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					                        Property: Class Notes




8/22/2005
Revision 0.1

Author: Philip Larson
703.798.5244 (tel)
Contracts II: Case Briefs


                                                     Table of Contents
1.   Lecture 1 .................................................................................................................................. 3
2.   Lecture 2 .................................................................................. Error! Bookmark not defined.4
3.   Lecture 4 .................................................................................. Error! Bookmark not defined.5




Philip Larson                                                                                                                           Page 2
Contracts II: Case Briefs


                                     1. Lecture 1
1.1 What is Property? - Ilya Somin

    -   Who should own which things and what rights should they have over them? How
        do you create a stable structure of expectation.
    -   Distinguish between the intuitive sense of ownership
            o A bundle of sticks – with each object (marker, land) it doesn‟t make sense
               to say there is only one property right. There are many property rights.
            o Phil owns the markets really just means that Phil has the bundle of sticks
               of property rights associated with that object.
    -   Many ideological problems in society revolve around property law. (wars, issues,
        etc.)
    -   Real vs. Personal Property
            o Real property typically has higher economic value.
            o Real property can‟t usually be picked up and taken with you.
    -   What about Intellectual Property? Well, that has it‟s own course. Intellectual
        Property is a lucrative field these days…

Administrative issues of the class
  - Class time starts at 6:15pm.
  - Oral participation system – on-call system:
         o Each will sign up for five classes – on those days you will be on call.
         o You can participate voluntarily on other days.
         o You will be penalized for not showing up on days when you sign up.
         o ACTION: Sign up for days outside his office. By Wednesday night, the
             sign-up sheets will be posted.

Richard Posner, “The Economic Theory of Property Rights” p54
   - Posner is a judge in the 7th Circuit Court of Appeals – he is considered one of the
      founders of Law and Economics.
   - Why does Posner think property rights are good?
         o 1st: Efficient use of resources
                  Internalization of costs and benefits – person who owns the
                     property will look to increase the value of their property.
         o 2nd: Transferability of property rights
                  Someone w/ property may be induced to transfer the property to
                     someone who can work it more productively.
         o NOTE: property rights simply create the right incentives they can‟t ensure
             efficiency.
   - What is the downside of property rights?
         o 1st: Enforcement costs – there may be high costs of enforcing the deals
         o 2nd: Transaction costs – there may be high costs of negotiating those deals
         o 3rd: Social norms –

Margaret Radin, “Property and Personhood” p8


Philip Larson                                                                     Page 3
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    -   In Radin‟s view, what is the difference between a home and an investment
        property?
            o Fungible vs. non-fungible –
                      Investment property is fungible whereas a home is not fungible.
                      Non-fungible properties are often very tied to your sense of self.
                             How does this work with eccentric perspectives and value
                                systems?
            o Fetishism – attaching value to an object that is typically considered
                fungible by the rest of society.
                      What‟s to say the rest of society is right? What if they are wrong?
            o Radin believes there are some objects that are very important to your
                personhood.
    -   “They can come and take away your home.” – This statement is not as powerful
        for objects that people don‟t have
    -   Marx’s point about fetishism - “Do you own the property, or does the property
        own you?”
            o Marx argues that take too far, you become alienated from the real
                purposes of life of developing your own life and pursuing capitalism for
                its own sake.
            o Diverting people from their true nature is bad.
            o Too focused on material things and less focused on spiritual and religious
                things.

Richard Pipes, “Human Nature and the Fall of Communism” p20
   - There was an ideology of the governments that ruled about ½ of the worlds
      population:
   - Socialism – completely denied the concept of private property.
          o We should not have private property of land.
          o All important property should be publicly owned.
   - Few people today argue for full-blown socialism.
          o However, the full scope of private property is debated frequently.
   - Posner argues for private property based on efficiency and transferability; Pipes
      argues that socialism without private property is a disaster in practice because
      chronic apathy destroys the
   - Marx argues that having private property can grow to alienate you. Pipes says
      that not having the opportunity to own property also leads to alienation.
   - How did socialism have such a broad appeal?
          o There is a difference between socialism and egalitarianism.
          o Socialism – property should be collectively owned.
                   Some socialists think that capitalism exploits the poor whereas it is
                     better to exploit the rich.
          o Egalitarian – everyone should have roughly the same amount of stuff.
          o Redistribution takes place in every system.

Random Topics
  - landlord/tenant relationships


Philip Larson                                                                       Page 4
Contracts II: Case Briefs




Johnson v. M’Intosh

Facts: US gives away tract of land. Indians give away same tract of land afterwards.
Which transaction is valid?
Issues:
Reasoning: Indian‟s are merely using the land, not cultivating it and making it more
valuable. Therefore, they do not own the land. Since the Indian‟s did not own the land, it
was fair game to the first claimer. Moreover, the court also argued that since England
had successfully taken the land by conquest, they passed it to the US through the US
Revolution. “The US maintain…that discovery gave an exclusive right to extinguish the
Indian title of occupancy, either by purchase or by conquest.”
Holding: US had right to give away tract of land used by the Indians.

Notes:
   - Transition by conquest
   - Are you persuaded by this argument? Do you think the land should be given back
       to the Indian‟s?
   - The right to property by purchase or by conquest.
   - Somin Says: conquest has always played a role in property rights. It has been a
       fairly common means of changing property rights in real property.
           o Are there good reasons for not wanting conquest to have this type of role
               in property rights?
                    There is no way to assure the conqueror will use the land more
                        effectively than the previous owner. In peaceful transitions, the
                        transaction will only take place if the new owner can get more
                        value out of the land.
   - Book says conquest is not as relevant today because all land has been allocated,
       whereas in the 17th and 18th century much land hadn‟t been.
           o What about discovery in intellectual property?
           o The law of the sea treaty…Managing underwater resources. Space, the
               final frontier.
                    If I am the first person on Mars, how much of Mars can we claim?
   - There are so few American Indians, and they have such little political and military
       powers, that there is little they can do.

Pierson v. Post

Facts: D kills the fox P‟s dogs were chasing.
PP: trial court finds for P. S.C. reverses and says D had right to kill fox.
Issues: Does P have a property right to the fox by nature of chasing after it with his dogs?
Holding: No, P does not have property right to the fox since it was not in his possession.




Philip Larson                                                                        Page 5
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Reasoning: “A fox is an animal ferae naturae, and that property in such animals is
acquired by occupancy only.” Moreover, actual possession isn‟t always required.
Mortally wounding it and not abandoning the pursuit of it would be enough, for instance.
    - Public policy argument: floodgates of litigation p21 if you could sue for just
        seeing and starting pursuing an animal, it would be a fertile source of quarrels and
        litigation
    - Counter-argument based on efficiency: a rule that anyone chasing the animal had
        a right to it would make other hunters chase other animals. More foxes would be
        killed which would be more efficient.
Dissent
    - Public policy argument: our decision should have in view the greatest possible
        encouragement to the destruction of an animal and the hunters have no incentive
        to chase the fox if they can be poached at the last minute.
Rule: “Reduce to possession rule” – the reason it had to be reduced to possession
(compared to a cow that would have to be returned, or something) is that a fox is a wild
animal (ferae naturae).
Rule2: wild animals vs. domesticated animals: General rule is that we don‟t have to give
people an incentive to cultivate wild animals, but we do for domesticated animals. Cows
that wander off your land, you can ask to have returned. Wild animals that wander off
are no longer your property.

Notes
   - Somin says: What about the gamers argument: why not just follow the rules of the
      trade. Why not just follow local hunter customs. Why not have a special court,
      staffed by hunters to here these cases?
   - Does Livingston recognize any other interest? Why does he consider the fox to
      be evil? Benefits to farmers…
   - How much money was spent on this? 1000 pounds or about $900.

Ghen v. Rich

Facts: P kills a whale. When it washes on shore D sells it. D doesn‟t know that P killed
it. P sues.
Issues: You can‟t possess the whale immediately after mortally wounding it.
Holding: Court finds that D did not have a property right to the whale killed by P.
Required to pay damages to P.
Reasoning: It is virtually impossible for someone killing the whale to immediately take
the carcass in possession (compared to the fox on land, for instance).
Rule: “the usage for the first iron, whether attached to the boat or not” – If you can
identify who killed the whale (e.g. harpoon) you must give it to the fair owner. If you
can‟t identify it, you can keep it.
    - Note, this is a very efficient rule to maximize the killing of whales.

Notes
   - Somin Says: buffalo in America were similar to the whales. There were very
      efficient rules for killing them, but for a period of time they almost became


Philip Larson                                                                        Page 6
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        entirely extinct. Now they are being breeded profitably. Now, this profit motive
        is being used to preserve these valuable animals. Once the buffalo were
        privatized, people had an incentive to preserve them.
            o This is not an evil, greedy businessman problem.
            o Regarding conservation, the issue is often not whether there are greedy
                people. The question is one of incentives and whether the participants
                have fully internalized the impacts of their actions.
    -   Regulation –
            o Quota - cap the total number that can be killed in a year.
                     Government might set the level so low there might be a black
                        market.
                     Enforcement costs might be high.
                     It may be impossible to determine the appropriate level for the
                        quota.
            o Tax
                    


Keeble v. Hickeringill

Facts: P owns land with ponds full of ducks. He invests in nets, machines and other
tools for decoying the ducks. To frustrate Ps efforts, D shoots his guns to drive the fowl
away. P sues
PP: Trial court found for P granting 20c in damages.
Issues:
Holding: Affirmed, holding that P should get damages for D scaring off the ducks.
Reasoning: Making decoys is lawful and doing so is profitable. The underlying rationale
for the wild animals vs. domesticated animals is that people don‟t usually invest in wild
animals. In this case, P did invest in getting the wild animals to come onto his land.
Therefore, the standard ferae naturae rule does not apply.
    - Note, if the court had gone the other way, D could blackmail P into giving him a
        cut of the ducks.
Rule: ferae naturae rule of constructive possession for wild animals does not apply when
someone has invested in getting the wild animals onto their land in the first place. You
do have property rights in wild animals on your land if you have invested in creating a
habitat for them.

Notes
   - Keeble doesn‟t want damages. He wants an injunction. A property action was
      more likely to get this than an action in torts.


Tragedy of the Commons
   - First: No one owns the resource while it is still in the wild so there is an incentive
      of over exploitation.



Philip Larson                                                                        Page 7
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    -   Second: There are a large number of people involved such that the actions of one
        person are unlikely to be significant and makes it more difficult to create
        monitoring and social norms.
            o Fewer people make it easier to monitor each other and create social norms.
    -
INS v. AP (Stealing News)
Facts: INS was stealing news from AP. There were no copyrights, and couldn‟t be
easily. INS was getting information from employees, and bulletin boards. The court
distinguishes between the public taking it from them versus INS, as a competing
institution, taking and using the news for commercial profit.
Issues: Is news property?
Holding: Yes, court held that INS was not allowed to steal the news because they broke
APs property rights.
Reasoning: INS argued that once news is posted, it is fair game. They argued that news
is common property. Court says that news may be common and yet still have their be
property rights between AP and INS, as individual organizations. For the court, the case
turned on the question of unfair business practices. It held INS‟s actions were unfair. AP
says that if they don‟t have a property right, they won‟t have any incentive to retrieve the
news in the first place.
Rule: APs expenditure of labor, skill and money to acquire the news created a property
right.
Notes: Many people are worried about the Internet, because CNN might get all the news
but people might read the story from some guy‟s blog.
    - Yahoo v. AP Europe – Yahoo being sued for linking to AP‟s article. Somin does
         not see this complaint holding up in court.
    - Lexis & Westlaw do not have property rights over the cases themselves, but they
         do have property rights over their respective formats.
    - General principle of copyright is that you can‟t just make slight, or cosmetic
         changes, to get around the property rights.

Cheney Brothers v. Doris Silk Corp. (Stolen Silk Pattern Designs)
Facts: P (manufacturer of silk) sues D for stealing designs. It is onerous to get patents,
and only a few designs end up being profitable. Only 1/5th catch the public fancy.
Copying is easy and generally successful.
Issues: Can D steal P‟s designs?
Holding: Yes, D can steal P‟s designs, notwithstanding INS v. AP, unless Congress
changes the Copyright Act.
Reasoning:
    - Addressing this is responsibility of Congress: Creating a sort of “common-law
       patent or copyright” would “flagrantly conflict with the scheme which Congress
       has…devised to cover the subject”… Judges should not be doing this. Perhaps a
       court is not good at determining case-by-case decisions regarding this, and that
       rather, Congress is better suited to this task.
    - Good for competition: to exclude others from enjoyment is one thing, but to
       prevent imitation of it sets up a monopoly that gives great power, a power the
       Constitution only grants Congress to create…


Philip Larson                                                                        Page 8
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Rule: There is no common law patent or copyright. INS v AP was limited to news. The
right remedy, if there is a problem, would be an amendment of the Copyright Law.
    - GENERAL RULE: “in the absence of some recognized right at common law, or
        under the statutes…a man‟s property is limited to the chattels which embody his
        invention. Others may imitate these at their pleasure.”
            o You can own “chattels” but not ideas…Patterns are not “chattel”

Smith v. Chanel (Perfume Formula Stolen)
Facts: Perfume company was allowed to claim in its advertisements that their product
was the chemical equivalent of Chanel No. 5.
Issues: Can D steal P‟s perfume formula, and market it as a cheaper equivalent?
Holding: Yes, since Chanel No. 5 was unpatented, Smith could copy it and market it as
such.
Reasoning: “A large expenditure of money does not in itself create legally protectable
rights.” - “By taking his „free ride‟, the copyist…serves an important public interest of
offering comparable goods at lower prices.”
Rule: Perfume formulas that are unpatented can be stolen and sold cheaper to help drive
competition.
Notes: Perhaps Chanel didn‟t want to get a patent because patents expire. Perhaps they
thought they could leverage this trade secret for longer than a patent and just got it
wrong.
    - Somin Says: Ct emphasizes that imitators are serving a useful function of giving
        the same product for a lower price. Not allowing imitation would create
        monopoly rights.
    - The absence of property rights can dampen production, but recognition of them
        can create costly monopoly power.

