I. What is Property?
A. Two Conceptions of Property
Jacque v. Steenberg Homes, Inc. (Wisconsin, 1997), page 1
· Facts – Δ wanted to deliver mobile home to π’s neighbor and the easiest way was through π’s land (alternative was private road that would be potentially expensive, slow, and dangerous). Despite repeated refusals for permission to cross land, Δ nevertheless crossed π’s land to deliver. Jury awarded $1 nominal damages and $100,000 punitive damages.
· Holding – π’s are entitled to punitive damages. There is more than nominal interest to private landowner and society in excluding others from private land since intentional trespass to land causes actual harm to individual and that may support a punitive damage award.
· Policy – court allows punitive damages because there are real harms even if there are no monetary damages. Reasons include:
o Prevention of violence – private landowners might resort to “self-help”
o Privacy reasons
o Integrity of legal system
o Some risk of adverse possession
o Individual right to be autonomous is important enough to put up with “irrational behavior”
Hinman v. Pacific Air Transport (9th Circuit, 1936), page 9
· Facts – Δ’s allegedly flew above π’s land on numerous occasions and at times may have flown at altitudes less than 100 feet above the surface
· Holding – π’s are not entitled to injunctive relief because flying in airspace above π’s land isn’t trespass. The court rejects doctrine of ad coelum since π’s cannot possess the air that is above their land.
· Policy – four possible ways to justify:
o Action for trespass only available to people who are in possession of land
o Action for trespass only if the flights cause actual harm to the surface owner
o Airplane over flights are technically trespasses but the surface owner isn’t entitled to any damages because he obtains “implicit in kind compensation” from being able to take advantage of the benefits airplane travel has to offer
o Reclassify airspace as public property – eventually embraced by S. Ct.
1. Two Theories of Property
· Penner – “right to exclude” (i.e. Jacque)
· Grey – “bundle of sticks” (i.e. Hinman)
2. Two Kinds of Rights
· In rem – against a large and indefinite class; everyone has duty not to trespass certain land
· In personam – rights against a small and defined class; usually a contract
B. The Trespass / Nuisance Divide
Hendricks v. Stalnaker (S. Ct. of Appeals of West Virginia, 1989), page 23
· Facts – Δ owns land that already had one water-well and π owns adjacent land, which needed a septic system but the only possible location was near Δ’s land. While π was waiting for a permit, Δ also got permit and installed a water-well in the only other possible location, near π’s land. Π’s application was denied because proposed septic system would be too close to Δ’s new water well and π sued for nuisance
· Holding – because of similar competing interests (basically a tie and maybe slightly in favor of Δ’s water well), Δ’s use is not unreasonable use of land and thus no private nuisance. Courts claim to apply the restatement test (which is a reasonableness test using a cost-benefit analysis) but doesn’t really seem to use a cost-benefit analysis
· To determine nuisance, courts look to see if there is any of the following:
o Intentional or unreasonable nuisance
o Negligent / reckless
o Abnormally dangerous conditions
· Other possible theories:
o First in line
o Fairness – see who is going to be treated most unfairly
o Normal uses – see if uses are “normal”
o Invasion theory
1. Coase Theorem
Entitlement doesn’t matter because whoever has highest value ends up with it as long as there are no extra transactional costs. But there are transactional costs so entitlements do matter and should assign entitlements to highest value.
· Limitations of Coase theorem:
o Rational actor model – assuming that everyone maximizes their wealth
o Limits of bargaining – especially with multiple parties (i.e. holdouts and bilateral monopolies)
o Behavioral economics – whether people act at all as rational actors
· Ways to avoid these problems
o Recognize the situations and void them
o Negotiate beforehand
o Lobby the government
o Eminent domain
o Deal through an agent
2. Property and Contract
· If there is an entitlement initially, even before dispute, it is possible to negotiate around that entitlement. It’s possible to bargain around it after dispute. Reasons for why that might be good:
o Most efficient outcome (i.e. people know better than the law)
o Concerns with ability for people to bargain (i.e. not enough bargaining power or money)
· Ways to promote bargaining (within limits):
o Make entitlements clear ex ante (no need for expensive litigation)
o Lower transaction costs
o Make clear ex post opportunities to bargain
· Reasons to stop bargaining:
o Limit uses of land that is socially unhealthy (i.e. polluting factory)
o Worries of bargaining process itself (unconscionability)
o Prevent holdup or free-riding problem
· Reasons why bargaining fails:
o Bilateral monopoly – problems of strategic behavior
o Assembly problem – someone has incentive to hold out
C. Property and Equity
1. Equity Courts
Equity courts emerged as an alternative to common law pleading. Courts of Equity (a.k.a. Chancery) would resolve disputes by issuing mandatory decrees directing individuals to perform certain acts (i.e. injunctions), which operated in personam, and were binding only on the individual. Courts gave equitable relief only if the common law didn’t provide it and fairness required.
2. Repeated Trespass
At common law, the only remedy for trespass was damages but landowners could go to Courts of Equity seeking injunctions. One area where courts began granting injunctions are repeated trespass.
