Property Outline

It’s only when there is another person or group of people involved that you need to develop a law of property because property law is about how we allocate resources between people. The only context in which it makes sense is when I can use the force of the state to keep another person from messing with stuff that the state has allocated to me. When you own something, the government will come to your aid to protect your ownership rights. The scarcer the resource, the more law you’ll find.

Property is relative. If I say that I own something, it implies that I have the right to exclude everybody. However, that’s not how our system works. I can own things relative to you. In a lawsuit against you about who owns the computer, maybe I would win. On the other hand, if I got into a dispute with some other person or the government, I might lose. Title or ownership are relative.

Eminent domain

What does it mean to own property vis-à-vis the government? We own property subject to the power of the sovereign to just take our property rights. Some things can just be taken. Some things can be taken but must be compensated. The point is that whether the government pays just compensation or not, your title is subservient to the state. Eminent domain runs up against a particular clause in the Fifth Amendment: “nor shall private property be taken for public use, without just compensation”.

Per se takings

There are two different kinds of analysis. One analysis has to do with per se takings, which exist in three circumstances: (1) The garden-variety eminent domain case – the government says that they want to acquire title to your land or an easement to your land. The government brings suit for the purpose of establishing just compensation and its right to take the property. (2) A permanent physical occupation, as in Loretto. (3) Regulation depriving a property owner of all use of property – for example, vacant land that must stay vacant.

Public use or purpose

The only way you can stop eminent domain is if what the government does is actually illegal, as in beyond their statutory authority. Absent some statutory restriction on the eminent domain power, pretty much anything is going to satisfy the “public purpose” requirement. It’s probably not worth the cost and expense of trying to litigate it.

Hawaii Housing Authority et al. v. Midkiff et al. – When the use of eminent domain is “rationally related to a conceivable public purpose”, it will not be found to be unconstitutional. Public use means public purpose and public purpose means any plausible connection to a legitimate goal of public health and welfare that the government seeks to achieve.

Poletown Neighborhood Council v. City of Detroit – In this case, we’re transferring property from a large group of people to a single individual. The Supreme Court of Michigan says we don’t need a public use, but rather just a public purpose. Was this a wise thing to do to acquire this property for $200 million and sell it to GM for $8 million? We don’t care. We only care if this was rationally related to some public purpose. Clearly we have that here. The court is not going to look much behind at the wisdom of the rationale. The court says that there is increased scrutiny when there’s a taking that results in a transfer from one private individual to another. There may be some slight increased protection in Michigan that would not be available if we were deciding this case under the United States Constitution.

Has a taking occurred?

Braunstein suggests that asking whether there was a taking is a threshold question. This is a much more complicated issue: whether something has been taken at all. We’ll have a difficult time defining property, and thus we’ll have a hard time saying whether property has been taken. If we say an action is a taking, it doesn’t mean the government can’t do it, it just means that the government must pay for it. The measure of just compensation is not the value to the taker, but the change in value to the property in question.

Loretto v. Teleprompter Manhattan CATV Corp. et al. – The permanent physical occupation of another’s property, authorized by the government, is a taking. If it’s permanent, if it’s physical, and it occupies a portion of the complainant’s land, then it’s a taking. The case was an example of a per se taking for which compensation was required.

Private individuals cannot trespass on your property. However, what we’re talking about here is the government having the power to regulate. Loretto brings the lawsuit claiming that this power has been abused. Has the government just regulated what she can do with her land, or have they deprived her of her interest in the land?

If we accept what the Court says, then Mrs. Loretto certainly has lost a property right in this case. Do we accept, however, that she has lost all these rights that the majority says she has?

The essence of property rules is that they can’t be taken from you from other individuals. However, they can be taken from you by the sovereign. The Fifth Amendment limits the sovereign’s power. The sovereign can delegate that power to another entity like the cable company, phone company or power company. If the cable company was not granted this power, there would be no question that a trespass had occurred.

It turns out this is more of a procedural thing than a substantive thing. You can’t set a $1 standard for all cases. You must take it on a case-by-case basis. So Loretto actually loses, even though she appears to win: she’s going to end up with pretty much exactly what she would have had if she had never worked her way to the United States Supreme Court.

Why is it that we protect the owner and compensate them in trivial cases like this while we don’t compensate landowners for regulations that place a severe burden on them?

Regulatory takings

With regulatory takings, we will go through a complex process to determine whether compensation is due. Lots of regulation is okay and no compensation is required. But some regulation can go too far. If the regulation has gone too far, has it gone far enough that compensation is required? Regulation can cross the line, but then if it crosses another line, you have to pay.

The State ex rel. Preschool Development, Ltd. v. City of Springboro – Was the elimination of the curb cut a “taking”? The Ohio Supreme Court seems to say that the government may take the right of access without compensation. They also say that circuity of access created by government action is not compensable. Some would say that this is an exercise of the state police power. The owners still have access to their property; it’s just that it’s not as convenient as it was before. Then we would argue that it’s not a take, but rather it’s regulation to promote public health, safety, and welfare. That means it’s no longer a per se taking, but it might still be a taking and we would have to use a multi-factor analysis. If a regulation goes too far, it can nevertheless be a taking. Even if the Ohio Supreme Court is right, their analysis is clearly wrong.

Pennsylvania Coal Company v. Mahon – Does the state police power stretch so far as to allow the destruction of “previously existing rights of property and contract”? In general, “if regulation goes too far”, it will be considered a taking. Well, that’s swell, but when does it go too far?!

The denominator problem

We know what the law says. The law says: “You can’t mine this coal.” But compared to what? Do we compare it to just that coal, or to all the coal? This denominator problem is a recurring problem. How do we pick the denominator for measuring the extent of a loss?

It’s important to understand the difference between the Holmes and Brandeis opinions. Brandeis thinks that the public purpose is more important than Holmes thought it was: this is a problem that exists throughout Pennsylvania. Brandeis also thinks the coal company hasn’t lost much.

Both Holmes and Brandeis say you weigh the public benefit against the harm to the landowner. But what’s the harm to the landowner? We know what’s regulated, and we know what the coal company can and can’t do. But what fraction of their “total rights” is infringed? Do we make the “denominator” the entirety of the property that’s regulated? In that case, it’s a 100% deprivation. Or, on the other hand, do we make the “denominator” the entirety of the property owned by the coal company? Is it relevant if they “chop up” their property rights?

Brandeis says: Look at all the coal they own. They’ve lost 100% of the value of the coal under the house, but they own lots and lots of coal. Therefore, Brandeis would argue, the burden on the coal company is not so great as Holmes wants to claim.

Penn Central Transportation Company v. City of New York – Regulation authorized by statute that sufficiently frustrates the rational expectations of investors in land capital can amount to a “taking” even if it serves an important public purpose. New York wants to protect historic buildings! Penn Central owns Grand Central and they want to build an office building on top. The Court goes through two stages of analysis. First, the Court asks whether the landmarks statute is constitutional on its face. Since it is, the Court asks whether the statute is constitutional in its particular application to Penn Central.

Is there a public purpose to the statute? Sure there is! It’s a public purpose to have a beautiful city with beautiful architecture. That confers some benefit on the people who live there. The regulation of aesthetics is considered an appropriate state purpose.

Moreover, not all exercise of the state police power constitutes a taking. When does the police power go too far? It can go too far if it frustrates “investment backed expectations”. But just because Grand Central is worth less than before doesn’t make it a taking. If it’s just zoning, that’s okay. If it’s just regulating a nuisance, even though it might have a severe effect on the value of the property, that doesn’t make it a taking either. We all own land subject to certain laws and regulations with respect to how we use it; there’s no absolute ownership. One of those laws is that you can’t create a nuisance on your land. That’s actually sort of part of your title.

The Court distinguishes the actual situation with a situation where the train station had to be closed as a train station and reopened as a museum that would be far less profitable than the station. That would certainly be a taking.

If you own property and the property has gone up in value, you make a decision on the margin whether or not to sell it based not on the original value but based on what it’s worth now. The economist would say what’s relevant is the opportunity cost: every day they make the decision that “I’d rather have this building than, say, $20 million.” But that’s not how the court is looking at it.

The extent of the loss is important, but not dispositive: decrease in value by itself is insufficient to establish a taking. The Court refers to the brick furnace case from L.A. There was a big decline in the value of the regulated property, but because it was such a nuisance, it still wasn’t found to be a taking.

In turn, when we look at whether the problem has decreased in value, we have the denominator problem again. The majority looks at the value of the airspace rights above Grand Central compared to their entire holdings in the area. On the other hand, the minority looks at the airspace rights as an independent property right that has been taken away.

The dissent is saying that you look at the air rights and you find that those rights have been taken away 100%. There is no plan that will satisfy the Commission and allow them to develop their air rights. Therefore, the minority says that they’ve gone too far.

The majority doesn’t focus on what they can develop. They focus on what they own and whether they can get a “reasonable return” on their investment. The majority says that their investment expectations have not been frustrated.

What the dissent is saying is that it’s not necessary to invalidate all landmark statutes, it’s just that the people who benefit from the statutes should pay the people who incur the cost of preservation.

Braunstein doesn’t buy the argument that there’s “average reciprocity of advantage” here. Penn Central gets to enjoy their building and see how pretty it is just like everybody else in New York. They also get the benefit of the 400 landmarks located around New York. This argument strikes Braunstein as somewhat facile: Penn Central is bearing a huge cost that nobody else has to bear. The Court says, however, that everybody in the city benefits, and thus there is average reciprocity of advantage.

But is this statute constitutional as applied in this particular case? The majority says that there is no interference with the property’s current use (as a train station). The court again says that investment expectations are protected and there is average reciprocity of advantage.

The dissent also denies that there is average reciprocity of advantage.

The minority also says that the analogy to regulations that prohibit nuisances is not apt. Everybody agrees that regulation of a nuisance is no taking, but nobody’s saying that Grand Central, if it was developed as proposed, would be a nuisance. In fact, it would be in compliance with all other New York City regulations except the landmark law.

Finally, the dissent believes Penn Central has suffered a total loss: they choose the entirety of the air rights as the “denominator” here.

The Nollan nexus requirement

Nollan v. California Coastal Commission – Regulation is a taking unless it advances a state interest and does not deny the owner of all economically viable use of the property. A “permanent physical occupation” constitutes a compensable taking, and requiring such an occupation as a condition for a building permit also must be compensated in order to be constitutional. Is this a compensable taking or just a regulation that adjusts the benefits and burdens of economic life in our society and doesn’t require compensation?

The Court starts with the proposition that if the California Coastal Commission had wanted to, they could have denied a building permit altogether. If they had done that, then there would have been no taking. If the state can do that, why can’t the state just put a condition on the building that says “If you want to build on this property, you must grant an easement that runs between the wall and the mean high tide line”?

There are three main “sticks” in the bundle of property rights: the right to exclude, the right to use and enjoy, and the right to alienate. Which of these rights would be most affected by the actions of the California Coastal Commission? Arguably, it’s the right to exclude. You now have the public “intruding” on the landowners’ property and being authorized to do so by the government. So this is a physical invasion, but is it permanent? You might argue that people won’t use the easement 24 hours a day, year-round. However, the Court is willing to assume, without discussion, that the invasion is permanent. They find it doesn’t have to be continuous to be permanent.

So the landowners lose primarily their right to exclude, but secondarily the right to use and enjoy and a little bit of the right to alienate.

There seems to be a problem here. The majority admits that they could ban the construction altogether, which is more severe than what the state actually did. The state said: “You can build, and we’ll give you permission, but in return, you must allow the public to cross your land.” Why can’t they do that? Why can’t they condition their approval on this requirement?

Why are they talking about “‘fire’ in a crowded theater”? Why does Scalia go off on this tangent? Why would it be unlawful to let people pay $100 to yell “fire” in a crowded theater when the state could just ban it altogether?

The justification for prohibiting people from yelling “fire” is public safety, and that allows you to prohibit it altogether. The justification for allowing the permitting process would be to raise money. There is an important public purpose that would allow you to prohibit the speech, but the permitting process doesn’t serve that same purpose. Therefore, it would be unconstitutional.

How does that apply to this case? Just because they can ban something doesn’t mean they can impose a condition that forces people to give up a constitutional right.

The government is restricted: if you have a constitutional right, like free speech, the government can’t impose conditions on the exercise of that right. Here, you have the constitutional right not to have your property taken except to a public purpose with just compensation. What the government is doing is imposing a condition on that right: the Nollans must give up their constitutional right in order to get a building permit. Scalia says that this condition is unconstitutional. Just because the government has the right to do something more severe doesn’t mean the government has the right to do something less severe, that is, putting a condition on the exercise of a constitutional right.

Land use regulation is not a taking if it advances a substantial state interest and does not deny the owner economically viable use of the land.

The condition must be closely tailored to the public purpose that justifies the restriction. The rule of the case is that if the relationship between the condition and public purpose exists, then the condition is constitutional. But if the relationship doesn’t exist then the regulation can’t be imposed.