Legacy of International News Service v. AP (Intellectual Property)
Facts:
PP: asdf
Issues: asdf
Holding: asdf
Reasoning: “wheat and information are fundamentally different from one another. It is
the nature of wheat or land or any other tangible property that possession by one person
precludes possession by anyone else.”… “granting individuals exclusive rights to the
information they gather conflicts with other rights in a way that granting exclusive rights
to tangible property does not.”
Rule: Competition depends upon imitation.

Virtual Works, Inc. v. Volkswagen (Cybersquatters)
Facts: Virtual Works registered vw.net to host their ISP. They discussed that they could
be confused with Volkswagen and mentioned that they could sell it for “a lot of money”
later. There were other options Virtual Works could have taken (e.g. vwi.net). Virtual
Works said that they had 24 hours to make an offer or they would auction it to the highest
bidder.
PP: District Ct said that the Volkswagen trademark was infringed and diluted.


Philip Larson                                                                        Page 9
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Issues: asdf
Holding: asdf
Reasoning: Under ACPA, a cybersquatter is liable to the owner of a protected mark if
they 1) act in bad faith, and 2) registers a domain name that is identical and confusingly
similar to that mark.
    - Safe Harbor provision – said that bad faith could not be found “in any case in
        which the court determines that the person believed and had reasonable grounds
        to believe that the use of the domain name was fair use or otherwise lawful.”
            o Court says that it only applies if your intent was completely pure, not
                partially pure.
Rule: Leveraging

Anticommons Argument
Patents can deter innovation due to the anticommons problem. For example, if you can
patent gene fragments, you might need multiple gene fragments in order to build some
additional value or product. This presents a problem because the owners of the gene
fragments may hold out for more money, transaction costs may be high, etc.
Somin says: it will sometimes be too difficult and costly to collect all of the property
rights needed to administer a new drug. While this is true, there is an incentive for a
large research facility can exploit the synergies of handling a lot of the intellectual
property in a particular area, rather than by individual scientists.
    - The article also says people might be biased about how valuable there research is.
        Somin agrees that scientists overvalue their own research. However, usually the
        decision whether to share research is determined by a private corporation or
        research facility. Therefore, it is less likely that a scientist being overly biased
        about the value of their work would affect these types of transactions.

August 31, 2005

ACQUISITION OF PROPERTY BY FIND, ADVERSE POSSESSION, AND GIFT

Armory v. Delamirie
Facts: Chimney sweep found a jewel, took it to a jeweler. Jeweler took the jewel and
refused to return it.
Issues:
Holding: Court ruled that chimney sweep did not have an absolute right to the property
but he did have a right to it against everyone except the rightful owner.
Reasoning:
    - Incentive to find. Having a different rule might decrease the incentive to find
        things that are lost in the first place.
            o First finder rule is not narrow: this does not limit the incentive to find to a
                specific, small group of people.
    - Benefit to true owner: the farther the item gets from the real owner, probably the
        less likely he will be to get it back. People farther away from finding the item
        will feel a stronger property right over the object, they won‟t know where it was
        originally found, they won‟t post notices, etc.


Philip Larson                                                                         Page 10
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   -
Rule: Finder has title against the whole world except the owner.

Hannah v. Peel (soldier finds brooch in requisitioned house)
Facts: soldier in a requisitioned house, where owner has been away for a long time, finds
a valuable brooch. He returned it to the police who waited a period of time looking for
the real owner. Owner of the house (D) is being sued by the original finder (soldier).
Issues: Does the land owner or the finder have greater title to a valuable found on the
land?
Holding: The first finder
Reasoning: “the law on this is very uncertain”
    - EXAMPLE 1: Notes found on shop floor and given to shopkeeper to advertise.
        Original finder retains property right.
    - EXAMPLE 2: Company has pool cleaned and cleaner finds rings. Land owner
        retains the property. “Possession of land carries with it in general, by our law,
        possession of everything which is attached to or under that land, and, in the
        absence of better title elsewhere, the right to possess it also.”
             o Hiring someone to clean the pool is different than someone from the
                 general public finding it.
    - EXAMPLE 3: Land leased and lessee finds a pre-historic boat embedded in the
        soil. Original land owner (lessor) has property right.
Rule: If the item was not intentionally put on the property, the finder of the property has
greater title. If the item was intentionally put on the property (e.g. purse on table of
barbershop), the owner of the land has property.
Rule2: “a man does not necessarily possess a thing which is lying unattached on the
surface of his land even though the thing is not possessed by someone else.”
Note: note that the brooch is different than a shovel, or some other object, that is meant
for the upkeep of the house. It is more likely that the land owner would retain rights to
the shovel, even if he didn‟t know it was there.
    - Methodology the Judge applies to this case
    - Somin: What do you think about the methodology the judge uses? Do you think
        it helped bring out the correct rule?
             o Well, in many ways the precedents he discussed were not relevant.
             o Somin: Doesn‟t this show the limitation of this type of methodology. The
                 precedents may have actually impeded his ability to come up with a good
                 rule. Its not clear that the precedent tells you anything useful about what
                 the rule should be.
             o You can‟t successfully address this issue just by looking at precedent.
                 You must address the larger issue of what is actually important in
                 determining the relevant facts and analyzing them. Answer the broader
                 question.
    - HYPO: let‟s say there were voluntary guests, instead. For voluntary guests, is
        there any way for the owner to protect themselves? Yes, they could make it a
        requirement of their entering the home in the first place. However, with soldiers
        being quartered he did not have the same power.



Philip Larson                                                                       Page 11
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McAvoy v. Medina (Pocket book left in barbershop)
Facts: Person left a pocketbook (with money in it) on the table of a barbershop. Finder
gave to barber and then later demanded the money from it.
Issues:
Holding: Barber gets to keep the pocket book.
Reasoning: If you had gone to the barbershop, you would be likely to go back there to
get the pocketbook. However, you would not be as likely to get it back from a customer
of the barbershop.
    - Interest of right owner: this is the better rule because it is “one better adapted to
        secure the rights of the true owner” – presumably b/c the true owner will be likely
        to come back to the barbershop
Rule: Ct. distinguishes between property placed by the owner and neglected, versus
property lost.
Note: is “misplaced” versus “lost” a continuous variable, or a dichotomous variable
(completely separate categories). I think it is more of a continuous variable.
    - Somin says: Peerson v. Post feared that there may be an overinvestment in
        hunting. Is there the same problem with finding an object?
            o Perhaps there is an optimal level of treasure seekers to prevent societal
                waste.

Jacque v. Steenberg Homes, Inc – 1997 (Mobile home dragged through Ps land)
Facts: W/o P‟s permission, D moves a mobile home across P‟s land (which was the most
convenient path). P sues for intentional trespass.
PP: P awarded nominal damages plus $100,000 in punitive damages.
Issues:
Holding:
Reasoning: “A right is hollow if the legal system provides insufficient means to protect
it.” – “Society has an interest in punishing and deterring intentional trespassers beyond
that of protecting the interest of the individual landowner.”
     - Somin says: without the right to exclude, property owners take matters into their
         own hands (e.g. hiring gun fighters, etc.)
     - Somin says: why doesn‟t it matter that there was a major blizzard. Why wasn‟t
         this an emergency situation? Should that matter?
     - Somin says: this rule also increases the cost of delivering mobile homes. Perhaps
         fewer people will be able to afford the mobile home and fewer people will get the
         product.
Rule: private landowner‟s have a right to exclude others from his or her land. This is
“one of the most essential sticks in the bundle of rights commonly characterized as
property.”
Rule2: punitive damages can be awarded for intentional trespass, even when nominal
damages are awarded for harm to P.
Note:

State v. Shack (migrant farmworker gets help w/o permission of landowner)




Philip Larson                                                                      Page 12
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Facts: Ds entered private property to aid migrant farmworker who was employed and
housed there. They refused to leave on demand of the owner and D‟s were convicted of
trespassing.
Issues:
Holding:
Reasoning: a migrant worker must be allowed to receive visitors there of his own
choice.
    - these people are probably poor and ignorant of the law.
    - Somin says: we are assuming that this rule actually helps migrant farmworkers.
        Why might it hurt migrant farmworkers?
            o Disincentives for Farmers to hire migrant workers: This increases the cost
               of hiring migrant workers. You may hire fewer of them or offer them less
               wages.
                    It is irresponsible for the court to create this rule without
                       addressing the other side of the argument.
Rule: “the ownership of real property does not include the right to bar access to
governmental services available to migrant workers and hence there was no trespass
within the meaning of the penal statute.”
Rule2: “we see no legitimate need for a right in the farmer to deny the worker the
opportunity for aid available from federal, State or local services, or from recognized
charitable groups seeking to assist him.”


9/7/2005

Quick Discussion of New Orleans
The marginal person is who we look for. I would like to steal a TV but I can‟t because
of the circumstances. If 2-3% of people are at the margin that can lead to thousands of
people looting down in New Orleans. If you are just one or two people looting, that will
not effect relief efforts. If there are hundreds or thousands, that can obviously lead to
problems. You also have a tragedy of the commons problem in which any individual has
an incentive to loot as many TVs as possible and shoot guns because as an individual
there actions are unlikely to have a significant affect. However, it can help them enrich
themselves as individuals.

This is why we need a system of property rights that is consistently enforced. Whoever is
responsible should have tried to ensure a larger military or law presence. (just like in
whaling, you needed someone to create property rights in whales – or the buffalo)

Situations that on the surface (superficially) seem to be unique problems, are actually just
the same incentive problems. Looting and whaling – a large amount of people acting
rationally but with poor incentives can lead to bad collective outcomes. This is why we
create property rights.

Acquisition by Adverse Possession (p125)



Philip Larson                                                                       Page 13
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Adverse possession – owner of land can no longer bring an action for the recovery of land
from another person in possession after a period of time. The law of adverse possession
is a synthesis of statutory and decisional law.

Adverse possession functions as a method of transferring interest in land without the
consent of the prior owner. The theory rests on the idea that the adverse possessor may
acquire title at such time as an action in ejectment by the record owner would be barred
by the statute of limitations.

Holmes - “if a man neglects to enforce his rights, he cannot complain if, after a while,
the law follows his example”

Somin asks: Why is it that the law has adopted adverse possession?
   - to encourage people to assert title
   - avoiding wastage (don‟t let the land go to waste)
   - a thing which you have enjoyed and used for a long time takes root in your being
      and cannot be torn away (Holmes)
   - reliance argument – the “deep instincts of man”

Wastage rationale – are there any problematic aspects of the wastage rationale? What if
the rightful owner is using the property as a nature preserve. This theory is therefore
somewhat biased towards active usages like industry, etc. You may have a very strong
attachment to a nature preserve but not use it in an active way.

Adverse possession is well established in the common law. Why not get rid of it and
simply say that no matter how much time has passed, you shouldn‟t be able to acquire
property by squatting?

Somin says:
Requirements of Adverse Possession. (p139)
   1) actual entry giving exclusive possession
   2) open and notorious (ppl have to be aware you are there)
   3) adverse and under a claim of right
   4) continuous for the statutory period

Van Valkenburgh v. Lutz
Facts: two wooded lots in suburb of NY. Lutz owned lot 14/15. Lutz cleared lot 19 and
used it for tending a garden. He also built a home for his brother on 19. Van
Valkenburgh bought lots west of Lutz. Lutz screamed at their children for being in his
garden. Van Valkenburgh then bought lots 19,20, 21 and 22 and had policemen clear the
Lutz off the property. Lutz claimed right to use the travel way.
PP: trial ct found D had a prescriptive “right to use” the travel way. Court found that the
proof failed to show that the premises were improved.
Issues: Did Lutz acquire the land through adverse possession? Is gardening on land and
building a shack for your brother adequately “enclosing” the land? Does clearing the
land and gardening on it constitute “improving” the land?


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Holding: No. Dissent says yes.
Reasoning:
Dissent: Fuld – disagreed that the land had not been improved. He said there was
evidence that farming of the land was improvement. He also said that the property was
known as “Mr. Lutz‟s gardens”, etc. “There is ample evidence to sustain the finding that
William Lutz actually occupied the property in suit for over fifteen years under a claim of
title”
Rule: you can not claim adverse possession against a public entity.
Rule2: p132 “To acquire title to real property…it must be shown…that for at least fifteen
years there was n “actual” occupation…The essential elements of proof being either that
the premises 1) are protected by a substantial inclosure, or are 2) usually cultivated or
improved.
Note: prescriptive – only right to use; adverse possession – title actually changes.
Somin asks – what happens in the aftermath? Litigation goes on for 20 years. This
suggests that the adverse possession system may have significant transaction costs. Not
allowing claims of adverse possession would reduce some of these ridiculous, fact
intensive, litigation.

Adverse possession and states of mind (p142)

Your State of Mind matters in some jurisdictions. Options are:
   1. Objective Theory (doesn‟t matter whether you think the land is yours or not)
   2. Good Faith: (I thought the land was mine…)
   3. Bad Faith: (aggressive trespasser. I merely intended it to be mine knowing it was
       someone elses…)
Majority View in US: Objective Theory;
Minority View in US: good faith theory.

Manillo v. Gorski
Facts: a landowner built an addition that was 15 inches into their neighbor‟s land. They
were unaware at the time. They assert that they gained the land by adverse possession.
The Ps contend that D did not obtain title through adverse possession because that
requires “a knowing wrongful taking”.
Issues: Is “mistaken belief” requisite hostile possession for adverse possession?
Holding: No.
Reasoning: Court adopts the objective theory over the bad faith theory regarding the
state of mind of the person adversely possessing. Court says the “open and notorious”
requirement was not satisfied because, in cases of minor encroachment, the true owner
has to have “actual knowledge” thereof.
Rule: Objective theory wins out. This is the MAJORITY RULE.
Notes: Somin asks: Is the Maine (reward intentional wrongdoers) or the Connecticut
(rewarding mistakes) a better system?
Somin says: should there be a minimal exception to this rule where if you are only
encroaching slightly, you should get the property?

Howard v. Kunto


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Facts: D took possession of a deed but the deed described a different property than the
one they possessed. This was the case of multiple property owners in the area.
PP: Trial court denied claim of adverse possession saying that “Ds have failed to
prove…a continuity of possession or estate to permit tacking of the adverse possession of
Ds to the possession of their predecessors.”
Issues: 1) Is a claim of adverse possession defeated because use is restricted to summer
occupancy? 2) May a person use tacking to add on the time of previous possessors to get
adverse possession?
Holding: 1) summer occupancy does NOT break continuity of possession; 2) tacking is
allowed.
Reasoning:
Dissent:
Rule:
Notes: Regarding tacking. They did try to investigate. However, this was not integral to
the outcome. This seems to weaken people‟s incentives to investigate the accuracy of the
deeds before purchasing the place.