Baker v. Howard County Hunt (Ct. of Appeals of Maryland, 1936), page 42
· Facts – π noticed that Δ, a hunting club, often trespassed onto π’s farm causing damages including disrupting experimental rabbits. Π’s sought injunction against Δ.
· Holding – injunction should be granted to π as two elements are met: clean hands doctrine, and remedy at law must be inadequate.
· Generally, under dog-law at that time, certain reputable dogs that wander and trespass do not make their owner accountable for trespass. Though fox hounds are reputable, because they are in a pack and they are likely to trespass and cause harm, Δ should be held liable.
3. Building Encroachments
Courts also granted injunctions for building encroachments, where the continuing presence of an encroaching structure is an intentional trespass. Injunction is given only where there is a weighing of interests between the parties (a.k.a. “balance of the equities) favors giving injunctive relief rather than damages.
Pile v. Pedrick (Pennsylvania, 1895), page 50
· Facts – Δ built a factory and a wall which ever so slightly happened to overstep bounds onto π’s property (by about 1 ½ inches). Π had called upon district surveyor to locate boundary but had evidentially made a mistake. Π sought injunction
· Holding – injunction is granted and court orders that Δ should remove offending part
Golden Press, Inc. v. Rylands (Colorado, 1951), page 51
· Facts – π owned a parcel of land with Δ constructing building on adjoining property. Part of the wall of Δ extended from two to three and a half inches on π’s land and π sought injunction
· Holding – encroachment was in good faith and so court should weigh circumstances (balancing the equities). Because damages are slight and cost to remove is high, it would be unconscionable to require removal and so injunction is denied
4. Analysis for Injunctive Relief
Injunctive relief is a very contextual analysis. The Supreme Court in eBay v. MercExchange (2006) determined that an owner of a patent can receive a permanent injunction against a patent infringer if the patent holder satisfies a four-part test:
· Irreparable harm
· Remedy at law inadequate
· Balance of hardships
· Public interest
5. Property / Liability Rules
Rule 1 (Pile, Δ is enjoined)
Rule 2 (Golden Press, Δ pays damages)
Rule 3 (Hinman, π has no claim)
Rule 4 (Spur Industries)
o Rule 1: Award the entitlement to π and protect via property rule (i.e. injunction award to tear building down).
o Rule 2: Award the entitlement to π but protect via liability rule (i.e. Δ can take π’s entitlement without consent, typically upon the payment of court-determined damages).
o Rule 3: Award the entitlement to Δ protected by a property rule (i.e. building stays put, and π can get it removed only by getting Δ’s consent).
o Rule 4: Award the entitlement to Δ via liability rule (i.e. π can force Δ to transfer the entitlement to π in return for a payment of money compensation).
· Property Rules
o Remedy – injunctive relief
o Amount of state intervention – least intervention
o Who values enforcement – collective decision
· Liability Rules
o Remedy – damages
o Amount of state intervention – more intrusion
o Who values enforcement – state values imposed by court
· Inalienability Rules
o Remedy – hard to know as it’s set by state and can’t be changed
o Amount of state intervention – most intervention
o Who values enforcement – state
6. Ex Ante vs. Ex Post
Often times, there will be a difference in outcome depending on ex ante or ex post analysis. The direction in which you view a dispute affects which rule can be more effective (i.e. liability rules more effective in an ex post situation such as a building encroacher).
Contract law consists of bargained for benefits and harms. Tort law consists of non-bargained for harms. Restitution, often covered by property law, consists of non-bargained for benefits. The basic elements of restitution are:
· An enrichment of the Δ
· At the expense of the π
· Under circumstances that are “unjust”
Producers Lumber & Supply Co. v. Olney Building Co. (Court of Civil Appeals of Texas, 1960), page 68
· Facts – Δ sold a lot to π for $1428 which was purchased by π who had the intent to build a home on it. A couple years later, Δ decided to construct 9 dwellings including on the lot that was previously sold. Consulting a map, Δ mistakenly assumed it hadn’t been sold. Construction began and the house on the lot sold was 2/3rds complete when Δ discovered the mistake and notified π. They began to negotiate but couldn’t reach a settlement. Δ broke off the negotiations and demolished the house.
· Holding – When Δ demolished the dwelling without knowledge or consent, he committed waste and must pay cost of dwelling which is $5000. Δ can’t recover for ordinary restitution damages because he resorted to self-help and took the law into his own hands.
· If Δ hadn’t demolished the building, under restitution law, Δ would probably have been able to recover because all the elements are met. When something like that happens, there are different options:
o If you can remove improvement without harm, then do it
o If you can’t, then the improvement value is paid to improver (owner can pay for improvements or improver can pay for unimproved land value)
o If that doesn’t work, court can order that land be partitioned and sold with the profits divided
II. Acquisition of Property
A. First Possession
Rights of property often come from possession. Generally, owner obtains title of property by acquiring it from the prior owner. However, there are a few situations where owner can obtain title by the mere fact of possessing the article (i.e. wild animals, finding of lost articles, adverse possession).
