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Property I
University of Pennsylvania School of Law
Parchomovsky, Gideon

Property

Professor Parchomovsky

Fall 2017

I. General/Introduction

Definitions

Property law governs relationships among people that involve control over valuable resources
Convert means “to take”

Importance and Downside of Property?

Importance

The centrality of property from an economic standpoint – economic studies suggest that fairness and protection of property strongly influence the growth and development of new enterprises.

GP – Property laws are immutable. They aren’t easy to change. Other areas of law can be contracted around.
Jeremy Bentham, English philosopher who endorsed utilitarianism, ascribed special importance to the legal protection of property, believing that all things being equal, the loss suffered by the owner is greater than the happiness gained by a thief or converter. I.e. Endowment effect.

Milton Friedman argued that there is a link b/w private property and freedom. He considered property rights as “the most basic of human rights and as essential foundation for other human rights.”

Downside

The distribution of property largely determines the distribution of wealth and wealth disparities work to undermine social cohesiveness.
Conflicts over valuable resources and who gets to control them have been the source of many wars and suffering.

The Centrality of Property to Our Legal System

Property as the keystone right
Property creates in rem rights – right that avail against the rest of the world.

Contractual rights only avail against the counter-party

Property lies at the heart of the private law system…

Tort is the means by which we enforce property rights.
Contract law creates means/channels by which we can transfer our property rights to others.

…and receives special protection under the C

5A – Takings Clause –
“nor shall private property be taken for public use, w/o just compensation.”

Conceptions of Property

Blackstonian Conception

“that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe.”
Even though it is highly inaccurate, Blackstone’s conceptualization reveals the three essential dimensions of property analysis (see below).

Bundle of Sticks Conception

Represents the modern view of property.

More of an aspirational view at this point.

The “bundle of sticks” conception emerged in 1930s.
Under this view, property is a malleable concept, representing an enumeration of rights – none of which are indispensable or essential – chief among those are:

1. The right to Exclude
2. The right to Use
3. The power to Transfer

GP: we didn’t take anything away from the property owner b/c from the very beginning they were contingent; w/e protections they received was dependent on society – if they had greater needs, the rights of the property owner should give way.

Three Dimensions of Property Analysis

(a) scope of owner’s rights and powers; (dominion in Blackstonian conception)
(b) number of owners; and (one in Blackstonian conception)
(c) the definition of assets (things)

Hypothetical: Issue of Multiple Owners

If you have multiple owners (common ownership), can’t have absolute use and exclusion
You can introduce a temporal dimension (e.g. timeshares) such that all individuals get absolute rights/ownership of property for their time.

Need governance rules to regulate this common ownership.

Can parcel the land into X parcels, giving each individual absolute rights of their parcel

Issues

Leaves certain parcels less valuable.
Access/rights of way (e.g. the less valuable land will want access to the land with beach access).
Neighbors

Solution

Can further parcel the land, and use some of the parcels for public use (which can also be used for rights of way to the beach).
E.g. condominiums have private property with public space

Benefit: can offer amenities you might not offer to an individual
Downside: maintenance costs and disincentives of the individuals maintaining the space and the land not being used optimally

In each of these cases, we are playing with the asset definition

Commons v. Private Property

(1) The Tragedy of the Commons.

“Freedom in a commons brings ruin to all.”
Garrett Hardin, The Tragedy of the Commons.

(2) How can the tragedy of the commons be solved?

(a) Governance Rules. Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action
(b) Internalization via a single owner. Harold Demsetz, Toward a Theory of Property Rights

When you have a single owner, you get efficient use or consumption of resources because you can’t externalize costs (e.g. you won’t put a cigarette out on your carpet though you will on the street)
This pushes from common to private property.

(c) Look to dimensions of property analysis

Is there a downside to private property rights?

The Tragedy of the Anti-commons. Michael A. Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets
Results from too many overlapping property rights.

II. Acquisition of Rights

Acquisition by Capture

Wild Animals

The wild animal cases illustrate the important of possession and demonstrate why possession is considered nine-tenths of the law.

Pierson v. Post

FACTS: Post, w/ the aid of a pack of hounds was hunting for foxes upon wild, uninhibited and unpossessed land, known as “the beach.” Post and his dogs were chasing a fox when, all of a sudden Pierson appeared, killed the fox and took it away. Post sued and own in the trial court, Pierson appealed.
ISSUE: Which acts amount to occupancy or possession of wild animals (animals ferae naturae)? Four possible theories of acquisition are mentioned in the case:

(1) Actual possession (majority)
(2) Certain control – mortal wounding or trapping (majority)
(3) Reasonable prospect of taking (dissent)
(4) Pursuit with large dogs, not beagles (dissent)

HOLDING (Tompkins): As an animal ferae naturae the fox is part of the commons until an act of occupancy creates ownership over it.

The majority concedes that acts not amounting to actual killing, such as mortal wounding and trapping, may suffice but ruled that pursuit alone is insufficient to establish ownership over an animal.

DISSENT (Livingston): Prefers a rule that would, in his opinion, maximize incentive to exterminate foxes. With this utilitarian view in mind, he suggests that ownership over the fox should be granted to any pursuer with a reasonable prospect of catching the animal.