Newman v. Bost
Facts: Guy became paralyzed. He gave someone keys and said he wanted her to have
everything in his house. Pointed to all the furniture and said it included all of that. In
one of the bureaus was a life insurance policy. D‟s estate would not give P the furniture
or the life insurance policy.
Issues:
Holding:
Reasoning: What about the piano? Why doesn‟t the same logic for the furniture apply
to the piano? What happened after the piano burnt up? He never bought a replacement
piano and he referred to it as someone else‟s piano. He also had insurance on it and
never gave her the insurance money on the original piano which created reasonable doubt
about whether the piano had been *delivered*.
Rule:
Notes: Why is there a requirement for delivery? If there is clearly intent, why is this not
enough? Probably, the potential for fraud. If there is sufficient documentation of the
intent, why not get rid of the delivery requirement since we don‟t require the same thing
in the closely required K situation. Intent requirement does require being of sound mind.
Why are gifts in K different than gifts in property?
    - standard lawyer answer is requirement of consideration in K.
    - both sets of rules arose at different times. Common law is built up incrementally,
         not as an integrated whole. That, to some extent, has happened here.

Somin Says: common law is inherited from England. We have more or less the same
common law that has existed for hundreds of years. It is not surprising that we have
some archaic rules that exist.
Somin Says: the differences between gifts in K and Property is probably a result of having
archaic rules generated incrementally through common law.

Thoughts on potential limitations of intent and delivery:


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    -  Being drunk?
    -  Being too old and senile? Unable to talk?
    -  Duress?
    -  Unit of Analysis: When is sheer quantity of things enough to move requirement
       from actual to constructive delivery? (e.g. ease of delivery)
          o Courts tend to do this on a case by case basis.
Should everything in the house be considered a single unit?
   - Court broke it into different sets of things. Is this the right approach?
   - Having a written statement would be more useful.

Gruen v. Gruen
Facts: Gruen Sr. sent his son saying he was getting a painting but the father would keep
it until he died. He asked for the letter back for tax reasons. He then sent two more
letters. Step mother wouldn‟t give the painting when the father died. She said it wasn‟t
valid because it wasn‟t in the will.
PP: Trial court found for mother. Appellate court reversed. Highest court agreed that
the son should get the painting.
Issues: Why did the son prevail if there was no delivery of the painting? There is
intention but it is not clear that there was sufficient delivery.
Holding: Court said his intention was clear.
Reasoning:
Dissent:
Rule:
Note: Life estate – why didn‟t the father just leave the painting to his son in the will? He
didn‟t want to have to pay taxes on it. Shouldn‟t courts forbid these kinds of dodges of
estate taxes?
     - Assuming we want a state tax, this rule seems to encourage wasteful transactions.
         If the court were to close this loophole, it would reduce the incentive for lawyers
         to find ways to avoid these kinds of taxes. Do you think we should simply forbid
         these types of gifts and save the resources of crafting them and litigating them,
         etc?
     - Is there any other type of property which the court analogizes this property to?
              o Stocks, bonds. Part of what may have motivated the court was that in
                 practice, people have been doing this with stocks and bonds for a long
                 time.
              o What would happen if your goal were simply to let your heir inherit
                 without paying estate tax, what would you do?
One of the problems with having estate taxes, is that people who are alive try to find lots
of clever ways of avoiding paying the estate taxes. This creates more work for lawyers,
but may be bad for society if this effort could be put into something else.

Calabresi-Melamed Classification of Legal Rights
Key Point: this framework describes the three types of rubrics for defining property,
including in your own self. NOTE: **review the worksheet from class**
    1. Property Rules – What are distinctive characteristics of a property rule?
           a. Cannot be taken away without the consent of the owner.


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           b. The owner should be able to sell the property at the price he wants.
                    i. This allows the market to work for itself. There is incentive to 1)
                       invest in your property, 2) the market defines its worth, etc.
                   ii. Some scholars say that everything with value in the world should
                       be subject to property rules and there shouldn‟t be any other types
                       of approaches.
                           1. Currently, people cannot sell their organs. E.g. I cannot
                               sell one of my kidneys to someone who wants one. This
                               means some people die who could be saved if we allowed
                               property rights.
           c. Freely transferable by the owner.
    2. Liability Rules – (e.g. eminent domain)
           a. Can be taken away if violator is willing to pay a certain price.
           b. The price is set by the government or a court.
                    i. Justification: overcome collective action problems, overcome
                       holdouts and promotes a “just” distribution of the property.
                   ii. Problems: impossibility of finding “right” value, danger to sincere
                       dissenters from collective evaluation, enforcement costs, interest
                       group manipulation.
                  iii. Torts works in that if you do something for which you are
                       negligent, you don‟t have a choice about whether or not you pay
                       and the amount you pay is set by the court. This is different than
                       property rights where typically you get the property back in
                       question.
    3. Inalienability Rules
           a. Not transferable by owner (e.g. kidneys)
           b. Government sets both the “price” and defines which third parties to whom
               the right may be transferred.
                    i. Justification: avoid dehumanization, self control, and to prevent
                       irrational decisions.
                   ii. Posner has defended organ sales.

Advocates of property rules say that the fact that you are willing to enter in the
transaction in the first place shows that you are better off having made the transaction
than had you not made them.

Advocates of the inalienability rules say that you are basically selling your soul to get the
wealth (e.g. if you sell off various parts of your body).

Shortcomings of property rules? Why don‟t you have separate property rights over
everything
   - fetishism and dehumanization
   - collective action problems
   - high transaction costs – transaction enforcement costs sometimes make it not
       worth it to do things through property rules. In addition to some moral objectives,



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        there are some efficiency concerns based on high transaction costs. Sometimes
        the benefits of creating a property right is just not worth it.
    -   distributional concerns

Liability Rules – these are the least intuitive rules. They arise largely in torts.

Disagreements about which types of rules should be more common, and which rules
should be less common. A lot of people believe the free market style types of property
rules should encompass more of the legal framework. Liability rules provide more
discretion to the government, at the expense of free market conditions. Somin says:
socialism can be seen as forms of property rules where all the property is in the hands of
the state. Under Stalin, it was all property rules where all property was owned by Stalin.


9/14/2005

Possessory Estates
Historical Basis for Modern Property Law

Somin Says: one of the interesting characteristics of our property system, is that it hasn‟t
been obstructed for hundreds of years. Therefore, we have law that remains from feudal
era. While the American Revolution changed public law pretty drastically, much of the
private law remained the same. There are many

Path Dependencies – the cost of switching to another path are so great that you won‟t
choose to do it. An example of this is having America switch to the metric system. If we
could snap our fingers and do it, we might choose to. However, as is, there would be
many costs. The same is true for many of our laws. Some laws developed for various
reasons and become stuck down particular paths, unable to bridge the transition costs to a
potentially better system.

Feudal Tenure after the Norman Conquest
   - What was the basic structure? The King was at the top. The tenant in chief was
       next, who was some high ranking nobleman. Below him was the Main Lords.
       Below them were the actual tenants (e.g. serfs or free tenants).
   - How is this different than the modern system? Tenants paid in services, not in
       money. This was not a fully commercialized system. The general term for these
       services was socage. The services the Lords had to provide was the building of
       Armies and serving the King when at war.
   - Was the property freely alienable? No. In most cases they couldn‟t sell land at
       all. If they did, they had to get the right from the Lord. Instead, the land was
       passed down from generation to generation. This was the concept of
       primogeniture.
   - What happens if someone dies without an heir? The land goes back to the King.
       This was called escheat.



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    -   Are there any other ways to lose property rights under this system? If you didn‟t
        perform your services on the land, this created the concept of forfeiture. Usually
        this meant that you didn‟t bring your knights to war, then you could lose your
        land.
    -   Why is it that the Kings became dissatisfied with this system? Subinfeudation
        means that someone could bring in lower people to take care of the land. Why
        does this bother the King? This would reduce the chance that land would escheat.
        Additionally, when you substitute somebody the higher Lord still gets the services
        of the land but he might not get the same tax revenue that he otherwise would.
        This was a means of trying to avoid taxes. Moreover, the quality of the services
        through subinfeudating may be lower.
    -   What about the issue of the land being heritable by the oldest son? Why wouldn‟t
        the king like this? 1) perhaps the son is incompetent or doesn‟t provide the same
        level of services, 2) also reduced incentives not to commit treason against the king
        because the land would still go back to your son if you were caught; 3) it would
        concentrate more and more land in the hands of the Lords and be more likely to
        create Civil Wars.
    -   The statute “Quia Emptores” started to change this system. How? Prohibited
        subinfeudation which meant more people were direct feudiciaries under the king
        (increasing his tax revenue). This undercut some of the opposing Lords because
        they no longer had their own complete fiefdoms.
    -   What was the system called “fee tail” and why did Jefferson try to get rid of it?
        Fee tail was basically that no action by A or any of his sons could prevent the
        passing of the land to the next generation. There is a reduction in alienability and
        efficiency because you couldn‟t sell your land. Jefferson was against this was
        because it seems to perpetuate an aristocracy. He believed land needed to be
        alienable and not limited to specific families. Moreover, people could buy land
        thinking it was alienable and then be usurped by some long lost property owner.
    -   Other problems with the fee tail system? What was Blackstone‟s concern? You
        couldn‟t dispossess heirs so they could grow obnoxious and spoiled. There was
        not much in the form of pensions, etc. and people were dependent on their kids to
        support them. Parents had no leverage under this system. Therefore, in most
        states fee tail is forbidden.

Fee Simple – A replacement for the feudal, medieval system
   - How was fee simple different? Fee simple made 1) free choice of heirs, 2) free
       alienability, 3) default is that there are no service obligations.
           o What is the difference between serfs in the old system and tenants in the
               new system? It was against the law for a serf to leave the land and work
               for a different Lord. Now, tenants can shop around.
   - What is Cunningham‟s criticism of the abolition of the feudal system? In a
       system based on social status, it was not a strictly for profit system. There was
       incentive to care for the people on your land. In the new system, tenants feel no
       obligation to provide services to land lord and landlords feel no obligation to help
       the tenants.



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            o What other arguments are similar to this style of argument? 1) There will
                be limits to the amount a Lord would oppress his tenants. This will be less
                than the oppression of the rich against the poor. The closer interpersonal
                relations provide a check and balance on behavior that market forces
                don‟t. Relationships were more personal in the feudal system that created
                incentives for better behavior.
    -   Pros of the new system? 1) new system allows people to jump to higher classes,
        2) people are free
    -   Modern leftwing thought? Way to address Cunningham‟s arguments is to hire
        Democratic governments that will use the power to fix the concerns…

Inheritance in Fee Simple
   - Who gets the property in fee simple if I own property and die? The default
       common law system is as follows: 1) Spouse would inherit first. 2) Eschew is the
       legal term for your son or daughter. They are next. 3) Ancestors (parents and
       grandparents); 4) Collaterals (brothers and sisters); 5) the State
   - Intestate means dying without a will.

White v. Brown (free alienability of property)

Facts: Owner gave White right to her house in her will but said she could not sell it.
White wanted to sell it. Court held that she had a fee simple right over the land, not a life
estate so she was allowed to sell it.
Issues:
Holding: Will was ambiguous. Given the ambiguity, the default rule is a fee simple not
a life estate.
Reasoning: In other parts of her will, she knew how to give a fee simple. However, why
didn‟t she just say that she was living a life estate? Court‟s assumption is that fee simple
is better than having a life estate.
Dissent: Dissent said it was clear she was trying to leave a life estate, not a fee simple.
Rule: Fee simple is the default rule over life estate.
Notes: Why do people think it is better to have a fee simple than a life estate?
     - You get the advantage of alienability and reduced transaction costs. To get the
         land you would have to have two negotiations, one with White and one with the
         original owner.
     - What about the possibility that she didn‟t know the term? Should we have these
         types of assumptions that may negate the actual desires of the original owner.
     - Court enforced the fee simple baseline. Lye could have avoided this problem by
         leaving a clear, unambiguous will.

Law Journal Article
  - What is the main idea Coase is arguing for? He argues that in situations with low
      transaction costs, Peruvian taxes are not the best ways of avoiding externalities.
      He argues that people can bargain away externalities within their own
      negotiations.



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    -   Coase‟s theory does not factor in distribution concerns, gaps between racial or
        ethnic groups, or rich and poor. Therefore, there are some situations where you
        can still argue for Government intervention. A common misinterpretation of
        Coase is that it only applies with zero transaction costs and the cost of information
        is also zero. This is not actually the case…
    -   Last point: Coasian bargaining also depends on the efficiency of government
        intervention, including its transaction costs and enforcement costs.
    -   Example: Rancher encroaching on the Farmer‟s land. Farmer could pay the
        rancher not to encroach on his land.
             o Problems: if there are high transaction costs, the negotiation might not
                 occur.
             o Information: people may not know what is going on. They may not know
                 the exact tradeoff. The more uncertainty of the information, the more
                 difficult it is to come to an agreement. The more likely that the agreement
                 will not turn out to be optimal.
    -   Coase argues that it takes two to tango. Coase says these types of issues can be
        resolved in absence of Government intervention by assigning property rights,
        regardless of where the initial property right is given. With zero transaction costs,
        the end result for society will be the same.
    -   Externalities – Keeble v. Hickeringle – the noise keeping the ducks off of
        Keeble‟s land from Hickeringle firing his gun. Coase might say that it is not ex
        ante clear which activity is the nuisance. Keeble could pay off Hickeringle to not
        fire off his guns.


9/19/2005
Fee tail – has to go to the first born son.
Fee simple – full control over the property rights
Life estate – can use it for duration of life at which the property rights go to someone else
Default today: life estate

Remainder man – the person who gets the property after the life estate is over.


Baker v. Weedon
Facts: Weedon left a life estate to P and a remainder to D. P wishes to sell the land and
get its value. D wishes to retain ownership of the land to allow its value to increase.
PP:
Issues:
Holding: trial court will only order a judicial sale if it is in the best interest of both the
freehold tenant and the holder of the future interest
Reasoning:
Rule:
NOTE: free alienability can get complicated when land is divided into present interest
and future interest. Law prefers property to be alienable because it maximizes the value
of the land.


