PROPERTY OUTLINEProfessor Mahoney – Spring 2015

I. ORIGINAL ACQUISITION.......................................................................................................................................................... 2A. FIRST POSSESSION............................................................................................................................................................................................ 2B. DISCOVERY......................................................................................................................................................................................................... 3C. CREATION........................................................................................................................................................................................................... 4D. ACCESSION.......................................................................................................................................................................................................... 5E. ADVERSE POSSESSION...................................................................................................................................................................................... 6F. SEQUENTIAL POSSESSION.................................................................................................................................................................................9

II. TWO CONCEPTIONS OF PROPERTY................................................................................................................................... 9A. THEORIES OF PROPERTY.................................................................................................................................................................................. 9B. THE TRESPASS/NUISANCE DIVIDE............................................................................................................................................................. 11C. PROPERTY AND EQUITY................................................................................................................................................................................. 12

III. OWNER SOVEREIGNTY AND ITS LIMITS....................................................................................................................... 15A. PROTECTING THE RIGHT TO EXCLUDE.......................................................................................................................................................15B. EXCEPTIONS TO THE RIGHT TO EXCLUDE..................................................................................................................................................17C. OTHER POWERS – LICENSES, BAILMENTS, LEASES, AND EASEMENTS.................................................................................................18

IV. FORMS OF OWNERSHIP...................................................................................................................................................... 20A. DIVISIONS BY TIME – PRESENT AND FUTURE INTERESTS......................................................................................................................20B. CONSERVATION OF ESTATES........................................................................................................................................................................ 21C. DISCLAIMER, WASTE, AND RESTRAINTS ON ALIENATION......................................................................................................................22D. CO-OWNERSHIP.............................................................................................................................................................................................. 24E. MARITAL INTERESTS/TENANCY BY THE ENTIRETY.................................................................................................................................26

V. ENTITY PROPERTY................................................................................................................................................................ 28A. LEASEHOLD INTERESTS................................................................................................................................................................................. 29B. TRUSTS............................................................................................................................................................................................................. 32

VI. TITLE RECORDS AND TRANSFER OF PROPERTY.......................................................................................................33A. TRANSFER AND ALIENABILITY..................................................................................................................................................................... 33B. REAL ESTATE TRANSACTIONS..................................................................................................................................................................... 34C. DEEDS............................................................................................................................................................................................................... 37D. SECURITY INTERESTS..................................................................................................................................................................................... 39

VII. THE LAW OF NEIGHBORS................................................................................................................................................. 41A. NUISANCE......................................................................................................................................................................................................... 41B. SERVITUDES OVERVIEW................................................................................................................................................................................ 44C. EASEMENTS...................................................................................................................................................................................................... 44D. REAL COVENANTS AND EQUITABLE SERVITUDES....................................................................................................................................49E. PUBLIC LAND USE CONTROLS (ZONING)...................................................................................................................................................56

VIII. THE POWERS OF GOVERNMENT.................................................................................................................................. 58A. EMINENT DOMAIN.......................................................................................................................................................................................... 58B. REGULATORY TAKINGS.................................................................................................................................................................................. 59

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I. ORIGINAL ACQUISITION

A. First Possession a. First person to assert control over an otherwise unowned object and

establish a significant degree of power over it is deemed to be the owner if no one else has a claim of ownership.

i. Primary applications: wild animals, abandoned property (including salvage), home run baseballs, natural resources, etc.

b. Pierson v. Posti. Facts: Post was in pursuit of a fox on a beach when Pierson intervened and

killed the fox (knowing that Post was pursuing it). Who gets ownership?ii. Court: Mere pursuit insufficient to vest property rights on the

hunter – a person is in possession of an animal ferae naturae only when it exercises certain control over the animal (mortal wounding, trapping, etc.).

iii. Dissent: Allowing someone to take away the fruits of a hunter’s labors will discourage the pursuit of wild animals and harm society. Pursued animal should be considered property of the pursuer if he has a reasonable prospect of capture.

iv. Neither suggests that merely hunting the animal is sufficient to bestow ownership, the question is on the inevitable success of the hunter. Tompkins says it is impossible know whether it is inevitable that he would have been successful until there is actual possession – stresses the importance a clear/absolute rule.

c. Ghen v. Richi. Facts: Ghen killed a whale with a bomb-lance; Ellis found it on the shore

but instead of following custom and sending word to P-town he sold it to Rich, who sold off the blubber.

ii. Court: Custom and usage in the industry can be determinative in establishing first possession in this trade. The person who first shot the whale must be considered the rightful owner because allowing others to claim rightful ownership would devastate the whaling industry. Objective = maximize the capture of whales and sale of whale oil.

d. Takeaways from Pierson and Ghen:i. The rule that courts craft will vary extensively depending on what

goals it wants to promote (cheap whale oil, sustainability of whales, eradication of foxes).

ii. The rule preferred by whalers and foxhunters may not be a good proxy for the preferences of society as a whole.

iii. The meaning of possession can change depending on the circumstances, but it is clear that intention and time spent is not enough.

iv. Possession has an important element of communication – for courts to recognize ownership rights, others have to understand that an ownership right is being asserted. Cannot be a secret; gives notice to the rest of the world.

e. Keeble v. Hickeringilli. Facts: Keeble set up duck decoys and nets to capture ducks for profit on

his property; D fired guns to drive the ducks away from P’s pond.

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ii. Court: Every man may employ his property for his pleasure and profit; any person who maliciously hinders another in his trade or livelihood is liable to the other for so hindering him (unless he uses the same employment on his own property).

iii. One of the first cases about fair vs. unfair competition – there are certain ways of competing that are acceptable and some that are not. Foundational case in determining unfair competition – revolves around state of mind.

1. D can set up another decoy on his own land (fair competition) but he cannot fire a gun towards P’s land to scare them off (unfair competition) even though both would harm P. Law encourages the former because it increases social welfare and discourages the latter because it reduces social welfare.

2. Often cited for the propositions that: (1) there is a right not to have someone interfere with your livelihood (out of malice or not); and (2) conduct that reduces social welfare is generally actionable.

f. Shipwrecks/Salvage and Abandoned Property :i. Many statues have been passed to change the common law regime in

order to preserve and protect valuable historical property. Unclear whether these have been effective because they may discourage people from seeking these artifacts out at all.

ii. Common law approach was to distinguish between sunken vessels that were abandoned and those that were not (could be salvaged). To be abandoned, there must be an indication by the owner that they are no longer claiming ownership rights.

1. Generally after property is abandoned the first finder can take possession – the finder of the wreck had to actually reduce it to possession.

2. If the vessel was not abandoned, the law of salvor took over – rewarded those that were willing to go down and recover items from the wreck.

3. To be recognized as a salvor, you must show that you have exercised due diligence and are capable of salving the property – no actual possession requirement, just need physical presence and work being done.

g. Home Run Baseballs :i. Once a ball is hit out of the field of play it is considered abandoned

property.ii. Popov v. Hayashi

1. Barry Bonds 73rd home run ball; both parties claimed ownership by first possession but have different concepts of this rule.

2. Court split the ownership rights – ordered sale and equal division of proceeds (very unusual remedy). Popov had pre-possessory interest in ball; Hayashi had actual possession.

h. Oil and Gas Law :i. Common law rules for establishing ownership of fossil fuels were

grounded in principles of first possession. Oil was analogized to wild animals because both tend to move around after found.

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ii. First possession proved to be an unsatisfactory rule because the land containing the oil was usually not owned by one person – award of first possession led to a socially unsatisfactory outcome (a race to drain all the oil). Might be more sensible to award an exclusive right to pull out all the oil.

i. Types of Ownership :i. Individual ownership – one owner and one decision-maker.

ii. Joint ownership (couples or groups) – tenants in common; joint tenants; co-ops; corporations; LLCs/partnerships.

1. When property is owned as a group there has to be some form of governance (e.g. a board).

2. The more people that are involved and the more decisions that need to be made the more complex the governance structure needs to be.

iii. Government ownership (such as with natural resources/land).1. Low salience, not well known so accountability and responsiveness is

a problem.iv. Commons – no ownership.

1. Tragedy of the commons – where no one owns something that is valuable, it leads to undesirable outcomes and the value ends up being degraded.

a. In practice there were often well-understood norms about how to deal with commons.

2. Success is not inevitable – to make a reasonable prediction about whether a governance regime will emerge to deal with the tragedy of the commons we have to know about the society and the social norms.

a. In most new societies there was originally some property held in common because of diversity and risk-management.

B. Discovery a. The first person to claim an object establishes ownership over it;

revolves around a claim of ownership rather than actual possession of an object.

b. Johnson v. M’Intoshi. Facts: Johnson and his son inherited land bought from Piankeshaw tribe in

1775; M’Intosh bought same land from the U.S. gov’t in 1818; Johnson brought an action in ejectment to establish his superior claim of title.

ii. Court: Native Americans only possessed the right to occupancy/possession of the land, but did not have title to the land. The Europeans first established ownership by discovery and then transferred it to the U.S. – the Native Americans cannot claim ownership by discovery because they were not fully sovereign and didn’t have a concept of individual property rights.

iii. The chain of title for all parcels of land in America begins with the U.S. government – it has the exclusive right to extinguish occupancy and transfer ownership; any transactions made by the occupants is invalid and cannot be enforced in a court of law.

iv. Takeaways:1. Conquest gives a title that the courts of the conqueror cannot

deny (even if it conflicts with private/speculative ownership) – court treated use of discovery principle as inevitable.

2. Nemo dat – you can’t transfer what you don’t own.4

3. Court worried that so many people had relied on land grants from the U.S. government, so deciding it any other way would have been highly disruptive.

4. Anglo-American law has been hostile to restricting alienation, yet the court held that the federal government had the exclusive right to transfer title.

C. Creation a. Those that create something or bring new information to light have the

right to exclude others, make derivative works, sell it, etc. even if it is of minimal or no value.

b. Overview :i. IP rights created by Congress: patent, copyright, trademark

ii. IP rights created by common law (and legislature): trade secrets, right of publicity

iii. Rationale/justification for rewarding property rights to creators:1. Moral element/just deserts – people deserve to be rewarded for

their efforts.2. Instrumental – giving financial rewards to those who create

provides incentives for further creations.iv. Concern about follow-on works as a result of giving property rights to

creators – our cultural commons would be limited if those inspired by prior works were prevented from adapting those ideas into new works.

1. Things that are in the public domain can be reproduced in a new and innovative ways that would otherwise not exist.

2. Distributional concerns – the backup singer in Midler is barred from making any profit off of her voice, while Midler herself prospers.

c. International News Service v. Associated Pressi. Facts: INS collecting news printed by AP in its papers and billboards and

re-printing in its own papers without paying/citing AP; AP alleged INS’ activity amounted to unfair competition.

ii. Court: Holding for AP – no copyright in news, but court created a quasi-property right limited in time (while the news is “hot”) and in scope (applied only to INS).

1. This is a contrast to most property rights with are perpetual and good against the world – this is more along the lines of a contract right.

2. INS’ actions to appropriate the AP stories amounted to unfair competition because it was taking the product of AP’s investments and labor precisely at the point at which a profit was to be reaped – allowing this takes profit directly away from AP and ultimately would render the news-gathering business entirely unprofitable.

iii. Dissent (Holmes): There is no general right to forbid others from repeating words; there is no property right to protect these creations from being destroyed. Information is generally free, but INS has to give credit to AP.

iv. Dissent (Brandeis): Danger of too many property rights because it will frustrate later innovators and lead to less innovation – a dynamic society needs a big public domain in order to go forward.

v. Both dissents suggest it is the legislature’s role to create new IP rights.

b. Midler v. Ford Motor Company

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i. Facts: Ford wanted Bette Midler to sing in a TV commercial; when she refused Ford hired a “sound alike” and used this version (sounded almost exactly like Midler) in its commercial.

ii. Court: CA’s civil code §3344 didn’t apply because they were not using Midler’s likeness, voice, name etc.; looks instead to common law right to publicity. A voice is not copyrightable because the sounds are not fixed, but Ford used an attribute of Midler’s identity in an unauthorized way – by impersonating her distinctive voice, Ford was attempting to pirate her identity to sell a product.

1. Most IP rights are legislative in nature, most courts have not followed INS to expand judge-made property rights except in this area.

2. Implication is that Midler has labored to create something of value and should alone be able to reap benefits from it. In a way infringing on rights of people that sound like Midler to make $$ – worry about frustrating creativity by giving expansive property rights to Midler.

c. Wheel of Fortune Case:i. Vanna White claimed a property right to anything that reminds people of

her.ii. Judge Kozinski said this is wrong – IP rights are created at the expense

of future creators and public at large. Such a broad right would impoverish public domain and might shut down much of cultural richness that makes our society vibrant risks having innovation/creativity stand still.

D. Accession a. Assigns property rights of unowned or contested objects to the owner most

prominently connected to the property in question and to which ownership has already been established.

b. Accession is universal (in all property rights) and does not give rise to controversy.

c. Doctrine of Increasei. The offspring or increase of tame or domestic animals belongs to the

owner of the female animal.ii. Distinct from first possession – can’t assume ownership of an animal after

birth by taking it first.iii. Eliminated the problem of dealing with paternity – very difficult to

determine who the father was; this rule made it easier to adjudicate/more efficient.

d. Accretion/Avulsioni. Doctrine of accretion and avulsion (like increase) is universal (the same

throughout the world) accretion follows the river; avulsion leaves the boundary where it is.

e. Nebraska v. Iowai. Facts: Border between Iowa and Nebraska was defined as middle channel

of Missouri River; over ~25 years, river changed course so that it occupied a very different bed and flowed through a different area.

ii. Court: Doctrines of accretion and avulsion are universally recognized/beyond doubt – gives no consideration to updating them (unlike in INS, where court modified long-standing doctrines with respect to the news). The movement here was an accretion even though it was

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faster than normal because the pieces of bank that broke away immediately broke apart and changed river gradually.

1. Justice Brewer favors clarity and predictability over efficiency – applying the old rules in a strict manner is helpful in maintaining the peace even if it sometimes leads to arbitrary or bizarre results in some cases.

iii. Stands for the benefits of stability and predictability of property law doctrines.

f. Doctrine of Fixturesi. Defined as “a thing which, although originally a movable chattel, is by

reason of its annexation to, or association in use with land, regarded as part of the land.”

ii. This is a default rule – parties can contract around it.1. If there is any ambiguity, the parties should put it in writing so as to

protect themselves if the other party tries to remove property.2. If there is no obvious or explicit contracting around it, the law of

fixture determines what happens to the items.g. Strain v. Green

i. Example of a court struggling to update precedent.ii. Facts: Greens sold their house to the Strains; prior to leaving Greens

removed a number of items (water heater, blinds, mirrors, light fixtures, etc.), arguing that the property was movable and it was never their intent for the items to be fixtures.

iii. Court: The law of fixtures varies depending on whether the dispute involves the sale of real property, a landlord/tenant relationship, a mortgager/mortgagee relationship (foreclosure situation) because expectations will be different (someone who is foreclosing will not be surprised to find things taken from the home, but a buyer of home will be surprised).

1. The key issue is on the expectations of the parties.2. Court uses an objective standard – cannot consider the secret

intention of the sellers because there is an incentive for sellers to lie/deceive.

E. Adverse Possession a. Method by which someone can acquire ownership of another’s property by

possessing it without the owner’s permission until the statute of limitations has run.

b. Overview :i. Idea is that after a generation has passed, we let things lie where they are

because it’s too difficult to revise land titles – would lead to a lot of litigation and be big drag on economic prosperity.

ii. Benefits:1. Clears up uncertainty in land titles – there are a lot of lost or

erroneous land records; this does away with difficult disputes over chains of title.

2. Promotes economically efficient use of resources – if the owner is not paying attention to it and the possessor is making good use of it, it makes economic sense to allow them to keep it (maximizes societal wealth).

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3. Punishes sleeping owners – punish neglect to make it clear to property owners that ownership is not just a right, but a responsibility.

iii. Circumstances under which adverse possession generally arises:1. Boundary disputes (one of a variety of mechanisms)2. Color of title – mistakes in documents (usually a deed); prefer to let

things lie where they are rather than reorganize as a result of the mistake.

3. Undeveloped or uninhabited land – difficult to know what qualifies as possession. Are they using it in a way the true owner would use it?

iv. Elements of adverse possession:1. Actual possession – exercising dominion over the property in the

way the true owner would be doing.2. Open and notorious – true owner knew or should have known AP

was possessing land.a. The TO has to be put on notice that the property is being

claimed, but does not have to have actual knowledge of the possessor.

b. The TO will be charged with knowing what a reasonable owner would know.

3. Exclusive – not shared w/ TO or general public; AP is excluding others (as a TO would).

4. Adverse/hostile to the interests of the TO – claim of title/claim of right.

a. Must be w/o the TO’s permission and w/o any claim that derives from the owner.

b. Use that began as permissive and turned hostile unlikely to qualify unless there is an indication that the possession has turned hostile.

c. Majority view is that the state of mind of the AP is irrelevant (they don’t have to know that they are not the TO). AP does not have to have an intention to strip the TO of their property rights.

5. Continuous for requisite statutory period – all these factors must be satisfied for the entire statutory period.

a. Determined by the kind of possession the TO would engage in – if the property at issue is a vacation home, you just have to make use of it during the season it is intended as a TO would (Howard v. Kunto).

b. Tacking – AP’s can tack onto the possession of previous possessors if they are in privity with one another and AP’s can tack against successive true owners.

v. Possibilities for initial allocation of rights:1. Historical rule was that the surface owner owns everything from the

center of the earth to the heavens, but this is not workable in modern society.

2. Could allocate land underneath a property via first possession or accession.

3. Could assign ownership by discovery – the first person to explore and find it should be assigned the property rights.

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4. Choice depends on what incentives we want to promote – isn’t one clear right way to do so.

c. Marengo Cave Co. v. Rossi. Facts: Appellant owned property that contained the opening to Marengo

Cave; prior owners of his lands claimed complete possession of the cave; after being surveyed it was found that a portion of the cave extended below appellee’s land.

ii. Court: Because the cave was underground, apellee’s possession was not open and notorious – no way for the TO to see that it was being possessed. Apellee’s possession also was not hostile/did not act as an ouster to appellant.

d. Carpenter v. Rupertoi. Facts: P bought a home next to an undeveloped lot and cleared part of the

adjacent lot/used it as an extension of her lot to plant bushes, put a propane tank and extend her driveway; D bought adjacent lot and P brought an action to quiet title.

ii. Court: P did not obtain the adjacent lot through AP under a claim of right because her claim of right was not in good faith (knew its title belonged to someone else). Permitting someone to acquire land through adverse possession without a showing of good faith would recognize squatters rights and put a “premium on dishonesty.”

iii. A good faith requirement incentivizes people to lie; also eliminates the benefit of using AP to clear up chains of title in an efficient manner and forces future purchasers to make an inquiry as to whether the seller can transfer true ownership.

iv. The dominant rule is that state of mind of the AP is irrelevant. Minority rule is to require good faith; very rare to require bad faith – generally bad faith AP’s do not prevail (unsympathetic litigants often don’t win).

e. Howard v. Kuntoi. Facts: Several owners of property at summer resort destination discovered

that land they occupied didn’t match deeds; P brought suit to quiet title and assert ownership of the land occupied by D.

ii. Even though D had been in possession of the land less than 1 year, he argued that he and his successors had been living there for longer than the 10-year statutory period and thus had acquired the land through adverse possession by tacking.

iii. Court: (1) A party may prevail on a claim of AP if physical use of the property is limited to summer occupancy given the nature of the property – D was still possessing it as the TO would; (2) tacking of possession by subsequent occupants is permitted if the land is occupied under a mistake of fact provided the occupants are in privity (doesn’t matter that D had not occupied the home themselves for the requisite statutory period doesn’t matter because of tacking).

1. AP’s can “tack on” to the possession of previous adverse possessors assuming they are in privity of estate (there is a valid/official transfer of the property between the two parties – not true for successive trespassers).

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2. There must be privity between every sequential possessor of the property to continue AP, but the number of times it has changed hands is irrelevant.

3. The sellers of a property transfer whatever rights they have to buyer through the doctrine of privity and tacking. The court held that, summer use can amount to actual possession.

4. NB: There is also tacking against successive TO’s – the AP clock begins when the AP begins their possession and runs against subsequent TO’s. This can usually be discernable by looking at public records; TO #2 will also likely have an action against TO #1.

f. AP and color of title : Many states differentiate between those possessing under color of title and those that are not (statute of limitations is often lower for those under color of title). If you are occupying a portion of a property described by a writing (e.g., deed), you will be deemed to have possession of the entire property described by the writing.

g. AP against the government : Traditional rule was that AP did not run against government – a sovereign could not lose ownership rights through AP. Today, courts roughly distinguish between property held by governments in their national/functional capacity and property held in their proprietary capacity.

h. Disabilities :i. For a disability to toll the statute of limitations or result in an

altered statute of limitations, the TO must be subject to it at the time of the initial trespass.

ii. Disabilities can include: legal incompetence; insanity; under age; imprisonment.

iii. People can argue for more than one disability.iv. After removal of the disability, many states will provide an additional 10-

year period or will toll the SoL (restart the clock).v. Jurisdictions that give extra time mostly only do so if original SoL has

already run. But parties can make argument for how statute should be interpreted and courts are willing to make adjustments.

i. Adverse Possession of Personal Property :i. Generally raises questions of whether the possession was open and

notorious – most items of personal property are by their nature not displayed publicly.

ii. Guggenheim (NY) – favorable to TO (lets them reclaim their property years after it was taken).

iii. O’Keeffe v. Snyder (NJ) – less favorable to true owner (COA accrues when the injured party discovers or should have discovered that the property was taken).

j. Songbyrd, Inc. v. Estate of Grossmani. Facts: Bailee provided several master recordings of musical performances

to D; years later bailee asked for it back multiple times but never returned (evidence that possession had become adverse)

ii. NY law applies; SoL for conversion of personal property is 3 years.iii. Court: The SoL runs regardless of whether the TO is aware the property

has been converted – this decision stands in contrast with Guggenheim.k. Guggenheim Foundation v. Lubell

i. Facts: A painting was stolen from the Guggenheim (they didn’t alert police); two years later, a good faith purchaser bought the painting at an

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auction; Guggenheim later found out that the purchaser had the painting and sued to get it back.

ii. Court: The SoL begins to run only when the TO makes demand for return of the property and someone refuses to do so.

iii. This is in contrast to O’Keeffe, which held that the SOL will not begin to run until the injured party discovers or by exercise of reasonable diligence and intelligence should have discovered facts that form the basis of a cause of action (“discovery rule”) – that court wanted to give incentives for people to continue looking for property; if you have something valuable you need to monitor it.

iv. As a result of these holdings, when someone has lost property to a wrongdoer, the SoL is only 3 years from when it was taken, but in cases where the possessor is a good faith/bona fide purchaser for value, the SoL is much longer.