Dolan v. City of Tigard – In this case, the city imposed a condition and it was clear that the expansion of the plaintiff’s hardware store, which resulted in increased traffic, was causing some harm. It was clear that what the state was doing satisfied the Nollan nexus requirement. The Supreme Court looked at this and said it was fine.

But what was wrong in Dolan was that there was no reasonable relationship between how much land Dolan was being required to give up and how much harm she was causing.

Therefore, there are two requirements: (1) There must be a nexus between the condition and the public purpose. (2) The burden on the landowner must be proportional to the amount of harm the landowner is causing by their current use of the land.

Lucas v. South Carolina Coastal Council – Did the law’s effect on the economic value of Lucas’s land constitute a “taking” under the Fifth and Fourteenth Amendments requiring “just compensation”? When the state deprives a property owner of 100% of the economic value of their land for some public purpose, it is a compensable taking unless the use that is being taken away was never part of the title to the land in the first place (e.g. creating a nuisance).

The Court says that there are two clear-cut cases of regulatory “takings”: (1) physical occupation of private property, and (2) denial of all economically productive use of private property.

This case falls into the latter category. The Court acknowledges that there are occasions when it will allow such regulation to fall short of a compensable taking. The only time that happens is if, in effect, the state takes away something the landowner never had in the first place.

It is reasonable for property owners to expect that their property will be restricted in some ways. One way to look at this is to say that certain implied limitations “inhere” in the title to the land. The government doesn’t need to compensate for making explicit limitations that were previously implicit.

The Court says that in order for South Carolina to prevail on remand, it must show that common law principles of nuisance and property forbid the intended use of the land.

The trial court decides, and no one disputes, that the land has lost its value altogether. (Braunstein thinks this probably isn’t strictly true: the land has some value, it’s just that it’s minimal versus what you would get if you could develop it.)

This will develop the third of the per se rules: when government regulation denies an owner all economically viable use of his land.

This is kind of an odd case because we’re not quite sure what the statute means. The Supreme Court assumes that the statute means what the South Carolina Supreme Court said, which is that there are no exceptions to the no-build line.

What’s the holding of this case? The U.S. Supreme Court reversed the South Carolina Supreme Court and found for Lucas. Let’s assume that the value of Lucas’s land has gone down to $0, that is, 100%. The Court says that Lucas is entitled to fair market value.

Say you have a nuclear power plant, and suddenly it’s discovered that the plant is located on an earthquake fault and thus it’s very dangerous to people in the vicinity. This is not a taking, because this use was always a nuisance. It’s just that we didn’t know at the time that it was a nuisance.

The right to create a nuisance is not part of the “bundle of sticks” of property rights. You always take the risk as you develop property that a nuisance will develop such that the cost of fixing it zeros out the net value of the property.

If there’s a taking, just compensation is required, though it may be quite small.

Wasn’t the South Carolina legislature trying to prevent a nuisance by passing the statute? What’s Scalia’s concern with the nuisance exception? He’s concerned that it’s just a loophole around paying compensation for what would otherwise be takings. How does Scalia get around that? Can state governments create new and novel nuisances? If you distrust the state, and it’s clear that Scalia does, you have to be concerned with what prohibits the state from saying: “You want a nuisance? I got yer nuisance right here!”

Scalia tries to get around it thus: if something was a nuisance in the 19^th century, it’s okay to regulate it without running into the Fifth Amendment. If it’s always been considered a nuisance, then the state can regulate it. On the other hand, Scalia says: “Don’t just go back and declare something a nuisance all of the sudden. You’ll have to show something special about this property before you can say that it would be a nuisance to build on it.”

But the problem with this, according to Braunstein, is that it limits the legislature in terms of discovering new nuisances. What Scalia must be saying is that the Court will defer to the common law of nuisances, but if the legislature starts creating new and novel nuisances they will be scrutinized carefully to make sure they’re not just trying to weasel their way out of the Fifth Amendment.

The nuisance exception is tough to limit. The legislature can say anything it wants is a nuisance. All we’re left with is that the question of whether something is a nuisance must be judged against the background of state law. That’s fine, but as new things are discovered that constitute nuisances, it’s going to be difficult or impossible to regulate those nuisances without paying just compensation.

Footnote 11: what’s it all about? It’s the denominator problem! Scalia recognizes its existence, but doesn’t do much to help solve it. He does two things: (1) He says the New York Penn Central decision is unsupportable. The court in that case said that the denominator is all of Penn Central’s holdings in the whole world. (2) If the state clearly recognizes that one “stick” in the “bundle” is an important property right, that may form the relevant denominator.

What about footnote 12? Justice Stevens says the “100%” rule is arbitrary. Say Lucas had been deprived of 95% or 99% of the productive economic value of his property. Why should he be deprived of the benefit of this rule?

Say you have two neighbors. Say one neighbor has 100% of their property over the no-build line, while the other neighbor has a sliver of land on the “build” side of the “no-build” line. Then the first neighbor gets 100% compensation, and the second neighbor gets nothing.

How does Scalia deal with this problem? First, he says basically “life is tough”. This seems like an unsatisfactory answer to Braunstein.

It’s hard to know what it means to be deprived of 100% of value. The state didn’t do much to say what Lucas could still do with his land, but there may have been something productive he could have done. It’s hard to believe he couldn’t have done anything.

However, the rule is easy to state. If you are deprived of 100% of the economically productive value of your land, it’s a taking and you’re entitled to just compensation unless the regulated use of the land constitutes a nuisance under established (not “new and novel”) state law.

The State ex rel. R.T.G., Inc. et al. v. The State of Ohio – Did the Ohio Reclamation Board of Review’s decision that RTG’s land was unsuitable for mining constitute a compensable taking? The rule of Lucas applies if there has been a 100% taking, while the rule of Penn Central applies if the taking is less than 100%. The “percentage” will largely depend on how the court defines the denominator of the fraction.

The lower court rules that the fee land hasn’t been taken even though they can’t mine under it. All that means is that this isn’t a per se take. So the lower court applied Penn Central and found it wasn’t a take.

What Braunstein likes about the case is that they go through and talk about both tests. First, they look at the Penn Central test, which has three factors: (1) the nature of the governmental regulation, (2) the economic impact of the regulation, and (3) the extent of the interference with the “distinct investment backed expectations” of the landowner.

The third factor was pretty clear: they had recently spend a lot of money to get access to the land to mine coal, which was legal at the time they acquired the land. This ad hoc analysis applies only when the deprivation is less that 100% of the economically beneficial use of the property.

Then the court goes on and talks about the per se test, which involves one of the following: (1) Physical invasion – Loretto; (2) Denial of all economically beneficial or productive use of land – Lucas (but what does all mean?).

If Lucas applies, there’s a taking unless the regulated conduct constitutes a nuisance under established state law.

The court also tackles the denominator problem. The numerator is the portion of the property that has been taken by the regulation (this is the easy part). The denominator is the property interest that is subject to the regulation. If the resulting fraction is equal to one, then there is a per se taking. Otherwise, the regulation will be judged under the factor test of Penn Central.

This goes pretty far: it seems that the fraction will always be one when the state says “you can’t mine that coal”. Now, what we have to do is figure out which of these two apply. Braunstein likes this better than the Preschool case because the analytical framework is set up better.

The court decides to look at the coal as the relevant parcel because there is a tradition in Ohio of having rights in coal being a separate right from surface rights. The court also says that the owners’ intent was to purchase the property solely to mine the coal. The court will go on to claim that the surface rights were worth nothing to the RTG because the surface was actually an impediment to getting at the coal. But why would you determine the value of the surface subjectively (the value to RTG) as opposed to objectively (the value to anyone).

The court finds that the relevant parcel in the vertical plane is the coal—the sub-surface rights. But what about the horizontal plane?

It turns out that 20% of the coal is outside the “unsuitable for mining area”. The court says that economies of scale make mining outside of the UFM commercially impractical. But there’s no factual support for that in the case. The case also seems to be internally inconsistent to Braunstein (he bets that you can find economically productive coal mines of 100 acres or less). Therefore, the court says that the relevant parcel is the coal locating in the UFM area.

What the court has done in order to determine the denominator in the horizontal plane is to ignore the coal that RTG can mine. The court claims that the economics of coal mining are such that the 20% outside of the UFM becomes worthless due to this regulation.

Braunstein is especially suspicious of the use of the “all” from Lucas. He doesn’t thing all really means all in this case.

The analysis wraps up by claiming that there hasn’t been a nuisance, and thus there has been a taking of both the leasehold coal and the fee simple coal.

What do we get out of this case? It’s a good analytical summary of the rules and the circumstances in which they apply. Also, no matter how hard you try, the denominator problem is very difficult and one that is really left up to the discretion of judges.

Just compensation

The rule is pretty easy to state: just compensation is the fair market value of the property taken, or at least that’s a big part of it. Why do we have just compensation? In a sense, this is an anti-democratic provision. It’s designed to frustrate—at least in certain circumstances—the will of the majority. The minority have certain rights no matter how unpopular they are. Most people believe that this provision was put into the Constitution to prevent radical redistributions of wealth from the large landowners to the majority.

It becomes sort of a wash: if a majority of the people want to take farms in Virginia and make them into public lands, they could do it but they have to pay for. While you may shift land to money, you’re not going to have a radical redistribution of wealth, at least through this procedure.

Another reason for just compensation is that taking people’s property is in some sense demoralizing. It not only makes them unhappy and seems unfair but also is demoralizing in the sense that if your property is subject to being taken without just compensation, there is little incentive to improve the property. It would be foolish to invent a lot of money in property if it could be taken by the government at any time without compensation.

Fair market value

Fair market value is the amount that a willing buyer would pay a willing seller, both reasonably well informed and neither under a compulsion to buy or sell. In order words, it’s the selling price in a market that works well. Some things are fungible and easy to find fair market value for: for example, a pound of copper or a share of GM. One of the problems with land is that there is a “thin” market for land, that is, a particular parcel of land doesn’t sell frequently. So the fair market value question becomes tougher; you need good proof including things like expert witnesses.

Other compensation

You’re also entitled to damages in addition to just compensation. Frequently, the government doesn’t take all of a landowner’s property. It depends on how much land they own and what the needs of the condemning authority are. Consider widening a highway, for example. The government is only going to take a portion of the land and leave the remainder. But this may result in damage to the “residue”, or the land remaining. The remaining land may not be appropriate for all the valuable uses it could have been used for before. You can get damages for the decreased value of the land you continue to own.

Factors which are excluded

You don’t get compensated for sentimental value, historic value, annoyance, and the value of any business you have going on that property. The only way you get compensated for historic value is if there may be buyers on the market who are interested in “collecting” the property because of its historical significance, for instance a Frank Lloyd Wright house or a president’s birthplace. If you operate a business on the taken property, you can’t get compensated for the value of the business. So just compensation, in many cases, is arguably insufficient because it doesn’t fully compensate people for the losses they suffer as a result of the taking of their property. It can be argued in turn that we should either change (increase) what we mean by just compensation or be more careful with what we mean as “public purpose”. Alternatively, it can be argued that we accept as a burden of citizenship that all property is subject to possible eminent domain.

Almota Farmers Elevator & Warehouse Co. v. United States – What is the proper measure of the fair market value of a leaseholder’s interest in the remaining term of its lease? Fair market value is determined by “what a willing buyer would pay in cash to a willing seller”.

The “two-take” theory

When you value property for the purposes of eminent domain, you do so without reference to the project the land will be used for. The government can’t use its eminent domain power to force down the value of the property. When you value the property the government is taking, you do it as if the eminent domain proceedings weren’t proceeding.

United States v. 50 Acres of Land et al. – Is just compensation in this case properly measured by the cost of a reasonable substitute landfill or by the fair market value of the condemned facility? Just compensation is generally measured by fair market value. It was not difficult to establish a fair market value for the condemned facility, therefore it wasn’t necessary to substitute a different measure of just compensation. In this case, private property gets a new definition. The Court defines private property for the purposes of the Fifth Amendment to include public property owned by states and municipality. State or municipally owned property is treated the same way as property owned by private individuals for the purposes of the Fifth Amendment.

Possession

Now we’re going to look at some ways to acquire property. We’re going to look at a new concept that’s more complicated than we might think: what does it mean to say that someone is in “possession” of property? Possession is a difficult concept. But it’s a lot easier to do that than to try to establish ownership. So we protect possession as a proxy for ownership. But there is relativity of title. Getting possession has important legal consequences. Whatever possession means in terms of a wild animal, getting possession is important because your possession will be protected against the claims of others.

If we had a system that only protected ownership but not possession, people would fight each other all the time to gain possession and then make each other prove ownership. What we do instead is protect possession. We protect it by saying: “First in time, first in right.” Prior possessors win out over subsequent possessors. We do this for very practical, instrumental reasons. We want to protect peace, order, and the certainty of knowledge of what you own. It’s easy and practical to prove that you possessed some property before somebody else did. So the prior possessor wins.