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    -   why wasn‟t it possible to just reflect the rising prices in the present value of the
        house?
    -   When you have a life estate, two people have an interest in the property, the
        people who have the life estate and the people who get it when they pass away.
    -   What is the rationale Anna presents to allow the sale? She says it would be the
        most efficient use of the land to sell it at that time. Why? Because otherwise the
        land will just be wasted for the next 4 years.
    -   Inefficiency – “economic waste” – sometimes the most valued use of the property
        is one that is arranged through a sale of the property or is somehow not
        compatible with the rights of the person with the life estate.
            o To get a sale, you need to get the approval of both of the parties.
            o Why couldn‟t the COASE theorem solve this problem?
                      Perhaps the transaction costs would be a problem.
                      Bilateral monopoly – there is a chance of deadlock that is more
                         likely to arise than in a thick market.
            o This case has a risk of bilateral monopoly.
    -   How long has this litigation taken place? 8 years have already passed. We have
        already had 8 years of economic waste. The problem is that deciding to sell the
        property could benefit one party but not another.
    -   How would you ever calculate the net present value of a life estate, if they both
        agreed to sell the property? How to take into account her likely life expectancy,
        the value of the use of the land, etc. Would it be subjective or objective?
            o There is no perfect solution to this economic waste problem.

Waste
  - What are the two different types of waste?
          o Affirmative Waste – present interest holder may not actively participate
              in activities that diminish the value of the land. (can‟t cut mature trees,
              mine the land, tear down buildings)
          o Permissive/Passive Waste – present interest holder has a duty to take
              reasonable steps to prevent a deterioration in the value of the land. (e.g.
              duty to repair structures, etc.). This is similar to a negligence standard.
  - Who brings actions based on these types of waste? Usually the remainder man
      (future interest holder) against the present interest holder.
  - Final period problem – people with a life estate are more likely to create this
      type of waste during the final period of their property ownership. The present
      interest holder, since they can‟t sell the property, have less incentive to keep up
      the place because they won‟t have it for much longer.
  - NOTE: Heirs are not remainder men. If I own my property and declare an heir in
      my will, they do not have a cause of action if I start messing the property up.
          o This makes good, intuitive, logical and economic sense.

Defeasible estates
   - what are the two types?
           o Fee Simple Determinable – Possessory interest in the property ends
               automatically upon the occurrence of some specified event.


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            o Fee Simple Subject to Condition Subsequent – Fee simple estate may
              end upon the occurrence of some specified event IF the grantor elects to
              terminate and retake the estate.
     -
Mahrenholz v. County Board of School Trustees
Facts: Huttons conveyed land to the School Board (D) “to be used for school purposes
only.” Huttons passed the “reversionary” interest in the property to Jacqmain. Jacqaim
then conveyed this reversionary interest to Mahrenholz (P). Subsequently, the school
used the land for storage.
Issues:
Holding:
Reasoning:
Dissent:
Rule:
NOTES: Why does it matter if it is fee simple determinable or fee simple subject to
condition subsequent?
- Why did the court find it was determinable rather than subject to condition subsequent?
- Possibility of reverter – the future interest that corresponds to the fee simple
determinable. If the pre-specified condition subsequent occurs, the property
automatically reverts to the grantor.
- When you have a right that goes automatically, once that right vests, you can pass it
down.
- Is there any justification for having a legal rule that distinguishes between these two
situations? Is there any justification for having these two different types?
         - Determinable being automatically going back versus
- why not have a situation where he could pass down the right of entry to the
Mahrenholz?
     - they want to avoid restraints on alienability. They are trying to figure out a way
         to convert the fee determinable to a fee simple.
     - THIS IS A HARD AND FAST RULE. This is really a type of inalienability rule.
         This is a significant restriction on what the person is allowed to do when granting
         the use of the property.
             o NOTE: you could set up a corporation that would hold this right.
             o Phil says: why do these silly requirements exist that just encourage,
                 complex, strange solutions to get around the problems to operate the way
                 the holder of the property wants.
             o Courts are reluctant to change a long common law rule. They would
                 rather have the legislators change the common law by statute.
     - Majority talks about the McElvain v. Dorris case.
             o “to be used for mill purposes, and if not for mill purposes the title reverts
                 back to the former owner.” – this is very similar to Mahrenholz. So why
                 did the McElvain court find it to be a condition subsequent and
                 Mahrenholz was a fee simple determinable.


MISSED CLASS


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9/26/2005
Rule against perpetuities
   - came about in the 17th century
   - What is the main benefit the king gets from privately owned land?
           o Tax money
           o If there is land that is not owned for a period of time, the King loses tax
               revenue.
   - Why is the king particularly concerned if it is the Duke of Norfolk?
           o The size of the land will mean more taxes.
           o Duke of Norfolk might become a rival of the King.
   - What are the details of the rule itself? What is the basic principle of the rule?
           o Interest MUST vest in 21 years or it will fail.
           o HYPO: Could the vesting life for an interest be for someone who is not yet
               born?
                    No. Why not? They have to be in existence at the time of the
                       creation of the interest. “life in being”
                    Within 21 years of a “life in being”
   - Even if there is a conceivable possibility that the interest will not vest, the rule
       against perpetuities applies.
   - HYPO: leave it to any X‟s children within 21 years of the death of Ted Kennedy.
           o The person who serves as the validating life need not have any
               relationship to the property. It has to be someone who is alive at the time
               the bequest.
   - Traditionally, the interest does not vest if there is a conceivable.
   - It is not necessary that there be someone to take the property. It is just necessary
       that there will
   - WHAT THE FUCK IS HE TALKING ABOUT?
   - If you limit it to the specific child, it is probably okay. If you don‟t limit it to any
       child,
   - IF THERE IS ANY LOGICALLY CONCEIVABLE SITUATION IN WHICH
       THE PROPERTY WILL STILL BE IN LIMBO, THEN IT DOESN”T WORK.
   - X has a child that will be 22 in time
   - They require that it vest, if at all within 21 years because they need a bright line
       rule. To adopt a “high likelihood” standard would not have been a bright line.
   - 1) THERE HAS TO BE A VALIDATING LIFE THAT MUST BE ALIVE
       WHEN THE INTEREST IS CREATED. 2) IT MUST VEST OR NOT VEST
       WITHIN 21 YEARS OF THE VALIDATING LIFE.
           o You should be reasonably okay for this class based on these two
               principles.

Jee v. Audley
Facts:
PP:
Issues:
Holding:


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Reasoning:
Dissent:
Rule: Even if there is a very low chance that the interest won‟t vest, the rule against
perpetuities still makes it void. It must be a bright line test.

How has the rule been modified in current courts?
  - What is a “wait and see” doctrine? Instead of taking the Jee approach,
  - Wait and see rule:
          o Simple “Wait and See” doctrine: an alternative to the traditional
              application of the Rule against Perpetuities that Wait and see if anyone
              gets it after 21 years. If it is invalid after 21 years, the interest is
              destroyed. Therefore, this still uses the basic 21 years except it waits out
              the 21 years to see if the interest is still in limbo.
          o Wait and See for 90 years: there is no life in being. It is 90 years after
              the creation of the interest. This is really in addition to the traditional
              “wait and see” rule. There are two ways to validate. Either it will vest in
              90 years, or alternatively it can vest within 21 years of a life in being.
              This is a supplement to the simple wait and see, but whichever is longer.
              The majority of states use this 90 year rule. 6 states use the simple “wait
              and see”. And there are a large number of states that allow perpetual
              trusts meaning the rule against perpetuities is completely gone.
  - Is it a good idea to abolish the rule against perpetuities?
          o What about the point that if you don‟t have a rule against perpetuities, you
              might have excessive concentration of wealth by keeping their estates in
              the family? Rule against perpetuities prevents this from happening
              without cutting off the rights of inheritance. Why isn‟t it relevant today?
              Estate taxes are a way of getting around this. Big estate owners
              probably would prefer the rule against perpetuities to the estate tax
              because the estate tax is probably more efficient. You can make more
              wealth but you can‟t make more land.
          o Good
  - Can there be multiple validating lives? I could have said 21 years after either Ted
      Kennedy‟s death or the death of Queen Victoria, whoever dies last.
  - Summary from most conducive to concentrating wealth to least conducive:
          o 1. Perpetual Trust
          o 2. Wait and See for 90 years
          o 3. Traditional Wait and See (for 21 years)
          o 4. Traditional Rule Against Perpetuities
          o 5. No inheritance
  - Where on this spectrum should we be?

Concurrent Interest
  - What is a tenants in common?
         o Relatively loose arrangement by which both parties retain a high degree of
             autonomy in what they can do. Can I sell my interest without your
             consent? Yes.


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    -   Joint tenancy? In what ways is this different?
            o There is a right of survivorship. If one of the people dies, the other person
                gets the interest in the property.
            o Legally, the tenants are considered a single owner. This means that they
                have the right to the entire property. If I mortgage the property without
                consulting the other party, then the other party is liable for the mortgage
                anyway.
            o Under traditional common law, there were the four unities
                      1. Time – interest has to vest at same time
                      2. Title
                      3. Interest – must be the same. equal undivided shares
                      4. Possession – both sides had right to the whole property
            o Could you be joint tenants, if my interest was a fee simple and yours was a
                life estate? This would violate the Time and the Interest requirements.
            o Many states have watered down these four unities by statute.
            o What happens if a unity is broken?
                      It goes from a joint tenancy to a tenancy in common.
            o If two people are killed by the same act, but a few minutes later, does the
                person who dies last become the sole owner? Yes. The law is that it is a
                bright line rule.
                      If people want, they could draw up some type of joint will to
                         overwrite this common law, default rule.
                      It‟s not clear what the percent certainty that must be required.
            o What happens when a joint tenant dies? It reverts to the other person.
                That is called survivorship.
    -   Tenants in entirety
            o Limited to a marital situation.
            o Has survivorship.
            o Unlike a joint tenancy, people require a bilateral consent to break up the
                tenancy in entirety. The other option is to get a divorce. Severance by
                one of the tenants is impossible.
            o A sign of commitment to the marriage.
    -   A tenant does not necessarily mean what it means in property.
            o A tenant can be someone who owns a property.
            o A “leasehold tenancy” is only one example of a type of tenancy.

Riddle v. Harmon
Facts: Mr. Riddle (P) and his wife acquired a parcel of real estate as joint tenants. Mrs.
Riddle wanted to terminate the tenancy so she could dispose of her share by will. Her
attorney had her execute a deed granting herself an undivided one-half interest in the real
estate. The deed specifically stated that the purpose of the deed was to terminate the joint
tenancy.
PP:
Issues: May a joint tenant terminate a joint tenancy by granting her one-half undivided
interest to herself?
Holding: Yes


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Reasoning: Joint tenancy may be converted to a tenancy in common by destruction of
one of the four unities. Each joint tenant has the right to destroy the joint tenancy without
the consent or knowledge of the other joint tenant.
    - These can be dissolved. There‟s nothing preventing her, so why not allow her to
        do it in a single way.
    - Strawman: creating a joint tenancy with another person who would receive the
        property, then reconvey it to the original owner plus the other joint tenants. Prior
        cases said you can‟t terminate a joint tenancy without a strawman. Court argues
        that the strawman is no longer necessary.
    - Why not say the “strawman” was unlawful? Why not close off these different
        paths? They talked about wanting to honor the intention
    -
Rule:
NOTE: if you were in marriage and didn‟t want your partner couldn‟t eliminate your
rights, what would you do? You would try to set up a tenancy in entirety which would
require bilateral consent.

Delfino v. Vealencis
Facts: Delfinos (P) and Vealencis (D) owned parcel as tenants in common. D occupied
land. P sought to develop the property into building lots. P brought action to parttion the
property by sale. D moved for an in-kind partition. Trial court held that petition in-kind
would result in material injury to the rights of the parties and ordered that the property be
sold at auction and the proceeds distributed to the parties. D appeals.
Issues: Did court property order the sale of the property owned as tenants in common?
Holding: No
Reasoning: It has long been policy to favor partition in-kind but to allow partition by
sale in emergencies or when division cannot be well made otherwise. Burden is on the
party requesting partition by sale to demonstrate that such sale would better promote the
owner‟s interests.
    - Court must consider interests of all parties, and not only the economic gain of the
        one party. Court failed to conider that D had actual and exclusive possession of a
        portion of the property for a substantial period of time. D‟s home is on the
        property and she derives her livelihood from the operation of a business (garbage
        business).
Rule: Default rule is to favor partition in-kind over partition by sale.
NOTE: the fact that she has a business is relevant to the second criteria that each of the
owner‟s is properly served. It is by no means rare for a partition by sale to be ordered.
Therefore, it is not an overwhelming presumption.

Spiller v. Mackereth
Facts: Spiller (D) and Mackereth (P) owned a building as tenants in common. When the
lessee vacated, D entered the building, began using it as a warehouse and supplied new
locks. P wrote a letter demanding that D vacate half of the building or pay half of the
rental value. D refused. The court found for P. D appeals.
Issues: Is a co-tenant in possession liable to his co-tenants for the value of his use of the
property in the absence of an agreement to pay rent or an “ouster”?