F. Sequential Possession a. Law of Finders :

i. TO can generally reclaim their property if they locate the finder/identify where the property is and bring an action for recovery within the SoL.

ii. Finder has a special interest that only the TO can defeat – even if they have obtained the property by trespass, theft, or by finding it. Any other rule would result in an endless series of unlawful seizures and reprisals.

b. Causes of Action:i. Replevin – action to recover the actual property.ii. Trover – action to recover the value of the property.

c. Armory v. Delamiriei. Facts: P found a piece of jewelry and took it to D to get appraised; D took

out the stones and refused to return it, thinking that he stole it.ii. Court: P has a superior claim to the jewelry; the finder does not acquire

an absolute property/ownership right, but does have a property right sufficient to “enable him to keep it against all but the rightful owner.”

iii. Example of how property rights are relative – case says nothing about P’s property rights relative to the TO.

iv. Jus tertii – absent an agency relationship, a party to a lawsuit cannot invoke the rights of a third party to claim superior ownership rights; possession of property cannot be defeated by setting up superior title in a third party.

d. Clark v. Maloneyi. Facts: Action of trover; P found logs floating in Delaware Bay and tied

them at the mouth of a river; D later took possession of the logs, claiming they had floated up the creek. P was in possession first; D is the current possessor.

ii. Court: The first finder trumps the second/most recent finder – stays with the traditional rule. The finder of a chattel does not acquire an absolute property right in it, but has such a right as will enable him to keep it against all but the TO.

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iii. Court is afraid that if they award property rights to finder two, it will create incentives for people to nefariously claim they found property from another.

e. Anderson v. Gouldbergi. Facts: P cut down 93 pine logs by trespassing on another’s property; D

took the logs claiming they were cut on property they had a right to; jury found that the trees were not on D’s land.

ii. Court: The finder has a right to retain property against all but the rightful owner even if acquired wrongfully/tortiously. It is irrelevant to the determination of property rights between these parties that P trespassed – D is not in a position to defend a third party’s property rights. Fact that someone in the world has better claim against P does not enable D to assert ownership.

II. TWO CONCEPTIONS OF PROPERTY

A. Theories of Property a. In rem – property as a thing.b. In personam – property as a bundle of rights.c. Common Law Categories of Property – Law of Finders and Lost, Mislaid, or

Abandoned Property:i. Lost property – owner has involuntarily and unintentionally parted with

his possession and doesn’t know where it is or has no good way of finding it.

ii. Mislaid property – something that has been put by the owner in a certain place (voluntarily parted with) that they subsequently forget to retrieve.

iii. Abandoned property – the former owner has communicated an intention to no longer assert possession rights. Not subjective; the owner has to do something to alert the world that they are abandoning property rights. Owner has voluntarily relinquished all claim to ownership – ownership goes to the finder. NB: It is very hard to abandon real property.

iv. Treasure trove – something of value (currency, gold, etc.) that can subsequently be used for bargaining. Has to have been concealed/hidden (usually buried) – the act of someone who looks like they were going to return later, not abandon it. If a long time has passed, it suggests the owner is never coming back.

v. Courts often struggle to determine what category to put property in.1. Linder Aviation Case: State bank seized an airplane on foreclosure;

took the plane to Linder be restored/maintained; Linder took of some of the panels and noticed that there was $18,000 of cash stashed behind the panels.

2. Can be argued that this is treasure trove, abandoned, lost, or mislaid.vi. Because of this confusion, many jurisdictions have enacted statutes that

replace all or part of this common law taxonomy with a statutory scheme. Important to be aware that such statutory regimes may supersede the common law taxonomy.

b. Jacque v. Steenberg Homes, Inc.

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i. Facts: D wanted to deliver a mobile home to P’s neighbors by cutting across P’s property; P refused to allow them to do so but D did anyways; there was no damage to the land but P brought suit for punitive damages.

ii. Court: A key property right is the right to exclude others – property law protects idiosyncratic property owners. Upheld award of punitive damages ($100,000) even though actual damages were nominal.

iii. When there is a bargain at least one party is better off and no parties are worse off. The fact that there was no bargain in this case implies that one party was left worse off because D did not meet P’s price/assessment of utility.

iv. The language of the decision is about dignity, autonomy, and protection of non-economic values (privacy, autonomy, etc.), not economic efficiency.

v. Stands for the fact that property owners have the right to exclude (even in the face of some danger to the other party). Absolutist view, applying settled law. Owners hold out until they are given an offer they feel is fair.

c. Hinman v. Pacific Air Transporti. Facts: P sued Pacific for continuously flying airplanes over his land at

altitude of < 100 feet.ii. The traditional adage (ad coelum) is that you own from the center of the

earth to the heavens – if taken seriously this would present many problems.

iii. Epstein: Think of air rights as a form of eminent domain – people lost property rights in the air above their property but they are compensated by the fact that they are able to take advantage of the benefits of airline travel.

iv. Court: Ad coelum never said that people owned the air above their land – the air is like the sea; it is not capable of ownership, everyone can use it. This issue was never presented before because there was no technology available to use it.

1. The point at which a person’s property becomes interfered with varies according to what the landowner can actually make use of. Landowner owns as much of the space above him as he can actually use, but only so long as he actually uses it.

v. Unlike Steenberg, the court does not take an absolutist view, but adapts the law to new technology – did not want to adopt a hard and fast rule.

d. J.E. Penner on Property Rights :i. Property has one essential feature/unifying theme – right to exclude

entire world from that thing.ii. These are rights in rem (no matter who does x, I can stop them); different

than contracts, where you get rights against a specific person or group of people.

iii. This view stands up in simple cases like in Steenberg Homes, but does not hold up as well in more complicated property cases where rights are less clear (like Hinman).

e. Tom Grey on Property Rights :

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i. Property is not just stuff or things – it is best understood as a bundle of different rights (sell, use, transfer, exclude, gift, etc.).

ii. Capitalism contains the seeds of its own destruction because it is built on the fact that property is defendable and protectable – if it turns out that there is “no there there” this presents a threat to the system (property will have to be broken down into smaller and smaller pieces over time).

iii. Dated opinion because this very thing has happened since then (i.e., fragmentation of mortgages into tiny pieces). Hasn’t destroyed capitalism, but has allowed it to move to the next level.

B. The Trespass/Nuisance Divide a. Nuisance

i. Anything that disturbs the free use of one’s property or renders its ordinary use of physical occupation uncomfortable.

ii. Private nuisance: A substantial and unreasonable interference with the private use and enjoyment of another’s land.

iii. Public nuisance: An interference with a right common to the general public.

iv. Monetary recovery only available to property owners that have suffered a significant harm to their property or privileges caused by the interference.

v. Nuisance is reciprocal – happens when incompatible people are interacting with one another, but not always easy to figure out who is a nuisance and who is not.

vi. Nuisance (unlike trespass) is not clear-cut – there is often a lot of difficulty in determining whether someone or something is a nuisance. SEE SECTION BELOW ON NUISANCE

b. Hendricks v. Stalnakeri. Facts: D had a well on his property adjacent to P’s land; P wanted to

install septic system but the only place they could do so is within 100 feet of D’s land/well (which would violate health code).

ii. This is a bi-lateral monopoly – the two parties have to deal with each other to come to a mutually satisfactory deal (maybe one party should buy the other out).

iii. Court: The well is at most private nuisance (just interferes with the neighbor rather than the world at large); a land use can be considered a private nuisance if it is (1) intentional and (2) unreasonable (determined by balancing the landowners’ interests to see if the gravity of the harm outweighs the social value of the activity).

1. The installation of the well was intentional but not unreasonable because it was not done maliciously and because both uses had similar social value and would have caused similar harms to the other. Not a private nuisance.

c. Comparing Trespass and Nuisancei. Trespass and nuisance set up very different conflict resolution regimes.ii. Trespass regime is one of exclusion (Jacque) – law identifies one party

as in charge (person who owns property); they have absolute right to exclude (except in some very extreme situations, like emergencies).

iii. The law of nuisance is an illustration of the “bundle of rights” conception of property. Property rights are complicated – just because you have the right to exclude in some situations does not mean you have it in others.

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iv. Nuisance law is all about context, proportion, and governance. In order to have a governance strategy that nuisance law embodies, there has to be a strong, well-functioning court system.

d. Concept of Externalityi. Definition: The result of a decision by an actor that fails to take full

account of the costs of that decision. The private costs or benefits to the producer differs from the total social costs or benefits entailed in its production or consumption.

ii. Two ways to deal with externalities:1. Regulations on federal, state, local level (environmental regs,

zoning ordinances, etc.).2. Legal entitlements – assigning rights/entitlements to people and

allowing them to trade. Property rights initially assigned by nuisance law; problem is that nuisance law may not be up to challenge because it’s fairly amorphous. Parties free to bargain around these laws.

iii. Externalities are concerning because they tend to result in an inefficient use of resources. Not maximizing social wealth if producers are not taking full account of costs of their actions – if they had to take full account they wouldn’t undertake action because costs would outweigh benefits.

iv. Hard to accurately determine the cost – e.g., how to account for health and life?

v. Two key ways to assign value:1. Willingness to pay (e.g., I will pay $2,000 to have rooster removed

from my neighbor’s property).2. Willingness to accept (e.g., I will not accept less than $200,000 for

my house).vi. Endowment affect – people sometimes value things more than they are

worth once they have them (e.g., high-profile sports tickets). Things you get for free or pay a low amount for that you then don’t want to sell for a much higher price.

e. Ronald Coase – The Problem of Social Costsi. Designed to show why private ordering can be a good (but not perfect)

solution for incompatible uses; pushing back on the idea that the only solution to incompatible uses is government.

ii. Theory: Private parties can and will bargain around entitlements bestowed upon them by the legal system (somewhat of a tautology – only happens if there is no or low transaction costs). The market determines how resources will be used (they will be used by those who value them the most/in the manner that provides the most benefit).

iii. Once property rights are allocated the owner of the property is free to bargain with others to transfer the rights if two conditions are met:

1. There will be gains from trade (at least one party will benefit).2. Transaction costs are not so great as to inhibit the transfer of

property rights (if transaction costs are zero, the initial assignment of rights will not matter at all).

iv. For the Coase theorem to be useful, the following must be true:1. Humans are rational actors who seek to maximize their well-being.

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2. Values can be expressed in common metric ($) – but often hard to put a price on things.

3. The absence of wealth effects (those with fewer resources won’t have fewer options) – assumes that capital markets work.

a. Cave example: Property law will assign ownership to someone (finder, surface property owner, etc). Theoretically anyone who values this more than the initial owner will be able to buy it even if they don’t have the money (they can get the money by a loan, selling stock, etc. because they have a good idea).

b. But wealth effect does matter in some instances – e.g., a poor person can’t get the money required to buy an expensive car.

v. Transaction costs:1. Fragmentation costs – if initial assignment of the entitlement is to

many different parties, hard for a future purchaser because cost of bargaining with each owner is very high; also leads to holdout incentives for last few owners to sell (holdout for a huge sum of money).

2. Bilateral monopoly – two parties can only deal w/ each other because one property owner needs something that can only by provided by other. Often results in a stalemate.

vi. Coase: Regulation is not the only solution to inefficient uses – private parties (given the right circumstances) will reach deals that make them both better off.

C. Property and Equity a. Law and Equity Divide :

i. Equity entails mandatory decrees against particular persons (perform/refrain from performing certain acts).

ii. Equity originally functioned as a safety valve because the doctrines administered in courts of law were often precise and led to seemingly unfair outcomes.

iii. Property law remedies are usually equitable; this is in contrast to contracts where equitable remedies are very unusual. Such as:

1. Easements by estoppel – when someone has allowed another onto their property, they can lose rights to it if the representation was that it was to be permanent.

2. Equitable servitude – can be prevented from doing something on your property or be obligated to do something if court finds it will be inequitable to do/not do something.

b. Baker v. Howard County Hunti. Facts: D rode on people’s property during hunts with packs of dogs; P

was conducting experiments on animals on his property and didn’t want them to be disturbed by the hunt club.

ii. Court: The decision to have the hunt on P’s property is his decision, not the hunt club’s. Costs and benefits are irrelevant because this is a trespass, not a nuisance. The rights of the foxhunter are subordinate to the landowner’s right to exclude.

1. P can get an injunction because they have no remedy at law (because many of their injuries cannot be valued and because of the continued nature of the trespass).

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2. A defense against getting this remedy is if P had unclean hands, but the court held that shooting the dogs did not give them unclean hands.

iii. NB: This problem could have been resolved by private ordering (buying rights to the land) or regulation (P could try to get the county to prohibit it).

c. Equitable Remedies Overview :i. Equitable relief is not automatic, requires:

1. Clean hands – the person seeking it cannot have done wrong. 2. No adequate remedy at law – often occurs when the damages are

intangible and incapable of measurement.ii. Once there has been a government regulation, parties are not free to

bargain around it (e.g., there can be no nuclear waste dump on my property, so I cannot bargain with people to put one there).

1. But parties can bargain around a court’s decision (selling the injunction) – there can be a sale of property from one to another. Parties can bargain with each other after the issuance of an injunction.

d. Pile v. Pedricki. Facts: Encroachment case – D (in good faith) built a wall that encroached

on P’s property ~1.5 inches; D offered to chip away at the wall but P refused to allow them on his property and requested an injunction to force D to remove the wall.

ii. Court: D committed a trespass (has no right at law or equity to occupy land that does not belong to them) – precedent dictates that it grant the injunction.

1. Court is sympathetic to D because it sees this as wasteful – divides up the costs between the parties and gives them a year to get the wall down.

2. Even though this is a tiny encroachment and did not significantly affect the value of P’s property (and would cost D a great deal to remove), P has a right to demand the encroacher get rid of the wall on his property.

iii. This hard and fast approach would not be taken today, but does allow for clarity of expectations and provides strong incentives not to trespass.

e. Golden Press, Inc. v. Rylandsi. Facts: Encroachment case – D constructed a one-story commercial

building next to P’s property; one wall of the building extended 2-3.5 inches beyond the property line; P requested an injunction after the building was completed.

ii. Court surveyed the various options in encroachment cases (no universal rule):

1. Injunction mandating removal is the ordinary remedy (as in Pile), but is not to be issued as a matter of course (courts have some discretion).

2. Do nothing – de minimis trespasses are sometimes ignored.3. Grant damages based on the reduction in value of the

trespassed upon property or the benefit to the trespasser (allow the wall to stand).

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iii. There is a presumption of good faith unless there is a reason to think otherwise (more efficient); no consideration was given to D’s possible negligence.

iv. Because D’s encroachment was unintentional and slight (de minimis), court denied P’s request for a mandatory injunction and instead awarded damages. Expense and hardship of removal would be so great relative to any advantage to be gained by P that it would be unconscionable to require removal.

1. Relative hardship should be considered and court should not be party to extortion.

f. eBay Inc. v. MercExchange LLCi. Supreme Court created a four-factor test a patent holder must satisfy for

the court to grant a preliminary injunction.1. Suffered an irreparable injury;2. Remedies available at law are inadequate to compensate for the

injury;3. Considering that balance of hardships between the plaintiff and

defendant, a remedy in equity is warranted; and4. The public interest would not be disserved by a permanent

injunction.ii. Has become “the test” for whether a permanent injunction should issue

regardless of whether the dispute in question involves patent law (IP, contract, state tort law, constitutional law, etc.).

g. The Ex Ante/Ex Post Problem :i. Merrill and Smith argue that courts are drawn to consider things ex post

because that is how the issues are presented to them.ii. Looking at something from an ex post perspective leads people to

consider the cost of fixing the problem and the waste it would lead to.

iii. Looking at something from an ex ante perspective leads people to consider how the decision will change incentives going forward. High courts tend to follow this method because they are worried about the long-term implications of a ruling.

h. Mistaken Improversi. Their actions enhance the value of property they do not own.ii. Generally a person that has provided benefit to neighbors has no

recourse because we don’t want people taking things into their own hands. Common law rule was no compensation for a benefit not bargained for (except for actions in an emergency, where there is no opportunity to bargain).

iii. American law has struggled with the problem of the mistaken improver – two distinct approaches to this issue (one in law and one in equity):

1. The legal rule was that the building/improvement becomes a fixture and belongs to the owner of the land – the builder is without remedy.

2. But courts of equity wanted to prevent gross injustice/unjust enrichment – there were several ways to deal with this (see Producers Lumber).

i. Producers Lumber & Supply Co. v. Olney Building Co.

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i. Facts: D had sold Lot 8 to P (who planted trees on it), but forgot about the transaction/thought it was still his property and began to build a home on the lot; the house was almost complete before the parties became aware of the mistake; after failing to reach an agreement with P, D sent his crew to demolish the house.

ii. Court: D acted maliciously in demolishing the house; awarded damages for P of $5,000 (the stipulated value of the home).

1. D is a bad actor because he has destroyed wealth/property and has circumvented the judicial process. Once negotiations break down, the law comes into play; parties are not free take the law into their own hands. The law frowns on the destruction of wealth.

iii. If D had not destroyed the house the court could have:1. Taken the Pile approach – no equitable relief for D because he was

careless in keeping track of his property rights and ignored signs that it was not his. This is mostly a thing of the past – very unlikely to happen today.

2. Fashion an equitable solution:a. Make the owner pay the improver for the increase in

value of his property.b. Order the sale of property from the owner to the good

faith improver.c. Order the sale of property to a third party and divide the

money between the owner and the good faith improver.iv. Dissent: Self-help removal is an option for mistaken improvers in TX.v. This illustrates how devastating the consequences can be when

negotiations break down. Not unusual for bilateral monopoly situations to result in some destruction of value – mutually beneficial bargains are rarely met.

III. OWNER SOVEREIGNTY AND ITS LIMITS

A. Protecting the Right to Exclude a. Protection of Property :

i. Self-help1. Can include locks, fences, force, physical occupation, dogs, etc.2. This right has been dialed back in recent years, property owners are

less able to use it than they used to, but it is still an important mechanism.

3. Crucial to proper functioning of property law – legal process is expensive & cumbersome.

4. There are certain dangers/fears associated with self-help, including the threat of violence, confrontation, and accidents that lead to injury or death.

ii. Assistance from the state1. Criminal law – brought by the state.2. Civil law – brought by the individual.

b. Criminal Laws Protecting Property :i. For real property, usually involves trespass.

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1. Trespass not a common law crime – criminalizing trespass began to take form in the 20th century and initially only involved fenced land and certain prohibited certain activities.

2. Today criminal trespass statutes are broader, but only apply if the trespasser is alerted to the fact that they are on someone else’s land (by being told, seeing a sign, etc.) or when their license to be on someone else’s property has been revoked.

3. Penalties are modest, higher for arson/burglary where some form of real harm committed.

ii. For personal property, usually involves larceny.c. Civil Actions for Real Property :

i. Trespass – action for the individual in actual possession of the property.ii. Ejectment – action for true owner of land against a person currently &

wrongfully in possession.iii. Nuisance – no analog to nuisance for protecting non-real property

interests; applies to interference with the use and enjoyment of real property

iv. Replevin – a suit that seeks the return of personal property; often happens when creditors try to get money and property back.

v. Conversion – when someone takes property from another without consent or when a willing possession has become hostile.

vi. Trover – seeks damages/compensation for wrongful conversion of goods/personal property.

vii. Trespass to chattels – once thought of as “conversion’s little brother,” but has become an important legal concept in recent years. Legal precedents are not entirely clear about its elements.

1. Historically, not clear whether courts required actual damage to the chattel as opposed to mere dignitary harm to the owner (as in Steenberg Homes).

2. RST definition – person is liable only if he dispossesses the other of the chattel, deprives it of value, deprives the owner of use for a period of time, harms the owner, …

d. Intel Corporation v. Hamidii. Facts: D was fired by Intel and began sending all of the company’s

employees mass emails; Intel was unable to block his messages (incapable of self-help).

ii. Intel argued it had the right to exclude his electronic messages/entry just as it has the right to exclude people from physically entering their property.

iii. Under CA law & RST, for a trespass to chattels claim, P has to show damage to chattel/property.

iv. Court refused to update law/extend it to emails that don’t damage the computer system itself. Rejected Intel’s argument that D was damaging company property by costing company time because time and employees are not chattel (even if legally protected interests of possessor).

1. NB: The court could have extended the law to say that it involves using the company’s chattel to cause it harm, but refused to do so.

2. Court differentiated from other mass email cases (CompuServe) where the emails were actually slowing the servers down because of

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the volume of emails; this is not the case here. Intel is being punished for setting up a very good email system.

3. Hamidi also looks like a nuisance, so it is possible that Intel could have requested that CA recognize a new “nuisance to chattels” COA.

v. Prof. Epstein suggested trespass to chattels claim should be extended to all cases of unauthorized electronic contact between computers w/o harm requirement – like how any physical trespass triggers liability. Court rejected because this idea because it would lead to excessive privatization of the internet – increasing transaction costs and making commerce prohibitively expensive.

vi. Intel may have been more successful in stressing the limited nature of the property right it was asking the court to recognize (compare to INS v. AP), but court argued it’s not body to recognize such a right/effect this sort of change – this is the legislature’s role (like Brandeis dissent in INS).

vii. Mosk dissent argues that this is analogous to trespass to physical property (the leafletter) – the majority is reading the precedent to narrowly.

e. Berg v. Wileyi. Facts: P ran a restaurant and leased the premises from D; the lease

provided that P would operate the business in a “lawful and prudent manner” and that D reserved the right to retake possession should the lessee fail to meet the conditions of this lease; P was remodeling without D’s permission and was operating a kitchen in violation of the health regulations.

ii. D took a locksmith and cop and changed locks. Law in MN (common law) was that a landlord can retake possession if legally entitled to possession and means of reentry are peaceable.

iii. Court decided to change MN law with respect to repossession of property by landlords in a prospective manner. Held that manner D retook property was not peaceable – created a substantial risk of violence. Noted that there is trend amongst states away from repossession by self-help – argued a streamlined legal process will allow for efficient dispute resolution.