Externalities

Externalities tend to lead to inefficient results. Private property tends to reduce (or internalize) externalities. This isn’t a difficult concept, but it’s more limited than you might think when you first think about it. There are two kinds of externalities: an external cost and an external benefit.

An external cost is a cost that an actor imposes on others but which the law doesn’t force the actor to include in their personal cost-benefit analysis. One of the cheapest ways to internalize externalities is through the institution of private property. If it’s private property, you tend not to waste it because it’s yours.

An external benefit is a benefit than an actor provides to others but that the law doesn’t force the actor to take into account in deciding whether or not to continue providing the benefit. The creator of the benefit cannot force the recipients to pay, which means they may not have incentive to continue to provide the benefit.

We want land to be used in its most productive way. Therefore, we want people to take into account all the consequences of their decisions when they choose how to use their land. If the landowner can’t be forced to pay the costs imposed on others by, for example, burning cheap coal, they may do that irrespective of the fact that the harm being caused to others is greater than the profit being made by burning cheap coal. Thus, the wealth of society is decreased.

The Coase theorem

Assuming that bargaining is free, property rights will end up in the hands of the person who values them the most. We like this because it means property rights will be put to their most productive use. It doesn’t make any difference from a social perspective how property rights are allocated. That’s not to say that there isn’t justice or injustice in how property rights are allocated. But if we accept that wealth is a value (the more wealth the better), then it doesn’t make a difference how property rights are initially allocated, because if transaction costs are low, property rights will always end up in the hands of the person who can use them most productively. Whoever gets it first will end up with some money. But we have no reason to prefer one party over another. Coase goes on to say: When markets don’t work, you ought to allocate property rights in the way that the market would if it did work. In other words, we should give the property right to the person who values the property the most.

That’s not to say that everything can be traded. You can’t give up your own right to bodily integrity and sell the right to kill you. Also, there are transaction costs. “All of you are studying very hard to become transaction costs.” There are all sorts of transaction costs. You have to figure out who’s lying and telling the truth. You need to ferret out free riders. Sometimes the transaction costs are more than the benefit you could get if you entered into the transaction.

The tragedy of the commons

The idea of a commons is that everybody owns the land together. Say we have a field and there are ten villagers. None of them owns the exclusive right to use the field, but they can all use it in common with each other. Say its only purpose is to graze cattle. Say there are ten guys. They’re going to overgraze the field! When they’re finished, the field may be totally worthless! How come? Everybody looks at the field and they say: “What’s the benefit to me if I put another cow out here? It’s the profit from the cow. What’s the cost to me if I put another cow out there? If I consider the problem of overgrazing, then the cost is very high and I shouldn’t put the cow out. But all the other villagers might graze their cows anyway. Therefore, the cost to me is really zero. It’s true I’m causing some harm, but that harm will occur no matter what I do. If I don’t graze more cows, the other guys will graze more cows.” The worse the field gets, the faster they’re going to put cows on the field until finally it can’t support any cattle at all. The villagers “rush headlong to their own destruction!” Why? The commons created a series of misincentives. It created an incentive to consume and a disincentive to conserve. That’s because even if I conserve, I have no assurance that my neighbors will conserve.

But now let’s say that each of the ten villagers owns one of ten parcels, privately. Each villager has the right to use the parcel and exclude others. Now the calculation changes. You have to weigh the profit from grazing another cow against the cost of failing to conserve. This problem comes up in many circumstances. Global warming is an example of this problem. It causes problems with oil and gas as well.

The law of capture

Pierson v. Post – Mere pursuit of a wild animal does not constitute possession of that animal. (“Actual bodily seizure”, killing, or “mortal wounding” seem to be sufficient to establish possession.) What underlies all this is “first in time, first in right”. The person who was first in possession of the fox is the person who is entitled to the pelt.

The holding of the case, which is the law as applied to these particular facts before the court is that one obtains possession of a wild animal by killing it. But then there’s dicta, which are things the court says but that aren’t necessary to come to a conclusion in the case. He says that people invest in resources for killing foxes, and you want to create public policy incentives to encourage more fox killing. People aren’t going to invest in killing foxes if people can come along and take the fox at the last minute.

So what happens if you catch a fox, but then it escapes? Then it becomes unowned again. One element of capture is that you must maintain control (possession) in order to maintain ownership.

Texas American Energy Corporation v. Citizens Fidelity Bank & Trust Company – Once natural gas is extracted from the ground and thus converted to personal property, it will remain so even if it is stored in underground reservoirs (so long as they don’t leak). You can continue the wild animal analogy and say that the gas hasn’t been released, but has been moved from one “cage” to another.

Finders

Armory v. Delamire – The finder of property has a better title to the property he found than everyone except the rightful owner. The plaintiff gets the maximum possible value of the jewel unless the defendant produces it. The prior possessor wins! Why should that be? (1) The rule tends to result in public order. The opposite rule would encourage people to engage in force and trickery to get control of property. (2) The rule rewards people’s reasonable expectations. Why do we care about this? We want to engender a respect for the law. (3) The rule encourages the use of bailments (like leaving your shoes at the shoe repair guy or leaving your car in a parking garage or taking your clothes into the cleaner). It is an important goal of property law to encourage commercial transactions by making them easier and cheaper.

Bailments

This is a relationship between the bailor (prior possessor) and bailee, whereby the bailor voluntarily transfers possession of the property with the expectation that it will be returned. When you check your coat at a restaurant or take your television in to be repaired, you give your stuff to the bailee with the expectation you’ll get it back upon payment.

There are two kinds of consensual bailments: (1) Express bailments – There’s a little agreement on your claim check. (I seem to recall that these aren’t enforceable as contracts.) (2) Implied bailments – The law will infer from the facts that the bailor did not permanently give possession to the bailee even though they didn’t say anything explicit. For example: “Can I use your book?” The expectation is that I’m going to give the book back to you when I’m done.

There are also non-consensual bailments: (1) Finders – Take Armory for example. The chimney sweep was both an implicit bailor (as far as the jeweler was concerned) and also a bailee (as far as the true owner of the jewel was concerned). In the latter case, there was no agreement at all. (2) Thieves – These dudes are bailees too, in that if you find the person who took your stuff, you can force them to return it to you.

We classify bailments in terms of who gets the benefit of it. The reason we do that is that it affects the standard of care. (1) If the bailee is the sole beneficiary, the bailee is liable to the bailor for even slight negligence that results in damage to the property. (2) If the bailment is solely for the benefit of the bailor, then only gross negligence on the part of the bailee will cause liability. (3) When the benefit from the bailment is mutual, then the bailee will only be liable if his conduct was characterized by ordinary negligence.

Hannah v. Peel – Who has superior title to the brooch? A landowner owns everything attached to or under the land, but not necessarily stuff lying on the surface of the land even though the stuff isn’t possessed by someone else.

Here are the four categories: Lost – The true owner has been unintentionally dispossessed of the property. The finder has better title to lost stuff than anyone except the true owner. Mislaid – The true owner intentionally left the stuff sitting around, intending to pick it up, but forgot. In this case, the owner of the property where the stuff is found has better title to the stuff than anyone except the true owner. Abandoned – The previous owner intentionally gave up the property and left it lying around so that someone else could acquire it. For example, if you leave furniture on the curb to be picked up by the garbage truck, it could be understood to be abandoned property. The finder of such property has an unqualified right to it. Treasure trove – This one is like pirate booty! If you find hidden treasure that has been hidden for so long that it would be impossible to find the true owner, then the treasure is awarded to the finder as long as they weren’t trespassing.

Bridges v. Hawkesworth – Some money was found on the floor of a shop. The finder turns it over to the shopkeeper. They can’t find the true owner. Who is entitled to possession of the notes? It turned out that the notes went to the finder. The shopkeeper didn’t have possession as against the owner. What the court is saying is that if the true owner sued the shopkeeper because the notes went missing, the true owner would lose. The shopkeeper never accepted possession of the notes and never knew of their existence. The court leaps to the conclusion that because the shopkeeper didn’t have possession against the true owner, the shopkeeper didn’t have possession against the finder either. This is a big logical leap. It might be right, but it fails to take into account the relativity of possession. Just because you’re the owner of land doesn’t mean you’re the owner of everything that sits on the land.

So Peel is not necessarily going to win just because he’s the owner of the house. So the owner of the locus in quo doesn’t always possess things found on the land. The owner doesn’t win in Bridges; the finder wins! Later we’ll find out that the holding of Bridges was limited to public places. Then the question becomes whether or not a shop is a public place.

If you don’t know something is there, you can’t intend to appropriate it for your own use or intend to exclude others.

Braunstein has a problem with this case: Couldn’t Peel have claimed to have the intent to appropriate everything in the house? Peel was compensated for the use of the house, but that doesn’t mean he intended to give up any of the stuff not related to the government’s occupation. We don’t know what Peel’s intent was. So Bridges doesn’t take us very far, and judge doesn’t say why the case is relevant.

The court makes a big deal out of the fact that Peel never occupied the house.

What about South Staffordshire? The employee finds some rings while cleaning a pool. Who gets the rings? The owner of the land wins. How come? There are several theories. When you possess land, you get everything attached to or under the land. In Hannah, the brooch was neither. When the locus in quo is private property from which the public is excluded, then the trespasser doesn’t get to keep what he finds. But that wasn’t the case in Hannah. Also, the employee was doing something sort of “beyond the scope of his employment”. The employee wasn’t invited on the property for the purpose of finding lost things. How would that apply to Hannah? Hannah wasn’t in Peel’s house to find stuff. He was there to do army stuff like hanging up blackout curtains. If that’s the rationale for South Staffordshire, wouldn’t Peel win?

The owner of the locus in quo won in this case. There are four different possible theories for explaining this case.

The court says that the possession of land carries with it everything attached to or under the land. The brooch in Hannah was neither.

How does this case help us decide Hannah v. Peel? The brooch was just lying around. It wasn’t buried. It wasn’t attached to anything. It was under the roof, but that doesn’t really mean the same thing.

How about the fact that the locus in quo was private property in this case, while it was public property in Bridges? Was Peel’s place private property at the time? Does it make a difference that it was taken by the government for the war? It was being used as a hospital. Isn’t that the same as a shop in a sense? An argument can be made that a hospital is a least as public as a shop, depending on where in the hospital you are. We don’t know what part of the building the brooch was found in.

Really, there’s a spectrum between public and private. Private homes are very private, while the public library is very public. Then you have shops and other businesses that are open to people who have business there. So if this is the holding of South Staffordshire, we’re not sure how it applies.

What about the “limited purpose” explanation? Sharman was invited to clean the pool and not to find things. Hannah’s purpose was to be a lance-corporal. The thing is that Sharman lost, while Hannah won. If this had been a limited purpose case, Hannah arguably could have lost.

The problem with this opinion is that it throws out lots of cases and holdings, but the court doesn’t say why they’re relevant.

How important is the plaintiff’s “good behavior” in turning over the brooch to the authorities? The court doesn’t say explicitly.

So we have a good brief, but then it peters out. It creates a lot of possibilities but doesn’t resolve them into a particular holding of the case. So don’t be like this judge!

What does the court do? Look at the last paragraph of the opinion. Was the brooch really lost? What is “lost property”? If someone is unintentionally dispossessed of something, it is lost. If someone intentionally leaves something somewhere and then they forget about it, then it’s mislaid.

How did the brooch get where it ended up? Was it lost or mislaid? How could you lose something “up high”? Mislaid property goes to the owner of the locus in quo, while lost property goes to the finder.

What assumptions does the court make that aren’t supported by the facts?

Even though Peel doesn’t own property, he may still have the power to sell it if he’s not a thief. The shop to which Peel sold the brooch acquires good title to the brooch. Peel’s title was voidable. If he still had the brooch, Hannah could have gotten it back. But a voidable title allows you to convey good title to a good-faith purchaser for value. On the other hand, a void title is the kind a thief has. If you buy from a thief, even in good faith, you don’t acquire good title.

If Hannah is entitled to the brooch, then he is entitled to its full value. But what is the full value of the brooch? Is it the value that Peel sold it for, or is it the value that the shop resold it for? Should Hannah get the higher amount or the lower amount? If Peel made a bad deal, Hannah would be entitled to the full price rather than the “bad deal” price.

What if Peel had lived in the house? Would that have made a difference? Peel would be more likely to win in that case. If Peel had lived in this private place, it looks like we would give the property to him and say he was the possessor of the property.

What reasonable expectations are protecting? If Peel has guests over to his house, he expects that people won’t take stuff from his house even if he doesn’t know it’s there. The law encourages a great expectation of privacy at home.

What if Hannah had been a trespasser? Well, we don’t want to reward a thief. But then what do we do with “first in time, first in right”? How do we resolve the conflict? We could have a special rule for trespassers, but that’s not how it’s done. Instead, we use the constructive possession doctrine.