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Holding: No. Judgment reversed.
Reasoning:
   - Since there was no agreement to pay rent, ouster of a co-tenant must be
       established before D is required to pay rent to P.
   - Putting the incentive on the coowner is dangerous, because you don‟t want to
       incentivise the party being screwed to have to prove they were screwed. It
       increases the chances that a nasty interaction might occur.
Dissent:
Rule:

Swartzbaugh v. Sampson
Facts: Swartzbaugh (P) and her husband owned as joint tenants 60 acres of land. Her
husband entered into an option to lease this property to Sampson (D). P sued her
husband and D to have the lease canceled. Sampson leased the property in order to
construct a boxing pavilion on it. P disapproved of this and would not sign any lease.
Her husband and D then entered into the lease without P‟s knowledge. Subsequently, the
two men entered into a second lease involving the property. P lost in the lower court and
appeals.
Issues: Can one joint tenant who has not joined in the leases executed between her co-
tenant and another maintain an action to cancel the leases where the lessee is in
possession of all the leased property to the exclusion of P?
Holding: No.
Reasoning:
    - An estate in joint tenancy can be severed by destroying one or more of the
        necessary unities. One of the essential unities is possession.
    - Ordinarily a joint tenant out of possession cannot recover possession of the
        property to the exclusion of the other.
    -
Rule:
NOTE: she knew about the rules before entering into the joint tenancy. From an ex ante
perspective, maybe she wasn‟t screwed over. Perhaps he made some ex ante sacrifice,
even though ex post it looks pretty bad.
    - COASE theorem – bright line rules define clear property rights that can then be
        negotiated away later. When it is unclear or ambiguous, it can impede negotiation
        and they may have an incentive to litigate instead.
    - It may be that the ambiguity in having “denial of right of entry” can‟t be removed
        entirely, however, as the body of law increases the ambiguity begins to get
        clearer.
    - What is the general rule: you can have a lease where only one joint tenant
        agrees, unless they don’t have the same right of possession, or if the lease is
        created in some way that affects

10/03/2005

Leasehold estates
Tenant can be a renter or anyone who owns an estate. Keep this in mind.


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    -   Term of Years: 1) fixed period of time and 2) calendar dates for the beginning
        and ending of the lease period are ascertainable.
            o Neither death of tenant or landlord matter. You just start getting rent from
                their heir.
            o Doesn‟t have to be in terms of years (could be months, days, etc.)
    -   Periodic Tenancy: “from month to month” or “from year to year”. Terminable
        by notice of either party. They have to provide notice before the last day of the
        term. It continues indefinitely until a party terminates it.
            o Death of tenant nor landlord effect the lease. Death does not matter. If
                landlord dies, you continue to rent from heir for duration of period.
    -   Why would you prefer one of these leases over another?
            o 1) Transaction costs: Transaction costs in giving notice; “Month by
                month” reduces transaction costs of renewing the contracts.
            o 3) Uncertainty: if you aren‟t sure how long you want to stay.
            o 4) Information asymmetries: Landlord may want a periodic tenancy to feel
                out a new tenant if they don‟t have enough information on whether they
                will treat the place well.
                     Additionally, tenant‟s may not know how competent the landlord
                        is.
    -   Tenancy at will: a tenancy at will lasts only so long as the landlord and tenant
        desire. Both are equally capable of terminating the lease at any time.
            o Death kills a tenancy at will.
            o Why would people want a tenancy at will? Maximum amount of
                flexibility on both sides.
                     E.g. Convicts on work release programs. Less likely that the
                        people will have trustworthy heirs, so it is less likely they want it
                        to
            o Why would a tenant be willing to accept this arrangement? Perhaps they
                can‟t get anything else.
    -   Lease Itself: do we tend to regard a lease a conveyance or a contract? Both.
            o Conveyance v. K
                     Conveyance: a particular property right has been transferred. A
                        stick in the bundle of sticks has been transferred.
                     Contract:
            o What practical difference does regarding leases as Ks make? There are
                differences in K law and pure traditional property law. Which
                predominates depends on the legal issue being addressed.
    -   Standard Form Leases: Similar to Ks of Adhesion.
            o What is the objection typically made against standard form leases?
                     1) Bargaining power problem.
                     2) Information overload: Typically lengthy, wordy, and difficult to
                        understand.
            o Why aren‟t these standard form leases forbidden?
                     1) Transaction costs: it would be too costly for creators of Ks to
                        have to create unique ones for each transaction.
            o Why would a monopoly make bargaining power different?


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                       If one party has a monopoly, there are no competitive alternatives.
                        They harm the public because the incentive is to maximize profit
                       In monopolistic situations, there will be transactions that won‟t
                        take place as they will in competitive markets.
                       What is harmful is having transactions from which both sides
                        could benefit that aren‟t taking place because of monopolistic
                        pricing. This can be avoided using price discrimination.

Garner v. Gerrish
Facts: Donovon (P) leased house to Gerrish (D) for $100 per month. Lease was to
continue until D terminated the agreement at a date of his choice. D lived there for 4 yrs
before P died. P‟s estate tried to evict D arguing it was a tenancy at will. D argued it was
a tenancy for life.
PP: Trial court held for P, saying that the lease was indefinite and therefore was a
tenancy at will periodic tenancy.
Issues: If tenant has right to terminate on date of his choice, is this a determinable life
tenancy?
Holding: Yes. Judgment reversed.
Reasoning: At common law, a lease at the will of the lessee was also deemed to be at
the will of the lessor. This arose from Livery of Seisin which has been abandoned. There
is no longer reason to assume that granting a tenant the exclusive right to terminate at will
implies the same right in the other.
Rule: Giving only one party the right to termination gives that party a life tenancy, not a
tenancy at will.
Note: This is just a presumption, this does not mean that you can‟t create a tenancy at
will. This doesn‟t put very much constraint on landlords. It just means they will interpret
the language as it is written.
    - Parties can contract around this rule.

    -   Holdover Tenants: A tenant who “holds over” is a tenant at sufferance.
           o General Rule:
                   Common Law: there were no excuses for being a holdover tenant.
                   Today: some courts will accept excuses if it is apparent that the
                     tenant did not intend to stay beyond the end of the term.
           o Rent Increases: if landlord notifies that a higher rent will be charged for
              holding over, the tenant is liable for the increased rent unless they notify
              landlord that they will not pay it. Silence is construed as consent.

Crechale & Polles, Inc. v. Smith
Facts: Crechale (P) brought suit for back rent and damages. P leased store building to
Smith (D) for 5 yrs. D notified P that new building D was moving to was not ready, and
D wanted to stay over on a month-to-month basis. Facts are disputed. D stayed past
lease term. P accepted and cashed a check for first holdover month‟s rent. P then refused
D‟s check for 2nd month. After 3.5 months, P notified D that it considered D a holdover
tenant and that the lease had been renewed. D moved out and did not pay rent.



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PP: P was awarded rent for the time D actually occupied the premises beyond the term
of the lease. P appeals b/c he wants more money.
Issues: Once landlord elected to treat tenant as a trespasser, can he rescind that election?
Holding: No, lower court affirmed.
Reasoning:
Dissent:
Rule: when tenant continues beyond the end of the lease term, a landlord may
    - 1) treat him as a trespasser and evict him, or
    - 2) hold him over as a tenant for another term.
    - Once having chosen a remedy, a landlord cannot rescind his choice. By accepting
        the check for the first holdover month‟s rent, P consented to the month-to-month
        extension.
Note: this court doesn‟t really encourage tenant to adhere to the original K. perhaps the
court should have created an incentive that prevents tenants from simply staying on and
not paying a penalty.
    - People can contract around this rule. Exception: in many states, it is difficult to
        evict the tenant.

Hannan v. Dusch
Facts: Dusch (D) leased some real property to Hannan (P) for term of 15 years. Prior
tenant refused to relinquish estate to P. D (landlord) refused to take legal action to
remove holdover tenant. P brought suit against D to recover damages resulting from
being unable to take possession of the land.
PP: lower court held for D, that landlord had no duty.
Issues: Does landlord have implied duty to deliver physical possession to tenant at the
beginning of the lease term?
Holding: No
Reasoning: tenant can sue the wrongdoer, not the landlord.
Dissent:
Rule: There is no implied covenant that leased premises shall be open for possession
(actual possession) by the tenant at the beginning of his term. Only has a right of
possession.
Note: this case represents the minority rule that don‟t provide actual possession in
addition to legal right of possession to tenant. Majority rule is that a landlord has a duty
to give the tenant both.
    - This rule is a default rule that also can be contracted around. The rules are not a
        complete matter of indifference, because contracting around these rules may be
        costly in transaction costs.
    - Majority Rule: Elements
            o A Landlord Must:
                      1) provide legal right of possession
                      2) not interfere directly or indirectly with tenant‟s physical
                        possession.
                      3) (in most jurisdictions), to place tenant in actual possession
    - COASE THEOREM:



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            o According COASE theorem, does it matter whether you adopt the English
              or the American rule?
                   No. If you adopt the American rule, tenants will simply demand it
                      in their leases or they will negotiate with the landlord to have the
                      landlord do it for them. The outcome would be the same, except
                      for the additional side payment.
            o Theorem should work pretty well for these types of problems, as long as
              the rule is clear.

10/05/2005
Antidiscrimination Law in Housing
   - Fair Housing Act of 1968 – long history of discrimination in housing,
       particularly against blacks, Asians, Jews, etc.
           o What kind of discrimination does this forbid?
                    Other types of discrimination have been analogized to racial
                      discrimination, and prohibited based on the 14th Amendment.

REVIEW FAIR HOUSING ACT OF 1968 on PAGE 463

Jones v. Mayer Co. (p463) held that 1866 Civil Rights Act bars all racial discrimination,
private and public, in the sale or rental of property. 1866 law is narrower than FHA in
that it reaches only racial discrimination, does not deal with discrimination in provision
of services and facilities, etc. However, it is broader in that it doesn‟t have any
exemptions like the FHA.

Soules v. HUD (Selection of Tenants – Discrimination Based on Familial Status)
Facts: Fair Housing Act. Realtor may have
Issues:
    1) Did substantial evidence support ALJ‟s decision to dismiss P‟s claims based on
        violation of Fair Housing Act?
    2) Did ALJ err by inquiring into Rs intent regarding Rs alleged statements indicating
        an impermissible preference, discrimination or limitation of the Act?
Holding: No. R was within his rights.
Reasoning:
    - Section 3604(a) of FHA, as amended in 1988, makes it unlawful “to refuse to
        negotiate for the sale or rental of…a dwelling…because of race, color, religion,
        sex, familial status.” Familial status includes “one or more individuals being
        domiciled with‟ a parent or guardian.”
    - Once P makes case showing she is a member of a protected class who applie for,
        was qualified to rent, and was rejected although the housing remained available,
        D is allowed to explain whether impermissible considerations motivated his
        actions.
    - D claimed she did not want to rent to P because Ps negative and combative
        attitude and because she wanted quiet neighbors. P claimed Ds reasons were
        pretextual and cited D‟s treatment of the first and second testers from HOME as
        support.


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    -   D‟s treatment of the Perry‟s establishes that D was willing to rent to a family.
    -   An “ordinary listener standard” is an appropriate guide for measuring complaints
        against the FHA. FHA is not necessarily violated when one asks whether a child
        is noisy.
    -   It was proper for ALJ, after determining Ds statement did not indicate a
        discrimination, to examine D‟s reasons for making the statements. He resolved
        Ds reason was to guarantee the elderly tenants would continue to live in a quiet
        environment. D only asked whether the child was noisy.
Rule:
NOTES:
   - What about asking about the children, including how old they are?
          o The statement of age, cannot in and of itself get her off the hook.
   - What in fact is the standard for judging statements that are made to determine if
      they are discriminatory?
          o Ordinary listener standard: Whether an ordinary listener would consider it
              to be discriminatory. Given that this is ambiguous, it makes sense that
              realtors would be overly cautious.
   - What about rational stereotyping? Is this acceptable or discriminatory? Is this
      typically an accepted defense to the law?
          o No, you can‟t really do this.
          o What types of rational stereotyping are permissible?
                   Criminal record.
                   Credit ratings.
          o What types of rational stereotyping are not permissible?
                   Race.
                   Religion.
          o Some people who discriminate against Blacks or Asians just have a
              general hatred toward the whole group.
          o By contrast, while there are people who hate children, most discrimination
              against children is based on rational stereotyping. Therefore, there might
              be some justification for having housing developments meant for people
              who do or do not want families to be allowed.

    -   Assignments: Leases may be assigned by either the lessee or lessor absent some
        contractual provision to the contrary. Assignee (new tenant) is in privity of estate
        with landlord, and unless otherwise provided, their obligations are the same as the
        original lease.
    -   Subleases: Different from assignments in that tenant who subleases is a landlord
        to his sublessee. No privity of estate between the original landlord and the
        sublessee. Neither one can sue the other. Certain rules apply in determining
        whether a transfer is a sublease or assignment.
            o Effect of Reversion: at common law, if the subleasing tenant conveyed to
                the sublessee anything less than the whole leasehold estate (retained a
                reversion), it was a sublease and not an assignment. Conversely, if the
                new lessee received the whole of the leasehold estate, an assignment was
                involved.


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            o Effect of retaining a right of entry: if transferring tenant retains a right of
              entry in the event the transferee breaches a condition of the lease, the
              common law regards the transfer as an assignment, not a sublease.
              Modern view would hold the transfer to be a sublease.
            o Modern Trend: is to examine the intention of the parties to determine
              whether a transfer is an assignment or a sublease. If the transferring tenant
              charges more rent than he has been paying, this is an indication of a
              sublease. If the transferee tenant pays a lump sum, this is an indication of
              an assignment.