1. Different approach than the court in Hamidi, which held that if there is to be a change in the trespass to chattels law, it has to come from the legislature this court believes it is the appropriate body to change law and applied it to the litigant in front of them.

iv. Self-help has continued to be very important in landlord repossession of property in the years after this decision – the trend this court recognized lost steam.

f. Williams v. Ford Motor Credit Companyi. Facts: P failed to make payments on her Mustang; repo men came at 4:30

am; P ran out and to stop them, but ultimately allowed them to take the car. P argued it was not a lawful taking.

ii. AR law follows the UCC – the owner of a security interest in the car has a right to retake the property unless they breach the peace.

iii. Court: This was a legal taking because P did not raise an objection and the taking was accomplished without any incident that might tend to provoke violence.

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1. P may have put herself in a worse position by taking a peaceful approach to the situation – seems like it will create bad incentives.

iv. Dissent: The reason the situation did not turn violent was P’s restraint.g. Rationale for allowing self-help :

i. Limited public resources (not referenced in Berg) making everyone go to court would require more judges, police, etc.

ii. It would ultimately pass costs on to consumers and taxpayers – state and local governments cannot run deficits like the federal government can. Repo men are much cheaper for sellers of goods than is resort to the legal process.

iii. NB: Self-help by private parties is exempt from due process constraints – creates an incentive for property owners to make use of it rather than the judicial process.

B. Exceptions to the Right to Exclude a. The right of property owners to exclude others is broad, but is not absolute.b. Ploof v. Putnam

i. Example of necessity right to exclude.ii. Facts: P tied his boat to D’s dock during a storm; D had his servant untie

the boat, causing it to hit the shore and broke apart.iii. Court: D had a duty to allow P to moor the boat for the duration of the

necessity right; when D’s servant untied the boat, he committed a trespass.

iv. Right to necessity because P was in grave danger; he has a right to be there for a limited time to tie up to the dock so as to be safe.

v. Necessity privilege is limited time and scope – what would be a trespass if there was no privilege is simply the right to be there. Damages to fair market value of the property are minimal, so not many of these cases are litigated.

c. Other examples of necessity privilege :i. Animals that are not under control – as long as a reasonable effort is

made to control them, other landowners cannot exclude them.ii. Going around a temporary obstruction of a public way by going onto

private property – owner of property cannot even collect fair market value; their right to exclude is completely abrogated.

iii. Entries onto the land of others to save property or to protect your own life/flee an assailant.

d. McConico v. Singletoni. Example of custom right to exclude.ii. Facts: P told D that he did not want him hunting on his property; D said

no and continued to hunt on his property.iii. Court: Custom dictates that property owners can’t exclude others

from land that is unenclosed and unimproved (wild land). If you’re not using land, can’t exclude others from enjoying land – allowed hunters to pursue animals across broad expanses of land for their well-being.

1. Suggests that P is somewhat of a misfit that is not willing to conform to the societal norms (one of which is to go onto others land to hunt).

2. This custom is so engrained that government itself has limited ability to abrogate this right.

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iv. Would not be true today, but remains generally true that hunting is allowed unless the property owner has expressly forbid it. Usually cheap and easy, such as by putting up signs or markers.

e. Public Accommodation Laws :i. At common law, common carriers were charged with duty to serve public

at a reasonable cost. This happened because they: (1) were granted an exclusive license by government, so it is quasi-public; and (2) enjoyed a natural monopoly, which causes problems if they choose who to serve.

ii. River ferry is different from night club.f. Uston v. Resorts International Hotel, Inc.

i. Facts: D (casino) wanted to exclude P because he was counting cards.ii. Casinos in NJ were governed by a comprehensive regulatory regime

(Casino Control Act), which issued new rules via a Commission.iii. Court: D does not have right to exclude a card counter because

Commission had not created a rule allowing such an exclusion (the ex post perspective). Court then used the common law to set out an ex ante rule for other exclusion cases (the right to exclude in any other case) – this is dicta.

1. Traditional rule was that provided that a business is not a common carrier and does not violate any anti-discrimination laws, they had a right to exclude anyone. This rule disregards the right of reasonable access.

2. Court rejects this rule, pointing out that in recent years NJ has brought back the right of reasonable access.

3. State v. Shack – recognized a limit to the owner’s right to exclude (outlier case). Employer can’t deny a migrant farm worker his privacy or interfere with his opportunity to associate with people on the employer’s property.

4. State v. Schmid – constitutional right to distribute literature on a university campus. Limited exception to the right to exclude specifically for universities because they are traditionally places where ideas are shared.

iv. NB: In general, states have taken an approach more in line with Brooks v. Chicago Downs Assn., Inc. – park can exclude for any reason or no reason at all, as long as there was no discrimination based on race, color, creed, national origin, or sex. The common law freedom to have access can generally be tempered by the ability of the owner of private property to exclude – the market will punish owners that are capricious, so members of the public don’t need specific protections.

C. Other Powers – Licenses, Bailments, Leases, and Easements a. Other Powers of the Sovereign Owner :

i. License – Operates as a waiver of the owner’s right to exclude for a limited time and purpose; a licensee is not a trespasser unless they exceed the scope of the license.

1. The line between licenses, leases, and bailments is not distinct – licenses can be difficult to categorize because unclear whether they are a property right, a contract right, or neither. Trend to treat license given for consideration like a K for purposes of dispute resolution.

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ii. Bailment – divides rights to possession to property along the axis of time – no transfer of ownership to the bailee but the bailee does have a right to possess for a limited time and a limited purpose.

iii. Lease – owner contracts to grant a tenant/lessee exclusive possession of specific real or personal property; usually for a fixed term and in exchange for rent.

iv. Easement – nonpossessory interest in the property another person possesses; gives the holder a right to use another’ land for a specific purpose.

b. Wood v. Leadbitteri. Facts: P paid to enter a race put on by D; P was later told to leave and

refused, then was physically removed from the event.ii. Court: D was free to revoke the license so long as he provided reasonable

notice and time to leave. Distinguished between a grant and a license.1. Licenses are completely revocable at whim of owner unless

accompanied by a grant of a property right (e.g., a license to hunt deer on private land results in killing a deer – once deer is dead, landowner can’t revoke license) case stands for the idea that owner has complete right to revoke a license (with proper notice and time to leave).

2. Seems harsh, but some say that the market can take care of this if the owner began to exclude people for no reason after paying, no one will go.

3. Also might sound like this is a contractual claim – as license law has evolved it has come to look more and more like contract.

iii. Court notes that sometimes property rights are created through a deed and sometimes they are created by a grant.

1. The ticket here was not signed. It is important to the court that P is not claiming he is a grantee – instead it is just a license for consideration.

2. A grant happens in situations in which the unlawful has been made lawful by the property owner. The license then becomes irrevocable but only to the extent necessary to vindicate the property right created by the grant.

c. Marrone v. Washington Jockey Club of the District of Columbiai. Also involved a dispute about when licenses can be revocable.ii. Justice Holmes grounded his decision in intentions of the parties – the

tickets to go to a race don’t create a right in rem (a property right good against the world); looks instead to terms of the bargain. Can be understood to bring in contract law to bring predictability to law of licenses.

1. The ticket does not create any kind of fractional interest in the property – it just recognizes a relationship between the parties.

2. The issue was not that there was no conveyance under seal, but that the parties didn’t intend for it to provide a property interest.

d. Evolution of the Law of Licenses :i. Holmes approach – look to the intentions of the parties.ii. Equitable principles – if a case arose where the result looked unfair,

courts would use their power in equity to limit the concept that licenses are revocable at will.

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iii. Hurst v. Picture Theatres, Ltd. – court declined to follow Leadbitter and held D liable for assault and false imprisonment for excluding P; still led to a lot of confusion.

iv. Easterbrook opinion in ProCD.e. ProCD v. Zeidenberg

i. Facts: ProCD sold software that lists phone #’s and other info; the license (inside box, not on top) prevented buyers of the consumer product from reselling it to commercial users or to use the product for commercial purposes; D bought the software and started an online business to resell the information contained in the CD.

ii. Court: P cannot copyright info contained in the software because it is in public domain, but it can establish a relationship with customers via contract law. Terms on outside of the box were just an offer to read more terms, if D didn’t like the terms inside the box he could have returned it.

1. This is a contract law issue, not a property law issue – one way to read this case is that in this particular instance, all that is needed is contract law because the “license” in question was really more like a contract.

2. Does not stand for idea that license law is completely irrelevant; the court acknowledges that there may be some differences between the two (though not clear what they are).

f. Bailments:i. Questions remain about the duties of bailees and applicable standards of

care.ii. Justice Story’s taxonomy

1. When the bailment is for the sole benefit of the bailor (the person taking it is doing the person delivering it a favor), the law requires only slight diligence on the part of the bailee – answerable only for gross neglect.

2. When the bailment is for sole benefit of bailee (the person you are delivering it to is doing it for your benefit), law requires great diligence on the part of bailee – responsible for only slight neglect because often concern that holder will be in cahoots with someone else.

3. When the bailment is reciprocally beneficial to both parites, the law requires ordinary diligence on the part of the bailee – responsible for ordinary neglect.

g. Allen v. Hyatt Regency–Nashville Hoteli. Facts: P drove his car into D’s garage and left car, which was later stolen;

issue is whether this is more like valet parking (bailor/bailee relationship) or parking in an open lot (license relationship).

1. NB: Some courts have drawn a firm line between valet parking and any other situation where you do not turn over your keys.

2. Court in McGlynn v. Parking Authority of City of Newark ignored the bailment/license taxonomy – what matters is the level of care that is expected from a parking authority.

ii. Court maintained the bailment taxonomy and held that this situation fit into the bailment model. Dissent argued this was more like a license situation.

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IV. FORMS OF OWNERSHIP

A. Divisions by Time – Present and Future Interests a. Overview :

i. Future interests allow for the division of ownership along the axis of time.ii. The law provides a limited menu of estates in land – if unclear what type

of interest was divided/transferred/created, courts will look at the facts and fit it into one of the discrete categories rather than fusing them together.

1. Intent matters, but the grantor doesn’t always get what it intended.iii. Created because of recurring tensions about a property owner’s dominion

over their property and the power to determine what happens to their property after they die and the inherent conflict/chaos that often results in these situations.

iv. There are much more effective ways to do this today, such as through the creation of trusts and servitudes – these have replaced defeasible fees as a way for the property owner to control what happens to their property after they die.

v. A remainder is contingent if identity of remainder is not known OR the remainder is subject to a condition precedent (something that must happen before possession of property can be taken).

vi. All of the interests need to add up to a fee simple absolute.b. Present Interests :

i. Fee Simple Absolute1. Entitles interest in property right now and is perpetual/eternal –

your interest in the property will survive you.2. Does not end when you die (in contrast to a life estate) – can be

transferred/left to another person.ii. Life Estate

1. Generally created in the context of trusts. Three trust entities:a. Settlor(s) – provides the money or property for the trust.b. Trustee(s) – legal owner of the property; able to manage

and/or sell the property.c. Beneficiary – equitable owner of the property.

2. Ownership divided along the axis of time; allows ownership for life.3. Usually measured by life of the holder – when they die, their

ownership rights die with them. BUT sometimes life estates are measured by another person’s life.

4. Raises the question of who owns the rest of the interest in the property.

a. Reversion = future interest held by the grantor.b. Remainder = future interest held by a third party.c. If the conveyance is simply “to x for life” and there is no

explicit description of what happens afterwards, there will be a reversion.

d. If the conveyance says “to x for life, and then to y” there will be a remainder (y will have the interest for the remainder of their life).

e. Whatever the grantor doesn’t convey, they retain. If there is no provision for it, there is a reversion.

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f. If there is no provision in the owner’s will, intestacy statutes dictate who it goes to (strong preference for family members).

iii. Defeasible Fees1. Overview:

a. Require specific language – it is rare to see a court find that a defeasible fee has been created absent the specific language required for each type.

b. Even with the required language, courts are reluctant to find that the condition has occurred leading to forfeiture of the property.

2. Fee simple determinable (FSD)a. Ends automatically upon the occurrence of a named

event, whereupon the grantor or grantor’s successor takes the property.

b. Created by specific language of duration, including “as long as,” “so long as,” “while,” “during,” and “until.”

c. Possibility of reverter = future interest that follows the FSD (exists from the moment the FSD is created).

i. Ex. O grants Blackacre “to Springfield Law School as long as it is used for instruction in the law, then to O.”

ii. If the condition is breached, the forfeiture of the property is automatic – the holder of the possibility of reverter doesn’t have to do anything to get the property back (this person then gets a fee simple absolute).

iii. Though the holder of the possibility of reverter often does not know of the breach of the condition, which can lead to transfer of property rights through adverse possession.

3. Fee simple subject to condition subsequent (FSSCS)a. Continues indefinitely except that, upon happening of the

named event/condition, the interest does not automatically end, but can be ended by action by the grantor or grantor’s successor.

b. Different than the FSD in that the forfeiture is not automatic.c. Also called “power of termination” or “right of entry/reentry.”d. Created by language of condition – “but if,” “on condition

that,” “provided that,” “provided however,” and “if.”e. Usually the holder of the power of termination will bring an

action to eject the present holder or will engage in self-help (though they have to be careful about state limitations on this as in Berg v. Wiley).

f. There are some ambiguities that make recovery by the holder of the power of termination more difficult (e.g., statutes of limitations for recovery of property, various equitable defenses for holders of property, doctrine of laches, etc.).

4. Fee simple subject to executory limitation (FSSEL)a. Occurs when the defeasible fee is followed by an interest not

reserved to the grantor (i.e., granted to some third party at time of conveyance of present interest) – contains explicit provision that allows the future interest to be held by a third party.

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b. Grantor transfers his entire interest to the present estate holder and the future interest to a third party (executory interest).

c. Created by language such as “as long as” or “but if” (language that would create a language that would create either an FSD or FSSCS, BUT followed by a future interest specifically created for third party.

d. Ex. O grants Blackacre “to Springfield Law School as long as it is used for instruction in the law, then to the Springfield Animal Hospital.”

e. Unlike remainders, which follow a life estate and naturally come into possession (upon the death of the previous holder), the executory interest divests/cuts short the previous holder.

f. Not clear whether the forfeiture is automatic, but the conventional wisdom is that the interest is automatically cut short by the executory interest upon happening of the named event, regardless of whether durational or conditional language is used.

B. Conservation of Estates a. Conservation of Estates/Principle of Conservation

i. When a transfer is made, all of what the grantor had must be accounted for.

ii. Applies whenever a grantor might convey something less than her full interest.

iii. Presumption against fragmentation and forfeiture of property rights.

b. Williams v. Estate of Williamsi. Facts: G.A. Williams created holographic will (handwritten); provided that

his 3 unmarried daughters would have possession of land during their lives, but interests terminate if they marry; P is only survivor of the 3 children named in will; D is only other surviving child of G.A.

ii. Issue: What form of possessory interest did the will create? Problem is there was no provision for the remainder interest after the daughters’ possessory interest ends. P argued for life estate rather than fee simple absolute.

iii. The language of will was very suggestive of a life estate that is determinable upon marriage, but there is a strong presumption against resorting to intestacy when interpreting wills – language is not binding. If ambiguity about what a grantor transferred, presumption is that they meant to transfer all of their interest this leans toward fee simple absolute.

iv. Court: Because there was no provision for future interest, property will be divided up amongst heirs comes down on side of giving more weight to language rather than the presumption against intestacy.

c. Application to Non-Real Property :i. Gruen v. Gruen

1. Facts: Owner of artwork wished to divide ownership between himself and his son; sent a letter saying he intended to leave the painting to his son after his death; after his death, the widow argued the letter meant nothing.

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2. To give a gift, there must be intent, delivery, and acceptance.3. Son argued that his father divided the full ownership into a life

estate (which his father retained) and a remainder interest.4. Court: The father gave an inter vivos gift to his son – he is perfectly

capable of dividing the interest in the painting over the axis of time.ii. Whether taxonomy of present/future interests apply to non-real property

has never been clear.1. There are equitable property rights in non-real property that are not

possessory (i.e., future interests).2. It is not advisable to proceed in the way the father did in Gruen,

because it is not always clear that this taxonomy applies to personal property.

C. Disclaimer, Waste, and Restraints on Alienation a. Disclaimer :

i. Reasons for disclaiming property:1. Negative value2. Tax considerations

a. Relation back – if you want to pass the rights on to your children immediately it will be as if you never held the property rights.

3. Defeating creditorsa. Though there are laws that prevent people in bankruptcy from

disclaiming property; some states also limit ability of people in debt to disclaim property.

b. Disclaiming to defeat federal tax obligations will not work (Drye v. U.S.) property interests for the purposes of federal tax law may be distinct from property interests for the purpose of state law. Drye’s inheritance is a property interest subject to federal tax liens; state disclaimer procedures will not defeat federal disclaimer laws.

b. Brokaw v. Fairchildi. Facts: Isaac Brokaw built four estates and left them to his children in life

estate; George Brokaw wanted to tear down the estate left to him to build an apartment building – issue is that he only had a present interest in the property.

ii. Isaac clearly intended to keep properties in family because he gave life estates to his children and then a series of remainder interests to other members of family. Problem is that this fractionates the property rights, which can lead to chaos – courts have generally held that only those with indefeasibly vested remainders or those with contingent remainders can have standing in courts.

iii. Court: George cannot take action on his own accord. Even if apartment building would increase value of property, property law protects those with idiosyncratic values. Also, the fact that they were not able to reach an agreement with him may indicate that George was committing waste.

c. Types of Waste :i. Affirmative waste – misfeasance/an affirmative act taken by the present

possessor that causes excess damage to remainder interest (e.g., depletion of all the minerals or removal of all the trees).

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1. The present holder can engage in “normal” extraction – to determine whether behavior is normal, ask whether this is something that you would expect from a holder of a fee simple absolute; is this good stewardship?

ii. Permissive waste – nonfeasance; occurs when the life tenant fails to take some action with regard to the property and the failure to act is unreasonable and causes excess damage to the reversion or remainder (e.g., failure to repair a failing roof resulting in water damage).

iii. Ameliorative waste – affirmative act by the life tenant that significantly changes the property but results in an increase, rather than diminution, of its market value.

1. This is controversial – see Melms v. Pabst Brewing Co., where Pabst owned a life estate, but thought they owned a fee simple absolute. They tore down an old brewery and constructed a new one. The court held that Pabst did not have the right to do this.

d. Valuation of Interests :i. Present valuation of a life estate depends on age of life estate holder.ii. A life estate is worth less and less as the life estate holder grows older

and older.1. This matters if the holder wants to sell their assets – usually life

estates are sold to the future interests holder, but rarely can be sold to a third party.

2. This can also be a benefit to some who want to reduce the benefit to the elderly because the value of the life estate decreases over time.

iii. Williams v. Estate of Williams1. G.A. Williams set up a situation whereby older her daughters got,

fewer assets they had and the more vulnerable they were to their relatives who held future interests in property.

e. Restraints on Alienation :i. Absolute/blanket restraints on alienation are void.ii. These clauses are just struck from the rest of the will – this can lead to

difficulty in interpreting the rest of the document.iii. Partial restraints on alienation are sometimes allowed (Morse/Mountain

Brow Lodge), particularly if there is:1. A limitation on who they apply to, such as a right of first refusal.2. A limitation on time.

iv. Restrictions on alienation that are part of a bargained-for agreement, rather than a donative transaction, are generally valid.

f. Morse v. Bloodi. Henry Blood left his estate to his widow “on condition that in no case

shall she give or bequeath one cent of said estate to any member of my family, or to any relation of her own.” “On condition that” is clear language for FSSCS.

1. This is a partial, not absolute prohibition on alienation.ii. Court: Condition against alienation is void as against public policy.

Even though only affects small group of people, would create a disincentive to use property efficiently. Would be very easy for her to inadvertently breach condition, resulting in forfeiture of property.

iii. It also could be that the court was considering the negative impact on family relations that would result or that it was so unusual/cruel that it

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raises questions of the grantor’s testamentary capacity (esp. since it was likely to be self-defeating).

g. Mountain Brow Lodge No. 82, Independent Order of Odd Fellows v. Toscanoi. Facts: “In the event the same fails to be used by the second party or in

the event of sale or transfer by the second party of all or any part of said lot, the same is to revert to the first parties herein, their successors, heirs or assigns.”

ii. Issue: Does this language create a valid FSSCS (restriction on use) or an absolute restriction on alienation (which makes it void)?

iii. Court: The alienation provision is severable from the use provision and should be struck from the will, leaving just a FSSCS.

1. Can argue that the use restriction is a backdoor restraint on alienation because it is based on the identity of the user, not the type of use.

iv. Dissent: Majority’s approach is too formalistic – allows people to get around restraints on alienation. The provisions must be judged based on what they do.

v. Takeaway: Restrictions framed in terms of a particular use (rather identity of the user) will be upheld even though they might constrain ownership to one party.

D. Co-Ownership a. Tenancy in Common

i. A form of concurrent ownership wherein each co-tenant has a separate undivided interest in the whole – each has right to possess and enjoy the whole (no right to exclude) and has right to exit.

ii. NO Right of Survivorship : When a tenant in common dies, his interest passes to his devisees or heirs. It does NOT go to the surviving tenant in common.

iii. Creation can result from a grant from someone who is not one of the co-tenants or from one of the co-tenants to himself and the other cotenants. Not necessary that each co-tenant hold an equal share or the same type of interest (fee simple absolute, life estate, etc.).

iv. Alienability : A tenant in common can sell, give, devise, or otherwise dispose of his undivided share in the same manner as if he were the sole owner of the property.

v. The law presumes a tenancy in common unless there is some other manifestation of intent to create a joint tenancy or a tenancy by the entirety.

b. Joint Tenancy i. Exactly like the tenancy in common, except for having a right of

survivorship (surviving joint tenant automatically acquires the interest of another joint tenant when the other tenant dies).

1. When a joint tenant dies, their ownership rights die/vanish with them rather than passing to the survivor

2. BUT a joint tenant can defeat this by converting joint tenancy into a tenancy in common.

3. Ownership rights NOT divided over the axis of time.ii. Creation requires 4 “unities” (if one is missing tenancy in common is

created):

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1. Time – each tenant’s interest must be acquired or vest at the same time.