Constructive possession

Constructive possession is an exception to the factual element of possession. Constructive possession is a way to say that we’ll pretend there is possession even though there really isn’t. “Constructive” means it’s a legal fiction. We’ll treat you like you’re in possession every though you’re not. We want to do that because we want to apply the rule of “first in time, first in right”. So we give Peel constructive possession against trespassers because we want to protect public order.

When we say somebody is in constructive possession, we’ll pretend that they have possession because we want a certain outcome to follow. Whether you’re in possession or not depends a lot on what objective the law is trying to achieve. Take, for example, possession of narcotics. That type of possession will be defined much more broadly than we define possession of lost property. We use the law as an instrumentality, bending a set of rules to a particular purpose.

When you learn the law, you must accept that you can’t rely just on doctrine and definitions. You can’t just look up “possession” in Black’s and know what it means. Look at Constitutional Law. You have a little tiny document that you can carry around in your pocket, but then you have a huge casebook you need to figure out what it means. So you can’t interpret the Constitution just by looking up the words it contains.

The law as stated can never be a complete explanation. You must ask the question: “What is the purpose of the law? Are we applying this law in a way that defeats its purpose? If so, we need to change the definitions to meet our goal.” Judges don’t like to change too much law at once because they are afraid of unintended consequences.

If a definition runs into problems with an important policy objective, we’ll dispense with it.

Lost property typically goes to the finder. Mislaid property typically goes to the locus in quo (the true owner may retrace their steps). But it’s tough to distinguish between lost and mislaid property! Say you’re in a barber shop and you see an envelope with lots of money sticking out. If the money was mislaid, it goes to the barber. If it’s lost, it goes to you, the customer. So what do we do? The money is sitting on a table. So the thing you do if you want the money is kick it to the ground. Then you’re within Bridges.

What’s the point of this? When you frame these rules, you want to do it in a way such that you don’t give people the incentive to lie or be manipulative. So Braunstein says the “lost/mislaid” distinction is problematic for two reasons: (1) It requires us to infer the intent of someone who is always absent: the true owner. If the true owner showed up, they would win out over both the finder and the owner of the locus in quo. (2) The distinction tends to encourage finders to manipulate the circumstances to make the property look lost and not mislaid.

Abandoned property also goes to the finder. Treasure trove is an ancient concept that started with (maybe?) Henry VIII. He made monasteries subject to tax. The monks went and hid their assets by burying them. They had the intention to return to claim the stuff. This still happens every once in a while. In England, when treasure is found it goes to the Crown, because the point was keeping it from the crown. But in the U.S., treasure trove goes to the finder. But we don’t want to encourage trespass. Trespass is inconsistent with the notion of private property. Whenever we see trespass, we’ll manipulate the rule so that the trespasser doesn’t win.

Adverse possession

This is based on the statute of limitations for the action of ejectment. If someone occupies your land, you only have a certain amount of time to take action to take it back. Once the adverse possessor has been in possession for a certain amount of time, nobody can do anything to dispossess you. The statutory period varies. It’s 21 years in Ohio, ten years in Missouri, and only two years in Nevada. They’re generally longer in the East and shorter in the West. The West developed with absentee owners and Eastern capital. Western people tended to favor the local residents, and a shorter statute of limitations had that effect.

When the statute of limitations bars a tort claim, we’re not saying that the bad person didn’t do it. We just say that you can’t sue them anymore. Notice that adverse possession bars anyone from coming forward with a claim. This statute of limitations is liberative; it ends the rights of all people to be able to make a claim. Tort statutes of limitations are prescriptive, in that they end the right of a particular person to sue.

The law of adverse possession is a composite of common law and statutes. But notice that the elements of adverse possession that we’ll discuss below are usually not contained in the actual statutes. Adverse possession is more or less uniform from state to state, but there are some important differences.

Why do we have this doctrine? It appears to be like acquiring title by theft. There are several theories. Holmes said that basically when you’ve been associated with a certain property long enough, you just start thinking of it as yours. There is some kind of psychological attachment, but also after some period of time, people develop the expectation that they’ll be able to stay where they are. Here are three more popular theories: We want to punish lax landowners (the “sleeping theory”). We want to reward the diligent occupier (“earning theory”). The court may lean towards different conclusions depending whether it focuses on the laziness of the true owner or the laziness of the adverse possessor. Finally, we want to provide security of title (certainty). After a while, you’ll want to clear up uncertainty in the records. Eventually, you just need to let bygones be bygones and let sleeping does lie. You don’t want disputes to proceed indefinitely.

The elements of adverse possession

Actual possession – You must actually enter onto the property. It has to be exclusive insofar as your occupation isn’t shared with the true owner. Entry is required because the cause of action that can later be barred by the statute of limitations out is ejectment or trespass. Until you have entry, your statute of limitations doesn’t begin to run. We’ll talk about claim of right (good faith versus bad faith of adverse possessor) and color of title, but entry must always be wrongful in order for the statute of limitations to start running. You can’t just look at someone’s land in order to take adverse possession. Looking at someone’s property isn’t unlawful and it’s not an entry, so it doesn’t matter how long you do it. In some states, you may be required to think you have the right to be there, but it’s always essential that you be wrong.

Open and notorious possession – These two words mean pretty much the same thing. These mean that you act the same way the true owner would act with respect to the land. Just what conduct this requires depends on the typical uses of the land. If the land is good for farming, then a true owner would farm on that land. If the land is good for building a house, then a true owner would build a house there. Some states, like New York, have statutes that say certain acts are deemed to constitute actual, “open and notorious” occupancy. Fences are one example. Fences give notice of the intent to stay there and use the land as a true owner. When I fence some land, it’s probably because I feel like I have some claim to it. “Open and notorious” means not covert. You can’t acquire title by adverse possession in secret. You must produce “markers” that a reasonably diligent true owner would discover. You must provide notice to the true owner if they want to protect their title.

Hostile possession – Possession must be adverse or hostile everywhere (not permissive). In some states, you also need a claim of right. An example of this would be that a tenant can never acquire title to a property they’re renting. If you’re not living in your apartment wrongfully, then your possession isn’t hostile and you won’t get adverse possession. What’s a “claim of right”? It could be, more or less, “hostility”. But in some states, there can be a subjective component. You may need a good faith belief that you’re entitled to your possession. Often this means you have a deed that purports to give you title to the land.

Continuous possession – “Continuous” and “uninterrupted” don’t mean the same thing. “Continuous” relates to what the adverse possession does. It doesn’t mean 24/7. It gets back to how a true owner would use the land. If it’s land in the mountains of Montana that you can only get to in the summer months, then continuous possession would only be using it in the summer. If you could use the land year round, then continuous possession would be year-round possession. “Uninterrupted” relates to the acts of the owner. The best way for an owner to stop the statute of limitations from running is to file a suit within the statutory period! Even if the judgment comes much later, you will have successfully interrupted the adverse possession and the judgment will be effective back to the date when the suit was filed (if you win). How else can you interrupt possession? You could simply stop the adverse possession. There are a couple problems, though. If you use force, you might fail because they’re stronger. Also, you may just give the adverse possessor the opportunity to show how hostile he is.

Possession must last for the prescriptive period – It’s more complicated than it seems! There are two problems: (1) Tacking – one adverse possessor can transfer their rights to someone, and the transferee is then herself an adverse possessor, but the two of them can add their time together. (2) Disabilities – If the owner is under some disability like insanity, that may last for quite a long time, and the regular statutory period may not be enough to get you adverse possession.

There are three generally recognized kinds of deeds: (1) Quitclaim deed – a deed by which one person transfers to another whatever interest they happen to own in the property. But they don’t warranty or guarantee that they own anything. These deeds are often used to clean up title defects. But it’s also a perfectly good way to convey title from one person to another. (2) General warranty deed – This is sort of the opposite of a quitclaim deed. This deed warrants that nobody has a better title and that quiet title is assured. (3) Limited warranty deed – This warrants that there are no defects in the title, but it’s limited to the acts of the person who is selling the land. It’s the new owner’s problem if there are any acts predating the warrantor. All of these deeds are effective to convey title. The only difference is whether you can sue for breach of warranty if the title is screwed up.

Teson v. Vasquez – The person claiming adverse possession must prove the following elements by the preponderance of the evidence: (1) actual possession, (2) hostile possession, (3) open and notorious possession, (4) exclusive possession, and (5) continuous possession over the course of the statutory period.

Color of title

Color of title means that you have a written instrument that, in good faith, you think is valid and purports to convey the land at issue in the adverse possession suit. This instrument is, by definition, invalid. If it were valid, then you wouldn’t be an adverse possession. Also, the true owner must have notice of the instrument. Notice can be acquired by: actual notice (like telling the dude the stuff) or constructive (fictional) notice. Color, in this sense, is like “colorable”, meaning “appearing to be valid”.

In the United States, there are “Recording Acts” which do a weird thing. You ought to be able to go down to the courthouse and look at the records and see who owns what. The Acts change a common law rule. If you have a conveyance (a deed) from O to A, even if that deed is not recorded, A is the owner. Then say you have a conveyance from O to B. Under the common law, A is still the owner of the property. At the time at O conveyed the property to B, O had nothing to convey! Under the common law, B loses, and this is considered an intolerable situation. If you look at the records, it looks like O is the owner of the property because the first conveyance was never recorded.

Property used to be transferred by livery of season, where one guy hands another guy a clump of dirt. It’s a symbolic act of transferring a piece of property itself. This is great in feudal England because most people can’t read or write. Also, it gives other people notice that a transfer has occurred. That might be fine in feudal England, but that’s not how we do it here.

What the Recording Acts say is that if A records the transfer, then B has constructive notice. We’ll act as though B has notice. We allow that fiction so that we can have a reliable recording system. On the other hand, if A fails to record the transaction, then B wins. This provides A an incentive to record promptly and rewards A by making A the definite owner. There’s a stick as well as a carrot: if A fails to record promptly, B could win! This fits in with “open and notorious”. Transfers of property can’t be secret.

Color of title has an impact on the mechanics of the adverse possession rule. If you have color of title, you’re deemed to possess all the property described in the deed. If you lack color of title, you’re deemed to possess only the property you actually occupy. Note that you can’t take adverse possession against the government. You can look at this as a case of sovereign immunity.

Say O is ten years old when P took possession. Would the action be barred? No, it appears that O has a total of 14 years to bring the suit because he has until he turns 21 plus three more years. Why does the statute contain the language “the person or his heirs”? Say, for example, a person dies a day before their 21^st birthday. Also, sometimes the thing that renders someone incompetent can never be cured. If you really have a 10 year old landowner, why can’t that person’s guardian take responsibility? Braunstein suggests that this might be a good reason to abolish these disabilities because they go again society’s interest in certain and marketable title. He can see how this statute could result in injustice in particular cases.

What if O was 15 years old when P took possession? In that case, the action would be barred if O was 25 because O only had until age 24 to bring suit. O either gets seven years or three years past the age of 21. Make sure to calculate the time both ways. Say O was 20 at the time the adverse possession enters. If O gets the full seven years, O gets seven years. If O gets the age of majority plus three years, he only gets four. You take the calculation that is most favorable to the owner, thus O gets 7 years in this case.

What if O was mentally ill when P took possession? It would depend on several factors: Is O still mentally ill? If O is better, when did he get better? How old was O when the affair began?

The law often weighs justice in the individual case against the public policy interest behind the statute. Braunstein doesn’t buy into the idea that this statute is going to do much justice.

Braunstein proposes another problem with these disabilities. Say O would have three years to sue after the age disability is removed. Let’s say that on O’s 21^st birthday, O goes crazy. Now what happens? On the face of the statute, it looks like O gets screwed! We deem O incompetent until he turns 21. Then let’s say he goes crazy just before he turns 21. Then it makes sense to say that the disability continues until it is resolved. The answer turns out to be that you can’t tack disabilities. Braunstein thinks that this is nuts! If disabilities are so important, then they ought to get more protection. On the other hand, if they are as unimportant as Braunstein believes, they don’t need any protection.

Say O is crazy, gets someone pregnant, and then dies. Now we have someone who hasn’t even been born yet at the time of possession, and they get crap! The point is that you can’t tack disabilities.

Braunstein can’t really figure why you get the extra time from this statute. It’s can’t just be because you need it. There are many situations where you just get screwed. Braunstein thinks that these disabilities don’t help much, and hurt the value of the statute of limitations overall.

Tacking

What is the standard for tacking? Tacking won’t be used to protect successive trespassers. There must be some relationship between the successive possessors (privity of estate) that makes it reasonable to tack. This is a vague, fluid concept.

Intestate means you die without a will. Think of the phrase “last will and testament”. Since you don’t have a will, somebody gets your property, and the people who get the property are called the heirs and are specified by statute.

Charlton v. Crocker – Did the Crockers acquire title to the lots in dispute by adverse possession? The defendants must show actual, hostile, open and notorious, exclusive, and continuous possession of the property in dispute for the statutory period.

What’s a mechanic’s lien? There’s a basic problem with construction contracts involving real property. It applies to anyone who works on a construction project. The only person that the owner promises to pay is the general contractor. A mechanic’s lien is a way for someone who does work on property without a direct contract with the owner to use the property as collateral for the payment of services. In this case, a mechanic’s lien was used by the adverse possessor to try to recover the cost of the improvements made to the land in the true owner’s absence.