Ernst v. Conditt (Construing terms of a sublease)
Facts: Ernst (P) leased land to Rogers, who owned a go-cart business. Conditt (D)
bought Roger‟s business and all three renegotiated lease so that Rogers remained
personally liable to P and D “sublet” from Rogers. D stopped paying rent and P sued. D
said there was no privity.
Issues: Are the words sublease and subletting controlling in determining whether a
transfer is a sublease?
Holding: No. Held for P.
Reasoning:
    - If a transfer is a sublease, there is no privity and original landlord cannot recover
        directly from sublessee. If transfer is an assignment, there is privity and landlord
        can recover from the assignee.
    - At common law, if a transfer conveyed the whole leased estate, it was an
        assignment. If it conveyed less than the whole, even one day less, it was a
        sublease. (Under sublease, sublessor had reversionary interest, a right to reenter.)
    - Modern rule looks to intent of the parties rather than to formalistic ancient rules.
    - Under either rule, transfer to D was an assignment.
             o Absent a lease provision to the contrary, Rogers would still be liable under
                either a sublease or an assignment. Rogers had no reversionary interest
                since he completely divested himself of the business and property.
                Transaction was therefore an assignment.
             o The use of the words “sublease” in the lease is not controlling.
Rule:

10/11/2005
   - FHA only applies to sellers. In Schelling example, it is the buyers who eventually
       cause the segregation.
   - You can have high degrees of segregation even in situations without any real
       degree of racism.
   - Even if people want integration, their differences in ideal percentages can lead to
       almost total segregation.
   -

Kendall v. Ernest Pestana, Inc.
Facts: Pestana, Inc. (D) leased hangar space at an airport that was subject to preexisting
sublease with Bixler. Bixler arranged to sell his business to Kendall (P), but because


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Bixler‟s lease provided that the consent of the lessor was necessary for an assignment,
Bixler sought D‟s consent.
Issues: Whether commercial lessor can unreasonably withhold consent to an assignment?
Holding: No. Judgment was reversed.
Reasoning:
    - Arguments for minority rule:
            o Importance of free alienability of a leasehold interest
            o Requirement of Good Faith in K
Dissent:
Rule:
NOTE: is majority rule or minority rule better?
    - majority rule – lets lessor arbitrarily refuse to consent to a proposed assignment
    - minority rule – lessor can only withhold consent if they have a commercially
        reasonable objection to the assignment.
    - Approval clauses – if you include in the K , tenants won‟t be willing to rent from
        that individual, or they would be interested in paying a lower rent.
    - Would the overall bargain be different, if you couldn‟t have a binding approval
        clause? Yes, you would probably charge more rent.
            o As a part of the overall part of the bargain, if you find situations in which
                the two parties agreed that having the clause included would be better for
                them,
            o Do the courts really have a better sense of judgment of these things (what
                clauses should be allowed) than the lessors and lessees themselves?
                Seems unlikely…
            o Plato had a theory that everything had an essence. Essence of K is to pay
    - Broader lesson to be learned
            o Regardless in whether you agree with the court, the flaw in its reasoning is
                that it only looked at the approval clause without looking at the whole
                arrangement. You want to look at the bargain as a whole.
            o We don‟t want to get caught up in the essence of dog, we also don‟t want
                to get caught up in the essence of K that would lead us to ignore other
                aspects of the K that may be equally important.
    -


Berg v. Wiley
Facts: Wiley (D) leased restaurant to Berg (P). P, in violation of lease, remodeled
restaurant w/o D‟s consent. Ps restaurant had health code violations. This violated the
lease provision requiring the business operate in a lawful manner. D gave P two weeks
notice to make remodeling changes or, pursuant to K, D would retake possession. Health
Dept. gave P two weeks to remedy health code violations. On last day, P dismissed
employees, closed restaurant, and put up a sign. D changed locks. P sued for damages
and lost profits. P sued for wrongful eviction and won $31,000.
Issues: May a landlord use a self-help to regain possession of his property?
Holding: No. Judgment affirmed.
Reasoning:


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    -  Why would you want to use self help?
           o No lawyer fees.
   - He definitely had a legitimate complaint. The question is what means he can use.
   - Was court right to ban peaceful self-help?
           o
   - Common law rule:
           o Landlord was legally entitled to retake possession if 1) landlord is legally
               entitled to possession, and 2) landlord‟s means of reentry is peaceable.
                    Changing the locks in Ps absence is not a peaceable method of
                       reentry but rather a forceful retaking.
                    Modern trend is to require landlords to use legal process, not self-
                       help, which is in direct contradiction to common law.
           o Public policy discourages landlords from taking law into their own hands
   - Georgia Approach: Is there any justification having a default rule that self-help is
       forbidden, but allow people to contract around that?
           o 1) self-help situations are less likely to escalate to non-peaceful results if
               they know what to expect.
           o There may be some logic to the Georgia approach.
   - Another rule would be to allow self-help if you let them know in advance.
   - Another rule would be to allow self-help if law enforcement officials are present.
   - Minnesota S.C. said that even under the old Common Law rule, Berg would still
       prevail.
           o They said changing of the locks in Ps absence was not a peaceable method
               of reentry.
                    They said one reason it was not peaceable was because Berg was
                       not present.
                    It also said that it was only through Berg‟s self-restraint that there
                       was no violence.
   - If you adopt the rule regarding self-help which says it is not peaceable only
       because the other party used self-restraint, what would happen to self-help?
   - Some concerns over self-help is that there may be harms to other parties in the
       neighborhood (innocent bystanders).
   - Therefore, perhaps prohibition of self-help is meant to protect society in general .
Dissent:
Rule:

Somer v. Kridel (Duty to mitigate damages)
Facts: Kridel leased apartment from Somers for two years.
Issues: Is a landlord seeking damages from a defaulting tenant under a duty to mitigate
those damages by making a reasonable effort to relet the premises?
Holding: Yes, decisions of appellate division reversed.
Reasoning:
    - Minority view, based on antitrust law, is that landlord has an obligation to make a
       reasonable effort to mitigate damages where tenant has abandoned premises prior
       to expiration of lease.



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    -   Majority view, based on property law, is that landlord is under no duty to
        mitigate damages caused by a defaulting tenant.
    -   Court held that majority view is antiquated and will follow the minority view.
            o Argument in favor: landlord is in a better position to find a new tenant
               than the old tenant.
            o Argument in favor: landlord has the ability to choose the new tenant rather
               than being forced into someone by the old tenant.
    -   Under the old rule, what would happen if old tenant found someone?
            o Regardless, the rent is owed. The landlord would obviously prefer to get
               rent for a room that is not used rather than accepting new tenants.
                    This is an inefficient use of the space from a property perspective.
            o Therefore, the old rule has been modified giving landlord a duty to
               mitigate.
    -   Comment: continuing trend by courts to apply principles of K law rather than
        pure property law to residential leases.
    -   Other remedies landlords have
            o Security deposit – usually so small that it is not worth litigating.

Dissent:
Rule:


10/24/2005
   - Mortgagor – borrower; buyer of house
   - Mortgagee – lender
   - Foreclosure
           o Private sale is more vulnerable to later judicial challenge
           o Public sale is less likely to be susceptible to judicial challenge
   - This is a property analogy to bankruptcy. He is simply labeled bankrupt under a
       single transaction.
   - Who gets the money from the foreclosure sale. The mortgagee gets the first cut at
       the money and the mortgagor gets the extra.
   - The second mortgage is riskier and therefore has a higher interest rate.
   - Deed of trust is better for the lender – however, they probably can only charge a
       lower interest rate.
   - Mortgage foreclosure is better for the borrower but they may have to pay a higher
       interest rate.

Murphy v. Financial Development Corp.
Facts: Murphy (P) bought house and financed it with a mortgage.
Issues:
Holding:
Reasoning:
Dissent:
Rule:



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NOTES: damages – court says Ps are only entitled to the difference between a fair price
and the price actually obtained. Why shouldn‟t they get the fair market value? How do
you calculate a fair, as opposed to fair market value, price? Most jurisdictions seem to
use the “fair” value rather than fair market value. The justification is that there may be
situations in which you can‟t get fair market value or situations in which it takes too long
to get fair market value.

Bean v. Walker
Facts:
PP:
Issues:
Holding:
Reasoning:
Dissent:
Rule:
    - equitable lien
    - this kind of contract gets treated as a mortgage foreclosure.
Three types of recording statutes
    - Race statute – first person to record the transfer gets the title.
    - Notice statute – subsequent purchaser prevails over a prior grantee who has not
        recorded unless
    - Race-notice – be without notice, and you have to record first.

10/26/2005
   - sample tests are available on TWEN

Recording
   - three types
          o race – first person to record
          o notice – second person wins as long as there was no notice
          o race-notice –
   - Examples
          o 1. A transfers to B. B does not record
          o 2. A transfers to C and C has no notice of AB. C does not record.
          o 3. B records
   - Answers
          o Notice – C wins
          o Race – B wins
          o Race-notice – B wins
   - Constructive vs. Actual Notice – these standards differ by state.
          o Note, you don‟t want to give someone incentive to not pay attention.
   - Ways to approach these problems
          o 1. Did 1st person record 1st?

Board of Education of Minneapolis v. Hughes



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Facts: Hoerger sold lot to Hughes (D) and forwarded deed with name blank. He then
sold to Duryea & Wilson (P). Then D signed the original deed making it operative. He
became a subsequent purchaser.
PP: Court reversed trial court and found for D, saying that as a subsequent purchaser he
did not have notice and that he recorded first.
Issues:
Holding:
Reasoning:
Dissent:
Rule:


Guillette v. Daly Dry Wall, Inc.
Facts:
PP:
Issues:
Holding:
Reasoning:
Dissent:
Rule:

Two types of easements
  - Affirmative easements – this is what most people think of as an easement. This is
      a right-of-way.
  - Negative easements – right to make te owner of a servient land not do something
      that he would otherwise be entitled to do. These easements are disfavored by the
      court.
  - We want to give ppl an incentive to use the land rather than to leave it alone.
      Therefore, historically affirmative easements are more prevalent than negative
      easements.
          o Law has started to shake-off this.
          o Perhaps there are more situations in which there are more benefits from
              using a neighbors land than restricting a neighbor from doing something.

Profits
   - License – when you give permission to allow someone to enter upon and do acts
        upon the land of another.
           o Licenses can be revoked at will by the grantor – by contrast, an easement
               is a property right that cannot be revoked.
           o Licenses can be granted orally

Willard v. First Church of Christ
   - McGuigan owned to lots
   - Gets rid of common law rule that you can‟t have an easement for the benefit of a
      third party (church). What about the issue of reliance on the old rule?
   - Shows movement away from standard common law rules.


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    -   Common law forbade easements reserved for third parties b/c they are difficult to
        enforce and because land wasn‟t typically owned in fee simple. Therefore,
        easements would have made taxes to the chancellor harder.

    -   Easement Appurtenant – if you sell land, the easement typically goes along with
        it. When you sell land, you do not keep easement in gross.
    -   Easement in Gross –
    -   Dominant tenement vs. servient tenement
            o
   -
Holbrook v. Taylor
   - P claimed an easement by prescription and an easement by estoppel
   - Easement by prescription – sort of like adverse possession. You must openly,
      peaceably and continuously be using the land. This type was not granted because
      it was by permission of the owner. You can‟t get an easement by prescription if
      you have permission. Since they had permission, they had a license.
   - Easement by estoppel – they improved the quality of the road. They built a
      house. Therefore, they relied enough on the license that they established an
      easement by estoppel.
          o
Van Sandt v. Royster
   - Quasi-easement –
   - When can a quasi-easement, one that is not reserved when deeded to others, be
      implied?
          o Elements
                   1) Necessity
                   2) Apparentness/Notice
                   3) Continuous (need has been continuous)
          o What these standards mean aren‟t necessarily always clear.
   - Implied grants
   - Implied reservations – you reserve an easement. These have the same standard.
   - Britain, as a general rule, requires you to explicitly state implied reservations in
      situations where there is a quasi-easement. In the US, however, that is not really
      the case.

Othen v. Rosier
   - Lane used by P on D‟s land was flooded do to a levee D built. P sued to have D
      fix the lane.
   - Trial court found an easement of necessity. The appellate court reversed.
   - Necessity must exist at the time of severance between the two estates.
   - Why not have an easement of necessity that just asks if there is a necessity now?
          o This could be analogized to the coming to the nuisance in Torts.
   - Prescription
          o Use was not a prescriptive right because he was using it by permission. It
               was not adverse.
          o It also was not necessarily


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Brown v. Voss
   - Brown owned parcel A. Brown bought B and C. P wanted to remove the house
     on B and replace with house that would extend from B to C. An easement existed
     on A for the use of B. P spent $11,000 developing property before D prevented P
     from using the easement. He blocked the road.
   - Remedy – do you agree there should only be monetary damages, or do you agree
     with dissent that D should be able to prevent Ps use for parcel C?

11/2/2005

REAL COVENANTS
  - similar to easements. Distinct because of privity rules and other technical
     applications.
  - A good way to make sense of the developments in real covenants is that we have
     seen a break down of C/L rules that might have inhibited contracting parties from
     effectuating their will. Modern rules usually allow people to contract the way
     they want. C/L rules
  - We are moving towards a more absolute view of property rules. The people who
     own it are in more control of restricting how they want it used in the future.

Common Law doctrine of privity – this has been significantly undermined

Requirement of Privity
   - vertical privity – if A is selling to B, this is vertical privity.
          o Traditional C/L required vertical privity for covenants and equitable
              servitudes to run with the land.
   - horizontal privity –
          o traditional C/L required horizontal privity for a burden to run with the
              land.
          o Traditional C/L never required horizontal privity for a benefit to run with
              the land.
                   Part of the reason for this is to encourage the alienability of
                      property. The argument is that benefits don‟t reduce alienability of
                      land but burdens do reduce the alienability.
                   Perhaps another reason is that burdens are harder to enforce
                      judicially than benefits.
                   NOTE: it is not clear that burdens reduce the alienability, it might
                      just reduce the price.
   - These privity rules have gradually been stripped away to support creating any
      type of Contract.

Tulk v. Moxhay
   - Tulk sold land to Elms w/ a covenant that some of the land remain open for use of
       tenants. Moxhay gets the land and says he doesn‟t want to uphold the covenants.



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        Moxhay paid a higher price thinking he was getting land that wasn‟t burdened.
        Therefore, Elms makes out like a bandit.
    -   Can Moxhay sue Elms? Perhaps.
    -   You could argue that Tulk should have known that this was the rule and that he
        was taking the risk.
    -   Elms doesn‟t include the covenants in his sale to Moxhay. Why does Moxhay
        have a duty to discover but Elms doesn‟t have a duty to disclose?


Sanborn v. McLean
   - D owned lot in strictly residential neighborhood and started to construct a gas
      station. Sanborn (P) sued and obtained an injunction against D. Ps and Ds
      obtained title through a common grantor with some of the deeds containing
      restrictions while others did not. 53 had restrictions and 38 that did not.
   - There is a concern that McLean had bought property thinking that he could build
      his gas station. Why isn‟t this information readily available?

What is the only way you can get a real covenant? A signed document by the
  - You can‟t get a covenant by estoppel, implication or prescription. Covenants are
       much more limited than easements.
  - A covenant can encompass a large amount of properties. This doesn‟t usually
       happen with easements.
  - This distinction is undermined by cases like Sanborn where you can apply
       covenants when there weren‟t written statements to that grantee (Sanborn).
  - Does Sanborn call this a covenant? No, they call it a reciprocal easement even
       though it is stretching the definition of easement.