Discussion

GP: this case raises some of the most fascinating/fundamental issues you will find in our legal system

(1) First Possession v. Labor

First Possession

Used by majority in Post. Dissent settles for reasonable prospect, which is not quite first possession.
Can be traced back to 17th century scholars, such as Hugo Grotius and Samuel Puffendorf.
Result oriented theory – sanctions first in time.
Key Determinations

(a) What counts as possession?
(b) Asset definition?

What rights do I get?

Labor

Effort based theory.
John Locke – Second Treatise of Civil Government (1689)

Investment in labor gives ownership in unowned property/property that is still part of the commons.

What happens when two laborers put effort into same asset? Who gets it?

The person who invested labor first? The one who invested more labor? Shared ownership?

In the case of a Fox of course, shared ownership presents issues. Auction the fox and divide the money?

(2) Rules v. Standards

Rules and Standards are the two primary modes by which the law directs behavior.

Rules contain a precise formulation of the proscribed conduct

E.g. Drive 55MPH

Standards provide generalized description of proscribed conduct

E.g. Drive at a reasonable speed

Understanding Pierson v. Post through the prism of rules and standards?

Rules (1) (2) (4) (3) Standards

Advantages of rules over standards?

Predictability/Certainty
Rules have high ex ante cost

Advantages of standards over rules?

Broader in applicability
Room for interpretation/flexibility

Better suited to address complexity

Easier to adjust
Cost savings in terms of adoption (ex ante) but expensive to implement (ex post) à we don’t determine the true content until ex post

When does it make sense to use Rules? Standards?

Makes sense to work w/ rules when we have recurrent behavior and the rule will cover a lot of behavior, otherwise we need a rule for each different behavior
Better for complex variegated behaviors, when we have a lot of variables to take into account. Standards are much more flexible.
Institutional dimension to the choice

Legislature creates rules
Standards transfer power to courts power b/c standards need to be interp

llecting them. Additionally, you don’t need to deal w/ loading whale onto ship.
Precipitates over-killing?
GP: Difference between group efficiency and societal efficiency.
GP: Not every group practice is desirable.

Reconciling Ghen with Pierson?

Isn’t Ghen a simple case under Pierson? After all, Ghen mortally wounded animal.

“Argument can be made Ghen isn’t really about acquiring right in mammal, but rather about a wholly different – but related – issue: abandonment.”
In Ghen, the question is, is the property abandoned? What rights is there in abandoned property?

Keeble v. Hickeringill

FACTS: The plaintiff, Keeble, set-up a decoy pond on his property to capture ducks. Defendant, Hickeringill, a neighbor, intentionally shot off guns to scare the ducks away from Keeble’s pond. Keeble sues for damages and wins.
ISSUE: Does a landlord (Keeble) have right to attract wild fowl to his pond unimpeded?
HOLDING: Yes. Court viewed Keeble’s pond-trap as a trade and held Hickeringill liable for maliciously interfering with trade. It noted that had Hickeringill lured the dock away with a competing duck pond, that would have been okay.
TAKEAWAY: constructive possession entitles you to certain rights, but not a full-fledged property right with the standard property remedies.

Discussion

How can the ruling in Keeble be explained in light of Pierson?

(a) constructive possession – in Pierson, the chase happened on common land. Here, Keeble had an inchoate property right since they were on his property.
(b) trade v. sport – If we deem it important to promote trade, we protect rights against interferences, but if its sport, maybe not; trade more important than sport?
(c) interloping v. competing – in Pierson, both were trying to catch the fox. Here, Hickeringill was just interfering/interloping with Keeble.
(d) harmful activities v. beneficial activities – want to stop harmful behavior irrespective of the other person’s behavior; had Hickeringill’s activity been beneficial, not harmful, it might have been okay.

Is Keeble, properly understood, a property case?

Keeble was awarded damages for the interference.

This is a negative measure – a tort remedy – not a property remedy (in Pierson, got value of fox; in Ghen, value of whale).

In the main, it is an unfair competition case.

The remedy was not the value of lost fowl, but, rather compensation for the interference (not a property, but a tort, remedy).

Extensions

(a) The relativity of property rights – property rights are relative. An unlawful possessor has a superior right against the rest of the world, except the true owner.
(b) animals revertendi (the habit of return)

Wild animals become common property after they are re-released.
Domesticated Animals who have the habit of return – allows owners to release them and roam free without someone else recapturing them.

Why treat them differently? Certain efficiencies:

(1) Motivate people to domesticate animals.
(2) Wanted owners to realize economies resulting from roaming

(c) The Rule of Increase –provides that title to offspring of a domesticated animal follows title to the mother. The rule has two main advantages:

(1) Promotes certainty; and
(2) Simple and cheap to administer

(d) Rights and Liability distinguished

Lack of symmetry b/w the two
Hypothetical: W/ Alligator Wally, relinquishing rights by releasing animal doesn’t release GP of liability for damage caused after release.

Why? Because we care more about the well-being of third parties than what the property owner wants to do.