It doesn’t matter whether you believe that you’re taking the true owner’s property in order to get adverse possession. It only matters that you believe that you possess the property in your own rights. You possess the way an owner would possess. If you know that what’s you’re doing is adverse possession, you know “more than you need to”. It’s not fatal to act willfully, but it might cast suspicion on some of the elements of adverse possession, as it does in this case. Note that “adverse” means substantially the same thing as “hostile” or “wrongful”. All the requirements of adverse possession boil down to acting like the true owner of the property.

Claim of right

Don’t let “claim of right” confuse you, because there’s basically no correct answer! In some cases, all “claim of right” means is that you’re claiming unequivocally that you have the right to possession in your own right. In other words, there is no requirement of good faith. But sometimes the courts go further than that and require that subjectively you must believe that you have a right to be where you are. The adverse possessor, in other words, must show that they really believed it was their land. Some courts go even further and make it nearly impossible to acquire title by adverse possession. They say that you must be adverse, have a claim of right, but that you must be non-hostile in the sense that you’re not thinking of the true owner. In other words, you must believe you have a right to be where you are yet actually not have the right to be where you are. This gets very close to a Catch-22 and makes it almost impossible to acquire land by adverse possession (AKA “title by larceny” among some of those who follow this rule). You would probably need color of title. The issue of what “claim of right” means cannot be resolved because it means different things in different jurisdictions.

If you believe that the purpose of adverse possession is to punish the lax owner, you will not care much about the mental state of the adverse possessor. If, on the other hand, you’re out to reward a diligent adverse possessor, then you might start asking more or less whether the adverse possessor is a “good person”.

Braunstein dislikes subjective intent because it’s easily manipulated. You can always just lie and no one would be the wiser. Braunstein would set an objective standard of whether the possessor acted like the true owner. But jurisdictions all over the place are split wildly over this issue.

Estates

First, we’ll learn to classify interests. Only after we’re classified them can we apply rules which determine their validity. The rules depend on the classifications. We will spend a lot of time classifying the different interests people have created or tried to create. Then we’ll look at rules about marketability of land.

You can’t just do anything you want with land in Anglo-American land. There are only a certain number of estates that are recognized, and you must fit your estate into one of the categories, or it’s no good.

What are some ways to divide ownership? We can divide land the way it gets divided on a map. We could divide it into flat pieces and parts. We could also divide the air, surface, and subsurface (vertically). We can give the air rights to one person, the surface rights to another person, and the subsurface rights to a third person.

But what we’re going to talk about now is dividing up land over time. The easiest example is the “non-freehold estate”: the landlord-tenant relationship. The tenant has the property for a time, and then it will revert to the landlord at the end of that time. A will have the property for a period of time, and then B will have the property after that.

Anglo-American law separates possession and ownership. A possessor doesn’t necessarily own the whole “bundle of sticks”. This can create some confusion! The possessor of the property isn’t necessarily the owner of the property.

We divide interests in land based on whether they are possessory or non-possessory. If it’s non-possessory, it’s a future interest. “Future interest” means it’s non-possessory but could become possessory at a later time. But a “future interest” is a current ownership. For example, a landlord owns a building, but doesn’t have a possessory interest in the building. That’s a future interest, but it’s not the ownership that’s delayed, it’s just the possession that’s delayed.

Terminology

This is like learning a foreign language. One problem is that some of the terminology is stuff you think you already know because it has a “lay” meaning and a different, more precise legal meaning. So we’ll have new words to learn and also words we already know that we’ll have to relearn for this purpose.

Heir – Heirs are defined by statute. Living people have no heirs. Heirs are not identified until the decedent dies (that’s what a decedent is). You can’t be an heir unless you survive the decedent.

Issue – Who are these people? It doesn’t mean children. If you mean children, say “children”. If you say issue, it means all direct lineal descendents. It only goes down: children, grandchildren, great-grandchildren, continuing down theoretically forever. If you believe in Adam and Eve, then we are all issue of Adam and Eve because we are direct lineal descendants. Adopted children are treated the same as natural children for all purposes of the law. But foster children or stepchildren are not descendants and thus not “issue”. Stepchildren don’t inherit from their stepparents.

There are only four kinds of estates: (1) The fee simple absolute – This is the most complete form of ownership recognized by American law. It’s the complete bundle of sticks. (2) The fee tail, (3) the fee simple defeasible – These are fees that are capable of being defeated, and (4) the life estate. These are all the freehold estates. The non-freehold estate is the landlord-tenant relationship. Those make up all the possessory estates. All of these, except for the fee simple absolute, are associated with a future interest. Everything always has to add up to 100%, and 100% equals a fee simple absolute. If you can’t add up back to a fee simple absolute, you’ve missed something.

Fee simple absolute

This is what we mean when we talk about owning something. It’s the whole bundle of sticks! When you get fee simple absolute, you get all of these fabulous prizes! (1) Possession without condition. (2) Title that is indefinitely inheritable (after the 1540 Statute of Wills): you can leave the property to whoever you want when you die. (3) Your property is freely alienable after 1290 and the Quia Emptores: while you’re alive you can also sell your property to anyone you want. (4) Your possession is for potentially infinite duration: there is nothing inherent in the estate that will cause it to end. The only thing that would cause the estate to end would be forfeiture for treason, where the property would revert to the sovereign. Because a fee simple absolute is everything, it’s not followed by anything. There is no future interest because there is nothing left to own.

Creation of the fee simple absolute

“O hereby grants Blackacre to A and her heirs”…this phrase includes words of purchase and words of limitation. “To A” are words of purchase and define just who gets the property. “And her heirs” are words of limitation that says not who gets the property, but what they get. Don’t worry about the word “purchase” in situations where it’s really a gift. It’s just terminology. This is what the Statute of Quia Emptores did. That’s how the fee simple absolute became alienable. The heirs are considered to own nothing in reality.

So in the conveyance above, A takes Blackacre in fee simple absolute, and the heirs get nothing. When you convey property to “A and her heirs”, the heirs get absolutely nothing. It is true that A’s heirs will likely be her children and will likely inherit either by virtue of being heirs of statute or by A’s will. But if the heirs take anything, they’ll take it by virtue of the statute or will. They get nothing by virtue of this gift. Recall that A doesn’t have any heirs because living people don’t have heirs.

The defeasible fees simple

“Defeasible” means conditional. These are also known as fee simple conditional. When you think of “defeasible”, think “defeat”. Here are the wonderful cash and prizes you get when you get a fee simple defeasible: (1) You get possession without condition! There is no condition precedent to your estate becoming possessory. But there are conditions under which you could lose the estate. (2) The estate is inheritable, but probably not devisable. They could go to your heirs, but you might not be able to will the estate to anybody. (3) The estate may be alienable, but it’s subject to defeasance. (4) The duration is until the defeasing event occurs.

What’s the difference between a condition precedent and a condition subsequent? A condition precedent is a condition that has to occur before you get something (“I’ll give you ten dollars if you work for me for an hour. You get the ten dollars after you work an hour.”). A condition subsequent is a condition where you get something and you get to keep it until and unless the condition occurs. This is a very important distinction that we need to master. With a condition precedent, the condition has to occur before you get something. With a condition subsequent, you get the thing, but if the condition occurs, then you lose it.

Fee simple determinable

The duration of this one is until some event occurs. The estate ends automatically. It is accompanied by a future interest in the grantor called “possibility of reverter” (not a reversion) in the transferor or his heirs. So fee simple determinable plus possibility of reverter equals fee simple absolute.

If we’re trying to create a fee simple determinable, we’ll use language that will create a condition precedent, also known as “durational language”. The words you might see include “while”, “during” and “so long as”. When the duration has run out, the estate runs out and there’s nothing left. When the duration runs out, the possibility of reverter turns into a possessory estate.

Fee simple subject to a condition subsequent

The duration is a little bit different. It lasts until an election is made after the occurrence of the specified event. It doesn’t end automatically, but rather ends at the option of the grantor or his heirs. If the city of Columbus starts using a park as a school instead of a park and I think that’s okay, then I can decline to exercise my election. The fee simple subject to a condition subsequent is always accompanied by a retained future interest in the grantor called “right of entry” or “retained right of entry for condition broken”. So a fee simple subject to a condition subsequent plus a right of entry equals a fee simple absolute.

The fee simple subject to a condition subsequent does not end automatically. The grantor or the grantor’s heirs must take some action to enter onto the property and regain possession. Therefore, two things must happen in order for the estate to end: some condition must occur, plus the grantor or the grantor’s heirs must take some action. The most common language to establish this estate includes “provided that”, “but if” and “upon condition that”.

Some courts prefer to construe conveyances as fees simple determinable under there is clear language retaining the right of entry. Note that the court in Higbee v. Kennedy does just the opposite. This is not a hard and fast rule, but it is something you can fall back on when you’re hopelessly confused.

These defeasible fees are accompanied by a retained interest in the grantor, either the possibility of reverter or the right of entry. If the future interest following the defeasible fee is created in a transferee then we call it an executory interest for reasons we’ll get to shortly. When the interest is an executory interest, it doesn’t matter if the accompanying estate is a fee simple determinable or a fee simple subject to a condition subsequent. Executory interests are not retained interests.

Mayor and City Council of Ocean City v. Taber – The habendum clause contains limitations on the estate granted. It usually follows the actual grant. What did the habendum clause say in this case that was relevant to our discussion? It says that it should be used “for the purpose of a Life Saving Station”. Is this a fee simple determinable, or is this a fee simple subject to a condition subsequent? Is the reversion to the trustees automatic? According to the deed, it seems to be. It says that the land will go back to the trustees “without any legal proceedings, suit or otherwise”. That sounds pretty automatic. On the other hand, there is language that follows that says: “they shall be entitled to re-enter upon and take possession”. Is that latter language consistent with the fee simple determinable? It doesn’t sound like it. It sounds more like a fee simple subject to a condition subsequent because that is followed by right of entry, which is the future interest that this sounds like.

What does the court conclude? The court doesn’t seem to tell us why, but they say that it’s a fee simple determinable. Has the use ended? Has the divesting condition been triggered? The United States stopped using the land for life saving stuff. The way the court looks at it is that it’s not enough for Ocean City to take over the life saving station. The condition seems to be that as soon as the United States fails to use the land as a life saving station, and thus as soon as the United States conveys the land to anybody else, the condition has occurred and the estate terminates. What if the United States had leased back the land to continue using it as a life saving station? What if the United States subcontracted to somebody to do life saving?

There was an adverse possession claim in this case. Why did it fail? Adverse possession started to run in 1967, so there couldn’t possibly be adverse possession. There was a claim that the original deed to the United States was invalid. If that had been true, the United States would have entered under color of title and might have obtained adverse possession over the parcel. In this case, the owner granted the property to the intended grantee. The grantor could argue that the possession was not hostile.

But the key is that if we have a fee simple determinable, which is what the court finds that we have here, adverse possession starts to run as soon as the determining condition occurs. In this case, that’s when the United States stopped using the land as a lifesaving station. Compare that to the next case.

Higbee Corporation v. Kennedy, Executor – Was the estate created by the deed a fee simple determinable or a fee simple subject to a condition subsequent? Words that express conditions, like “provided”, “if”, and “upon the condition that” suggest the existence of a fee simple subject to a condition subsequent. However, the express retention of a reverter to the grantor suggests a fee simple determinable. Finally, the burden of clearly establishing a restriction on a grant falls on the drafter, and grants will be construed to make title as marketable as possible without being inconsistent with the grant.

The fee simple determinable is less marketable and alienable than the fee simple subject to a condition subsequent. The court places a high burden on the drafter of the grant to use clear language establishing the fee simple determinable. If it’s unclear, the court will rule that the grant is a fee simple subject to a condition subsequent based on public policy grounds. The court thus finds that this grant was a fee simple subject to a condition subsequent.

Furthermore, the court finds that the condition subsequent has not been shown to have been broken. The word “wishes” suggests a subjective state of mind of the grantee. In order to show that the condition had been broken, the court says that Higbee would have to prove that Kennedy had “no inclination” to use the land for a road. It wasn’t enough merely to show that the land wasn’t being used as a road.

Fee tail

This is a “tailored” estate. This estate was designed to accommodate the dynastic urge by keeping property in the family. While the fee simple absolute could be transferred to anyone and left or devised to anyone, the fee tail was different. It was designed to keep family lands in the family. Not only do you keep family lands in the family, but you keep them undivided. Part of the purpose of this estate is to preserve concentrations of wealth. In the French Revolution, this was thought to be so pernicious in its effect that in the Napoleonic code it was provided that you must divide the property among your children. The idea was to get rid of the concentration of wealth that the fee tail was designed to preserve. We will see that the fee tail has been largely abolished.

