Property Outline – Professor Kieff
I. Property Law Theory
A. What is property?
1. essentialists- property confers exclusive control over an “external thing”
2. skeptics- property is a “bundle of rights”; there is plasticity
a. Grey- property is a contingent bundle of rights
B. Rent-Seeking
1. Rent- the gain; may be private or public
2. Rent (benefit) Dissipation (ruining the benefit); 2 types:
a. overinvestment- ex. 10 people in a room, each spend $9 to get a $10 prize; net loss
i. racing toward a common prize
ii. net investment exceeds benefit
b. bad investment- i.e. investing in lobbying rather than in building the economy
3. Solution: property entitlements: focal point for coordination (i.e. hassidic diamond-trading Jews), which helps prevent overinvestment; owner has power (b/c right to exclude)
C. Lockean
1. Labor Theory: mixing of sweat/labor = conversion of common property into private property (i.e. adverse possession, IP)
2. Gvmt does not create priv. property- God created private property; gvmt may not redistribute
3. Locke’s Proviso: One must leave “as good and enough for others” (used by Rawls to justify redistribution if extreme concentration of wealth)
D. Hegel
1. Personality theory of property- the subjective value of an object to an individual is not recognized by the law- disconnect
2. the only way to understand property is to understand its relationship to the person
E. Law and Economics School
1. Goal- efficiency, not morality
2. 2 most common definitions of EFFICIENCY:
a. Pareto Efficiency
i. Goal- get a pareto superior result- produces at least one winner and doesn’t make anyone worse off- making things more efficient
ii. Pareto optimality- point of optimal efficiency; point before first loser is produced
b. Kador-Hicks Efficiency
i. Goal- wealth maximization; producing losers doesn’t matter as long as there is a net gain; no need to compensate losers
3. Externalities/ Transaction Costs
a. Transaction costs- includes cost of finding/dealing w/each other in a deal; getting info about what something is worth, transmitting info; lock-in problems (once you’ve started investing); failed transactions
i. transaction costs are a bigger problem if the market is thinner (fewer number of trading partners/ moving pieces) in the market and the # of things they are trading)
ii. goal: look for the lowest cost provider, evaluator
b. Rational actors try to externalize their cost to others (i.e. externalizing pollution)
c. Hardin’s Tragedy of the commons- wealth maximizing farmers will continue to add cows to shared land w/finite amt. of grass even if doing so will cause the land to stop producing food; result- everyone starves
i. Solution? Introduce private property à creates incentive to keep resource healthy
d. Coase Theorum
i. Coase I- in a perfect market, the market determines the outcome of conflicts btw two uses – more valuable resource will ultimately prevail (farmer/ rancher ex.)
· redistribution/regulation not necessary- market will handle it
ii. Coase II- there is no perfect market; must include transactional costs (cost of reaching an accord btw parties), which can cause the outcome to flip- less valuable activity can continue b/c of the high transaction cost of stopping the activity; fewer people affected = higher transactional costs
· goal- information-forcing rule- want knowledge (i.e. who is lowest cost provider) brought to attn of decision-maker
F. Normative Thoery
1. descriptive norms- what people tend to do
2. diamond-trading Hassidic Jews- resolve disputes w/community counsels (cheaper, more effective)
G. Kieff
1. The more property has predictable enforcement and the ability to be traded/bundled/divided, the more it encourages private actors to interact à economic growth
2. Conversely, the more entitlement can be changed at the whim of gov’t actors and is inflexible, creating a system where actors must negotiate w/the gov’t à bad for economic growth
3. Inducements/Constraints on Behavior
a. Markets
i. capital (who will invest in you, how much, terms); products; control; exit options; compensation structures
b. Government
i. legislators, regulators, judges; mandatory vs. default rules; taxes, tax credits; property rights, regulatory entitlements
II. Assignation of Property Rights: Original Acquisition
A. First Possession
1. benefits: used commonly, equal opportunity (to race), requires work to possess, easy to administer, gives notice to how good is allocated
2. Wild Animals
a. Pierson v. Post- Pierson took fox Post was hunting; Held- pursuit not sufficient to establish possession; only person to mortally wound/ seize animal acquires possession
i. benefit of assigning property right w/possession? clear demarcation by which people can order their affairs (prevent others from making investment); notice impt
b. Ghen v. Rich- whale hunter sues to recover value of whale; Held- defer to custom when universal w/in community (and when custom is efficient)
c. Keeble v. Hickeringill- Held- interfering w/duck harvest (i.e. trade essential to your livelihood that you have entitlement to) is actionable
3. Open Access and the Commons
a. Open access- no one has a right to exclude others; open to all
i. Problems: rent dissipation, racing
ii. Solutions: exclusive “property” rights, private owner or state regulates the group, individual transferable quotas (ITQs)
b. Semi-commons- a resource is subject to private exclusion rights in some uses, but is open access for other purposes (shifts from common property to private property)
c. Anti-commons- too many have the right to exclude, so no one is able to use a resource
d. Patent- property rights in ideas; creates incentive for inventors
i. monopoly (creating giant transaction cost causing hold-ups/outs) or anti-monopoly (creates increased access to technology)?