Neponsit Property Owner’s Assn v. Emigrant Industrial Savings Bank
   - This is a classic collective action problem. Even though the Bank may not be
      benefiting from the common areas, they are benefiting from the increased value of
      their property associated with the common areas.
   - Other collective action problems: this class is graded on a curve. Therefore, you
      are not graded by absolute quality but only how you do compared to your
      classmates.
          o However, there is always an incentive to cheat and study even though you
              weren‟t supposed to.
          o Collective action problems occur when you need the collective action of
              multiple people but the actions of any one individual is not significant.
   - Privity issue as well.

MISSED A FULL WEEK

Zoning
   - if everyone in town knew that if you have inflexible zoning rules, they will be
       applied equally to everyone – perhaps the legislators will say no. however, if the



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        insiders can grant variances (exceptions), then it increases their likelihood they
        may accept harsher rules.
    -   Therefore, granting exceptions ironically, may lead to harsher rules in general b/c
        the people in power will be creating the exceptions for themselves.
    -   There is some limit to these abuses if they become public, but most zoning
        activity does not have very much public visibility.
    -   ZONING BOARD OF ADJUSTMENT – is a fairly transparent board. Often it is
        appointed so the people don‟t have to stand for election. If they are voted, usually
        they just vote along party lines.
    -   Argument for having a board is to ensure that you can create exceptions when
        they are good.

A variance, is simply an exception or exemption from a standard zoning law.

Commons v. Westwood Zoning Board of Adjustments
Facts:
PP:
Issues:
Holding:
Reasoning:
Dissent:
Rule:
    - Somin: two classic problems with granting exceptions:
           o 1) maybe this is not that great of a violation – however, this can lead to a
               slippery slope – you need to draw an arbitrary line somewhere.
           o 2) if you grant one person an exception, it probably won‟t matter much.
               However, if lots of people ask for the exception, it can unravel the rule. It
               can have a more dramatic effect that undercuts the objective of the rule.
    - Therefore, the argument for granting a variance gets stronger the fewer people
        who are interested in using the variance.
    - Court said there was no harm – Somin disagrees b/c some neighbors sued to
        enforce the rules.
    - Two basic points
           o 1) usually, you have to have some proof of hardship
           o 2) it cannot be a self-created hardship (if you yourself were the person
               who subdivided the lot and then you complained about the problems, you
               probably could not get the variance)
    -

Cope v. Inhabitants of the Town of Brunswick
Facts: Copes (P) sought exception to local zoning ordinance to build six-unit apartments
on land classified for residential use. Ordinance permitted D (board of appeals) to grant
an exception if P proved 1) use will not adversely affect the health, safety or general
welfare of the public, 2) can‟t defeat the purpose of the ordinance, and 3) that the use
requested will not tend to devalue or alter the essential characteristics of the surrounding



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property. D found that P‟s project complied with ordinance except for these two factors
and denied the application.
Issues: Does a local zoning board have authority to take action based on general
statements of policy contained in the zoning ordinance?
Holding: No, judgment reversed.
Reasoning: Local zoning boards have no inherent authority to regulate the use of
private property. Authority may only be conferred by the state. Court says this was too
broad a delegation.
    - two factors which D rejected were so general that they did not limit D‟s
        discretion. They gave D authority to approve or disapprove applications D thinks
        best serves the public interest. The lack of detailed standards would permit
        zoning board to discriminate in application of the law, so the ordinance is
        unconstitutional under Maine‟s constitution.
    - Given that D found Ps complied with all requirements of the ordinance except the
        two invalid ones, P should receive the exception.
    - Somin – should zoning boards have more authority?
    - There is a legal difference between an exception and a variance. An exception is
        a legal right – they think these uses might be appropriate, but only if the owner
        can show it won‟t be a nuisance, etc. Whereas, in a variance, it is slightly
        different.
    - If you do not allow broad, special exceptions, it takes away some power of the
        legislature b/c …
    - From a legal process point of view, the court makes a distinction between special
        exceptions and variances – in doing so, they leave open the deep underlying
        issues. Even separating these out, doesn‟t make clear whether a high level of
        discretion or a low level of discretion is most appropriate.

    -   when is something a special exception or a variance?
            o Somin – in many cases it is hard to tell. What is the general rule?
            o Special exception is something that is permissible under the ordinance
               when it is in accordance with the purpose of the ordinance.
            o A variance is something that is not permissible under the ordinance but the
               board is allowing it anyway.
            o Somin – sometimes it is hard to tell because if the statute is vague, it
               would be difficult to determine whether it is permissible under the
               ordinance or not. Also, it can be difficult to determine what the true
               purpose of the ordinance is. Also, allowing one person to have an
               exception might not undermine the goal of the ordinance, but having lots
               of people do it would become problematic.
    -   In practice, this distinction therefore becomes problematic if the ordinance is
        not precise and you rely on a purpose-based analysis which can be difficult to
        determine what it is, and also whether it has been undermined (or would
        only be undermined if lots of people are doing it)
    -




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Amending Zoning Ordinances: local legislative body has power to amend zoning
ordinances. It does not have to follow the zoning board‟s recommendations.
    - Spot zoning: this occurs when the local legislative body amends the zoning
       ordinance to permit a new zone that is limited in size and does not conform to the
       comprehensive plan. (can be more than one lot)


State v. City of Rochester
Facts: group of homeowners (P) opposed zoning change that allowed construction of a
49 unit condo building on a single tract zoned for single-family, low-density, multiple
family dwellings. Across the street was a 24-unit apartment building and a 35-unit
condominium. The planning commission recommended the rezoning application be
denied. Rochester City Council (D) rejected the recommendation and rezoned the tract to
high-density residential use. Ps filed suit challenging the rezoning ordinance and seeking
a declaratory judgment and injunction.
PP: Trial court denied the requested relief. Ps appeal.
Issues: Was the ordinance a valid exercise of the city‟s delegated legislative police
power, reasonably related to the public health, safety and welfare?
Holding: Yes. Judgment affirmed.
Reasoning: Declined to follow the rule in Fasano v. Board of County Commissioners of
Washington County that the rezoning of a single tract should be
    - if it is adopted by a legislative body, the level of review is lower (rational basis)
        compared with something adopted by a zoning board (higher basis of review)
    - Somin – does it make sense to have these different levels of review?
Rule:
    - Unless opponents to the rezoning can show no rational basis to support a
        reclassification or a taking woutout compensation, the reclassification must be
        upheld, regardless of the size of the tract of land in question. A legislative body
        can best determine which zoning classifications best serve the public welfare.
    - Rezoning is different than special-use permits in that rezoning can permit
        property to be used in a manner formerly forbidden, while a special-use permit
        allows property to be used in a manner authorized by the ordinance.

    -   People  elect city council, mayor, etc.  choose the zoning board and a board
        of adjustments
            o Therefore, a decision made by the city council, there is only one set of
                principal-agent problems. However a decision by the zoning board has
                two sets of principal-agent problems. Therefore, the court is basically
                saying that people farther down the totem-pole, farther away from the
                people, will be more closely monitored.
            o That makes a certain amount of sense but is not the only way of looking at
                it. What about the dissenting opinion by Kelly?
                     He says that he would overturn the cases, saying that there should
                        be a common standard of review that puts the burden of supporting
                        the ordinance on the city council. This would put greater reliance



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                       His argument is that people rely most on the basic rules of zoning
                        than the exceptions. Therefore, stability is more important than
                        making individual changes.
                       Dissent ignores that to have the ordinance change by the city
                        council, you have to go through the whole process of debate on the
                        floor, discussions, committees, etc. For the zoning board, they‟ll
                        probably just go into a room and figure it out  fewer transaction
                        costs.

    -   Spot zoning – has to be inconsistent with the general surrounding land use.

    -   while zoning can be used for good ends, it can also be used for bad ends (like
        excluding poor people)
           o it is not as esthetically pleasing
    -   When you look at City of Rochester, they draw a distinction between City
        Council and other bodies…While they do have greater visibility, most people
        know very little about local government. Therefore, while people on average
        know a little bit more they are unlikely to know a lot about it.
           o There are lots of states that don‟t elect City Council members – they are
               simply appointed. Many people decide whether they have a D or an R
               next to their name.


11/16/2005 – I’m on call

Takings clause
   - 5th Amendment: nor shall private property be taken for public use, without just
       compensation
   - State Constitutions also have similar clauses.
   -
Questions
   - 1) What does it mean for property to be taken?
   - 2) This says nothing about private use. Perhaps it means that if it is taken for
       private use, it can be used for anything it wants. For more than 200 years, it has
       not been interpreted this way.
           o Justifications for going against plain meaning:
                    1) This is the way everyone understood it. Therefore, there is a
                    2) The literal reading of the text would be absurd. It could not be
                        what the framers intended.
                    3) At the time of the original constitution, the powers of the federal
                        government were
   - 3) If we assume there is only a right to take for public use, it becomes very
       important to decide what a public use is.
   - 4) What actually counts as just compensation?




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There is a tremendous amount of diversity b/w states in terms of their constraints on what
a public use is. Legislature is heavily involved and given

Berman v. Parker
Facts: Congress passed an act that aspects of DC were injurious to the public health.
They wanted to fix up some of the slums. They did this by area rather than by building.
Most of the land was going to go to private developers. 3000 African Americans lost
their homes. Neighbor hood shifted from 97% black to 90%+ white.
PP: Court dismissed the complaint.
Issues: Was the Act Constitutional?
Holding: SC held it was constitutional. Once the public purpose was established, it was
up to Congress to choose the means to execute it.
Reasoning: P argued that this was taking private property for private use. Court
responds saying that legislature could make the decisions. SC said the legislature decides
what a public use is. If they agree that it is, we won‟t worry about the means. The
interesting thing about the SC‟s decision is that when they talk about public use they
often say that legislature should be given deference. On the other hand, they are not
experts in many other areas where they do employ judicial review. Somin – they do this
over a different part of the takings clause (just compensation) by requiring “fair market
value”.
    - The 5th Amendment had been incorporated into the states.
    - In the 50 years since Berman there has been a stronger view that there may be
        better ways to enforce change rather than requiring eminent domain.
    - What happened in Berman was not unusual…b/w WWII and today, this has
        happened on a massive scale (perhaps 4-5 million people)

Under Constitution, fair market value of the underlying property is all you get for your
business. Under some state constitutions, you get relocation payments. Sometimes,
individuals also get relocation payments.
    - The real problems of the blight are being used as a pretext to benefit more
        powerful, richer people, at the expense of the people who were the original reason
        for the condemnation in the first place.
The loss of subjective value – even if you get compensated for the market price, you
might not be compensated for your value above the market price. If you actually only
value the price at market or below, you would have already sold it.
    - Furthermore, renters won‟t get very much relocation compensation. Therefore,
        more often than not people are made worse off than before.
    - It is certainly not the case that the people in the blighted neighborhoods are
        benefiting from the changes. Rather, it is the new private owners.
    - Perhaps the right solution is simply to raise compensation, which a lot of scholars
        favor.

Argument for Eminent Domain

It is one thing to say there is a good rationale for eminent domain, but you should also
ask the political likelihood that eminent domain would be used in the right way. The


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practical political situation may be that politicians will use the people as a pretext for
benefiting others.

Hawaii Housing Authority v. Midkiff
Facts: If your property gets condemned, the compensation money you get cannot be
taxed. However, if you sell property that is income and it therefore gets taxed. These
high tax bracket landowners had a 70% tax bracket at this point in US history. This is a
rare case where the property of extremely affluent people was being condemned and the
majority of them (other than appellant) actually wanted this to occur. (so they could get
money without being taxed on it).
Oligopoly point – let‟s say the landowners got together and tried to fix prices. This
would be against antitrust laws. There are 72 people here, and the larger the # of people
involved the harder it would be to maintain some sort of cartel.
What is the standard for public use that the Court adopts here?
    - RULE: Rationally could have believed that the Act would promote its objective…
           o This is nothing of a test. Test adopted represents the most deferential
               standard of the public use standard the SC has ever provided. Even more
               deferential than Berman.


City of Oakland v. Oakland Raiders
Facts:
PP:
Issues:
Holding:
Reasoning:
Dissent:
Rule: You can condemn personal property (sports team), not just real property (land).

Is it the kind of public purpose that justifies condemnation through eminent domain?

Poletown Neighborhood Council v. City of Detroit
Facts: GM said there would be about 6,000 jobs created by the plant. This involved
several thousand people removed in a fell swoop. Primarily Polish American.
Issues:
Holding:
Reasoning: They say you have to use heightened scrutiny in these types of cases. This
says that whenever there is a private to private exchange, a heightened scrutiny should be
used. This one passed, but the heightened scrutiny standard did have some bite to it.
Other cases uses this standard to strike down various takings.
Dissent:
Rule:

One big question with public control is how much control is okay?
Even if there is only a 25% chance that the condemnation isn‟t allowed, it still has some
real bite in inhibiting.


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Economic rationale is the broadest rationale for takings. If you condemn this and they
might use it in a more profitable way, and this will truly be the case if they .

Habcock is a significant constraint. It‟s just not as constraining as you might think. It is
hard to draw precise lines. There is uncertainty

Kelo v. City of New London
Facts: 2000, city of new London – economic stress. Decades of economic decline. 1998
unemployment rate was double that of the rest of the state. Engaged in economic
development plan meant to increase jobs, taxes, and revitalize the city. City tried to buy
up areas piece by piece (about 7 parcels). Some people refused to sell the land.
Issues:
Holding: Supreme Court said that eminent domain was constitutional. It applied the 5th
Amendment of “public use” as a “public purpose”. Referenced Hawaii, etc. We‟re not
going to adopt any brightline rule. Legislation is given a high degree of deference …Is
this as deferential as other cases? Majority opinion does not apply the highly deferential
test in Midkiff. They leave open that
Reasoning: Kennedy – concurring, said that the giving of the land was incidental. He
argued that there was a strong economic argument. He tries to make use of the
“independent fact” argument. Difficulty here is that new revitalization only happens if
the new users use the land for something better. Kennedy is worried about whether rich
and powerful people will capture this process to their benefit. In this case, the City
initiated this, not Pfizer.
     - Clarification of Pfizer – development facility was going to be complementary to
        Pfizer. After the purpose dragged on, Pfizer lost interest. However, the
        condemnation‟s continued even though the future uses were unclear.
     - Kennedy goes further from retreating from Midkiff or Burman saying you have to
        do some checks to make sure what the motives and influences are. He doesn‟t say
        what motives or influences would have been too much.
     - Only majority opinion has precedent. Only says Kennedy might vote the other
        way if there was enough evidence.
Dissent:
Rule:
     - Majority opinion – both Majority and Kennedy are slightly less deferential than
        Burman and Midkiff are. Therefore, there is more of an outcry here.
     - Poletown was the taking of people‟s homes. Ordinary people see this as a
        dramatic case coming down. It gives tremendous scope to the Gov‟t. You can
        always draw up a comprehensive plan and it is tough to tell if there is
        manipulation.