2. Title – each must acquire title by same instrument or a joint enterprise (can be through joint adverse possession, but never through intestate succession or other act of law).

3. Interest – each must have durationally identical interests (e.g., fee simple, life estate, lease, etc.), although not necessarily equal fractional shares.

4. Possession – each has the right to possess and occupy the entirety.5. Some states have relaxed above requirements and put more

emphasis on intent of grantor.iii. Severance – A joint tenant can destroy their right of survivorship by

conveying their interest to a 3rd party who conveys it back or in some states by conveying it to oneself (unilateral severance – Riddle v. Harmon). Upon severance, joint tenancy becomes a tenancy in common, and right of survivorship is destroyed.

1. A joint tenancy cannot be severed by leaving a joint tenancy in a will – a joint tenant has nothing to devise.

2. When property is held in joint tenancy by three or more joint tenants, a conveyance/severance by one of them destroys the joint tenancy only as to the conveyor’s interest – the others continue to hold in joint tenancy, while the grantee holds their interest as a tenant in common with them.

iv. Theories of Severance of Joint Tenancies:1. Mortgage Severs – Granting of a mortgage severs a joint tenancy

(older cases) and creates a tenancy in common from the moment the mortgage is placed on the property. NB: This doesn’t perfectly track whether a state takes the lien theory or title theory of mortgage.

2. Conditional Severance – see Maine v. People’s Savings Heritage Bank.

3. No severance – see Harms v. Sprague and Smith v. Bank of America.c. Other Features Co-Ownership

i. Benefits1. Risk-spreading2. Helping to build familial bonds – unusual to see joint tenancies or

tenancies in common when owners are not close; people that are not close would usually choose a partnership, LLC, or corporation because the governance schemes are much better developed.

ii. Co-owners cannot exclude other co-owners (or will be committing ouster), but can exclude the rest of the world (they all function as de facto owners). The standard for ouster in this context is a lower bar than the standard for ouster that will start the clock for adverse possession (Gillmor).

iii. Courts used to not interfere with disputes between co-tenants because they all have exit rights (right to partition), but today co-tenants can sue for a variety of things while remaining in co-ownership, including:

1. Waste2. Contribution for essential repairs/maintenance (and maybe

improvements, but this is much more difficult).

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iv. Co-tenants can terminate the tenancy in common by partition – the right to partition is a default rule, it can be contracted around to a point.

v. Creating a tenancy in common is very easy – can result from a grant from someone who is not one of the cotenants or from one of the cotenants to himself and the other cotenants.

d. Delfino v. Vealencisi. Facts: P owned a 99/144 interest in property and D a 45/144 interest;

wanted to partition the property, P wanted partition in sale and D wanted partition in kind (so she could stay on land).

ii. Court: When terminating a tenancy in common, there is a presumption in favor of partition in kind. The standard for ordering a partition in sale is whether two conditions are satisfied: (1) the physical attributes of the land are such that a partition in kind is impracticable or inequitable; and (2) the interests of the owners would better be promoted by a partition by sale.

1. Here, the physical attributes of the land favor partition by kind.2. Court worried that D’s subjective value would not be sufficiently

accounted for/given enough weight by awarding partition in sale.iii. NB: There is no consideration of each party’s relative proportion of

interests in making the determination (doesn’t matter what the majority owners want).

e. Gillmor v. Gillmori. Facts: P and D are cousins; D and his brother owned ½ of the grazing

land, P owned the other ½; P filed an action for a contribution and accounting (and damages for D’s exclusive use of the land) and a separate action for partition.

ii. Court: To determine whether there was ouster, look to exclusive use:1. D has a right to use the entire property until the point that P also

wanted to use the land; D then has an obligation to reduce his usage.

2. P wrote a letter asking for use of the land; D never wrote back. This would not always be sufficient to establish ouster, but here it is.

a. This would NOT be adequate for adverse possession – there would have be an actual physical ouster (not allowing her on the property).

3. Damages – P entitled to contribution for necessary repairs or maintenance (though there is a gray area between repairs and improvements). A co-tenant is more likely to get contribution at the end of the relationship.

f. Harms v. Spraguei. Facts: William and John Harms are joint tenants; John agreed to co-sign a

loan for Sprague and transfer a mortgage on his property to the Simmons as security; John died and left his land to Charles; William argued John’s interest transferred to him when he died.

ii. Courts take differing views on whether granting a mortgage severs a joint tenancy; sometimes are swayed by whether the creditors are “regular people” like the Simmons’ or sophisticated financial institutions.

iii. Court: IL adheres to the lien theory of mortgage (as opposed to title theory), meaning there is no transfer of ownership and thus no severance.

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1. Under the title theory, a mortgage would sever the joint tenancy because a mortgage changes the title (passes ownership to the lender).

iv. IL had a statute stating that an encumbrance (including a mortgage) will survive the death of a joint tenant, but the court dismissed this because it was unclear that the legislature intended to make this change to the common law.

g. Smith v. Bank of America i. Facts: Smith (sole owner) conveyed her ownership to herself and

someone else as joint tenants; the other person (unbeknownst to Smith) got a loan from B of A secured against the property; the person then died and B of A moved against the property; Smith argued his right of ownership was severed upon his death.

ii. Court: The property interest vanished upon his death, so Smith retains sole ownership. B of A has nothing to move against because the property is gone; it could have required him to get the signature of the other joint tenant but failed to do so (this might be because a huge bank is an unsympathetic litigant).

E. Marital Interests/Tenancy by the Entirety a. Tenancy by the Entirety

i. Form of concurrent ownership created between husband and wife, who own property as one. Recognized in 22 of common law (separate property) states (not community property states).

ii. Requires the same 4 “unities” as joint tenancy, plus a fifth: “marriage.”

iii. Each co-owner has a separate and undivided interest, and each has the right to use and possess the whole, exclude, a limited right to transfer (has to be done by both tenants), and right to create liability by execution.

iv. Includes a right of survivorship – in the case of a death of a spouse, the survivor will take full ownership of the property.

v. In most states, the individual interest of the tenant by entirety cannot be sold, transferred or borrowed against without consent of spouse.

1. Partition is not available except through divorce or consent of spouse.

2. Divorce severs and converts to joint tenancy or tenancy in common.

3. In a few states you can transfer property interest, but the right of survivorship of the non-transferring spouse can’t be extinguished.

vi. Offers significant protection from creditors:1. Creditors can’t attach one’s spouses’ tenancy by the entirety

to satisfy debts.2. Exception: Property under forfeiture (e.g., property of non-drug

dealing spouse will likely not be protected)vii. Available to ownership of real property in all states that recognize it,

but some states also allow it for other forms of property.viii. In many states that recognize it there is a presumption that married

couples hold property in tenancy by the entirety, but this presumption is rebuttable.

b. United States v. Craft34

i. Facts: D and his wife held property in a tenancy by the entirety; D didn’t pay his federal income tax for years; IRS attached a federal tax lien to all of his property (as allowed by federal statute); D transferred his interest to his wife for $1 and she tried to sell it; IRS would only allow it if half of the money was put in escrow.

ii. Issue: Whether the federal tax lien attaches to property the non-taxpayer holds as a tenancy by the entirety (does D have a separate interest in the property)?

iii. Court: Yes, the federal lien attaches to the rights that states have created – takes the view of property as a “bundle of sticks.” To determine whether property rights are recognized for the purpose of the federal tax statute, court looks to how the rights function in practice, not to form of ownership or the state laws surrounding it. All that matters is what rights the individual has under state law in terms of the day-to-day functioning of the property.

1. Drye dictates the outcome – state law is important, but not dispositive. Two steps: (1) look to state law to determine what property rights someone has; (2) look to federal law to see if those rights meet the definition of property for the purposes of federal tax law.

2. Look to see how many “sticks in the bundle” the individual has.

3. Here, D has a wide variety of rights in this property under MI law, court holds that these were sufficient for the purposes of federal tax law.

4. The old conceptions of property don’t matter.iv. Dissent: Supreme Court has long held state law that determines property

rights for the purposes of the federal constitution. This effectively creates a federal law of property – makes two tracks, which risks considerable confusion and risks harming innocent spouses in tax disputes.

c. Common Law/Separate Property Statesi. Spouses bring separate property to marriage/acquire separate

property during marriage.ii. Dissolution of property upon divorce involves measures of

standard, not rule – most states have adopted the “hotchpot” or “kitchen sink” approach, meaning property is divided on a case-by-case basis rather than according to rules.

1. Under this approach, division of the property is based on an “equitable” distribution/apportionment.

2. In making this determination, courts consider a variety of factors, including: length of the marriage, prior marriages, antenuptial agreements, age, health, occupation, vocational skills, liabilities, custodial provisions, opportunity of each for further acquisition of capital or future income, the contribution or dissipation of each a party in the acquisition, preservation, depreciation, or appreciation in the value of the estate, etc.

d. Community Property Statesi. Spouses bring separate property to marriage, but property acquired

during marriage is community property (ownership doesn’t follow title). 35

While the marriage is ongoing, the spouses are held to fiduciary duties with respect to the maintenance and management of the property. Can acquire separate property but need detailed records to rebut presumption of community property.

ii. Inheritance and gifts usually not deemed community property even if acquired during marriage; sometimes increases in value of property during marriage can be deemed separate property.

iii. Each spouse has a right to possess community property, but typically any alienation or encumbrance must have the consent of both spouses.

iv. More of a rule-based regime that separate property. In all states there are hard and fast rules for the creation of community property; but some states differ in terms of division of property upon divorce – some states follow rules (equal distribution), others follow standards (equitable distribution).

e. Washington State v. Connellyi. Facts: Parties were in a relationship/cohabitants for 7 years in WA; upon

breaking up she was left with $10,000 while he doubled his net worth to over $2.7 million.

ii. Used to be that if unmarried, the spouse could only recover for unjust enrichment, but now some courts will try to determine their implicit agreement and others will follow the legal regime for dissolution of marriage.

iii. Court: Hybrid approach – there is a presumption that property acquired during a meretricious relationship is “community-like” property and the burden is on the party that acquired the property to show it is not community property.

f. Premarital Agreementsi. Used to be considered against public policy, but now courts are willing to

enforce both prenuptial and postnuptial agreements up to a point (though enforcement standards are more strict than commercial contracts).

ii. The subject matter over which enforcement will be granted is limited – distributions of property upon dissolution of marriage will be enforced, but agreements on child custody will NOT.

iii. Provisions in prenuptials that try to police day-to-day aspects of marriage (e.g., “weigh in” policies or how much vacation time spouse gets) will not be enforced.

iv. Courts consider both procedural and substantive fairness:1. Procedural fairness: voluntariness – was there coercion, surprises,

adequate time to reflect, full disclosure of assets? Did both parties have independent counsel or waive their right to independent counsel?

2. Substantive fairness: Are there huge disparities in wealth after dissolution of the marriage? Is the agreement is so extreme as to be considered unconscionable? Is one of the ex-spouses is in danger of becoming a public charge?

g. In re Marriage of Bondsi. Facts: The day before marriage, Bonds and Sun entered into an

agreement where they waived any rights to earnings of the other spouse during the marriage.

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ii. Court looks to precedent from other jurisdictions to determine meaning of “voluntariness” – considered that she had no independent counsel, had not waived her right to counsel effectively, etc. and applied strict judicial scrutiny.

iii. PA Supreme Court previously held that premarital agreement is similar to a commercial contract – did not create a new edifice for marriage contracts.

iv. This court didn’t apply law of commercial Ks because marriage is a highly regulated institution; those entering into marriage have not had freedom or ability to change terms of the contracts as have those in ordinary commercial Ks. Contractual latitude is severely limited in marriage Ks.

v. This led the legislature to create §1615 of the Family Code – premarital agreement not executed voluntarily unless the court finds:

1. The party against whom enforcement is being argued had independent legal counsel or waived that right.

2. The party against whom enforcement is sought had at least 7 calendar days between first being presented with the agreement and the signing.

3. The party against whom enforcement is sought was fully informed of the terms and basic effect of the agreement and all the rights and obligations he or she was giving up; was proficient in the language; etc.

4. The agreement was not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into the agreement.

5. Any other factors the court deems relevant (not clear what these will be).

V. ENTITY PROPERTY

Overview:a. The key attribute of entity property devices is that they permit the

management of entity resources to be separated from their use and enjoyment.i. This allows the managerial or governance function to be concentrated in

the hands of specialists, while use and enjoyment is distributed over larger and more diffuse group of individuals.

b. Devices whose function is to govern multiple possessory interests in the use of a single complex of assets include: Leases; Cooperatives; Condominiums.

i. Each of these can be used to separate management of a complex of assets from regular actual use of some portion of the assets by various people or family units.

c. Devices whose function is to govern multiple non-possessory interests in the enjoyment of assets include: Trusts; Corporations; Nonprofit Entities; Partnerships.

i. Designed to separate management of a complex of assets from the enjoyment of financial or other intangible returns for various people or family units.

A. Leasehold Interests a. Overview :

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i. Method of dividing property rights along the axis of time – allows for the fragmentation of property rights into leases and future interests of the landlords.

ii. Tenant has present possessory interest in leased premises, and landlord has a future interest (reversion).

iii. Benefits of leases1. Low transaction costs2. Governance and efficiency gains by specialization of management

(landlord/tenant relationship)3. Effective risk-spreading device (minimizes risk of allocating a large

portion of your assets in one asset)4. Low risk for tenants in living on the property unlike with ownership5. Solves problems of financing and the limitations of capital markets

iv. Common law rule – clauses in a lease were independent of one another except for the payment of right and the covenant of quiet enjoyment (lease as a conveyance view).

1. Destruction of the property did not obviate the need to pay rent; the landlord had no duty to pay damages (Paradine v. Jane).

v. Modern conception – obligations in leases are mutually dependent if a court finds that the parties so intended (contract view of leases).

1. If premises destroyed, lease is considered terminated provided it wasn’t caused by tenant.

2. But leases do contain some elements of conveyances – cannot import contract law entirely (not dispositive).

b. Types of Leasesi. There is a limited menu of leases (as with estates in land) – parties can’t

make up their own new form of lease; if unclear the court will fit it into one category.

ii. Term of years – ends at a designated time; without the landlord or tenant doing anything it will come to an end (no notice requirement). Most leases longer than one year must be in writing to satisfy the SoF.

iii. Periodic tenancy – automatically renewed from period to period unless notice is given (usually 6 months at common law, but this has been superseded by statute).

iv. Tenancy at will – lasts only as long as the parties wish it to continue. Common law was very strict and demanded symmetry (termination had to be at the will of both parties). This has largely been replaced by statute – landlords and tenants generally have to give notice. Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as a periodic tenancy.

v. Tenancy at sufferance – a tenant that doesn’t leave at end of a lease is a holdover and is converted to a tenant at sufferance – landlord could chose to evict the tenant or to create a new tenancy (if there is no express agreement as to time, this will be treated as a periodic tenancy).

c. Paradine v. Janei. Facts: D was ejected from property during wartime by the army and

didn’t pay rent because he couldn’t work the land.ii. Court: The covenant to pay rent is not dependent on possession of the

property. Example of independent covenant model of leases – all 38

covenants must be performed without regard to whether other covenants have been or can be performed. Lease is a contract with independent bundles of promises – agreed that tenant will pay rent even if dispossessed of land.

iii. NB: D would not have had to pay rent if he had been disposed by the landlord – this was viewed as a breach of the covenant of quiet enjoyment and obviated the obligation of the tenant to pay rent. This was known as “constructive eviction.”

iv. Today any act of the landlord that renders the tenant unable to enjoy the beneficial aspects of the property is a breach of the covenant of quiet enjoyment.

d. Smith v. McEnanyi. The tenant (D) leased land for the purposes of storing wagons; P’s

husband built a wall that extended only very slightly onto the property; D argued that this act amounted to constructive eviction; P argued it was a de minimis eviction.

ii. Court adheres to the common law/independent covenants model. The land is hired as a whole – ouster from any part of the leased premises amounts to an eviction and absolves D from paying rent even if still useful for the purpose for which it was hired.

1. This provides a clear rule and lays out expectations of the parties and prevents the landlord from modifying the deal at his own will.

e. Medico-Dental Building Company of Los Angeles v. Horton and Conversei. Facts: D established a pharmacy in P’s building; leased promised that D

would be free from competition from other pharmacies; P then leased 9th floor to a doctor with a contradictory provision to the lease with D; the doctor started dispensing drugs himself; D demanded P stop them, then broke the lease.

ii. Court adopts the dependent covenants model – leases, especially commercial leases, will be interpreted along the lines of commercial contracts. Rejects the idea that the covenants were independent and that the obligation to pay rent continued after P’s breach.

iii. Landlord-tenant law has always had elements of both conveyances and contract, but under the dependent covenants model, leases are treated like contracts. Here the breach went to the heart of consideration of the lease/k.

iv. After breach, the tenant can:1. Rescind the lease (and pay no more rent);2. Continue the lease and sue for lost profits; or3. Treat violation as end to the contract for purposes of performance

and sue for damages.f. Covenant of Quiet Enjoyment (CQE)

i. Every lease has an implied covenant of quiet enjoyment, regardless of whether viewed under the dependent or independent covenants model.

ii. Applies to both residential and commercial properties.iii. At common law, this covenant was construed strictly – if breached tenant

didn’t have to pay rent.iv. Today, there is a more of a range of how courts will interpret a breach. If

held to be breach, courts will say the tenant has been 39

constructively evicted – the landlord’s acts or omissions are the functional equivalent of forcibly evicting the tenant. Physical ouster is no longer the only thing that can lead to eviction.

v. Wesson v. Leone Enterprises, Inc.1. Landlord is responsible for repairing roof, but leaks didn’t amount to

constructive eviction b/c they didn’t make property “untenable for the purposes for which they were used” (to operate a printing company). The leak is an inconvenience, but not a breach of the CQE.

2. Old rule favored landlord in the sense that they did not warrant anything to tenant – it was up to the tenant to inspect the property before entering into the lease (caveat lessee – let the lessee beware). The parties can bargain in the lease so as to arrange risk in a suitable way.

vi. Different than the implied warranty of habitability, but both are not waiveable and achieve some of the same objectives.

g. Implied Warranty of Habitability (IWH):i. Applies only to residential properties. Not waiveable.ii. Has not been embraced by all jurisdictions, whereas the CQE has.iii. The law accomplishes the goal of ensuring that landlords have a duty of

establishing minimum standards of habitability through:1. Regulation – states and municipalities have enacted ordinances

establishing health and safety rules (though these do not generally have private rights of action). Some jurisdictions allow repair and deduct remedies – tenants can fix the problem and deduct the amount it cost from the rent.

2. Expansive construction of the covenant of quiet enjoyment.3. Implied warranty of habitability.

iv. A significant force for establishing the IWH was a commitment to redistribution of wealth, income, and power (take from landlords and give to tenants).

h. Javins v. First National Realty Corp.i. Facts: P (landlord) was in violation of the housing code; D refused to pay

rent.ii. Court updates “outdated” caveat lessee rule – makes IWH a

mandatory rule, not default rule. Habitability should not hinge on whether DC chooses to enforce its own regulations, tenants should have rights to enforce habitability.

iii. Modern society/housing patterns puts landlords in a better position than tenants to maintain the property (they have expertise, economies of scale, etc.).

iv. Skelly Wright likens IWH to consumer protection context – tenants not capable of determining whether a property is safe because of insufficient expertise; also inequality of bargaining power.

v. Contrast to the ruling in Intel v. Hamidi, which said that any change in tort law has to come from the legislature – Skelly Wright assumes he has the authority to modify the law without explaining why courts are competent to do so.

i. Impact of IWH :

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i. Some take “no free lunch” view – making landlords sell a different package of property rights will ultimately be reflected by a price increase even if some people don’t want that package of rights.

ii. Empirical evidence tends to show that it has not made much of a difference in terms of the welfare of those it was supposed to help.

iii. Posner: IWH will cause rents to rise – increases demand for low-cost housing and increases cost of supplying low-cost housing. Some will be pushed out of low-cost housing because of the price increases and have nowhere to go.

iv. Ackerman and Kennedy: Markets are not frictionless – costs may rise and push some people out of housing market in long-run, but not in short-run. Landlords will eat the cost of the improved conditions because they will find it hard to exit market, resulting in a wealth transfer to the poor.

v. Craswell: It will help some, hurt others. Unclear what the overall result will be.

j. Sommer v. Krideli. Facts: D signs lease, thinking he will soon be married. Engagement

broken, landlord does not reply to lessee nor does he reply to inquiries about apartment from another tenant willing and able to rent

ii. Common law rule is that a landlord has no duty to mitigate damages that result from the tenant’s default – lease as a conveyance dictates that the landlord has no responsibility for the property during the lease, so no duty to bail out tenant.

iii. Court updates property law/shifts the default rule to include a duty to mitigate damages. In the modern world, the landlord is in a better position to find a new tenant and already have strong incentives to do so.

1. Similar reasoning to Javins, except this is a default rule, not mandatory rule.

2. Another example of a court changing property law/overhaul landlord-tenant doctrine rather than leaving it to the legislature.

3. Also part of the trend to view leases as contracts rather than conveyances.

4. The apartment has to be put back in the general stock of apartments that the landlord has to show because each apartment is unique.

iv. NB: The duty to mitigate extends only to residential leases, not commercial.

k. Assignment and Subleasei. Tenant interests are alienable/transferable by either method.ii. Assignment – transfer of the tenant’s entire interest in the leasehold to a

3rd party. But tenant continues to have obligations under the lease.iii. Sublease – not a transfer of the entire leasehold interest – the tenant

retains some aspects of the leasehold interest. The original tenant becomes a “prime tenant” or “sub-landlord” – they effectively become a “mini-landlord.”

1. There is no privity/relationship between the landlord and the subtenant as there is with an assignment (as between the landlord and first assignee).

iv. Assumption – assignee expressly promises to be bound by the terms of the original lease (assumes the contractual obligations entered into by the first tenant).

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1. Means the assignee has privity of estate and contract with the landlord.

2. But does NOT mean the first tenant is released of all obligations to the landlord (this requires a novation).

v. Novation – when parties agree to erase any privity of contract liability on part of prime tenant.

B. Trusts a. Overview :

i. A fiduciary relationship with respect to property in which one person, the trustee, holds the legal title to property subject to equitable rights in beneficiaries.

ii. Created in writing, by will, by inter vivos transfer, or by declaration.iii. Trusts represent a successful fragmentation of property rights – no single

party has full responsibility over the property.iv. Trusts involve three parties:

1. Settlor – person who creates the trust; typically owns some property in fee simple and grants or conveys it to a trust.