1. Wild Animals
Wild animals aren’t generally owned by anybody and courts have generally said that once a person gains possession of such an animal, he has rights to that animal superior to the rest of the world. However, it’s not always easy to determine what possession is. Capture of an animal is usually sufficient but when there’s less than capture, the line becomes blurry.
Pierson v. Post (Supreme Court of New York, 1805), page 81
· Facts – π had dogs and was chasing a fox on an uninhabited beach. While π was chasing, Δ saw that fox was being pursed and to prevent π from catching the fox, intervened, killed the fox, and carried it away.
· Holding – Fox is property of Δ and not π. Ownership requires possession but π never had possession because mere pursuit is not enough and must actually capture the fox. On the sliding scale, the court
tted a tort. Court seems to give π the right to publicity because Δ used her likeness.
· These theories didn’t work:
o Copyright – because voice is not copyrightable and Δ had permission to use the song itself
o CA Civil Code § 3344 and sue for likeness of voice –because Δ didn’t use π’s image or voice
o Unfair competition – π is not in the car or commercial business so unfair competition theory in INS v. AP fails
Trenton Industries v. A. E. Peterson Manufacturing Co. (US District Court, Southern District of California, 1958), page 154
· Facts – π filed for a patent and sued on two counts:
o First count deals with infringement of patent issued. Π made a collapsible high chair that made it easier to fold the chair and also made a shorter and more compact package when folded.
o The second count, dealt with unjust enrichment arguing that he had shown his prototype to Peterson who kept it for two months, returned it, but then marketed a similar chair.
· Holding –
o The patent is denied to π’s product. The alleged novel feature of π’s invent was known and disclosed by the prior art and that the combination though an improvement is a product of mechanical skill rather than result of a new invention.
o A patent cannot be obtained by statute if the subject matter as whole could have been obvious at the time of the invention was made to a person having ordinary skill in the art
o Π is entitled to recover a reasonable royalty on the chairs manufactured by the Δ because π communicated a novel idea with the intention that the latter may use the idea for compensation
· It looks like there are two thresholds to overcome for patent. It must be beyond scope and content of prior art and must not be obvious to someone of ordinary skill in the art.
C. Principle of Accession
Accession refers to family of doctrines which share a common feature: ownership of some unclaimed or contested resource assigned to the owner of some other resources that has a particularly prominent relationship to the unclaimed or contested resource.
General rule is that the offspring or increase of livestock belongs to the owner of the mother (seems to have been rule forever, probably for good economic and maybe intuitive or psychological sense)
2. Doctrine of Accession
The doctrine of accession is a common law doctrine that applies when someone mistakenly takes up a physical object that belongs to someone else and transforms it through his labor into a fundamental different object. Traditionally, the rule was that the owner of the original materials had title to the finished product, unless that project was so different from the original object that essentially a new species of object has been created. The requirements for accession:
· Mental state – there must be good faith as a willful trespasser who in bad faith improves the property, will probably not be able to recover
· Amount of transformation – if the object is changed too much, the owner doesn’t retain full rights
· Relative value – if the value added is wholly disproportionate to the value of the original materials, the improver gains title, otherwise the original owner retains title over the improvement
Wetherbee v. Green (Michigan, 1871), page 166
· Facts – Δ claimed that he made a good faith mistake when he converted π’s trees into hoops. Hoops were immensely more valuable than the cost of the timber.
· Holding – Δ should have had a right to show that he manufactured the hoops in good faith.
· Rule of accession is that if you make something or improve upon property, improver gets some right. This is definitely a liability rule and not a property rule but there is a question of whether or not owner of improver gets entitlement (i.e. who gets the hoops). If there is no good faith, than it’s simply trespass or theft. The 3 aspects are: mental state, amount of transformation, and relative value
3. Ad Coelum
Translated from Latin, the phrase means “to whomever the soil belongs, he owns also to the sky and to the depths. The doctrine also applies to resources discovered beneath the surface, such as minerals, oil and gas deposits, and also caves. Generally, as new increments in value are discovered below the surface (i.e. minerals), these increments in value are automatically assigned to the owner of the surface.
Edwards v. Sims (Court of Appeals of Kentucky, 1929), page 175
· Facts – π discovered a cave under his land and called it “Great Onyx Cave.” He turned it into a tourist attraction that was quite profitable. Later however, Lee, adjoining landowner, filed suit against π claiming that portion of cave was under his land. Court ordered that a survey be made. Π brought this suit arguing that survey would be trespass and shouldn’t be allowed.
· Holding – majority view of ad coelum rule is that surface owner owns everything above and below and therefore, the part of the cave that is below Lee’s land could be his. Therefore, the survey should happen.
· Dissent – landowner owns everything theoretically but must be able to possess it (i.e. Hinman). Therefore, because the entrance to the cave is under π’s land and Δ has nothing of value in the cave, Δ can’t claim ownership over the land.