The fee tail includes: (1) Possession here is without condition. (2) Modification of inheritability is limited to the grantee’s direct line. (3) Only the grantee’s limited interest is alienable. The grantee can sell a life estate, but it reverts to the grantee’s line when the grantee dies. (4) This estate is not of infinite duration: it ends when the tenant in the tail’s line dies without issue. At some point, in other words, the line could simply die out.

This estate is created by the words: “To A and the heirs of his body”. Those words don’t create a present interest in the “heirs of A’s body”, at least at common law. Those are just words of limitation. Because the fee tail falls short of the fee simple absolute, it must be followed by a future interest. If the future interest is retained by the grantor or the grantor’s heirs, then it’s a reversion. If I say: “to A and the heirs of her body”, that gives A a fee tail but leaves a reversion to me in fee simple absolute. If I say: “to A and the heirs of her body and then to B and her heirs” then I create a fee tail for A with a remainder for B (a future interest in fee simple absolute). B doesn’t get any possessory interest until A’s line dies out. But that doesn’t mean B doesn’t own anything. B owns a future interest!

The fee tail was preceded by the fee simple conditional. This is another example of government and rich people and their attorneys fighting with each other. The owner of the fee simple conditional had the power to convey a fee simple absolute as soon as issue were born. So having a baby made the father rich! The fee simple conditional was abolished by De Donis Conditionalibus in 1285. The younger generation wins for the time being by finding a way to convert the fee simple conditional into a fee simple absolute. Later, the older generation wins again by establishing the fee tail.

The fee tail has been pretty much abolished everywhere. Different states have dealt with the fee tail in different ways. The two most common are: (1) “To A and the heirs of his body” creates a fee simple absolute in A. (2) In most states, all you have to do to disentail the estate is to sell the property. In fact, you can sell the property and then buy it right back. The person you sell the property to and buy it back from is called a “straw man”.

The fee tail in Ohio

Let’s talk about Ohio. The Ohio statute says: “All estates given in tail, by deed or will, in lands or tenements lying within this state shall be and remain an absolute estate in fee simple to the issue of the first donee in tail.” So a gift that purports to create a fee tail will create a life estate in the tenant-in-tail, and then a fee simple absolute in the issue of the tenant-in-tail, assuming that the tenant-in-tail has any issue.

Another alternative used in other states is to abolish the fee tail altogether and say that “to A and the heirs of her body” equals “to A and her heirs”. Or you could get a life estate that converts into a fee simple absolute upon the birth of issue. There are a couple of reasons for these statutes. One is that fee tails last too long! They prevent the property from being used in commerce during that period.

Life estate

Here’s the stuff you get: (1) You get possession without condition. (2) This estate is not inheritable by its very nature. (3) The life estate is alienable, but A’s life is still the measuring life. (This is called a life estate pur autre vie.) (4) The estate ends with the death of the life tenant. This is a lot less than a fee simple absolute! That means that this estate is also always followed by a future interest: either reversion in the grantor, or remainder in a transferee. Remainder off of a life estate is probably the most frequently used future interest.

Creation of the life estate

Originally, at common law, there was a presumption in favor of the life estate because that kept the property in the grantor’s family. So if you say: “To A for life”, the property goes back to the grantor and his heirs upon A’s death. “To A forever” would also create a life estate. “To A in fee simple absolute” would create a life estate at old, old common law because you failed to use the magic words. But now, statutes presume that the grantor conveys everything the grantor has. In other words, if O has a fee simple absolute, then “To A” will create a fee simple absolute in A unless there is evidence otherwise. If you want to create a life estate in A, one way to do it, at least in Missouri, is to say: “To A and then to B and his heirs.”

Waste

Woodrick v. Wood – Is the holder of a remainder interest in some land entitled to stop the life tenant from destroying buildings there? While at common law anything that altered leased premises in any way constituted waste, under Ohio case law there must be substantial damage to the reversion in order for waste to be actionable.

The issue is whether the owner of the remainder can sue in order to prevent waste. She can! Notice how this is another common pool problem! When more than one person owns a piece of property jointly, it creates the incentive to commit waste. If a life tenant thinks about fixing up the property, the incentive is not so great. If they take care of the property, they have to pay the whole cost, but they may not get the whole benefit. Most of the benefit might go to the owner of the remainder. We have externalities! By taking care of the place, the life tenant confers an external benefit to the owner of the remainder. So the law steps in! When we have this kind of situation, we’ll have a rule that says that the life tenant more or less has to take care of the property. This rule is designed to cure these misincentives inherent in the situation.

There are two competing definitions of “waste”. At old time common law, any change at all is waste, even if it improves the property! But Ohio doesn’t recognize this rule. In Ohio, it’s only waste if it actually lowers the value of the property overall. There’s permissive waste and voluntary (intentional) waste. If you destroy the place on purpose, that’s voluntary. If you break your duty to keep up the place, that’s permissive waste. The idea of beneficial or ameliorative waste is that if you’re going to make a change to your place and you’re a tenant, you better go bargain with your landlord first before you end up in court. You must have the law of waste once we separate possession from ownership. A life tenant will have an incentive to commit waste, and that’s why the government needs to step in and regulate.

Adverse possession and estates

An adverse possessor acquires by adverse possession the estate of the person who was in possession when A wrongfully entered. So if the current possessor has a life estate, the interloper gets a life estate. If the current possessor has a fee simple absolute, A gets a fee simple absolute, and so on. You can’t adversely possess a future interest (except in the case of waste…see below).

This is a common pool problem. Two people own an interest in the same land at the same time. Whenever you have a common pool problem, regulations are sure to follow to deal with the “tragedy of the commons”. If A’s possession would constitute waste, it would be a violation of C’s rights as well. If A wasted stuff for long enough, he could get adverse possession against C. But we’ll get back to this and clarify it later.

The point of this is not primarily to learn more about adverse possession, but rather to demonstrate the difference between possessory and non-possessory interests in land. The estate is a thing. You can only have adverse possession against a particular estate. If that estate ends, like a life estate deforms into a fee simple absolute, then the thing you possessed doesn’t exist anymore.

The trust

The purpose of a trust is to separate management of wealth from enjoyment of wealth. You create a manager, called the trustee, whose function is to make the property productive through investment and then dispose of the property according to the terms of the trust. So you have a trusted person who is responsible for management and enforcing the trust. But the trustee is not supposed to enjoy the money. The trustee has a high standard of care and a fiduciary duty to the beneficiary.

The person that starts out with the money is called the trustor, settlor, or grantor. The trustor transfers the property to the trustee, but not for the trustee’s benefit. Then the trustee manages the property for the benefit of the beneficiary. Sometimes, these three roles can be held by three different people. You might set up a trust in anticipation that you might become incompetent in the future, and set yourself up as trustor, trustee, and beneficiary. But then you provide that if you become incompetent, another trustee will be appointed.

The courts of law did not originally recognize and enforce this transaction. Instead, they would say that the trustee had a fee simple absolute. But the courts of equity would enforce trusts. So not only do we divide title between estates and future interest, but also between legal title and equitable title. That simply depends on which court you would go to in order to enforce the title.

So there are two kinds of title: legal and equitable. Both the beneficiary and the trustee could have a fee simple absolute. The trustee would have a legal fee simple absolute, while the beneficiary would have an equitable fee simple absolute. For our purposes, all the classifications remain the same, except when we talk about trusts. We say that the beneficiary has an equitable fee simple absolute and the trustee has a legal fee simple absolute. Both of them can have fee simple absolutes. In a sense, this doesn’t make sense. We already defined fee simple absolute as the whole bundle of sticks, but now we’re saying that a legal fee simple absolute is not the whole bundle of sticks.

Trusts are private and secret, which is a plus for many people. You won’t have to go to court to show that you’re not crazy, for example. But trusts are expensive! It costs money to set one up, plus you probably have to pay the trustee. Trusts are good for their purpose, but they’re expensive.

Creation of the trust

You would say “to T in trust for B for life and then to C and his heirs”. Then T has a legal fee simple absolute, B has an equitable life estate, and C has an equitable remainder in fee simple absolute. T’s legal fee simple absolute gives the trustee the power to sell the property and invest the proceeds. Even though T’s legal estate is going to end, we call it a legal fee simple absolute because T has to be able to sell the property. T can’t enjoy the trust property. B is entitled to the income from the trust, and B may be able to invade the “corpus” of the trust, too. C gets whatever’s left when B dies.

Pigg v. Haley – By statute, a conveyance is in fee simple absolute unless there is a contrary intention. By precedent, life estate plus absolute power of disposition equals fee simple absolute and any remainder is automatically void. But then, by statute again, life estate plus absolute power of disposition leaves a remainder in whatever the life tenant doesn’t sell or consume in his or her lifetime.

Edward Haley left a holographic (handwritten) will. A holographic will has to be handwritten and signed. It’s an exception to the general rule that a testator must sign a will, have it notarized and have it signed by witnesses. If the whole thing is in the testator’s handwriting, you have some assurance that it’s not a forgery.

Mrs. Pigg found the will while rooting around her husband’s things. The will was found among his genealogical notes. Was this really intended as a will? Braunstein thinks it’s an open question. When you really want something to be your will, you let people know. Maybe this will was just tentative. Maybe at one time he intended it to be final, but instead of tearing it up, he just put it aside. This document was not kept in a place that you would usually expect to store important papers. Mrs. Haley’s lawyer could have made the argument that this document was not intended to be a will at all.

The two big issues are: (1) What are the interests created? (2) Were there any interests that Garland gave up that would constitute consideration for the later agreement?

Courts tend to enforce these agreements because if they can come to an agreement it’s usually better than if they have to litigate. Litigation sucks!

It’s a confusing case because of the consideration, but it’s not that confusing in the future interests sense. It’s clear that there’s a life estate with the remainder to Pigg, but then there’s an absolute power to dispose. There are several different views on the effect of that power, and the court has to sort out which is right and how it applies.

Future interests

Reversionary interests

These are interests retained by the grantor when the grantor conveys a vested estate that’s less than the estate the grantor had. There are three types: (1) reversion, (2) possibility of reverter, and (3) right of entry (for condition broken). Is there any difference between a remainder and a reversion? What we’re dealing with is a matter of form, and it’s a formal distinction that could have significant consequences.

In property, the extrinsic evidence rule is much more restrictive than it is in the law of contracts. When property law developed, real property was the most important way that capital was held. That’s no longer true. In the absence of the statute, the words “to Mary” would have just created a life estate in Mary and would have left Oswald a reversion in fee simple absolute. So after Mary dies, Oswald would have a possessory estate in fee simple absolute.

Braunstein says that this rule is related to the Recording Acts. If A, the first purchaser, fails to make a record of sale, then B, the second purchaser without notice, will win. We want to be able to tell by going down to the courthouse and looking at public records who owns what property. If we want to accomplish that purpose, we can’t use extrinsic evidence. If such evidence is allowed to be used too liberally, then it defeats the idea of a recording system. Also, deeds last longer than contracts. Contracts are basically done once they’ve been fully performed, and are most often performed within the parties’ lifetimes. But the significance of deeds can last a very long time, even after the parties are dead or no longer own an interest in the property. So we want the deed to be certain on its face and within its four corners. The Recording Acts create a strong incentive to record!

Black v. Black – The court finds that the joint will implicitly gives Jessie a life estate and gives the nieces and nephews a remainder in fee simple. What rights do the nieces and nephews have? Jessie seems to have the right to dispose of or consume some of the property that is subject to the will. What does the language “then remaining” mean?

What’s the West Virginia statute and what’s the common law rule of how you deal with a case of a life estate with a power in the life tenant to dispose of some or all of the property that is the subject of the life estate? Under the common law rule, the nieces and nephews would get nothing because if you give a life estate the absolute power of disposal then they actually get a fee simple and the purported gift to the nieces and nephews simply fails. But under the statute, the life tenant has the power to dispose, but if there’s anything left it goes to the folks who hold the remainder. The common law rule has been changed by the statute! The purpose is to give increased flexibility to the life estate.

Frequently, the support of the life tenant is the principal goal of the testator. For example: “To my spouse for life, and then to my children.” The goal is to provide for the spouse, but there is a secondary goal of providing for the children. So you can provide the life estate plus the added power to dispose. At common law, that just mutates into a fee simple absolute, but by statute, you can have this new category that’s kind of halfway in-between the two.

The court uses the statute and the result is that Jessie gets a life estate, and then the nieces and nephews get a remainder in fee simple absolute. Braunstein suggests that because there was no power of disposal, it works out the same way under either rule.

Say you convey “to A for life with power to dispose, then to B and her heirs”. Under the common law, we say that the gift to B fails and A gets a fee simple absolute. At common law, the idea of the power to dispose is repugnant to the idea of a life estate. On the other hand, under the statute, the second gift does not fail. The statute says that we’ll enforce the clear intent of the testator. What’s dangerous about putting in (or leaving out) the power to dispose? There’s a risk either way. Land values go up. The cost of living goes up. The rents from owning a farm may be sufficient to live on at one point, but later not be enough. If the life tenant can’t sell any of the property, they may be left destitute. But on the other hand, the life tenant could turn out to be a spendthrift who gambles away the estate. So there is a danger either way that can only be resolved through careful drafting.