O‟Connor and Thomas‟s dissents.
Thomas wants to overrule other cases.

Somin says: Thomas relies on an originalist approach. Public use should be narrowly
construed. The key problem here is that private to private condemnation wasn‟t


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considered at the time of the foundings since the takings clause was only considered for
the federal government, that would do it very rarely. The other interesting thing is that
Thomas is overruling Berman and Midkiff. O‟Connor wants to simply distinguish.
However, it is hard to distinguish these cases. Her argument‟s against the majority could
also be made against Berman and Midkiff. There are flaws in both of the analyses.

Until the 1930s, most of the Bill of Rights were not thought to be incorporated to the
States. Therefore, people thought the only way of bringing these cases was under
substantive due process.


11/28/05
   - review session before the final – Thursday, 6p.m.
   - tenants rights – essay question about that
   - COASE theory questions – application to a wide range of areas
   - To what extent we should use property rules instead of liability rules
   - Worry more about answering the specific questions before you.

ISSUE 1: What constitutes a public use?
ISSUE 2: What counts as “just compensation”? This is relevant under federal and state
constitutions.
ISSUE 3: (more difficult) What constitutes a taking in the first place?
   - One extreme: any action of government that diminishes the value of your property
   - Second extreme: only a taking if gov‟t takes title to your property.

What is the formula in the United States?
  - Fair market value – what would the property go for on the open market. You can
       never get this with perfect certainty because of people‟s subjective values.
  - Objections to this standard:
           o 1) Subjective value – if it were only worth market value to the owner, they
               would have already sold it.
                    How do we know there is a subjective value? They haven‟t sold it.
                    Why not pay the subjective value?
                            1) hard to estimate – not always true – (business profits,
                               etc. or other hard economic considerations)
                            2) information asymmetries – owner himself is only person
                               who knows their own subjective value.
                                   o Midkiff – ppl lobbying to have their properties
                                        condemned.
                    Some countries provide a set formula above fair market value.
                    What if we go to the opposite extreme and just leave it to the
                       legislative process?
                            Lack of uniformity, and uniformity.
                            Some property owners are politically more powerful than
                               others.


Philip Larson                                                                      Page 51
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                             1) if you know your property can be condemned w/o
                              compensation, people will invest less heavily in that type of
                              property.
                          2) cost internalization – requiring gov‟t to pay for
                              condemnation forcing the gov‟t to pay the full cost of
                              implementing their programs. They will only condemn if
                              their use is worth more than the previous value.
                                  o Problems w/ this: gov‟t is spending public money,
                                      not their own. They might be spending for political
                                      reasons. This may have happened in Poletown. It
                                      is unlikely these gov‟t officials would have invested
                                      in GMs plant as private investors.
                          3) singling out – it is often considered unfair if the cost is
                              paid by the owner of the condemned property. In many
                              instances, even if we agree the project is a good one, it may
                              be considered unfair to make the owner of the property pay
                              it. Using just compensation spreads this cost out across the
                              community.
                                  o You could also say it is unfair for this property
                                      owner to prevent the adoption of a project for the
                                      common good.
                          Requiring compensation could cause people to over invest.
                              If you are worried about your property being condemned,
                              you might make additional investments to prevent
                              condemnation, even if the costs were not justified if you
                              weren‟t worried about condemnation. ($10 investment for
                              $8 return may make sense if it can ensure the property
                              won‟t be condemned – defensive investment)
            o 2) Relocation costs – may have nothing to do with subjective value.
              However, if it is a house, you have to pay movers to move your stuff.
              Same for a business or other facility. These aren‟t required by the formula
              but many states will provide these on a statutory basis.
                   Often, moving costs fails to pay for all of them.

What constitutes a taking?
Hard to argue that being very tough on compensation and hands off on public use. There
are strong arguments for the opposite.

Loretto v. Teleprompter Manhattan CATV Corp.
Facts: building owner sued a cable company over the cable it was allowed to install on
the building by a state statute.
Issues:
Holding: physical occupation of an owner‟s property authorized by the gov‟t constitutes
a taking of property which requires just compensation, regardless of the public interests it
may serve.
Reasoning:

Philip Larson                                                                       Page 52
Contracts II: Case Briefs


Dissent:
Rule:
Majority opinion says there is a distinction b/w this and minimum housing standards. In
all cases where landlord won‟t do the work on their own, they have to engage a
contractor to improve the quality of the property. However, these aren‟t considered
takings.
     - If someone came on your lawn and erected a small box, you would still be ticked
        off and feel like your rights were being violated.
     - Blackman points out – it is not easy to draw distinctions b/w this and other things
        that would not constitute a taking.
     - Physical occupations that are not permanent – laws requiring inspection.
     - A permanent physical occupation is automatically a taking. Things that aren‟t
        will be considered on a case-by-case basis. We‟ll create balancing tests in
        situations where it is not a permanent physical occupation.
     - It may be that a physical occupation is necessary to prevent a public nuisance.
        (e.g. if the meter is being used on your property to prevent you from committing a
        common law tort, a permanent physical occupation might not be a taking)
This would be considered a public use because it is a common carrier. Cable companies
are required to take business from everyone.
     - Cable TV and the Internet are starting to merge. As the technologies merge, this
        may reduce the case for eminent domain of cable companies.
     - Public purpose and public benefit – many ppl think cable TV is harmful and
        corrupting our morals.
     -

Pennsylvania Coal v. Mahon
Facts: P wanted D not to coal under his mine. Deed allowed it but a PA statute,
afterwards, said you can‟t mine coal that might cause sinking of structures.
Issues:
Holding: SC held the PA statute unconstitutional because it violated the takings clause.
When regulation of use of property that is not a nuisance imposes too great a burden on
property owners, it cannot be enforced without compensation.
Reasoning: Gov‟t created a statute that eliminated a pre-existing property right. This is
the equivalent of a taking without compensation. Court said this “goes too far” and
therefore you have to compensate.
    - there is an exception in situations where the owner owns both the ground above
        and below. He has a narrower view of the police power than Midkiff. This was
        the view from the 20s.
    - denominator problem – they‟ve lost all economically valuable use of the property.
        Denominator is the value of the mine. Numerator is whatever portion of that was
        taken away.
            o From P‟s point of view, the denominator was
            o Brandeis says the “true denominator” is the „advantage of doing business
               in a civilized society” – if you are the coal company, you are benefited by
               a society that has a structure that helps safety. Therefore, this overall



Philip Larson                                                                     Page 53
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                regulation is in the public interest and you are benefiting from a part of
                that.
    -   How does the average reciprocity of advantage? What did Holmes say about
        this?
            o Holmes: if you are benefiting from the regulation, you don‟t have to be
                compensated.
                     In Loretto – given that the value of having cable exceeds the cost
                        of having boxes on your property, perhaps you shouldn‟t be
                        compensated.
                     Does Holmes find there is an average reciprocity of advantage?
    -   Couldn‟t the coal company have gone to the people and offered to buy out their
        rights?
            o Coal companies were in the practice of paying for the problems they
                created. Was this altruism? No, this was simply to maintain good
                relations with the community. This may reinforce Holmes position.
            o Brandeis says these people could end up with nothing. It doesn‟t seem to
                be the case that companies that are already doing what the statute required
                of them.
            o How do you distinguish b/w regulations that go “too far” versus
                regulations that are okay?
    -   The practical significance has been undermined b/c SC upholds a similar
        regulation saying that the diminution of value was not as great as that in Mahon.
        Any statute that significantly restricts isn‟t necessarily a taking.

Frank Michelman article
   - Laundry list of criteria used to decide if there is a taking:
          o Four criteria for finding a taking
                  1) Physical use or occupation
                  2) Size of harm – degree of devaluation (Amount of devaluation)
                  3) Owners loss vs. publics gain
                  4) Harm vs. Benefit distinction – if what the owner is doing creates
                     a common law harm (e.g. nuisance) it can be restricted by the
                     gov‟t.
   - Problems w/ Michelman‟s formulation?
          o None of these are enough…Are there other criteria that should be
             weighed?
                  Lucas case (next week) – we‟ll ask whether the harm/benefit thing
                     is a real distinction. This is kind of arbitrary.
   - Demoralization costs – has stuck, just as “social costs” or “transaction costs” have
      stuck even though they are hard to define.
          o 1) includes subjective value of property
          o 2) generalized sense of insecurity (Kelo was controversial, not b/c the
             costs were so vastly greater than in Midkiff or Burmen. Rather, after
             Kelo, many people were worried that this could happen to them. There
             was general insecurity in the public.
   -


Philip Larson                                                                       Page 54
Contracts II: Case Briefs


    - what does he mean by this? Total dollar value required to offset dis
Dissent:
Rule:
Note: this is interesting b/c it allows questions of degree rather than just questions of the
type of taking involved.

11/30/2005
   - some ppl won‟t be able to make
Regulatory Takings
   - per se taking – Loretto – if there is a permanent, physical occupation.
          o If it is not a permanent, physical occupation, the S.C.‟s jurisprudence is a
              mess.
          o The distinctions aren‟t very persuasive. Either way the court decides,
              there is a very strong argument on the other side.

Penn Central Transportation Co. v. City of New York
   - how far is too far?
   - Facts: statute
   - Rationale:
          o Two main arguments
          o Parcel in whole – look not just at the effect of the regulation, but also look
              at it relative to the entire property question.
                    They are taking the air rights, but not the station itself.
          o Diminution in Value – they are still able to get a “reasonable return”.
              Diminution in value does not mean automatically that there is a taking.
   - Three factor test for deciding if it is a taking if it is NOT a physical invasion:
          o 1) economic impact on owner
          o 2) extent to which the regulation interferes with – if you had been
              expected to be able to utilize this and had invested to back that up, it is
              more likely to be a taking.
          o 3) character of the government action
   - Court does not say how to weigh these various factors. The Penn Central test is
      more of a balancing approach than an absolute rule.
   - Application of test in this case:
          o 1) you are already getting a “reasonable return”
          o 2) you‟ve never used it in this way before - statute doesn‟t interfere with
              the present use
          o 3) general welfare includes having this commission ensuring landmarks
              look nice.
   - The parcel as a whole rule – even if the whole thing is taken away from him, he
      may not suffer much if he is Bill Gates. However, if this is a large percentage of
      their net worth
          o Therefore, if it is a question of the impact on the individual, you should
              look at the percentage of the total wealth of the individual, not a “parcel as
              a whole” rule.
          o Would people accept a progressive takings rule that is more accepting


Philip Larson                                                                         Page 55
Contracts II: Case Briefs


    -   SOMIN: this justification is miserable.

Investment backed expectations – does everyone agree with the court‟s analysis of the
investment backed expectations analysis. They haven‟t used these rights, therefore, we
are not taking away these rights.

What about the dissent of Rehnquist?
  - 1. complexity of investment backed expectations.
  - 2. thinks the TDR issue should be about compensation, not about whether there is
      a taking in the first place.
  - Don‟t single out the Penn Station owners as the group that should pay for this
      public benefit. The entire public should pay for it instead. This is the classic
      argument for why this should be considered a taking b/c you have a generalized
      public benefit whose cost is being borne entirely by a single organization.


Lucas v. South Carolina Coastal Council
   - Facts: South Carolina is trying to avoid land erosion that would cause
      environmental damage. However, because he can‟t build there he loses almost all
      economically viable use of the land.
   - per se taking if you lose all economically viable use of the land
          o exception is where it is a violation of common law rights (e.g. nuisance)
   - Concurrence (Kennedy) – stresses the point that there hasn‟t been a complete loss
      here. He stresses that you want to import some of the Penn Central test (e.g.
      investment backed expectations)
          o Even under the Penn Central

Are there reciprocal benefits?
   - If you had many people on the coastline, what would happen. If everyone builds,
       it might sink. If a few people build, it might not sink. Therefore, perhaps this is a
       public good that benefits everyone along the coastline.
   - Court doesn‟t consider this at all.

    -    100% is not a magic number – if it is 100%, then we can know for sure that it is a
         taking. If it is 99%, it may still be a taking but you
     - Those instances isolate relatively extreme situations where the taking is pretty
         clear. While we can disagree
It is in part because of this case that environmentalists started to fear regulatory takings
law because it makes it more difficult for Government‟s to fix problems of pollution, etc.
If the benefits do outweigh the harm, the state should be willing to pay compensation.

Most commentators either think Lucas went too far or not far enough. Some people say
even a smaller loss should be considered a per se taking. Therefore, not too many people
found this persuasive.

Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency


Philip Larson                                                                        Page 56
Contracts II: Case Briefs



    -   Where an owner possesses a full bundle of property rights, the destruction of one
        strand of the bundle is not a taking.
    -   Compensation is required when a regulation deprives an owner of all
        economically beneficial uses of his land. Under that rule, a statute that wholly
        eliminates the value of a fee simple title clearly qualifies as a taking. But the rule
        is limited to the extraordinary circumstance when no productive or economically
        beneficial use of land is permitted.
    -   The better approach to claims that a regulation has effected a temporary taking
        requires careful examination and weighing of all the relevant circumstances.


Individual decides when they sell who they want to exclude

Greater use of alienability rules in which gov‟t has more control over who can use it and
under what circumstances.
Just before the semester started, we had the Kelo case. We also had the property rights of
the Iraqi constitution saying who would have access to their oil, etc.
Property rules from the Katrina issues.
Ongoing litigation over regulatory takings and planned community issues. Zoning,
planned communities, etc. These property issues are not going away and are becoming
more intensely fought over.

The difference in opinion in the judiciary is causing this. These are being decided 5-4, 6-
3, etc.

Berman was more severe than Midkiff and they were both 9-0 decisions. In the last 10-
15 years, we have had a breakdown in this. There are therefore lots of interesting issues
even though the law is unstable in these areas.




Philip Larson                                                                          Page 57

				
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