4. Eads v. Brazelton- Brazelton intended to salvage a boat, Eads moved in first; Held- possession of property requires actual taking and intent to reduce it to possession; possession requires notice plus diligence
5. Popov v. Hayashi- issue- who was 1st to possess a homerun baseball; Held- Popov had pre-possessory interest b/c he grasped it, Hayashi held on; ball sold, proceeds split btw them
B. Discovery
1. Johnson v. M’Intosh- Π bought the land from Indians, fed. gov’t conveyed the land to Δ; Held- Native Americans were granted right of occupancy only, no right to transfer/ exclude
2. Lockean theory – mix your labor/sweat w/it – you own it
C. Creation
1. Misappropriation/ quasi-property right in hot news
a. Int. News v. Assoc. Press- INS (West Coast) used AP’s (East) bulletins as a source for news stories; Held- “hot news rule:” some limited form of right to news at newest moment
b. costs of quasi-property right: racing leading to overinvestment, inefficient, higher price to consumers, transaction costs
2. Right of Publicity
a. Midler v. Ford Motor Co.- Ford’s advertising agency used a “sound alike” (to Midler); Held- Ford is trespassing on Midler’s right of publicity (b/c her voice is widely known, and that was used by Ford to sell a product)
3. Novelty
a. Trenton Indus. v. A.E. Peterson Mfg.- claim for patent infringement of improvement in high chairs; Held- no property right; objective standard for patentability requires: 1. new to the world (compare to prior art references) and 2. non-obviousness;
D. Accession- one person adds to the property of another either by labor or labor & new materials
1. Doctrine of Accession- the group of legal doctrines that awards ownership to the most prominent thing in the field of view; adding ownership on to existing ownership
a. Increase almost always operates as an accession-type analysis
i. i.e. you give me a cow, which gives birth to a calf, you own both the cow and calf
b. Accession generally not applied to land b/c difficult to figure out unit of measurement
2. Labor Added
a. Rule: usually owner of raw material will be awarded final product, unless the improver’s efforts have sufficiently increased its value to make doing so unfair
b. Wetherby v. Green- who owns the wood btw original owner and improver; Held- accession applies
i. if finding of accession- improver takes from owner and pays that person the value of what they took (at time of taking); liability rule, recognizing entitlement, Calabresi framework
· if no accession (property rule), prior owner keeps it and improver has to negotiate w/owner
ii. factors court considers in deciding whether to use accession doctrine:
· mental state of improver (good-faith?)- if bad-faith, no accession treatment
· degree of transformation – question of degree
o just desserts (req. high deg. transformation) vs. personhood/lockean view (rel’ship btw improved thing and improver makes it more/ less their’s)
· relative value contributed by orig. owner compared to value contributed by the improver; factor of degree
3. Ad Coelum Rule (if own soil, also own to sky and depths)
a. see Hinman- airplane overflights
b. Resources under the surface (minerals, oil, caves)
i. Edwards v. Sims- cave under neighboring lands, Edwards made it a tourist site, entrance on his land; Held- person who owns the surface has legal title to that below (accession approach); Dissent- possession approach
4. Accession vs. Confusion
a. Accession- labor/creation and transfer; liability rule; Calabresi framework; accession operates to take a piece of property and transfer it to another via liability rule
b. Confusion- mistake and mixing/co-mingling; both parties usually get their property right enforced by a liability rule
5. Accretion Doctrine- operates like accession
a. accretion vs. avulsion; 2 different rules regarding land boundaries:
i. Established doctrine: Accretion- land that is added to an owner’s land becomes his property (slow movement of soil)
ii. Avulsion- location of the old river bed constitutes a permanent, fixed boundary (typical where river completely/ rapidly changes its bed)
b. Nebraska v. Iowa- dispute over boundary btw 2 states; argued avulsion should apply b/c Missouri River is constantly changing; Held- court continues to treat it through established doctrine of accretion
6. Real Estate Fixtures