2. Trustee – holds legal title and has authority to manage it but no authority to enjoy the property. Held to strict fiduciary duties (as if it were their own).

3. Beneficiary – beneficial owner; person for whom the trust is set up for and for whose benefit the trustee manages it; not actively involved in management of trust and usually has no possessory interest. Can be a class of beneficiaries.

v. The parties do not need to be separate people/entities (except that one person can never be the sole trustee and sole beneficiary).

b. Spendthrift Trustsi. Trust assets generally treated as being distinct from the assets of both

the settlor and the trustee, meaning they can’t be reached by the beneficiary’s creditors.

1. Designed to provide financial support for people who are regarded by the settlor as being less than capable of managing their own financial affairs.

2. Creditors can’t get money in trust prior to distribution BUT can go after distributions.

ii. Some states have limited the reach of spendthrift clauses by law, explicitly limiting the settlor’s ability to prevent alienation and allowing a certain amount of creditor reach into the interest of the beneficiary in the trust.

c. Broadway National Bank v. Adamsi. Facts: D’s brother left him $75,000 with bank as the trustee; said that D

couldn’t get the money outright, just had the right to receive semi-annual payments; also stated that the money was to be protected from D’s creditors. Ultimately Adams’ children would be able to get money outright.

ii. Common law rule articulated in Brandon v. Robinson was that spendthrift trusts like this were illegal and unenforceable; was followed in the U.S. until this case.

iii. Court modified the law and upheld the spendthrift clause as valid – holds that the settlor’s intent rules. This basically enables him to give gifts

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after death; as if he set up an account to provide his brother with money twice a year.

iv. NB: The creditor in this case was an institutional/contract creditor – not very sympathetic litigant because they should understand the risks they are taking. Outcome might be different if it was a tort creditor (i.e., someone he ran over with his car) because they did not chose to be his creditor.

1. An MS court held that a tort creditor will have access to the funds of a beneficiary of a spendthrift trust – the first judicial decision to carve out an exception to spendthrift trusts. This was later overruled by statute.

2. Three common categories of exceptions: (1) a spouse or child if the beneficiary has a judgment against them (2) a judgment creditor who has protected the interests of the trusts (including lawyers); or (3) a state or federal gov’t entity to the extent that state or federal law so provides.

d. Charitable Trustsi. Set up with a public-spirited aim, but often as the years pass it becomes

difficult to vindicate the goals of the trust or it was never practical to do in the first place.

ii. Cy pres doctrine – courts can modify the trust to give effect to what the settlor would have wanted had they foreseen the changed circumstances.

e. Wilber v. Owensi. Facts: Wealthy donor left a detailed will; ¶ 10 set up a charitable trust to

carry forward a project and edit/publish research findings; Princeton didn’t want to carry forward the project because it was unintelligible, but did want the money.

ii. Court places emphasis on donor intent – held that the settlor had a general charitable purpose; applied cy pres because his specific intent in ¶ 10 could not be carried out. As such, the trust should be given to Princeton to be used for a similar charitable purpose, such as to fund research.

1. Court could have enforced the will strictly as written but this might result in an inefficient expenditure of resources; or

2. Struck ¶ 10 entirely by holding that the bequest fails for impossibility – courts have done this when portions of the will are too hard to effectuate.

iii. Cy pres (“so near”) has been used only sparingly by courts, but there has been an increase in use in recent years. The primary focus in applying it is the settlor’s intent (though social mores and other factors are also taken into account).

1. This might be challenged on public policy grounds because the dead hand exerts too much influence, but it is still the doctrine.

VI. TITLE RECORDS AND TRANSFER OF PROPERTY

A. Transfer and Alienability a. Transfers of Property Rights :

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i. Blanket restraints on alienation are void, but some restraints on alienation will be enforced (e.g., first refusal in condo communities).

ii. Right to transfer/freely alienate is one of most important property rights in “bundle of sticks.”

iii. Requirements in order to give effectuation to the transfer of property can be complicated – these are designed to protect owners by making sure they are not losing their property, but also can be seen as restrictions on donor autonomy.

iv. Hard for property owners to transfer their property without careful thought –requires convincing indication that owner meant to surrender property rights. Inadvertent transfers/gifts very rare.

v. A writing is generally required for real estate interests; delivery for gifts.

vi. Three elements of a gift: (1) intent; (2) delivery; and (3) acceptance.

1. Delivery and intent go together – delivery is generally the best evidence of intent to give. Constructive delivery sometimes is sufficient (e.g., a writing or key to safety deposit box).

2. This might have an evidentiary rationale at its basis – courts don’t want to get involved in complicated disputes and waste public resources.

vii. Options for determining what happens to property after death:1. Do nothing – intestacy statutes divide property nearest relatives.2. Make out a will – but sometimes these will not be given effect

because of failures to meet certain legal formalities.3. Give gifts causa mortis (in contemplation of death) – if donor dies,

the receiver keeps the article, but if the donor survives, the donor gets it back.

viii. Most gifts aren’t conditional – after intent, delivery, and acceptance the giver can’t take it back, but some inter vivos gifts are conditional (e.g., engagement rings).

b. Irons v. Smallpiecei. Facts: Son says that his father gave him a verbal gift of two colts – no

writing and the colts remained in the custody of the father. This is an inter vivos gift (had nothing to do with death). After father died, estate argued colts were his.

ii. Court: In order to transfer property by gift there must be actual delivery of property to the donee or there must be a deed or instrument of gift. Without these, there will be no finding that there was a gift – very strict interpretation of the formal doctrinal elements of the law.

iii. Acceptance is generally presumed (easiest factor); intent and delivery are more complicated – actual delivery or constructive delivery (e.g., a writing or a key to a safety deposit box) is powerful evidence of intent.

iv. Judge Holroyd says that in order to change property by a gift there must be change of possession.

c. Foster v. Reiss

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i. Facts: Before P underwent surgery, she left a note to her husband telling him to take property from her home and put it in the drawer; she died a few days later.

ii. NB: Donor is allowed to distribute gifts causa mortis AND leave a will (as P did).

iii. Court: Gifts to husband were not causa mortis because there was no delivery. Formalistic opinion – P did not meet doctrinal requirements for delivery, even though it was not practical in this case.

1. Because gifts causa mortis have raised issues of fraud and donor competency, courts are very reluctant to recognize them – the “actual, unequivocal, and complete delivery” standard is an extremely high bar.

iv. Dissent: Donor intent should be more important than the doctrinal elements – the whole legal edifice is designed to effectuate the intent of the donor and places an emphasis on donor autonomy. The doctrine is not an end in and of itself.

v. This case hasn’t been overruled, but Scherer v. Hyland held that an unambiguous indication of donor intent satisfied the constructive delivery requirement.

B. Real Estate Transactions a. Stages of Transactions

i. Preliminary Negotiation/Agreement1. Typically involves brokers on both sides; potential purchaser will

hire someone to undertake a title search; offer is generally in writing.

2. No obligations at this stage (except for some carve outs in the SOF) – but just because there is not a contract doesn’t mean the parties aren’t bound.

ii. Contracting1. If a deal is reached, parties will generally draw up a written contract

(though not always).2. If there is a contract, SOF dictates there has to be a signed writing

with essential terms (also behavior of the parties can give rise to obligations).

iii. Executory Period1. Gap between formation of K and completion of deal – buyer uses

recording acts & other means to investigate validity of title (title search), inspect property, secure financing.

2. Can lead to damage to the property or backing out of one of the parties.

3. Seller agrees to convey “marketable title” at closing – if there are any problems with the title they have to deal with them now (Johnson v. Davis).

iv. Closing1. Security interest in the property is transferred, possession is

delivered, and property is conveyed by seller; buyer provides the purchase price if one has been agreed on; if none is stated a reasonable price will be imputed to satisfy the SOF. Also has to include essential terms to satisfy the SOF.

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2. Creditors do not always have to take a security interest in the property (most property lending is not secured lending).

3. Security interest – a special type of property right in an asset (collateral).

a. Designed to protect the lender – should the debtor default the lender can always go after the collateral.

b. Happens often with real property, cars and vehicles, fixtures, IP, etc.

4. At this stage, the contract and deed are said to have merged – any promises in the contract will merge and be included in the deed.

v. Post-Closing Period1. Generally uneventful, but sometimes leads to disputes (fraud,

misrepresentation, foreclosure by holder of security interest because of a failure to keep up with obligations).

2. Foreclosure – when the debtor is unwilling or unable to repay the balance of the loan, the lender may foreclose against the secured property.

vi. A broker is generally entitled to commission when they find someone that is ready, willing, and able to purchase the property.

b. Statute of Fraudsi. Requires real estate transactions to be in writing, signed by the

party against whom enforcement is sought, and contain all essential terms – must identify parties, describe both land and interest to be conveyed with reasonable certainty, state purchase price (if not agreed upon courts imply FMV), and (in some states) provide any other essential terms or conditions.

ii. Two demarcation systems for describing the property to satisfy SOF:1. “Meets and bounds” approach – older system; good for land that

is not flat; refers to landmarks and gives instructions for how to define the edges of the property; used in VA.

a. Allowed settlers to specify land they were claiming, but can be very confusing (unless you have surveying experience) and leads to high transaction costs.

2. Rectangular approach – very clear; dominates in many western states because when the government initially began transferring property to people it created a clear system.

a. Disadvantage was that people had to take their rectangle, could not decide what parts of it they wanted (take the good with the bad).

b. Study found this approach leads to clearer property rights, more transactions (because lower transaction costs), and proves to be more efficient over time.

iii. The goal of the SOF was to make people more secure in their property and contracts by making deceitful contracts unenforceable.

iv. Courts often invoke SOF as a general principle (look to its goal and case law rather than specific statutory text). Some courts have expressed grave reluctance to enforce agreements that are not in strict alignment with the SOF, but others have done so in order to prevent injustice/windfalls.

v. Exceptions to the SOF:46

1. Part performance – if one party has performed substantial obligations under the k, the other party may not be able to invoke the SOF to get out of the k (e.g., if the buyer has paid all or most of the price and has made substantial improvements; if a buyer has paid most of the purchase price and possession has passed from seller to buyer).

2. Estoppel – (1) if one of the parties has made a promise or promises that a reasonable person would expect the other party to rely on; (2) the promisee does rely on that promise; and (3) the promisee would experience real loss/harm if the SOF was invoked at this point. If these criteria are met, courts will often prevent the SOF from being invoked.

c. Hickey v. Greeni. Facts: Green orally agreed to sell lot to Hickey for 15k; Hickey stated

intention to sell home and build on Greens lot; Green accepted check but didn’t deposit; Green reneged to sell to another for 16k; Hickey already had deposit for his house, so sued and demanded specific performance.

ii. SP is an equitable remedy – not automatic, but is common with real estate.

iii. Court stretches the estoppel doctrine beyond precedent (no possession, no payment, no improvements – unusual for a court to bar enforcement without these) because the recent trend among courts is to be less exacting in applying SOF. No doubt parties made an oral agreement and that the Hickeys have relied on the oral contract; Green did not repudiate fast enough.

1. All there has been is that the Hickeys moved very fast and gave a $500 check – this would often not lead to an exception to the SOF for estoppel but it does here.

2. Hickeys are entitled to SP only if the agreement with respect to the sale of their own property is still being enforced – trial court has to decide.

d. Marketable Titlei. Seller must deliver legal title (usually at closing) that a reasonably

prudent purchaser would accept because its validity is reasonably free from doubt – buyer is not required to “purchase a lawsuit.”

ii. Title has to be free from liens (have to disclose if there is an easement on the property or lease pendant or tax liens) and should not be subject to a claim/defect/encumbrance that gives a danger of litigation such that the buyer would find himself unable to sell the property at a fair price to a prudent acquirer.

iii. If the seller cannot convey a marketable title, the buyer is entitled to rescind the k.

iv. Duties to disclose:1. Common law rule was caveat emptor (“let the buyer beware”) –

there was no obligation to disclose, if the buyer wants things disclosed they have to specially request it in the contract. Though fraud is never acceptable – if someone relies on a misrepresentation and suffers real loss, the k will not be enforced. Beneficial in that it provides a clear rule.

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2. Caveat emptor no longer exists in its common law form, but is still a starting place for transactions:

a. Parties at an arms-length relationship have to bargain for any reassurances/representations they want (and will likely have to pay more); expect both parties to look after their own interests.

b. Exception to the rule for sale of new homes (when seller is the builder), it has generally been replaced by implied warranties of fitness and habitability because the builder is in a superior position to know about defects since they just constructed it.

c. There has been movement to make sellers disclose some defects, but not all.

e. Johnson v. Davisi. Facts: Davis purchased a home from Johnson; saw there might be a

problem with the roof, so inserted a provision requiring the seller to pay for any necessary repairs to the roof; Johnson assured them there were no problems with it; after Johnson left but before closing Davis found serious roof leaks and sued.

ii. Court considers caveat emptor rule outdated/unfair and updates law even though it is not necessary to decide this case. Announces a new COA for aggrieved buyers of residential real estate – “where the seller of a home knows facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose.”

1. Courts haven’t extended this from residential to commercial real property.

2. Comes into play when seller knows of defect, defect is material and not able to change.

iii. Dissent: If the law needs to be changed it should be done by the legislature, not the courts. Caveat emptor is a very clear rule; this muddies the water.

f. Remedies for Breach of Contract Involving Sale of Real Propertyi. If seller breaches, buyer can choose whether they want damages or

specific performance. Assumption that real property is unique (even though it may not be as true as it used to be) – this makes specific performance appropriate. Generally damages measured by expectation damages.

ii. If buyer breaches, seller (at least formally) can also choose between damages and specific performance. Doesn’t make a lot of sense because sellers usually selling in exchange for $; they generally don’t care who gets property so long as they get their money. Money is hardly unique.

g. Jones v. Leei. Facts: D agreed to buy P’s home for $610k but backed out after signing

purchase agreement and providing $6k in interest money; P kept money and sued much later on after selling it for $540k.

ii. Court: Follow the “loss of the bargain” rule in determining damages – if the buyer breaches, damages are determined based on the difference

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between the k price and the fair market value at the time of the breach (not the ultimate sale price).

1. A subsequent sale of land may be considered evidence of the market value at the time of the breach, but is not dispositive.

C. Deeds a. Overview:

i. Contain warranties, saying that seller is in possession of property, giving title to buyer, and that property is free from encumbrances (tax liens, mortgage, trespass, etc.) except those that have been explicitly disclosed.

1. General warranty deed – seller warrants title against all defects and will protect the property against third party attacks.

2. Quitclaim deed – seller does not warrant marketable title; no promises that the property is free from encumbrances; it only passes whatever interest the seller has.

3. Special warranty deed – seller takes responsibility for certain defects that arose during their period of ownership.

4. If you want the seller to be responsible for something, get it written into the deed – but the price reflects the promises/protections you get.

ii. Doctrine of merger – whatever terms were included in the contract are superseded by whatever promises are in the deed. The deed always wins.

1. Has been relaxed in recent decades such that if there is a contractual term that was not included in the deed, it is not clear that it will be left out if the term in question does not go to the heart of the transfer.

iii. At common law, whoever first acquires land has a valid interest and whoever transfers land has nothing to offer.

1. Nemo Dat – In general, sellers of property cannot convey more than they have ownership of or there will be an action for fraud.

iv. In the U.S., public reporting of deeds in a communal office was a fixture from early on – there is a central depository where you can check to figure out what property rights the person who is about to transfer property to you has.

v. With a few exceptions, any document that shows an interest in land can be recorded (deeds, easements, judgments, liens on land, etc.). Deeds are presented to an official, it is stamped, and then filed.

1. Most states use a grantor/grantee index – search by the grantor or grantee’s name back to root of title or from root of title forward (although adverse possession reduces the amount of time you have to work back because it establishes a new chain of title).

2. Some states use a tract index – filed according to the plot of land.vi. Many states have adopted “marketable title” statutes to limit burden of

title searches, such as by eliminating old reversionary interests (e.g., powers of termination or possibilities of reverter). Other states have adopted legislation requiring searcher only go back to the “root title” (the most recent recoded transaction that is at least 40 years old). As a general rule 30-60 years is sufficient.

b. Recording Acts

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i. These are superimposed on nemo dat regime – makes it such that subsequent transferees/ purchasers can hold title in situations where they would otherwise lose under nemo dat. Serves as means of resolving disputes between grantees who have competing claims to the same property.

ii. Types of recording acts in the US:1. Race statute – subsequent purchaser prevails over prior grantee if

he is first to record; these are basically obsolete today.2. Notice statute – subsequent grantee prevails over prior grantee if

and only if they are a bona fide purchaser for value. What matters is not having notice of the prior claim at the time of the transaction.

a. Types of Notice:i. Record Noticeii. Actual Noticeiii. Inquiry (Constructive) Notice – if buyer’s inspection of

property would reveal evidence of possibly competing claim (e.g., seeing the other person’s name on the mailbox).

3. Race-notice statute – subsequent purchaser has superior title only if they are both a bona fide purchaser for value and record their instrument before the prior purchaser. Must not have had notice at the time of the transaction AND must win the race to the courthouse.

iii. Recording acts are designed to protect purchasers, not donees. About half of all states have notice statutes and half have race-notice statutes.

c. Miller v. Greeni. Facts: Hines (D) claimed their title under the deed is superior to P’s

because it was recorded first; D knew P had been leasing land and was in possession but did not realize P purchased property from Green prior to his purchase.

ii. Court: D’s title is void – possession of land is constructive notice to the world of whatever rights possessor has in the premises. Burden is on purchasing party to make inquiries.

iii. Dissent: Possession wasn’t so open/visible/exclusive as to make it obvious. Generally, property law requires that possession be of the type that it communicates to the world that a claim is being made to property rights – must be open, clear, unambiguous.

d. Deliveryi. For a deed to transfer property rights it must be delivered by the grantor

and accepted by the grantee. Generally very clear when this happens.ii. In bargained-for exchanges usually seller brings deed and buyer brings

money – happens at same time. If exchange is not to be made contemporaneously, the usual practice is to put the money in escrow where a neutral third party makes sure the bargained-for exchange happens as planned.

iii. In the context of gifts/gratuitous exchanges, delivery is often a problem.1. Intent and delivery are often analyzed together by courts – to

determine donor’s intent, it can be useful to consider whether there has been delivery.

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2. Problems often arise when the owner of property executes a deed to give a relative property but does not surrender complete control of the deed (e.g., instead leaves it in a security box at a bank). Executing a deed is not enough – have to actually take it to the records office and record it.

3. Gifts count as complete when they are accepted, but acceptance will be presumed unless the gift is a deed to a negative value property.

e. Joseph Singer – Forged/Fraudulent Deeds:i. A forged deed is void even if there has been a subsequent transfer

to a bona fide purchaser for value. This puts subsequent purchasers for value who had no notice of subsequent claims in a bad position – bona fide purchasers for value are not always going to prevail against other claimants.

1. Though there have been various equitable remedies crafted by courts to stave off injustice – such as estoppel.

ii. If the transfer results from fraud, the deed is a nullity – you can’t get good ownership by defrauding someone. Also if the fraudulent grantee then transfers to another person, that subsequent person has no cause of action against the grantor because the original grantor is treated as having no intent to convey title, so the original deed is treated as a nullity.

f. Green and Wachter – The American Mortgage in Historical and International Context:

i. In 2005 mortgages looked like a massive success story in the U.S. – many on both sides of the political spectrum thought we should put more people in houses.

ii. Mortgages used to be short-term obligations and did not require much long-term planning, but they changed because of gov’t practices that deliberately made them longer, more uniform.

iii. Fannie and Freddie bought mortgages that were backed by securities. The government decided to privatize Fannie in order to get its debt off of the government’s balance sheet – not clear this mattered because even after this, everyone understood there was a high probability that if it got into trouble, the government would pay off its debt.

iv. Even in 2007 very few people expected the crisis that happened in 2008 – there had been concerns about having Fannie and Freddie be so large, but no problems had ever materialized. People also thought it highly unlikely that there would be declines in the value of real estate throughout the entire country at the same time.

D. Security Interests a. Overview:

i. Security interest is a special type of property right in an asset called “collateral.” The purpose of a security interest is to secure a loan; it makes an asset, the collateral, available as a source of value if the debtor defaults on the loan.

1. One reason to have a secured loan is that it gives lender clear ability to have “first dibs” on a particular asset – don’t have to compete with other lenders. Not entirely understood why borrowers and lenders decide to have a secured vs. unsecured loan in given situations.

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ii. Form of divided ownership – typically, borrower holds a fee simple and enjoys all rights associated with possession. These rights are subject to security interest, a non-possessory interest that ripens into a possessory interest under certain conditions, namely non-repayment of loan.

b. Two important forms of security interests in real property:i. Mortgages – borrower has transferred a lien on property to lender. In

some states a mortgage is considered a transfer of legal title, though the borrower is still the owner of equitable title.

ii. Deeds of trust – title is conveyed to a trustee/third party, not the lender. Trustee operates the trust for the benefit of the lender until the loan is paid off. If there is a default the trustee will ask what the lender wants to do (generally to sell the property to pay off the debt, but not always). If the borrower repays the loan in due course, the trustee conveys title back to the borrower.

iii. For both, the borrower maintains possession of the property – the lender is not considered the “owner” for the purposes of controlling the property.

c. Foreclosure can be either judicial foreclosure or power of sale foreclosure.i. Judicial foreclosure – lender has to initiate legal action against

borrower. If lender wins, they will order property sold with proceeds going to lender. Can be expensive and time consuming.

ii. Power of sale foreclosure – lender may hold a public sale of real property almost immediately after borrower defaults without first having to file lawsuit. Usual course of action for a deed of trust but is also available in many states for mortgages. Lenders prefer this option because it is faster and inexpensive.

d. Key problem – how can third parties know about these split property rights?i. The primary solution is the development of sophisticated

recordation/registration schemes so the lender can let the world know (via a title search) that they have a security interest.

ii. Article IX governs the methods for protecting security interests in personal property – most states have required a financing statement to be filed in order to allow a security interest.

e. Right of Redemptioni. Equity of redemption is present until there is a foreclosure sale –

borrower and other people with an interest in the property have right to redeem property (get it back) if they make the payments.

ii. Statutes generally impose time limitation on this – borrowers can pay all their obligations and get their title restored. But equitable right of redemption is over once there’s been a foreclosure sale.

iii. BUT at this point in about half of all states there is a statutory right of redemption that will kick in after the foreclosure sale. These generally last 6 months to 2 years. During this time, the mortgagor may, for a particular sum of money (usually the foreclosure sale price) redeem their rights in the property. No statutory right of redemption is allowed with a deed of trust.

f. Deficiency Judgmentsi. Often the foreclosure sale doesn’t cover full amount of the loan, so lender

will seek a judgment of the additional money. In most states, if a lender

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has foreclosed on a property that someone has borrowed against they can go after the borrower’s other assets (even bank accounts).

ii. But they may not choose to do this because often people that default do not have other assets, so it costs more to go after them then lender would recover. Transaction costs are too high.

iii. Minority of states (mostly in west) have “anti-deficiency statutes” that protect defaulters from some deficiency judgments in some circumstances – likened to Swiss cheese- full of holes.