The legal life estate is a pretty inflexible way to accomplish the purpose it’s usually used for. The best way to accomplish the purpose of providing for the successive generations after the property owner’s death is a trust.

Reversions

When a grantor conveys a vested estate of a lesser quantum than that which he had, the grantor retains a reversion. A reversion is a future interest retained by the grantor when he transfers a vested estate(s) and/or a vested future interest of a lesser quantum than that which he owed. For example, the fee tail is of a lesser quantum than the fee simple absolute, and a life estate is of a lesser quantum than the fee tail. As part of the definition of reversion, notice that it says that when the grantor transfers vested estates, he retains a reversion.

The future interests of the defeasible fees

The possibility of reverter, right of entry, and reversion are all vested interests. That means that they are all essential parts of the fee simple absolute. They are not contingent. They are retained parts of the fee simple absolute, which was vested. Even if the owner transfers away a big chunk of his fee simple absolute, the part that he keeps is still vested. Therefore, the rules we’ll look at next week (like the Rule Against Perpetuities) don’t work to invalidate these interests. The point of those rules is to make land marketable. We want to be able to put the interests back together again so we can get the land into commerce.

Originally, the possibility of reverter and right of entry were unlikely to be alienable or devisable. In modern times, they are generally alienable, devisable and inheritable.

Two classes of future interests can be created in transferees: (1) remainders and (2) executory interests. Any time you see a vested fee, the interest created in a transferee that follows it must be an executory interest. A remainder cannot divest the preceding interest.

The vested remainder is a property right even though it’s not a possessory right. It can be sold, transferred, or devised in a will.

A deed is effective when it’s delivered. A will has no legal effect so long as the testator is alive.

No matter what language is used, the property interest that the grantor retains will always be a reversionary interest.

There are three ways to transfer property. You can alienate it, you can devise it, or you can inherit it.

To alienate property means to sell it inter vivos, while you’re alive. To devise property means to dispose of property by will. If you inherit property, it means you die without a will and it goes to your statutory heirs.

Remainders

This is not a retained interest. It is created in a transferee. It doesn’t have to become possessory, but it can become possessory. There can’t be any gaps between the termination of the previous possessory estate and the remainder. The common law couldn’t tolerate the idea that ownership was in abeyance. “Who owns it in the meantime? It can’t be nobody! There can’t be any gaps!”

The remainder can become possessory upon the natural termination of the preceding estate. For example, “To A for life, and then to B and her heirs.” A gets a life estate and B gets a remainder which becomes possessory on A’s death.

What about: “To A for life and then to B if B gives A a proper funeral.” What’s a proper funeral? You have to wait until after the person’s dead to have a funeral. There is a necessary gap between A’s life estate and when B’s estate becomes possessory. Therefore, B’s interest is not a remainder.

Contingent remainders

A remainder is contingent if either or both of two things exist: (1) It is subject to a condition precedent, and/or (2) it is given to an unascertained person. Notice with the “and/or” that remainders can be “doubly” contingent.

Vested remainders

There are three types of vested remainders: (1) Vested remainders, (2) vested remainders subject to open (or vested subject to partial divestment) – for example: “To A for life and then to the children of A and their heirs (if A already has at least one child)”. If there are more kids, the existing kids get partially divested. (3) Vested remainders subject to (complete) divestment – “To A for life, then to B and his heirs, but if B marries Z, then to C and his heirs.” A vested remainder subject to divestment is also known as a vested remainder in fee simple absolute subject to a condition subsequent. Remainders change their name based on changes in the relevant facts.

The law is antiquated in two respects: (1) It is based on a time when there was no technology for determining if people can have children. (2) It is based on the presumption that children have to be conceived during the lifetime of the husband. If you have frozen embryos or conception that occurs after the death of the donors, the law won’t know what to do.

Remainders stay remainders, and reversions stay reversions. We classify them at the time they are created. However, remainders can switch between being vested and being contingent. O has a reversion if he has given away a vested remainder of lesser duration than that which he had. The focus is on vested and not contingent interests. Future interests are future because they’re not yet possessory. They are interests that the law recognizes. They can be inherited and devised by will. A vested life estate plus a vested remainder in fee simple absolute equals a possessory interest in fee simple absolute. A will has no effect to future interests while you’re living.

In order for a remainder to be vested, it can’t be subject to any condition precedent. But conditions precedent exclude a certain group of things that might happen. Vested means not subject to a condition precedent other than the natural termination of the precedent estate.

If “A’s children” get a remainder, and A doesn’t have any children yet, what kind of remainder do A’s children own? It’s a contingent remainder! The children, if they don’t exist, are unascertained. The most common groups of people who are unascertained are (1) heirs of living people, and (2) unborn children.

Executory interests

An executory interest is contingent, not vested. An executory interest is always given away, never retained. An executory interest is a future interest in someone other than the grantor that’s not a reversion. One way you can have an executory interest is when you have a fee simple subject to an executory limitation. Another way is when you have a vested remainder subject to divestment.

There are two kinds of executory interests: shifting and springing. Shifting executory interests go from one grantee to another upon the occurrence of some condition. Springing executory interests go from the grantor to a grantee upon the occurrence of some condition. Another way to put it is that there is a springing executory interest whenever there is an unavoidable gap in ownership of a present possessory estate in the land. If the gap is avoidable, then you don’t call it a springing executory interest. But these types have no practical significance. We distinguish them for analytical purposes.

What happens if there is a gap in ownership? What happens to possession? Land is always owned by someone. During the gap, the owner gets a fee simple subject to executory limitation. The distinction between shifting and springing is a distinction between from whom the interest is coming.

The Statute of Uses

Before the Statute of Uses in 1536, shifting executory interests were not enforceable at law but only in equity. In order to make shifting executory interests enforceable, you had to use certain “magic words” to “raise a use”. You also had to appoint a “feoffee to uses” who was almost like a trustee. After the Statute, the legal fee simple of the “feoffee to uses” disappeared as soon as he got it.

“To T and his heirs for the use of A and his heirs for so long as A is unmarried at the time of her death and then to B and his heirs”: Before the Statute of Uses, you wouldn’t allow the future interest in B. At law, this wouldn’t have been enforced, but in equity, it would have been recognized.

The Statute of Uses is passed to increase taxes, among other reasons. “Raising a use” was a tax avoidance scheme because seisin didn’t pass at death at law.

What the Statute did was execute the trust. “Execute” means the same thing here as it does when you talk about “executed” contracts. What the Statute says is that what were previously equitable interests are now legal interests.

In the above example, before the Statute of Uses, A had an equitable fee simple determinable and B had nothing at law, but had an equitable interest. T had the fee simple absolute at law, but his duties would be enforced at equity. O had a possibility of reverter at law, but nothing in equity.

So law and equity were in conflict! The Statute of Uses brings them into harmony! We make all the interests legally enforceable. The mechanism was complicated because it “indulged in a fiction”: the “feoffee to uses”, or trustee, acquired a fee simple absolute, but it disappeared as soon as he got it. Thus, the trust was said to be executed.

So how do we still have trusts in light of the Statute of Uses? The Statute of Uses executed trusts! This Statute is part of our common law here! How can we still have trusts?

Trusts are valuable! The courts and people with money didn’t want to see them go. There are two possibilities that will result in the creation of a valid trust: (1) To T for the use of T₁ for the use of…somebody else. The first trust would execute, but the second trust would be valid. This is totally artificial, but it worked. One you execute once, you don’t execute again, so the second trust gets enforced in equity. (2) You can establish an “active trust” but not a “dry” or “passive” trust.

How do we interpret “To A five days hence”? How can you have a fee simple absolute if it’s going to end in five days or when somebody graduates from law school or gets married or whatever? It seems inconsistent, and it is. We just grin and bear it. A fee simple absolute is an estate of potentially infinite duration except as modified by the Statute of Uses.

Interests can be vested in two ways: (1) They can be vested because they are no longer contingent. (2) They can be vested because they are possessory interests, which are always vested.

Executory interests are never vested until they become possessory. In other words, for the purposes of the Rule Against Perpetuities, they are always treated as contingent, not vested. (This is not in the right place in your notes!)

The reason we will call something an executory interest is because it can’t be a remainder.

How come there’s a reversion when there are contingent remainders that seem to be complete alternatives? It’s kind of fictional, but on the other hand, there are ways that a life estate can end before the death of the life tenant. For example, the life tenant can decline the estate. In that case, the estate may go back to the grantor in fee simple absolute.

A vested remainder subject to divestment could be clarified to be more specific. It could be a vested remainder in fee simple determinable, a vested remainder in fee simple subject to a condition subsequent, or a vested remainder subject to an executory limitation. The latter three tell you that this remainder is followed by an executory limitation.

When you have “but if” language, but there’s a condition precedent that comes before, “but if” doesn’t make the condition a condition subsequent.

You can’t divest something that’s not vested.

Rules furthering marketability

There are four of these: (1) The destructibility of contingent remainders, (2) the Rule in Shelley’s case, (3) the Doctrine of Worthier Title, and (4) the Rule Against Perpetuities. The first three rules have been abolished in most places (relatively recently). These rules all act to invalidate certain contingent and/or executory interests. That’s how they work to further marketability. These rules are designed to “put back together” the fee simple absolute or get close to doing so by destroying contingent interests.

What kind of interest is offensive to the law? “To A for life, and then to A’s heirs”: A living person has no heirs. It’s impossible to convey a fee simple absolute. That property is effectively taken out of commerce until we can determine who A’s heirs are (basically until A dies). It could be even longer!

There is a process of reform going on. It’s a competition between “dead hand” control and the rights of the living! These rules are getting easier and easier to get around. We’re at a stage of our history where the trend seems to be to allow people to tie up property for a number of generations. These rules are being abolished or being given much less significance than 50-60 years ago. One reason is that land is so much less important as a store of wealth in our society. We’re no longer an agrarian society. The principal stores of wealth are corporate. Land is an important store of wealth, but if land is not on the market, the economy is not going to be destroyed. So it’s getting easier to tie up land for a long time.

When you see gifts “to heirs”, think about the Rule in Shelley’s Case and the Doctrine of Worthier Title.

The Destructibility of Contingent Remainders

This is more or less only for historical interest. At common law, lapses in the seisin were not allowed. Remainders weren’t allowed to spring. Contingent remainders were destroyed if they didn’t take effect at the end of the prior estate. But this was before the Statute of Uses and the recognition of executory interests.

Another rule was that you could destroy a contingent remainder by acquiring both the life estate and the (fictional) reversion “surrounding” the contingent remainder and kind of “crush” it in between. Vested remainders don’t get “crushed”.

But by 1700, executory interests were indestructible. So how do you make indestructible future interests at this point?

Executory interests weren’t recognized at law before the Statute of Uses! You really had a problem! The common law couldn’t tolerate an abeyance of seisin. The common law says that the contingent remainder is B is simply cut off and doesn’t exist if A dies before the condition is satisfied. In that case, O has a possessory fee simple absolute, has the whole bundle of sticks, and there’s nothing left for B.

Once you have the Statute of Uses, there’s no need for the destructibility rule anymore.

The effect of the rule is that contingent remainders are destroyed if the contingent remaindermen are not ready to take (i.e. the conditions precedent have not been removed for ascertained) when the preceding estate terminates.

This rule stops making sense once springing executory interests are recognized by the Statute of Uses in 1536.

Let’s say we have the situation above, except A conveys his life estate to O. Before the Statute of Uses, the owner now has a fee simple absolute by merger. When O has the present possessory estate and the vested reversion, the intervening contingent remainder is wiped out. This rule no longer serves any purpose. After the Statute of Uses, the contingent remainder becomes valid as an executory interest and therefore there is no reason to destroy it.

At common law, they couldn’t stand that idea that no owner was entitled to possession of property at a given time. Therefore, if the contingent remaindermen are not ready to take when the previous estate terminates, we just kill the contingent remainder and the property goes to whatever the next vested estate is. The common law didn’t like abeyance of seisin!

Trusts never fail for want of a trustee. If T dies, someone else will be appointed. But the safest thing to do is to have more than one trustee so if one dies you’ll have a backup. Also, the trustee has all the management functions.

The point is that it’s really easy to avoid this rule. This all tends to show why the rule is more or less obsolete.

The Rule in Shelley’s Case

This rule operates to destroy contingent remainders in heirs. There are four requirements: (1) There is one instrument. (2) The instrument creates a life estate in land in A – the rule only applied to land. (3) The instrument purports to create a remainder in persons described as A’s heirs or the heirs of A’s body. (4) Both the life estate and the remainder are of the same quality, i.e. both equitable or both legal. But…it’s also easy to avoid this rule! The simplest way to get around the rule is to simply use two pieces of paper.

