rights to water by priority of appropriation   Difference based on availability of water Reasonable Use:                     a) uncertain/unclear standard                               b) dry year, may not enough for anyone                                                 c) discourages investment in infrastructure          d) creates bowling alley parcels Prior Appropriation:             a) doesn’t put water to most productive use       b) dry year not enough for subsequent                                                 c) encourages excessive appropriation, excessive premature investment   Capture: Water: Diffuse surface waterà Issue of Disposal 1. Natural flow doctrine: owner can dispose of unwanted surface water only by using natural water paths; one cannot force water down, cannot change natural flow/force of water (change in flow/force creates liability) 2. Minority: Common enemy rule: every owner can dispose of surface water however one wants, and neighbors can do the same; limitation—prohibits artificial collection then dumping on neighbors 3. Majority: Reasonable use: balancing test requires courts to consider                 a) value of improvement causing the flood                         b) gravity of harm to neighboring properties                 c) availability of other drainage means and precaution costs   Creation: Property in One’s Person: Body Parts Moore v Regents of University of CA, CA (1990) Conversion: requires “an actual interference with his ownership or right of possession”; here no continuous ownership, so no conversion Majority:                 a) commodification of human body                    b) di

heft         4) reward honesty                  5) respect parties’ expectations
 
Armory v Delamirie, England (1722)
Rule: Finder has superior right in property against anyone except TO; first in time finder prevails over subsequent finders
Why protect possession rights?
1) preserve public orders                       2) prevent hiding of property               3) cumbersome to prove ownership outside of possession
 
McAvoy v Medina, MA (1866)
Differences in chattel status
1) Mislaid: left behind, owner intent to retrieve no rights, leave to property owner to facilitate TO’s search
2) Lost: unintentionally dropped                                         possession except for TO (second best)
3) Abandoned: left behind, no intent to retrieve                full ownership
(distinction between mislaid and lost rests on owner’s state of mind, difficult to prove)
 
Statutes may regulate, example: NY Personal Property Law 252
 
Bailment: Personal Property
Bailment: whenever person is in rightful possession of a good that belongs to another; created by agreement, implication, even find
1) Mutually beneficial bailment (hotel safe)                         Must exercise ordinary diligence
2) Sole benefit of bailor (eye on bag)                                   Will be held only in cases of gross negligence
3) Sole benefit of bailee (lend notes)                                    Must exercise extraordinary care
4) Involuntary bailment (car in driveway w/o notice)        Must exercise only slight care
 
Gift: Personal Property
Gift requires delivery of something in the present that one currently has
1) Delivery:             a) physical (manual)—car      b) constructive (if physical impractical/impossible)—keys                c) symbolic—license plate
Rule: Whenever physical delivery is possible, it must be so
2) Intent:                to effect gift
3) Acceptance:        if gift is strictly beneficial to recipient, acceptance is presumed
(Promissory estoppel if (a) reliance on gift (b) caused change in adverse position)
 
Inter vivos gift: present and irrevocable transfer of the right of ownership
Gift causa mortis: gift effected in contemplation of immediate, imminent death; should danger pass, trad. revoked (now, explicit revoke)
                Limitation: donee cannot die before donor
 
Gift causa mortis Newman v Bost, NC (1898)
1) Court points to problems with both intent and delivery; policy was present in room, so manual delivery required
2) Symbolic delivery of D_’s bedroom furniture (physical delivery impractical/impossible
 
Inter vivos gift Gruen v Gruen, NY (1986)
Rule: Can transfer ownership in the present but retain possession during lifetimeà ability to transfer abstract “remainder interest”
Cannot promise to give gift at future time (requires present transfer) or gift that one doesn’t presently possess
 
Discovery: Land
Johnson v M’Intosh, SCOTUS (1823)
Principle of discoveryàconquest (might makes right); conventions of public international law among Europeans
N.American tribes as occupants: rights to stay on land, use land, limited power to transfer (only transfer to US government)
US as monopsonist: sole buyer, which reduces prices (efficient expropriation); “compensation” in Christianty, civilization)