1. CA law provides that if the lender forecloses on the property they lose the right to sue the borrower on deficiency (can’t go after other assets), but there are many exceptions – often apply only to original purchase money loans (money to buy the property originally, not after you have paid it off and then use the home as security for a different loan); only to protect those that own residential property; and only to the borrower’s primary residence.

g. U.S. Bank National Association v. Ibanezi. Facts: At this time there were so many mortgages being created,

transferred, and pooled. Pooling = putting together mortgages and then selling security interests in them to investors; Rose Mortgage first gets the mortgage and then assigns it to Option One; Option One assigns it in blank to Lehman Brothers; Lehman then assigns it to SAS; SAS then assigns it to U.S. Bank, who conducted a private placement by pooling together mortgage loans, which became rights to income streams. No legal problem with assigning these rights, just done sloppily here – under MA statute, they need to be assigned before notice and the subsequent sale.

ii. Court: (1) Notice of the foreclosure sale in the Boston Globe rather than the local paper did not satisfy the statutory publication requirement; (2) U.S. Bank not entitled to foreclose where the assignments of the mortgages to the plaintiffs were neither executed nor recorded in the registry of the deeds until after the sale. Court enforces letter of the law – there was no persuasive documentation that there was assignment before the foreclosure process began.

iii. This holding put down a marker that said that sloppiness would not be tolerated – cannot backdate things or play fast and loose with the rules. Put a spotlight on practices of the banking industry – not acting fraudulently, just sloppily. Encouraged banks to settle more quickly with DOJ, though not clear this $ will ever get to those that actually suffered loss from these deals.

VII. THE LAW OF NEIGHBORSThree Legs of a Stool (means to a similar ends):

a. Nuisanceb. Servitudesc. Public land use controls (zoning)

A. Nuisance a. Overview

i. Generally involves something with little or no redeeming social value – often happens when the use of one person that interferes with the use

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and enjoyment of another’s property that still plausibly has some redeeming social value.

ii. It is contextual –what is a nuisance in one circumstance will not be in another.

iii. Old definition was anything that displeases another can be a nuisance, but this is not always true – aesthetic injuries are almost never said to be a nuisance.

iv. What was an unobjectionable use of property can become a nuisance over time.

1. Ex. Houses grow up around a brickyard or mine that has existed for much longer than the houses – can still be nuisance even if others were aware of it when they moved there. Fact that person complaining of a nuisance came to nuisance is not a prohibition, but is factor.

v. Compliance with all applicable laws/regulations does not mean that you are not a nuisance. Also fact that someone is in violation of laws/regulations does not necessarily make them a nuisance.

vi. To determine what is a nuisance, courts engage in a balancing of equities:

1. Does the value of the harm outweigh the utility of the conduct?

2. Apply the “locality rule” – was this conduct reasonable given what else was going on around his/her property?

3. Balancing also occurs at the remedial stage. If a nuisance occurs, the suffering landowner doesn’t necessarily have the right to get the other party enjoined (unlike in trespass). Court can issue an injunction or reward damages. Some argue that they will choose a remedy based on the most efficient outcome (maximize total social wealth). Others say they will promote non-economic values (such as health, equality of wealth, etc).

b. Adams v. Cleveland-Cliffs Iron Companyi. Trespass and nuisance are two common law actions that protect a

landowner’s right to exclude.1. Trespass protects landowners that are deprived of the right to

exclude – physical invasion is a trespass. Strict liability in a way nuisance is not.

2. Nuisance protects against the deprivation of the use and enjoyment of the property – non-physical intrusions are a nuisance.

3. Change in the law illustrated by Martin v. Reynolds Metal – even though the court called it a trespass, it still applied a nuisance-like remedy.

ii. Facts: D operated a mine 24-hours a day, engaged in blasting, etc.; jury instructions below stated that every unauthorized intrusion is a trespass; there was no finding of nuisance by the jury, but there was a finding of trespass.

iii. Court: Although there is a trend in other jurisdictions to conflate/blur the boundary between trespass and nuisance, it decides to uphold traditional distinctions between trespass and nuisance.

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1. Trespass requires a direct intrusion onto the land and the intrusion has to be by a tangible object (something you can grab/visible to the naked eye).

2. Nuisance results from an indirect intrusion and does not have to be a tangible object (such as the dust and oily particles here).

iv. Takeaways: Though there has been some movement to relax the boundary between nuisance and trespass, the traditional boundary between trespass and nuisance has by and large been maintained. Even if something has been deemed a trespass but looks like a nuisance, courts will often look to nuisance (rather than trespass) precedents in crafting a remedy.

c. Campbell v. Seamani. Sic utere tuo ut alienum non laedas – “use what is yours so as not to

damage others.”1. Shows that there are limits to what property owners can do when

their use diminishes the use and enjoyment of their neighbor’s property.

ii. Facts: Incompatible land uses – P built a beautiful estate, D ran a brickyard on the adjacent property, which blew toxic smoke over P’s property, causing harm.

iii. Court: This is a nuisance – the damage done to P’s property is serious, not de minimis. Emphasizes locality rule – D can operate a brickyard in other places (unlike Tucker v. Mack Paving Co., involved mine that couldn’t be moved). Also emphasizes balancing harms and benefits of two parties and a solution that maximizes total social wealth (RST approach).

iv. The court does not explicitly say this is why it reached its decision – emphasizes owner autonomy. One of the owner’s property rights is to do something that is special/important to them – suggests that a jury can’t estimate the damage done to P’s property because it is subjective (actual damages will not fully compensate).

v. Also refers to expectations of property owner – P didn’t expect brickyard to pollute and make his property unsuitable. It doesn’t matter that P came to nuisance or that D has been doing it for long (maybe if it had gone on for >20 years D could have gotten a prescriptive easement).

d. Calabresi & Melamed – Property Rules, Liability Rules, and Inalienability

i. Rule 1: Court decides there is a nuisance and decides to enjoin it.1. The parties can choose to bargain around the injunction.

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Mode of ProtectionProperty Rule Liability Rule

Assignment of Entitlement

P Rule 1Pile v. PressCampbell v. Seaman

Rule 2Golden Press v. RylandsBoomer v. Atlantic Cement

D Rule 3Hinman v. Pacific Air Transport

Rule 4RARE!!Spur Industries v. Del E. Webb

2. In Pile, court presented itself as constrained by precedent – knew there might be inequity, but had no choice but to issue the injunction. Other options did not exist at that time.

ii. Rule 2: Court decides there is a nuisance but issues damages rather than an injunction.

1. This gets complicated because a lot of the complained injuries are hard to measure – there may be subjective value that is not reflected in the market price. This problem often arises in eminent domain cases.

2. Ex. Fact that an owner hasn’t sold property over the years indicates high subjective value. This will not get you anything in eminent domain case, but might in nuisance case (see damages assessed on retrial in Boomer). Tort law is all about valuation – even though property rules protect your property, liability rules often still apply to damages to property because they provide the most reasonable solutions.

3. In Golden Press, the court held that relative hardship should be considered –weighing the equities of the situation. Explicitly recognizes a danger that the court in Pile implicitly recognized – awarding an injunction effectively gives the holder a right worth much more than the damage they suffered as a result of the trespass.

4. Advantage of Rule 2 is that the court is not a facilitator of extortion (as in Pile), but the disadvantage is that liability protection will not always be satisfactory/fully compensatory b/c of the difficulty of assessing damages.

iii. Rule 3: Court finds no nuisance (finding for D). P can then come to D and bargain/ purchase land restriction (which will bind not only present owner, but also future owners of the property to restricted uses). Can also offer to buy property outright and shut it down themselves.

1. Anglo-American law has been ambivalent about this because owner autonomy militates against restricting future property owners in terms of the use of their land.

2. P could also use the political process to achieve the intended result – try to get a change in regulation (e.g., zoning ordinances) to disallow or restrict certain activities in the area.

3. Ex. Hinman – overflights are not a trespass; but if you don’t want the other person to undertake this activity you can negotiate with them to stop.

iv. Rule 4: Court says D has a right to engage in the conduct; does not order D to pay damages, but rather says that D can keep doing it unless P pays them to stop (assuming they pay price set by court, not a price D agrees to as result of free bargaining). Very rare result.

1. Spur is kind of an illustration of this rule, but is not a perfect application.

v. Takeaways:1. In addition to efficiency concerns, courts can and do take

account of non-efficiency considerations (i.e., justice and distributional concerns) – particularly with takings cases.

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2. The nature of the entitlement is a function of the circumstances. Property rules and liabilities attach to particular rights in particular circumstances, not to the property itself.

3. In determining whether a property rule or liability rule is better, one often overlooked aspect is that with property rules it can sometimes be costly for individuals to set price at which they are willing to sell. One benefit of using liability rules is that the court sets the price.

e. Boomer v. Atlantic Cement Company, Inc.i. Facts: D ran a cement plant; surrounding neighbors sought an injunction

because of the dirt, smoke, and vibration emanating from the plant. These facts illustrate a classic situation of a bilateral monopoly with very high transaction costs.

ii. Court noted there is ongoing doctrinal change – until 1970, courts in NY had not been balancing conveniences, they had just been issuing injunctions automatically. Argues that there is huge social value in having the plant (big part of the region’s economy), but also tremendous downsides due to pollution.

iii. Court held that this was a nuisance – says it can only decide the rights of parties before it. The law assigns initial entitlements and the remedies by which those entitlements will be protected; regulations deal with larger societal issues. Rather than issuing an injunction, it awarded damages of $185,000. Issuing an injunction would be inequitable because the plant has invested so much money into the property (over $45 million) – thus the balancing discussion comes in at this point (rather than when finding if there is a nuisance).

1. One of the concerns with balancing is that it might incentivize premature development – basically gives a prescriptive easement.

2. Others say that sunk costs don’t matter – the fact that D has already sunk money into the plant should not affect the assessment of the social utility of shutting it down or not. All that matters are the costs going forward.

3. The problem with shutting it down is that it would impose undue hardship on D. If the court issues an injunction, the odds are low that D will be able to negotiate around it because of how many residents are involved.

iv. In addition to nuisance, think about servitudes and regulations – where nuisance law is inadequate, we don’t tend to see innovations that reduce the high transaction costs, but rather more regulation and servitudes.

v. Court determined how much the permanent damages would be based on hardship caused to all the residents. But fact that the damages on retrial ended up being 4 times this amount indicates how difficult it is to determine damages in nuisance cases – market value does not always tell the full story. Always a concern that court-assessed damages will be undercompensatory.

vi. Because assessment costs are high, liability protection is not always satisfactory.

f. Spur Industries, Inc. v. Del E. Webb Development57

i. Facts: When Spur developed its farmland, the area was very sparsely populated, but P began building a retirement community in the area; both parties continued to buy land/expand until P began to face sales resistance because of the feed lot.

ii. Court finds that there is a public and private nuisance and issues an injunction – D’s use presents a public health issue. Though it is sympathetic to D (said it had no way of knowing surrounding land uses would change) and says that if P (who came to nuisance) was only party complaining, outcome would be different. Shows again coming to nuisance is not dispositive.

iii. Instead of issuing an injunction, court enjoined D but held that P has to indemnify Spur a reasonable amount to reflect its shut down/moving costs. P has a choice – it can have the injunction if it indemnifies/compensates Spur or it can reject injunction and not have to pay (as if suit had not been brought). Rule 4 makes property owner buy their property rights again.

1. It seems odd to apply Rule 4 here because it is basically forcing the property owner to buy their property rights again – they thought they were getting the use and enjoyment of their property first time, but now they are being told that they have to pay again to get this.

iv. Difference between Rule 3 and 4:1. Under Rule 3 the property owner has lost – they get nothing.2. Under Rule 4 the property owner has not lost, but has to pay to get

it.g. Government Laws/Regulations Related to Nuisance :

i. Zoning, environmental laws/regulations, etc. are powerful tools for avoiding and refereeing nuisance cases. They don’t supersede nuisance law, but work together.

ii. Local government can decide which land uses are allowed in a given area – make some areas available for farm uses and others for residential uses. Make incompatible land uses separate from one another.

iii. One factor to consider in terms of their success is the complexity of nuisance litigation – as more and more parties are added, nuisance litigation becomes increasingly complex and less effective. At this point there are strong arguments for allowing more government regulation and relying less on nuisance law.

iv. Also if there is uneasiness about putting a price on health and enjoyment, government regulation looks more appealing because the more affluent people are, the more likely to pay more to protect their life and health. In a world of nuisance law, the foreseeable consequence is that pollution will be found more often around the less affluent than the more affluent.

v. Think of nuisance law, servitudes, and government regulations as three legs of a stool – they all have important parts to play.

vi. In general, legislatures don’t pass statutes to say that x is a nuisance and y is not –no zoning regime and servitudes will eliminate the need for nuisance law/courts.

B. Servitudes Overview a. Overview :

i. We recognize three kinds of servitudes:1. Easements

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2. Real covenants – traditional remedy was damages3. Equitable servitudes – traditional remedy was an injunction

ii. There has an effort to combine real covenants and equitable servitudes – the line between them has blurred, but not completely vanished. The same promise made (usually to not do something on property) can give rise to either a real covenant or equitable servitude.

iii. However the line between easements and the others remains quite distinct.

iv. Restatement of Property (Third) has proposed combining easements, covenants, and equitable servitudes into one kind of interest called a “servitude,” but this is not happening.

C. Easements a. Overview :

i. Easements are interests in land – interests in land are transferred by writing, so easements are generally subject to the SoF (with some exceptions).

ii. In general, easements are positive/affirmative rather than negative.1. The common law was very hostile to the creation of negative

easements.2. Positive easement usually involves the right of someone to do

something on another’s property (often gives a non-possessory interest to go on someone’s property or send something physically onto another’s property).

3. Easements are not a right to possession and not a right to exclude.iii. The Lease/License/Easement Divide – usually simple to figure out when

an easement has been created, but sometimes it can be difficult to distinguish them from leases and licenses. See Baseball Publishing Co. v. Bruton.

b. Types of Easementsi. Appurtenant Easement – one that belongs to another parcel of land;

attaches to the land and automatically transfers as the property it is attached to is transferred.

1. E.g., A gives B a right to cut across their land to get to the main road. B will record that easement in property office, so as to make it viewable to anyone doing a property search.

2. The common law has been hostile to easements in gross transferred by individuals.

ii. Easement in Gross – one that belongs to a particular grantee, as opposed to a particular tract of land. Generally seen in with railroads and utilities.

1. An easement in gross that is not commercial in nature will often be prevented from being transferred.

c. Transfers of Easementsi. Usually done in writing (except for those listed below).ii. Two types of writings:

1. Grant of an easement – an instrument that will say “from A to B an easement to do x.”

2. Reservation – when a property owner transfers it to another they can reserve an easement for someone else (e.g., A reserves to B a right to cross their property). Some states allow people to reserve

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an easement to a 3rd party (transfer from A to B that reserves an easement for C) – others don’t.

d. Baseball Publishing Co. v. Brutoni. Facts: The parties signed a writing they referred to as a lease – the

problem was that it didn’t transfer possession. This was not a possessory right (which raises flags that it might be an easement because leases provide the right to possess).

ii. Not a license, because licenses are revocable at the will of the property owner (though the license holder often retains certain rights/can recover damages).

iii. Court looked to the intent of the parties/engages in a process of elimination – eliminates a license and lease, so it has to be an easement. Since it is not attached to a piece of property, it has to be an easement in gross.

iv. American courts are quick to recognize easements in gross that are commercial in nature – these are clearly valid and transferrable. The fuzziness arises with easements in gross that are recreational in nature – often not transferrable.

e. Easements that Don’t Require a Writingi. Easements by Prescription – over time, you can acquire a prescriptive

right to an easement that is identical to what you can acquire through an explicit grant.

1. Ex. If you cut across a neighbor’s property for long enough (the statutory period) you can acquire a prescriptive easement to that pathway.

2. Most are private (held by one person) – public prescriptive easements are more problematic because they can catch the property owner off guard.

3. Requires continuous use for the requisite statutory period; have to be acting in the way the holder of a true easement would be.

4. Some older cases will use the “lost grant” theory – at one point there must have been a formal grant of an easement that later got lost. The fact that someone has been using an easement without it having been recorded is an indication of a lost grant.

5. The modern formulation stresses that easements by prescription are similar to AP – someone is asserting rights, even if he/she has no true claim, over time they can become the TO by acting as the TO.

6. Specific requirements:a. Actual use – claimant must physically use the easement;b. Open and notorious use – must be open and visible such that

the landowner will notice it or should notice it;c. Hostile/adverse use (use by claim of right) – no permission from

landowner;d. Continuous use for the requisite statutory period in a manner

consistent with what a reasonable easement holder would do.ii. Easements by Estoppel (irrevocable licenses) – if the

actions/representations of the property owner indicate that the license is not going to be revoked and the holder reasonably relies, that right can

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be held to be irrevocable. Through equitable principles revocable licenses become irrevocable licenses. Requires:

1. Owner of the servient estate consents to the use;2. Servient estate owner knows or should know the dominant estate

owner will materially change his position in reliance;3. Dominant estate holder reasonably relies and substantially changes

his position, such as by investing in improvements to the dominant estate or to the easement itself

iii. Implied Easements – come in two forms: (1) easement by necessity and (2) easement implied from prior use. Both have a necessity element.

1. Easement Implied From Prior Use/Easement by Implication – judges put in place what reasonable parties would have contracted for had they remembered to do so; what the parties would have done.

a. Tend to arise in situations like when someone builds a drainage ditch or road over a property and then sells off the property without getting an easement and it is impossible to use the property that was benefiting from the road/pipe/ditch without having the benefit.

b. Formal elements:i. Separation of Title – the two parcels had to have

previously been under common ownership;ii. There was a continuous or permanent pre-subdivision use

before the property was divided up;iii. The use in question that benefited one property to the

detriment of the other was apparent upon reasonable inspection (obvious or manifest) so as to show that it was permanent; and

iv. Easement must be “reasonably necessary” to the beneficial enjoyment of the land granted or retained – it is required to allow the owner to use the property in a way similar to the way owners of similar property are able to use theirs. Usually a slightly lower bar than for easements by necessity.

2. Easement by Necessity – arises when land is divided and one of the parcels ends up being landlocked. Formal Elements:

a. Common ownership of the dominant and servient parcels prior to severance of the landlocked parcel;

b. The easement must be strictly necessary (e.g., no access to the property but for the easement); and

c. The necessity must have existed at the time of the severance of the property, not later (has to be landlocked at the time of severance).

i. In some sates, the landlocked parcel will have a right to condemn and pay for the easement if necessary.

f. Schwab v. Timmonsi. Facts: P’s land was blocked by water on one side and a bluff on the other;

wanted an easement by necessity for access to a private road that runs through the properties to the south and also an easement by implication

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(by prior use) because the lands were once under the common ownership of the U.S. government.

ii. NB: Water access is not enough here – in recent decades water access and foot path access have not been sufficient; though it may be possible to argue that water access is adequate for a summer home, for instance.

iii. P had previously conveyed away their own access – basically landlocked themselves. Some courts have said this defeats a claim of easement by necessity – if the easement is needed as a result of the grantor’s own negligence, some courts will not allow it.

iv. Court refused to grant either easement and declined to change law of implied easements. Didn’t trace ownership as far back as P wanted (to the government). Also said the there are important public policy considerations that push against expansion of the doctrine of implied easements.

1. The main consideration is that it would give rise to “hidden easements” – those interested in knowing what property rights are associated with a given piece of land already have only limited means of discovering it. They can (1) review the chain of title; (2) search other public records to show judgments and liens; and (3) inspect the land itself. If the court expanded the doctrine, it might not be possible for potential purchasers to be put on notice of these easements. Very skeptical about unwritten easements.

v. Court applies the traditional doctrine of implied easements – maintains the boundary between implied easements and easements of necessity. The elements are not met because the private road in question never extended to P’s property.

vi. Easements by necessity arise where an owner severs a landlocked portion of his/her property by conveying such parcel to another. The elements are not satisfied in this case because when the land was initially conveyed by the government, P’s property had access to the public road above the bluff – the government never severed a landlocked portion of its property.

g. Holbrook v. Taylori. Facts: Appellants owned property with a road that appellees used to

access their home/adjacent property with appellant’s permission. Appellees improved the road; later claimed a right to use the road by either a prescriptive easement or easement by estoppel after appellants tried to charge them for use of the road.

ii. Court: No easement by prescription, but use of the roadway is established by an easement by estoppel. Supports P’s position that this looks like extortion. If you allow people to go across your property without making them pay and they materially change their position in reasonable reliance on your decision (i.e., making substantial investments on their property), there will be an easement by estoppel.

1. D shouldn’t have allowed use of their property without reaching any permanent deal; should have executed a written easement.

2. Different than Golden Press, where the court ordered damages rather than making them tear down the building. Here, the court adopts the standard outcome for easements by estoppel – if the property owner loses, there is no compensation.