a. Strain v. Green- Greens sell home to Strains; when they move out, take several items (mirrors, chandelier, water tank); Held- gap-filling approach (take what everyone wants and provide for it)- law of fixtures, if attached, should be considered part of house
i. gap-filling rule (most ppl get what they want w/o having to ask) vs. info-forcing rule (coerces ppl into speaking more clearly upfront)
E. Adverse Possession
1. Basic elements: one person has title to land; another lays claim to it w/o having title, after period of time, the land is granted to the possessor/claimant
2. Requirements: possession must be:
a. actual – physical occupation (i.e. fence, building, farming)
b. exclusive (exclusive control)
c. open and notorious
d. continuous
e. adverse/ hostile under a claim of right – non-permissive use
3. Theoretical approaches
a. Lockean – focused on dessert; person mixing labor/ doing work, deserves ownership
b. Hegelian- person who values the land the most/ has utilized the land deserves it (look at rel’ship btw person and the asset- whether it’s tight); use partly defines formation of the person, not partaking in property = lack of acknowledgement in that tradition
c. Utilitarian- efficiency-based; AP makes most use of the land; gatekeeper is allowing others to make best use of property while cutting out transaction costs (dealing w/others)
4. Lessee of Ewing v. Burnet- Δ maintained the property, granting rights/exclusions to it; Π, in 21 yrs., never brought a claim of right against Δ; Held- acts of visible and notorious ownership (taking of soil/gravel) for 21 years sufficient to demonstrate AP
a. Rule: neither actual occupation, cultivation, nor residence is necessary to constitute actual possession
5. Minority- requirement of good faith of adverse possessor
a. Carpenter v. Ruperto- Π puts land to higher use though aware property is not her’s; Held- no claim of right b/c she acted in bad faith
b. Majority- objective non-permission interpretation of adverse under a claim of right
6. Tacking- periods of possession by different people may be added together but requires privity
a. Howard v. Kunto- descriptions in deeds didn’t fit land deed holders were occupying; Held- continuity measured by what is the community norm for that property (summer home- every summer counts as continuous); tacking also allowed when there is privity
7. SOL/ Disability
a. Songbyrd, Inc. v. Estate of Grossman- adverse possession claim- co. produces album of Byrd’s music from recordings w/o consent; Held- Songbyrd failed to commence action w/in SOL; court applies time of conversion rule
b. Time-of-Conversion Rule- SOL begins to run at time of conversion
c. Demand Rule- SOL odes not begin to run until true owner makes demand for return of property and return is refused (favors true owner, more time for recovery)
F. Sequential Possession
1. Found Property
a. Armory v. Delamirie- boy finds jewel, takes it to jewelry shop; shop’s apprentice took out stones and gave boy back socket; Rule- finder has unqualified property right against the world, excluding the original owner (who has the ultimate right)
b. Clark v. Maloney- finder 1 vs. finder 2; Rule- first finder wins; benefits- bright-line, allows 1st person to invest, more likely to be found by true owner
c. Anderson v. Gouldberg- two converters of pine logs; Rule: first converter wins; benefits: true owner more likely to find 1st converter, want to disincentivize serial taking
d. Lost (falls out of pocket) vs. mislaid (placed somewhere, forgotten about) property; courts generally give lost property to finder and mislaid property to the owner of the land
2. Competing Principles of Original Acquisition
a. Fisher v. Steward- Π’s told Δ about the beehive they found on his land; Held: Πs lose- claim of property by occupancy would allow trespass; true ownership of beehive based on accession
i. Ways to resolve: 1. accession-test- if on the land, it goes w/it; 2. ratione sole- he who possesses the property owns what is found on the land (English test)
b. Hannah v. Peel- Peel’s house requisitioned by gov’t, soldier finds brooch; Held- soldier prevails b/c Peel never moved into the house/ took phys. possession of it; 1st possession instead of accession counts here; another way to resolve: trespass, soldier there lawfully
III. Values Subject to Ownership
A. Personhood
1. Regents of California v. Moore- patient w/leukemia’s organ removed and used for science; issue: body parts property?; Held- no conversion, abandonment applies