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3. Key fact: D let them improve road – very common in irrevocable license cases for there have been expenditures to improve either the other property or access road.

iii. Easement by prescription claim (difficult to argue with easement by estoppel because of the permission issue) – the essence of an easement by prescription claim is that there is NO PERMISSION. Not the case here.

h. Warsaw v. Chicago Metallic Ceilings, Inc.i. Shows the distinction between AP and prescriptive easements (is the user

possessing the property or simply using it as a holder of an easement would?).

ii. Facts: The TO declined to sell an easement; P used part of D’s property anyways to back trucks into his warehouse (blatant bad faith); D attempted to build a warehouse on the portion of his property P had been using.

iii. Trial court denied P’s request for a preliminary injunction so D built the warehouse – but after a trial, it found that P had acquired a prescriptive easement.

iv. The appeals court required that the adverse user compensate D for taking down the warehouse and for the value of the lost rights. Effectively imposes a damages remedy – D loses property rights but should be made whole (Rule 4).

v. CA Supreme Court rejects this remedy – sticks with traditional on/off switch for finding a prescriptive easement; no modification of the remedial structure. This provides clarity – the law has been this way (all or nothing) for a long time, no intermediate remedies.

vi. Dissent disagrees that the result is ordained by statute – the courts still have the traditional power to invoke equitable doctrines that deal with fairness. Equity dictates that P must pay fair market value because he acted in bad faith.

vii. To prevent this D could have excluded P earlier (including by self-help, such as putting up a fence) then negotiated with P to find solution. Also could have called police to report trespassing or given permission, which defeats an easement be prescription claim, but might open D up to an easement by estoppel claim (D would want to make it clear that it was limited in time and scope).

i. Termination of Easementsi. Release – termination by explicit bargain; property holders bargain with

one another to terminate an easement. Common when an easement has outlived its usefulness. Conservation servitudes are not terminable through release.

ii. Expiration – termination through operation of their own terms.1. Term of Years – any specific period of time; when time specified

ends so does easement.2. Determinable – generally in fee simple determinable language (“so

long as used for ___”).iii. Merger – if dominant and servient estates come under common

ownership, easement vanishes through doctrine of merger. BUT if the pieces of property are once again separated, easement doesn’t

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automatically revive (have to make sure drafting reflects the easement in this situation).

iv. End of Necessity (for easement by necessity) – easement by necessity will end when the necessity ends (e.g., when a road is built to give alternate ingress/egress).

v. Abandonment – generally, mere non-use is not enough to constitute abandonment (though there are some cases where this is true). There has to be some kind of communication/action that evinces an intention not to use that property any more (e.g., a railroad not using tracks on an easement any more is not sufficient, but pulling up the tracks is).

vi. Prescription – if the owner of the servient estate blocks access to the easement holder, acts like it doesn’t exist, or takes other action to extinguish the rights of the easement holder, the easement may be extinguished over time.

vii. Condemnation – if gov’t or an entity to which gov’t has given eminent domain power has condemned a property, easement holder also has right extinguished (but must be compensated).

viii. Estoppel – if an easement holder indicates that she will not be using that easement and the owner of the servient estate reasonably relies on those representations, the easement may be considered terminated by estoppel.

ix. Excessive Use – fairly rare because courts will usually just enjoin the excessive use, but in some cases the court will terminate the easement.

x. Sales to Bona-Fide Purchasers Without Notice – easements may be terminated if the property is sold to a purchaser who has no notice of any kind (no actual notice or inquiry notice). If they could have figured it out by looking at the property, that counts as notice.

j. Scope and Misuse of Easementsi. As society and technology change so does the scope of easements.ii. In determining the scope of most easements (those created by

grant), courts look to the intent of the parties. If there is no indication otherwise, courts will assume they intended for the easement to change with the change of technology.

iii. For easements by estoppel, the scope of the easement hinges on the reliance interest that gave rise to the easement in the first place.

iv. For easements implied by prior use, the scope depends on the pre-easement use. How was the property used before the common ownership ended?

v. For easements by necessity, the scope turns on what is strictly necessary; when the necessity ends so does the easement.

vi. For prescriptive easements, scope is a function of use that resulted in the prescriptive easement.

vii. For unwritten easements, courts are hesitant to expand the scope, instead will hold easement holders to the contours of the property right qualified by the unwritten easements.

viii. Generally courts are very strict about not increasing the burden on the servient estate (particularly with respect to unwritten easements).

k. Penn Bowling Recreation Center, Inc. v. Hot Shoppes, Inc.

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i. Facts: Penn started using the easement across Hot Shoppes’ property for property beyond the dominant estate; Penn argued the total burden didn’t increase.

ii. Court: There is no property right to use the easement to benefit anything other than the dominant tract – the property right is to use the easement for the dominant tract only. Strict reading of the rule.

1. Courts are alert for the holders of the easement to expand the scope of the easement on the servient estate. Having to figure out whether the increased use actually burdens the servient estate is difficult/costly to figure out, so it makes sense to have a clear rule.

2. This is a property right, the expectation is unique – an injunction will issue when the use exceeds expectations.

iii. No damages remedy – want to encourage bargaining, but there are very high assessment costs in determining damages for overuse or misuse of an easement.

1. See Brown v. Voss – the court gave damages ($1) rather than awarding injunctive relief. Owner of the servient estate “wins”, but also loses in the sense that there is no injunction. This is an outlier in terms of remedies.

iv. Key: The misuse of an easement may lead to termination of that easement.

D. Real Covenants and Equitable Servitudes a. Overview (see p. 1038-1040) :

i. Definition: Written promises to do or not do certain things relating to the use of the land

ii. The line between these is less distinct than it used to be, but they are still unique.

iii. The background of these is related to the common law’s hostility about recognizing negative easements you could get an easement to cross your neighbor’s property, but could not get one with your neighbor not to construct an apartment building, for instance.

1. Balance between the autonomy interests of present owners to do what they want with the property and anxiety over the dead hand/having property burdened by so many restrictions that it is no longer useful.

2. The common law was hesitant to recognize restrictions on land use that would attach to property and bind future owners these doctrines are the result of a compromise between the benefits of allowing owners to do what they want with their property to benefit others and the potential social costs of having property burdened by outmoded prescriptions.

iv. Jurisdictions differ in terms of the actual elements (particularly with respect to horizontal and vertical privity), but not radically.

v. The law is in a state of some change – the Restatement (Third) has not succeeded in erasing the distinctions, but has succeeded in some respects. Servitude law is now reasonably dynamic – it is possible that courts might be open to some modification of the law of servitudes (unlike Schwab).

b. How to Proceed/Key Features65

i. Is there an equitable servitude?1. Easier than figuring out whether there is a real covenant because

there are fewer elements.ii. What are the potential remedies available (legal or equitable)?

1. At common law, the standard remedy for equitable servitudes was an injunction; the standard remedy for real covenants was damages.

2. The merger of law and equity in the U.S. has blurred some of the distinctions between equitable servitudes and real covenants. Damages may now be available for equitable servitudes and an injunction for real covenants. In general the remedy sought for both is injunctive relief, but sometimes there can be damages.

iii. Why do we permit or encourage these?1. It enhances economic value/protects property values –

particularly in subdivisions or planned communities (e.g., no gas station or factory in a residential area). Some of these restrictions in planned communities can be persnickety/excessive and limit economic value, however.

2. Servitudes law permits people to reallocate planned use entitlements provided by law (engage in Coasian bargaining) and to impose obligations on landholders beyond those imposed by law. These are arranged by permanent private agreements – have burdens attach to property and transfer automatically when property is transferred.

iv. Usefulness of private ordering vs. public regulation:1. The two work together – servitudes work as a private alternative to

public zoning laws. Land use planning accomplished through private ordering or contract allows those who have tastes that aren’t shared by greater community to vindicate those tastes – these people might lose in political arena (not get a zoning law) but can group together with like-minded people and agree to bind each other (no pets, no basketball courts, no loud appliances over the weekend, etc.).

2. Downside is that it raises concern of private tyranny – people are delegating governance over themselves to a group not responsive to concerns in the way that public groups are.

c. History of Real Covenants and Equitable Servitudes:i. Starts with Spencer’s Case (1583) – the court said that: (1) a covenant is

not going to bind assignees of the promisor unless the promisor expressly agrees to that (explicitly says it binds his assignees); (2) the promise must touch and concern the land; and (3) there must be privity of estate for the covenant to run with the land.

ii. Debate over meaning of touch and concern and privity of estate continued until Tulk v. Moxhay.

d. Tulk v. Moxhayi. Tulk conveys garden to Elms, who signed affirmative covenant to keep

the land as a garden and negative covenant stating that Elms and his assigns will not build any buildings on the land; Elms conveys property to Moxhay (who knew about restrictions, but were not included in the deed);

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Moxhay argued that he was not bound by restriction – elements of a real covenant were not met.

ii. This is a case in court of equity, so it doesn’t matter that Tulk doesn’t have the law on his side.

iii. Court enforced the restriction even though elements were not met. Said there’s possibility of a windfall – first purchaser can buy a property with restrictions at lower value and turn it around and sell it at higher value because restrictions don’t carry over to next owner. Court held that someone who purchases a property with notice of restrictions stands in same place as current owner of the property.

iv. Stands for the beginning of the doctrine of equitable servitudes – starts out as an equitable doctrine that issues an injunction.

e. Elements of Equitable Servitudes (ES) and Real Covenants (RC)i. Need both a burden and a benefit to run in order for enforcement of

either if the benefit does not run to the party seeking enforcement, they do NOT have authority to enforce it.

1. The fact that the burden runs to a subsequent purchaser does not mean that the person seeking enforcement has the right to do so.

ii. For the burden of a real covenant to run, there must be:1. Intent – intent for the restrictions/promises to run is usually

explicit. Generally explicit language in the conveyance/deed indicating an intent to bind successive buyers and assigns, but sometimes it is more ambiguous and court has to infer intent from context.

2. Horizontal Privity – requires that the original contracting parties transferred a property interest of some type (usually buyer/seller; grantor/grantee; or landlord/tenant). There has to be a mutual, simultaneous interest in the same land. This is not satisfied if A and B are not in a conveyor/conveyee relationship, such as if they are just neighbors.

a. This requirement has been criticized because it is so easy to engineer – it is simply a trap for the unwary. People with access to legal assistance have a huge advantage.

3. Vertical Privity – relationship between original contracting parties and their successors in interest. Successor has to hold entire durational interest held by covenantor at the time they made the covenant.

a. Holders of subleases weren’t bound in same way as those who held assignments, however.

b. Not clear whether holder of a freehold interest (life estate, fee simple determinable, etc.) satisfies this requirement. Invitation to bad behavior (to engineer not having vertical privity), so would probably qualify even though it isn’t the same duration.

4. Touch and Concern – covenant must relate to the direct use of the land (affect the nature, quality, use, enjoyment, or value of the property).

a. The Restatement (Third) eliminates this requirement because it is very confusing/ indeterminate, but hasn’t succeeded. Says that servitudes will be valid unless they are illegal, unconstitutional, or violate public policy (e.g., things that are

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arbitrary or spiteful, place an unreasonable restraint on alienation, are unconscionable, etc.).

iii. Key to enforcement = need to know that the benefit has run TO THE PERSON THAT IS TRYING TO ENFORCE IT.

iv. For the benefit of an real covenant to run, there must be:1. Intent;2. Vertical privity; and3. Touch and concern.

v. For the burden of an equitable servitude to run, there must be:1. Intent2. Notice3. Touch and Concern

vi. For the benefit of a equitable servitude to run, there must be:1. Intent2. Touch and concern

f. Eagle Enterprises v. Grossi. Issue: Whether promises to pay money to a homeowners association

would be enforced. At common law, most affirmative covenants didn’t touch and concern the land (with some exceptions, such as an affirmative covenant to repair fences).

ii. Court held that a promise to pay money for maintenance and other services for the community operate as a functional substitute to repairing the land yourself these affirmative promises do touch and concern the land and are enforceable.

1. Affirmative covenants will touch and concern land if closely related to the property.

iii. Court held that this specific covenant was not necessary to get water to the property. The promise to get seasonal water is superfluous – actually decreases the property value because it is a burden. It does not touch and concern.

1. This is a cost/benefit analysis – cost: the property will be worth more without servitude; benefit: the seasonal water supplier has made investments relying on these customers that are required to buy from them.

2. Also problematic that there is no limit on time on this covenant (unlimited duration) – circumstances have changed over time (though this is not a changed circumstances case, it seems to take this into account).

3. The covenant is also tangential – it doesn’t have that much to do with the operation of the property (perhaps because it is seasonal only).

iv. Restatement (Third) suggests that contracts entered into by private parties should be presumed to be valid, but courts will be able to determine if the servitudes are no longer enforceable because they violate constitutional rights; are arbitrary, spiteful, or capricious; impose an unreasonable restraint on alienation; impose an unreasonable restraint on trade or competition; or are unconscionable.

1. The fear is that these would open up the court to all sorts of challenges.

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g. Sanborn v. McLeani. Facts: D wanted to build a gas station on their property in a subdivision;

P argued this would be in violation of the general plan fixed for use of all lots on the street for residential purposes only.

ii. The first deeds transferred by the creator of the subdivision did include a covenant restricting the land for residential use, but later conveyances (including the one for D’s lot) were made with a deed that did not include the covenant.

1. This fact pattern would not be seen today – there would be a common scheme plan filed in the records office by the subdivision planner.

2. D argued they didn’t have actual notice – were told it was not restricted when they purchased it.

iii. Court: Common plan doctrine – reciprocal negative easements can be implied if there was a common plan and indication of this common plan can come from a master plan or a general pattern of earlier restrictions.

1. Here the fact that the original deeds were subject to a negative reciprocal easement is enough to subject Ds to a servitude.

iv. Implied negative easement – when a common owner sells parcels, reciprocal restrictions are automatically implied on the lots retained by the common grantor. This would be a different case if D’s lots had been conveyed before the lots with the restriction in the deed. The implied easement runs with the land.

1. The party seeking to enforce the restriction and the party burdened by the restriction must trace title back to a common grantor.

v. Here there was intent, it touches and concerns, and there was notice.1. Record notice – D maybe has record notice; perhaps could have

looked at all of the deeds the original owners transferred and would have found out there were a lot of restrictions on properties that abutted their lot.

2. Inquiry notice – D definitely has inquiry notice; the lack of commercial activity/strictly uniform nature of the neighborhood should have put them on notice that they needed to look more into the records. Not enough that they asked about their property.

a. NB: Record and/or inquiry notice are known as constructive notice.

3. Actual notice – no indication that D had any actual notice – they would not have found any indication of a restriction.

h. Nahrstedt v. Lakeside Village Condominium Association, Inc.i. Facts: P kept cats in her condo in violation of the rule against pets in

community. P argued that the restriction was unreasonable and that there are limits on enforceability of these restrictions by CA statute. There is no dispute that she had notice (actual and constructive) – it was in her deed.

1. CA statute says that limitations/restrictions in the recorded declaration of a common interest development are enforceable “unless unreasonable.”

ii. Most common interest communities contain a large number of restrictions – designed to protect home values and ensure people are not

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injured by actions of others in community. P argues these are not designed to place limits on things that go on solely within the confines of their homes.

iii. Court: A restriction contained in the founding document of a common interest community is presumed to be reasonable and will be enforced uniformly against all residents unless it is arbitrary, imposes a burden on the use of lands it affects that substantially outweigh the benefits it provides, or violates a fundamental public policy.

1. Finds that the legislature intended for the courts to give content to the term “unreasonable.” Also draws a distinction between restrictions included in the original declaration that everyone knowingly signs on to when purchasing and those that are later adopted by vote of the owners – the former will be enforced more strictly than the latter.

2. Will be “heavy thumb on the scale” in favor of restrictions in original declaration.

3. Court will also consider whether it is reasonable to limit entire community on a general level, not individual owner in each case. The reasonableness of the restriction is not determined by looking at odorless, noiseless cats, but rather animals in general.

4. The legislature intended to promote stability of expectations – people thought there would be no animals when they moved there.

iv. Dissent: This rule is unreasonable; also looks carefully and costs and benefits – suggests that any construction of reasonableness must take these into account. Believes that judges are well equipped to make an assessment of the costs and benefits. If there were no transaction costs, P would be willing to pay the others in the community not to enforce the restriction – we ought to see deals like this made, but the transaction costs would be huge, so courts should as they think would happen as the result of normal bargaining between the parties.

v. NB: CC&Rs can be enforced as either RCs or ESs.i. Kiekel v. Four Colonies Homes Association

i. Facts: A minority of homes in subdivision were rentals; tenants were causing problems for full-time residents; declaration could only be changed by a vote of 75% of owners, but bylaws could be changed with a simple majority; owners held a meeting to amend bylaws to disallow renting.

1. Common for bylaws to be more easily modifiable than declarations – bylaws tend to oversee the operation of the board/homeowners association (e.g., how often the board meets); declarations tend to have more substance (e.g., what owners can and can’t do).

2. Those actually living in the community are much more likely to know about the meeting changing the bylaws than are absentee owners.

ii. Court: Holding for Kiekel – interprets declaration with background idea that restraints on alienation are disfavored and importance of owner autonomy (if owners have not formally surrendered their autonomy a court is going to be hesitant to find they left themselves open to having a valuable property right removed by operation of other members of the community).

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1. The declaration did not explicitly permit renting, but there were references to tenants, which makes it look like renting was contemplated.

2. Places a lot of weight on the expectations of the parties – these bylaw amendments came as a shock.

iii. Compare to Apple Valley Gardens Ass’n Inc. v. McHutta1. Similar facts, but the court held that the rules can be changed;

aggrieved property owners can be restricted in ways they didn’t anticipate.

2. Court says to pay careful attention to the declaration and bylaws that govern their ownership – owners have to be aware there is a loophole that allows amendment of the bylaws to change their rights.

j. Tensions About When to Change/Terminate RCs and ESs :i. Efficiency vs. individual autonomyii. Stability vs. adjustment to shifts in needs and preferences

k. Methods for Modifying or Terminating ESs and RCsi. Expiration – sometimes happens by terms of ES and RC (expiration

date/sunset provisions).ii. Release – good way of unsaddling a restricted property from an

outmoded RC or ES when it is not counterbalanced by corresponding benefits to another property. Not available for conservation servitudes because they are engineered to be difficult to change/are designed to promote non-pecuniary benefits.

1. This can be difficult when a lot of parties are involved.iii. Abandonment/Waiver – not easy to convince a court that a RC or ES

has been abandoned. Requires a showing that the benefits of the original plan can no longer be realized (or if there isn’t a plan, that the benefits the original parties intended is not realizable).

iv. Merger – if the benefited property and the burdened property come under common ownership, the operation of merger can make the RC or ES evaporate.

v. Estoppel – if holder of RC or ES (who has the right to enforce it) has through act or statement suggested/implied that he or she is not going to enforce it and the owner of the property subject to the servitude has reasonably relied and would suffer real loss/damage (measured in a pecuniary fashion) if the RC or ES were now deemed enforceable, it will not be enforced.

1. Requires (1) an admission, statement, or act inconsistent with the claim asserted afterward; (2) reasonable reliance by the other party on that admission, statement or act; and (3) injury to the party if the first party is allowed to contradict their prior statement.

vi. Prescription – if someone is under an affirmative covenant and fails to act in accordance with it, that RC or ES may be deemed to be no longer enforceable.

vii. Condemnation – if the government condemns a property through exercise of its eminent domain power and the purposes of the servitude are no longer realizable for the purposes for which the land has been condemned, it not be enforceable.

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viii. Servitude in Gross – may be terminated if it is hard/impracticable to locate the holder of that servitude in gross. Ex. Covenant is held by a firm – if they go out of business and it will be hard to ascertain who their successors are.

ix. Changed Conditions – on its surface is very demanding – relates to conditions within the neighborhood (not surrounding it) in order to prevent it from changing over time. Don’t want commercial development (for example) to march inward from the outskirts of the community.

l. Pocono Springs Civic Association, Inc. v. MacKenziei. Facts: D tried to bargain with P and release the property from the

restrictions after realizing it could not meet the sewer requirement; then tried to abandon it.

ii. The requirements of an ES are met – D at least had record notice. They were either in the deed or were referred to (could have easily figured it out). Clearly there was also intent and the restriction touched and concerned the land.

iii. Court: Property not abandoned because D continues to hold perfect title.iv. It is very hard to abandon real property (compared to personal

property). Strategies for doing so were unsuccessful here because it is a negative value property. Another option would be to try to use political process – by changing the regulations that affect their property (so they can build on it) or by persuading the legislature to pass a sunset law or limit the amount of money an owner of property without a structure on it would have to pay to the community.

m. Bolotin v. Rindgei. NB: Eagle Enterprises was not a changed conditions case, but involved a

general idea that as times change servitudes are going to be less enforceable. The broader idea of changing conditions runs throughout more of servitude law than the actual doctrine of changed conditions, which remains limited/narrow.

ii. Facts: P owned an unimproved lot in a subdivision that was subject to a servitude requiring residential use scheduled to expire in 1970, but wanted to use it for commercial purposes. The area around the subdivision has changed dramatically and residential use was unsuitable because it was on a busy road.

iii. Trial court found that the financial impact on the property owners in the interior of this community of allowing commercial use would be zero.

iv. Court reverses – whether or not there is a benefit to the ES is not just measured by the market value of the interior lots. It is about protecting the interests of the interior lot owners in ways that might not be easy to measure by home values. The doctrine will only set aside an ES if there is no substantial benefit to any of the other property owners.

1. It is difficult to determine the market value of the ES to interior lot owners, so courts should not put a thumb on the scale for the market value. If the negatively affected party is willing to litigate, it is enough indication that they are hurt.

2. Court takes a very strict interpretation of the doctrine of changed conditions – looks only to changed conditions within

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the neighborhood itself, not what is going on outside/surrounding the neighborhood.

3. Changing restrictions would give the owners of border parcels a windfall – allows them to manipulate the legal doctrine to make them not be bound by something they agreed to be bound by (and paid less for). To allow someone with actual notice to escape the restriction would be unfair.

v. High transaction costs in these situations because of so many owners, so release is not going to function perfectly. When the interior of the community has changed such that the restrictions are no longer meaningful, they can be terminated.

vi. NB: The doctrine of cy pres (so near) provides for more malleableness than does changed circumstances. Though with cy pres there is no one to bargain with – don’t know what they would want to do given the changed societal circumstances.

n. Peckham v. Milroyi. Facts: There is a covenant in a neighborhood that prohibits home

businesses; D remodeled their home and attempted to operate a home day care center there; P tried to get the public authorities to enforce the violation, then sued.

ii. Court held for P, rejecting all of D’s defenses, including:1. Abandonment: D argued the covenant was abandoned because

there were other small businesses. But the hurdle for abandonment is very high – a few non-conforming uses are not sufficient/are de minimis. The other commercial violations were far less disruptive and were not habitual.

2. Laches: Equitable defense; does not have a specific time period, but requires P had a reasonable opportunity to discover/know about the COA yet unreasonably delayed in bringing suit. P can’t sit on his/her rights. Laches requires: (1) unreasonable delay; and (2) real damage to D resulting from the delay. Here, P saw them remodeling but he didn’t know it was going to be used for a daycare center – no unreasonable delay.

3. Estoppel: Requires (1) an admission, statement, or act inconsistent with the claim asserted afterward; (2) reasonable reliance by other party on that admission, statement or act; and (3) injury to party if first party is allowed to contradict prior statement. Here, P did not make any statement inconsistent with his position. D also did not rely on P even if there was a statement.

4. Public Policy: D argued the state has a duty to make quality child care a priority and this fulfills this duty. Court rejects – even if there was a reason to repeal the restriction, such a change should come from the legislature.

iii. NB: D didn’t argue for release because the number of parties trying to enforce it.

o. Public Navigation Servitudesi. Some resources must not be subject to privatization and must be in

government hands. If these resources were privatized it would bring commerce to a halt.

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ii. Sometimes held by government entities, but more often land trusts, non-profits.

iii. Navigable Waters:1. If a navigable channel could be privatized it would lead to massive

transaction costs to the transportation of goods. Water transport is cheap, so the law has been hostile to private ownership of navigable waters.

2. The navigation servitude is a matter of federal constitutional law – it exists by way of interpretations of the commerce clause, not by any specific text that provides for protection of the navigation servitude.

3. The idea that free men have access to open waters is a long-standing idea. Invoking the commerce clause raises some questions about the scope and durability of the navigation servitude (NS). Can Congress modify it?

4. Also applies to inland navigable waters (in contrast to the CL doctrine, which only applied to tidewaters) because the U.S. is a different type of country – navigable rivers are extremely important to commerce.

iv. Navigable Airspace:1. The navigable servitude principle from navigable waters has been

extended to the air as well by the Air Commerce Act of 1926.2. Property owners are both burdened and benefitted by the Air

Commerce Act – it did take property rights (loss of an easement in the airspace) but also provided the right to travel in the airspace over other property owners.

3. Allowed because either there was no property right to begin with or because there are corresponding benefits to the taking.

E. Public Land Use Controls (Zoning) a. Land Regulation Overview:

i. Before zoning, nuisance law and servitudes placed limitations on landowners. Many municipalities also had restrictions on particular land uses.

ii. Cities eventually created comprehensive zoning schemes to allow for prospective land use planning. Also used to promote racial and class segregation.

iii. Buchanan v. Warley (1917) – Supreme Court held that Louisville’s ordinance to separate races was unconstitutional under the DPC. Result: Explicit racial segregation as a result of public laws were not enforceable; many deeds still contained servitudes enforcing segregation, but the court later declared these unenforceable (Shelley v. Kramer).

iv. Early assumptions by drafters of zoning ordinances:1. Separation of land uses would result in a quality

environment/improve health and property values. Assumed that more intense uses harmed less intense uses, so most of the early zoning restrictions were cumulative. Now there is more push for mixed land uses; no cumulative restrictions.

2. Assumed that wholesome and healthy housing was key – attention to disease prevention. Sunlight, fresh air, etc. were needed to protect the health of children. Now there are interests in additional measures to do so.

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3. Assumed that open space is desirable to promote healthy living. Modern view on this is ambivalent – it can be nice, but also inefficient.

4. Few amendments to the comprehensive plan will be required – strong faith that central planners could set out land use plans that would endure.

b. Police Power:i. State and local governments have a general police power that is very

broad – it includes general regulatory powers to ensure health and safety.ii. This power is not without limit – the court has been very clear about this.

Even in Euclid and other cases sustaining the police power have noted that it is limited.

iii. Line that separates legitimate from illegitimate exercises of police power is blurry one that changes with conditions. Courts can look to nuisance law for clues – use it for helpful aid of its analogies/a guide for whether the exercise of police power has crossed line into the illegitimate.

c. Village of Euclid v. Ambler Realty Co.i. Facts: Facial challenge to the zoning ordinance under the 14th

Amendment/DPC, not an as applied challenge much harder to win. Ambler didn’t dispute the constitutionality of land use regulations generally or the application of nuisance law, but argues that he should be able to use up to what constitutes a nuisance (what would otherwise be legal purposes).

ii. Court: Line that separates the legitimate from the illegitimate application of the police power varies with changing circumstances and conditions (technology, societal needs and preferences, etc.). Urban life is now more complex than in the past, which requires additional restrictions on the use and occupation of private lands in urban communities.

1. Regulations that would have been rejected in the past are now constitutional due to the complex conditions of the day (e.g., before cars there were very few traffic regulations, but they are now necessary).

2. The exact line between the legitimate and illegitimate use of the police power cannot be fixed, but there are limits. Look to nuisance law as an analogy (no one may use his land to injure another) – this doesn’t control, but may be consulted in ascertaining the scope of the police power (not dispositive).

3. Court also notes that most state courts that have examined this issue have sustained the constitutionality of land use restrictions affecting uses that are not nuisance-like. This puts thumb on scale in favor of restraining these restrictions against constitutional challenge.

iii. BUT, court is careful to make clear that a zoning ordinance may be unconstitutional as applied in under particular circumstances – if Ambler loses money as a result of application of ordinance, he might be able to win an as applied challenge. These are extremely hard to win today – very rare.

d. Approaches to Non-Conforming Uses:

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i. Uses that are legal when a zoning ordinance takes effect, but would not be permitted in that district under the newly enacted ordinance.

ii. There used to be an idea that non-conforming uses would wither away over time after the adoption of zoning ordinances, so they were grandfathered into the zoning schemes but this did not turn out to be the case because non-conforming uses ended up being very valuable.

iii. To deal with this, ordinances adopted the concept of amortization – people can keep using the land for a reasonable time.

1. But this raises a lot of questions – what are the expectations of those that invest in property? Might make people take on two much risk.

e. Harbison v. City of Buffaloi. Facts: P operated a cooperage business in an un-zoned area; in 1926 it

was zoned for residential use; in 1956 the city changed the ordinance to state that any non-conforming uses in a residential district should cease or be changed to a conforming use within 3 years; P argues that the statute does not provide long enough; Buffalo argues this is a fair exercise of its police power.

ii. Court: The owner of land devoted to a prior use does have the right to continue the non-conforming use, but not forever. The amortization approach in zoning laws is constitutional if reasonable.

1. Reasonable termination periods based on amortization are constitutional. Ordinances can allow the structures to live out their ordinary life/make it so that property owners can’t make any repairs or improvements.

2. Coming out other way would carry with it “land use sclerosis” – cities try to strike a balance between “social harm and private industry.” An eternal right to continue would place an unreasonable restriction on legislature in dealing with complexities of modern life.

iii. Dissent: There aren’t many landowners with incompatible uses; they might be politically vulnerable because they are outliers. Their business/livelihood is effectively being confiscated. Need constitutional protection because can’t protect themselves through the political process.

iv. Takeaway: Amortization scheme is one example of how legislative bodies choose to ameliorate the impact in changes of property rights that result from changes in regulation. Attempts take a moderate path that would address the problem over time without completely destroying property value. Others argue the amortization scheme is wrong because it doesn’t even purport to compensate the property owner for the financial loss they are suffering.

VIII. THE POWERS OF GOVERNMENT

5th Amendment – “Nor shall private property be taken for public use without just compensation.”

A. Eminent Domain a. Overview :

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i. Definition : Formal condemnation of private property by the government or an entity to which the government has delegated its eminent domain power.

ii. Considered to be an inherent power of sovereignty (predates the constitution).

iii. Three main areas of the 5th Amendment:1. Taken2. Public use3. Just compensation – this is interpreted to mean fair market value,

but is a bit of a paradox because there is no transaction. Generally involves an appraisal of the property, but many owners are undercompensated because it does not factor in their subjective value.

iv. Some state constitutions contain similar language to the 5th Amendment.v. Unclear what type of government behavior the 5th Amend. is intended to

restrict.b. Kelo v. City of New London, Connecticut

i. Facts: After Pfizer announced plans to build a facility, New London announced a redevelopment scheme to revitalize the city, including by acquiring land in P’s neighborhood to build private office buildings. Is this public use?

ii. Precedent dictated that legislatures have very wide latitude to determine what satisfies the “public use” requirement of the 5th Amendment – these cases said that the judiciary basically has no role to play in this determination.

iii. This also raised question of whether there is impermissible favoritism or corruption involved – assuming there is not, courts generally leave it to political process to scrutinize legislative actions.

iv. Court (Stevens): Points to a variety of factors, including:1. Process – city had public meetings with organization tapped to lead

the process; created a comprehensive plan for the entire neighborhood (did pick and choose what properties to tear down). This is different than the prior cases where there was no comprehensive plan.

2. Precedent – court’s recognition of deference to the legislature is overwhelming with respect to eminent domain.

3. Safeguards against the harnessing of political power to serve private ends – the plan would make it difficult to enrich private entities at the expense of the public – the fact that the private entities are chosen after the planning stage makes it tougher for Pfizer and others to subvert authorities to convert wealth from the general public.

4. Public use – P argues that economic development should not be considered public use; equating the public use and public welfare opens the door to uses of government power that are wealth destroying or serve as vehicles of corruption. Stevens argues that courts cannot define what economic development means – cost/benefit analyses of development schemes are left to legislative bodies (though courts can have a veto).

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5. The laboratory of the states – that there is nothing that precludes individual states from placing stricter limits on eminent domain power or giving meaning to public use through statute or constitutional amendment. Rebuttal – you can make this argument about everything in the bill of rights (e.g., if you don’t like unreasonable searches, you can move).

v. Concurrence (Kennedy): The standard of review for determining whether a land use accords with the public use clause requires rational basis review – does not call for heightened review. If there is a clear showing that there was an intention to favor a particular party with only incidental public benefits, courts need to strike it down. There has to be a clear showing, intent, and no public benefit.

1. Here, trial court weighed evidence and found that there was a low likelihood of favoritism – the plans were reviewed before picking out transferees/private beneficiaries beforehand.

vi. Dissent (O’Connor): Berman and Hawaii involved uses of property that were causing harm – but this is questionable. She sees decision as a threat to property rights and thus a threat to liberty.

vii. Dissent (Thomas): These redevelopment schemes fall on the least politically powerful – usually the exercise of eminent domain power affect the poor and minority communities. Admits it is hard to determine what public use means – this is why courts have been so deferential. The advantage of the deferential approach is that it is simple, the disadvantage is that it doesn’t adequately protect property owners. Court should go back to the original meaning of public use.

B. Regulatory Takings a. Overview :

i. Issue: Whether or not a regulation of property goes too far and thus constitutes a taking (i.e., is the functional equivalent of the government exercising its eminent domain power).

ii. Pennsylvania Coal is the foundational case for regulatory takings – has come to stand for the idea that regulatory takings can go too far, thereby giving rise to a right of compensation on the part of the property owner.

iii. Distinction between a violation of the due process clause and a regulation that goes too far and amounts to a taking.

1. If the government violates the DPC, it is estopped from taking the action at all. However, if a regulation amounts to a taking, the owner is just entitled to compensation. Does not go as far as a due process challenge.

b. Pennsylvania Coal Co. v. Mahoni. Facts: Property owners in PA agreed to surrender this common law right

to have their land supported (just left pillars of coal) in return for compensation from P; PA then passed a law making it unlawful to mine coal in a way that would threaten any structures that people live in – designed to protect the health and safety because otherwise the land could collapse.

ii. This seems like a valid health and safety law (no corruption involved), but the problem is that it effectively undid a privately negotiated transaction that had occurred years before – this seems unfair. The surface owners

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transferred this right and got compensated; now they are getting back what they bargained away. Effectively gives them a windfall.

iii. Court (Holmes) looks to 3 factors to determine whether it amounts to a taking:

1. Diminution in value – how much is the property reduced in value?a. Key question – what is denominator? If you look at the coal

estate the diminution is huge, but if you look at the parcel as a whole, the diminution is much less stark.

b. Police power cannot be unlimited – inevitability/tendency of increased government has to be limited. But, gov’t can hardly go on if to some extent value of property could not be diminished without paying for such changes in the general law.

c. There is a natural tendency on part of government to regulate until the institution of private property is significantly harmed – the court has a role in determining where this line is/ensuring that it doesn’t give in to this natural tendency.

2. Nuisance – if the underlying property use is of such as to constitute a public nuisance the government is within its rights to regulate.

a. This is not the case here because any damage to property is the result of a deliberate choice of the property owner to give away its right to subsidence.

3. Reciprocity of advantage – does it affect everyone equally or single out specific parties (ex ante) as winners and losers?

a. At what level of generality do we measure it? b. Generally a regulation affects everyone equally – everyone is

similarly burdened or benefitted. Here, a specific party is injured.

c. Some say we all get some benefit to living in a democracy even if we get hurt by individual regulations.

d. Holmes says it has to be a fairly tight connection – low level of generality. Here it is clear who the winners and losers are; look at it ex ante – if you know that someone is going to suffer a huge loss and another is going to enjoy a huge benefit, there is no reciprocity of advantage – there is a taking.

iv. Dissent (Brandeis) agrees with Holmes’ factors, but construes the precedents differently. For many regulations there will be a lack of clarity as to what the denominator should be.

1. Nuisance is a factor, but argued that ensuring subsidence is within the police power; similar to other things the government has fairly regulated.

2. Reciprocity of advantage is important, but argues that it has never been considered in regulating a public nuisance or potential public nuisance.

c. Penn Central Transportation Co. v. New York Cityi. Facts: NYC passed a landmarks preservation law; prevented P from

erecting an office building over Grand Central Station.ii. If there is reciprocity of advantage it is on a very general level – P argued

that it was being disadvantaged for owning a very nice building. As if the

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city has an easement in the air above Grand Central and did nothing to compensated P.

iii. NY argues this is just a normal land use regulation. Also P is not completely uncompensated because of the transferable development rights (TDRs) – gives P the right to develop other property in ways otherwise forbidden. Also argues it is the dynamism of NY that makes Grand Central worth anything to begin with.

iv. Court holds it is not a taking based on a different set of factors than Holmes:

1. “Investment-backed” expectations – what do you expect when you purchase a building like Grand Central Station? Brennan borrows this from permissible rate regulations in areas like railroads, utilities, and other things subject to intense regulations with natural monopolies, so there are concerns that the public will be harmed without rate regulation.

a. Can quickly be pushed to a point where it doesn’t have much content because you can always that a property owner should have taken it into account when purchasing the property.

b. But it is hard to determine what the expectations are of those seeking to develop property. Maybe should expect to be able to do what others in the neighborhood have been able to do – see Lucas.

2. Reduction of value – Penn Central is receiving compensation in the form of TDRs; this minimizes any reduction in value.

3. Character of the government regulation – is it a physical invasion by the government or is it just a typical regulation about use? In a sense, this can be characterized as the functional equivalent of a physical invasion because P can’t build in the space above the station – it is as if the government is occupying/has taken that air. Also could be argued that it is not like a physical invasion because the government has not actually moved in; no actual easement; no actual prevention of building above the station.

4. Not clear which of the above factors are doing the work; also briefly mentions nuisance but this is irrelevant in this case (because P wanted to do something in line with what everyone else around them was doing).

v. Dissent (Rehnquist) agrees with most of factors put forward by the majority, but puts a lot of weight on fact this is in no way a regulation of a nuisance or nuisance-like activity. He believes there has been severe reduction in value of property as a result of regulation and that the TDRs should only come into play when determining whether there has been just compensation, not reduction in value. Emphasizes this law goes further than other land use regulations (like zoning) because it departs from reciprocity of advantage – a few buildings here are singled out and treated differently than all the rest.

d. Five-factor test for determining whether something results in a taking (though it is not a stable doctrinal test):

i. Reduction of valueii. Public nuisance/nuisance-like activityiii. Reciprocity of advantage

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iv. Investment-backed exceptionsv. Character of government regulation

e. Loretto v. Teleprompter Manhattan CATV Corp.i. Facts: D put cables and small boxes on P’s apartment building – invasion

of property that does not have a significant reduction in value.ii. Property owners have autonomy rights to exclude even if it could

arguably make the property more valuable – this will not defeat any claims that the property is being taken. This is a physical invasion, even if minor. But all other factors of the test lean against finding a taking.

iii. Despite this the court created a categorical rule that permanent physical occupations of property necessarily constitute a taking. Court says that a permanent occupation is more extreme than a blanket use restriction because it denies the owner all property rights and inflicts a severe autonomy injury on property owners – it is worse to say you loose the right to exclude from any part of your property than it is to say that you can’t use your property for the certain things/purposes that would maximize its value.

iv. This rule has the categorical advantage of a bright line authority – easy to apply.

v. Dissent (Blackmun): A permanent physical occupation that is de minimis is less severe taking than a severe use restriction. This isn’t going to be a bright line rule because it is hard to define what it means to be permanent – laws can always be changed/repealed and technological changes may also render certain invasions obsolete over time. Courts have to decide whether a physical occupation is permanent – this will bog them down in another inquiry that will hurt everyone.

vi. Blackmun also suggests that majority’s approach is wrong because it applies old approaches to new technology – prevents a fluid response to a modern social problem and runs the risk slowing down technological development.

f. Lucas v. South Carolinai. Facts: Lucas purchased two oceanfront lots and intended to build single-

family homes on both.ii. Creates a new categorical rule – but not clear that this applies very often,

if at all.1. Souter argued that Court shouldn’t have granted cert because trial

court’s conclusion that Lucas had been denied all value in property was wrong (appeals courts never reviewed the finding).

iii. Applying the five-factor test:1. Massive reduction in value (though it doesn’t seem like a total

elimination of value; maybe he could have gotten a modification to the law through the legislature; not clear he was prevented from doing anything with his property forever). He is able to be on the property, just can’t build on it.

2. In a way the law is preventing a nuisance-like activity (preventing the public harm of beach erosion), but it is hard to argue that two additional houses on the oceanfront (when there are already a lot of houses in the area) would end up being a nuisance.

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3. Maybe if the beach was saved there could be an argument for reciprocity of advantage – but this determination hinges on the level of generality at which it is analyzed.

4. Investment-backed expectations – he bought the land before the legislature passed the law; maybe no one thought that SC would ban the building of homes there; but perhaps he should have been aware that there were significant erosion issues and concerns about beachfront development by people who are active in the political process.

5. Character of the invasion – the government is not physically invading his property or excluding him. Lucas can still enjoy his property.

iv. Court (Scalia) notes that there is no set formula for determining what constitutes a taking – not clear how many of five factors need to be satisfied for there to be a taking. Reduction in value seems to be very important. Argues that notwithstanding this multi-factor test, the court has previously found a taking where regulation has denied all economically beneficial or productive uses of land. Precedent dictates that a total wipeout of economic value = a taking.

1. There is an exception to the second rule for nuisances and maybe for things that are nuisance-like it is not clear how far the nuisance exception extends.

2. This is not simple categorical rule – states that if there is total wipeout in economic value, the property owner gets compensated UNLESS regulation was such that all it did was prevent property owner from engaging in behavior that didn’t inhere in his title to begin with.

a. But who is ultimate authority on whether or not a particular use of land amounts to a nuisance or nuisance-like activity such that use doesn’t inhere to someone’s title? There has to be a limit of the police power – if the government is going to be the ultimate arbiter of what constitutes a noxious use, the takings clause will be gutted.

b. Scalia looks to what other landowners have done in the area – it is important that the land use in this case is the same as what everyone else is doing, unlike in the older cases where the activity was completely different than what others in the area were doing and the harm from this activity was imminent.

v. Concurrence (Kennedy): The takings clause should be interpreted according to the owner’s reasonable, investment-backed expectations. The inquiry shouldn’t be backwards looking, but rather forwards-looking what did they expect to be able to do with the land? This also values stability – does this land use regulation result in a discontinuity? Is it the kind of thing that landowners would say I had no idea this would happen or is it something that seems natural given the evolving circumstances?

1. Nuisance law is too narrow a confine – the government has very broad powers, these are not adequately hemmed in by nuisance. Without this approach we risk a very serious fall off in private investment with a resulting loss of societal wealth.

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vi. Dissent (Blackmun): The majority is creating a discontinuity rather than abating one – there has always been a thumb on the scale for allowing the legislature to figure out how to regulate. It has never turned on nuisance.

vii. Dissent (Stevens): This categorical rule is both too narrow and too broad and departs from the Pennsylvania Coal approach (which said that a categorical rule is not feasible). Holmes said that economic injury is just one factor – not that total wipeout of economic value is a per se taking. If there is a 95% wipeout, compensation is not owed – this creates perverse incentives for the legislature to regulate only up to that point.

1. He also brings back denominator problem – argues that it is encouraging fragmentation of ownership because people will want to cordon off the part which is affected and sell the rest so that the economic loss is 100%. This creates perverse incentives. Also encourages courts to play around with denominator so that either the rule has no teeth or so investors will manipulate property interests via fragmentation to give the rule sweeping effect.

2. Also says this decision carries with it the danger that legislatures won’t be able to engage in the evolution of their state’s property law.

Exactions??? When local and state and federal governments give approval for development,

they sometimes exact or make certain conditions on the existing landownerso Definition : Agreements by developers to donate certain property or money

to local community as a condition of obtaining approval from zoning authorities to proceed with their development plans

The justification for these exactions is that they provide resources that the community can use for public goods like new parks or schools that offset, at least in part, the burdens imposed on the community by the new development

o Constitutionality Requirements: In order for an exaction to be constitutional and not violate the

Takings Clause, there must be a Nexus between the condition and the public justification: The permit condition must serve the same governmental purpose as the development ban

Ex: Nollan v. California Coastal Comm’n: The Supreme Court declared that the exaction violated the Takings Clause when the Commission said that it wouldn’t grant the Nollans permission to replace their dilapidated beachfront bungalow with a bigger house unless they agreed to convey an easement of public access along the beach behind their house.

The Court said there was no nexus between the easement and the alleged ill effects of their building a house

Additionally, the exactions must be “Roughly Proportionate” to the impact of the development: The negative impact of the development must be roughly proportionate to what is being exacted

Articulated in Dolan v. City of Tigardo A lot of controversy arose out of Dolan

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o Led to more predictability o Key is the relationship must be “roughly proportional”,

something more than rational basis, not clear just how roughly proportional it has to be

o Look to state constitutions

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