Seymour v. Heubaum – Whenever a freehold estate is granted to the ancestor and a remainder is granted to his heirs, the word “heirs” is taken to be a word of limitation rather than a word of purchase, and thus the ancestor acquires a fee simple interest in the estate. The rule operates when all three of these conditions are present: (1) A freehold estate must be granted to the ancestor (in this case William). (2) A remainder must be granted to “his heirs” using exactly those words. (3) The two estates must be of the same quality (legal or equitable).

Note that the Rule in Shelley’s Case has been abolished almost everywhere because it’s so easy to get around.

The only way you have an equitable interest is if there are trustees involved.

Don’t forget that we never cut off vested estates or remainders with this Rule.

A devise is a gift of real property in a will. A legacy is a gift of personal property in a will. No devise, legacy, or bequest is of any legal consequence until the testator dies. (He says that he’s exaggerating a little bit.)

When the time comes to distribute the money and you’re not sure who to give it to, you close the class and just distribute the money. This is the Rule of Convenience.

Doctrine of Worthier Title

This doctrine is very similar to the Rule in Shelley’s Case. But instead of cutting off contingent remainders created in heirs of the transferee, it cuts off contingent remainders in the heirs of the transferor. The doctrine applies only to inter vivos transfers, not to wills. The Rule in Shelley’s Case, on the other hand, applies both to wills and to inter vivos transfers. How come? Well, once you’re dead, we know exactly who your heirs are, and then the remainder is vested. There’s nothing contingent about it anymore!

For example: “To A for life and then to the heirs of O”: This purports to give a life estate to A followed by a contingent remainder in fee simple absolute to the heirs of O, plus a reversion in fee simple absolute to “O’s heirs”. After the operation of the Doctrine of Worthier Title, this would simply become a life estate to A followed by a reversion in fee simple absolute to O. So let’s say that O devises all of his property to the Red Cross. The Red Cross gets the reversion, and O’s heirs get nothing.

“To T, to be held in trust for O for life and then to O’s heirs”: It turns out that the trust income wasn’t enough to support O, and O wanted to know if she could terminate the trust. So let’s classify: T has a legal fee simple absolute, O has an equitable life estate, and O’s heirs have an equitable contingent remainder in fee simple absolute. Under the Doctrine of Worthier Title, T would have the legal fee simple absolute and O would have an equitable fee simple absolute. That means that O will be able to terminate the trust because she is the sole beneficiary.

If O hadn’t been able to use the Doctrine, there would have been no way to terminate the trust, because some of the trustees are unascertained. If all the beneficiaries agree, then the trust can be terminated.

The Rule Against Perpetuities

This is a Rule that kills contingent remainder that vest too remotely. The remainders that it kills must be contingent and must have the possibility of staying contingent for too long. The most famous statement of the rule is: “No interest in real or personal property shall be good unless it must vest, if at all, not later than twenty-one years (plus nine or ten months) after a life or lives in being at the creation of the interest.” We’re happy to either have the contingent remainder vest or fail in a timely way. We just want contingent remainders to go away! They have to stop being contingent remainder either because they become vested or because they become impossible to occur.

The part that will drive us batty is the part about “life or lives in being”. The people have to be alive at the time of the creation of the interest!

As a matter of public policy, we will let the older generation tie property up for one generation plus the (former) age of minority in the next generation. Then that’s it! Anything that stays contingent longer than that offends the rule and will be invalidated. We don’t like remote vesting! That’s what we want to get rid of! We will kill any possibility of remote vesting! We’ll kill contingent remainders that are very unlikely to stick around too long, just as long as it’s possible for them to stick around too long. If it could happen, it’s void. But it’s only the interests that vest remotely that are void. The other interests will still be good.

The tendency lately is to relax the Rule Against Perpetuities which favors “dead hand control” more and more. But the Rule Against Perpetuities is very technical and gets more so as it gets reformed (unfortunately).

With the Rule Against Perpetuities, we are worried about contingent remainders and executory interests, plus vested remainders subject to open, which we’ll treat as contingent for the purposes of the Rule.

The hard part of all this is to determine what life in being validates the gift. You want to pick a life in being who has something to do with the condition that the contingent remainder or executory interest hinges on.

Your children have to be born during your lifetime. The earliest you can die is when your child is zero.

The rule of destructibility of contingent remainder is applied when the estate immediately preceding the contingent remainder terminates. Then you ask the question: “Are the remaindermen ready to take possession?” If they are not, then the contingent remainder fails. If they are, then the remainder vests and becomes a possessory estate. Notice how this rule is different from the other rules enhancing marketability.

North Carolina National Bank v. Norris – Montague left a will with a life estate to his wife, then to his daughters for life, then to his grandchildren for life, and then a remainder in fee simple to his great-grandchildren (none of whom were born at the time of Montague’s death). Upon the death of his only grandchild, Norris, the bank named as the executor of Norris’s will sues to find out whether Montague’s will is invalid for violating the Rule Against Perpetuities. The bank gets the property if the Rule was violated, but Norris’s kids get the property if the Rule wasn’t violated. The trial court finds for the bank, and the kids appeal. Did Montague’s will violate the Rule Against Perpetuities? A grant of a future interest must vest, if at all, not later than 21 years (plus the period of gestation) after some life in being at the time of the creation of the interest.

The problem with Montague’s gift to the great-grandchildren was that it created a contingent remainder for people who weren’t born yet at the time of Montague’s death. There was the possibility that Montague’s daughters could have more kids (thus more Montague grandchildren) after his death.

The problem with the will appears to be that Norris wasn’t specifically named in the will, and thus he couldn’t be used as a “life in being”.

Maybe the problem is this: Norris could have croaked right after Montague. But that wouldn’t have been the end of it, because the daughters could have had more children. Then the daughters could have croaked. So no one alive at the time of the execution of the will would still be alive. But the grandchildren could live longer than 21 years before they have children. Then the remainder could remain contingent for longer than 21 years and 9 months. So the future interest fails!

Furthermore, the court finds that the Doctrine of Separability does not apply in this case.

The gift is this: “To W for life, then to named daughters for life, on death of last daughter, to the children of my daughters (i.e. my grandchildren) for life, then to lawful issue of my grandchildren.” Did this gift, as things turned out, violate the Rule Against Perpetuities? Did the interest in the greatgrandchildren actually vest within a life in being? Sure! Thomas Norris was a life in being at the time of Montague’s death. When he died, the interest would vest in his children (the great-grandchildren). But that’s not how we apply the common law Rule Against Perpetuities!

The gift to the daughters is vested, because this is in a will and when Montague dies, he can’t have any more daughters. As a bonus, the daughters are specifically named. Therefore, the hypothetical possibility that Montague could have more children doesn’t matter.

What about the gift to the children of his daughters? This gift would be vested remainder subject to open. We treat that as contingent for the purposes of the Rule Against Perpetuities.

What about the gift to the “lawful issue” of the grandchildren? This could include great-grandchildren, great-great-grandchildren, and so on. This one is a contingent remainder in fee simple absolute, because it involves unascertained people.

What about the Peace Institute? They have an alternative contingent remainder in fee simple absolute. The only way they get it is if there’s no lawful issue of the grandchildren.

How do we apply the Rule Against Perpetuities? Why does the gift violate the Rule with respect to the great-grandchildren?

The Rule Against Perpetuities says, in effect, “you can’t control a world that consists of people who weren’t born when you were alive, except for the first 21 years”. (This is just my conception of it, it’s not the law.)

The Rule Against Perpetuities works better than the other rules because it’s harder to avoid.

The doctrine of severability

If you could have divided these gifts up into several gifts to each of the children of the grandchildren, then Thomas would have worked as a life in being for his issue because his issue would have been identified on the date of his death. Thomas’s remainder had been vested subject to open, but when his mother died, his remainder would be vested. But the counterargument in this case is that it wasn’t separate gifts; it was all one gift, and the court must treat it that way. If there is any example where the remainder will vest too remotely, then it fails.

There are a limited number of fact patterns. If you don’t get it, you can probably memorize it. There’s the “precocious toddler”, there’s the “fertile octogenarian”, there are “unborn widows”, and there are problems with gifts spanning three generations.

Be suspicious of conditions that don’t relate to human life or death. They might be things that could stay contingent way longer than any one person will live.

Notice that once you drop off an executory interest, saying that it violates the Rule Against Perpetuities, the preceding estate can’t be a fee simple subject to an executory limitation anymore.

Recall that possibilities of reverter are the least alienable kind of future interest. One reason is that they can potentially be a way around the Rule Against Perpetuities.

All reversionary interests are vested!!! The Rule Against Perpetuities can’t kill these interests!!!

When you see a future interest, the thing that will make it into an executory interest in general is if it follows a vested fee, or if there is necessarily a gap in seisin.

Pretty much all Rule Against Perpetuities problems seem to arise from gifts where the recipients aren’t named.

It was considered dangerous to have alienable possibilities of reverter! If you could sell the possibility of reverter, then you could pretty much get around the Rule Against Perpetuities.

The Rule Against Perpetuities doesn’t operate on reversionary interests! This includes reversions, possibilities of reverter, and rights of entry.

There is a special exception for successive charitable uses. If you do, they are exempt from the Rule Against Perpetuities. “Contingent or executory interests to charities fall within the rule unless it is a charity on a charity.”

Judicial reform

There’s lot of stuff that goes under this heading, but is it really reform? Braunstein would just abolish future interests. One reason that they don’t get abolished is that every generation of law students has gone through the process of learning them and that future law students better do it too because it’s kind of like hazing.

Only Anglo-American law recognizes these future interests! Continental Europe doesn’t recognize them. England doesn’t recognize future interests nearly as much as the United States since 1925.

The modern view has been to move in the other direction, keeping these future interests valid for longer periods than these rules would allow. The rule of destructibility, the Rule in Shelley’s Case, and the Doctrine of Worthier Title have been abolished in most places.

The reform of the Rule Against Perpetuities hasn’t done a whole heck of a lot. You still need to know the Rule to work with the reform. For example, the Uniform Statutory Rule Against Perpetuities allows future interests to be valid if they would either vest or terminate within 90 years after its creation.

Then you have “wait and see”. First you apply the common law Rule. Then, if an interest might violate the Rule Against Perpetuities, then you must identify why it violates the Rule, and finally identify the events that you’re waiting for. Then you wait around to see what really happens. After you sit and wait, if the Rule Against Perpetuities is violated, you try to reform the interest to best carry out the grantor’s intent.

The point is that with all these rules, we’re extending contingent interests, reforming the Rule Against Perpetuities by making it less potent, but we’re doing nothing to make the Rule Against Perpetuities simpler.

Statutory reform of the Rule Against Perpetuities

O.R.C. § 2131.08 (C) is a combination of two reform elements: cy pres (which applies to the law of charitable trusts) and wait-and-see. The doctrine of cy pres says that if things go on for a long time, it might be impossible to accomplish the original purpose, so you reform the original document to keep with the testator’s intent. So this is a doctrine of reform, trying to keep with the testator’s intent. The second thing is that the statute adopts “wait-and-see”. In determining if the Rule has been violated, you don’t indulge in all the crazy assumptions like the fertile octogenarian and the unborn widow: you actually wait and see what happens. You judge the validity of the gift by actual events, not possible events.

So first: we’ll find if the gift violates the common law Rule Against Perpetuities. If not, you’re done. If so, we figure out what the potential problem is, which tells us how long we have to wait. Then we wait and see if the contingent remainder vests or fails too remotely. If we wait all that time to find out if the gift actually violated the Rule Against Perpetuities, then we reform it at the date we find it in violation in order to bring it into compliance, taking into account the testator’s intent. By that time, the testator will be dead.

Options and rights of first refusal

We haven’t talked about these, but an option is a right to purchase something at a certain price at a future time. A right of first refusal is a promise to first offer certain property to a certain person before it’s made available for anybody else. These may have Rule Against Perpetuities problems! For example, what if the parties are corporations? Traditionally, the courts have applied the Rule Against Perpetuities and have struck down options and rights of first refusal if they didn’t end or have to be exercised within 21 years. Wait and see applies to these and cures most of the problems. Usually, the parties didn’t intend for these things to be perpetual, and wait and see cures their ills.

Wait and see doesn’t make things easier! If anything, according to Braunstein, it makes matters more complicated!

The Uniform Statutory Rule Against Perpetuities

This version of the Rule says that you just wait some fixed period (like 90 years) regardless of any lives in being. You just wait that period of time from the creation of the gift! Then you void any contingent remainders that linger. There are plusses and minuses! You have to wait a long time, and these interests are guaranteed to hang around a long time even if they eventually fail! Whether you like this version depends on how you feel about the marketability of land and how you feel about “dead hand control”.

State statutory reforms

The Illinois statute, for example, reflects a more piecemeal approach. This statute tries to limit the most extreme applications of the Rule Against Perpetuities, but otherwise tries to leave the common law Rule intact.

If you create a trust with a trustee who can create a fee simple absolute in Ohio, then the Rule Against Perpetuities doesn’t apply. Now it’s possible if you just create equitable interests and if the trustee or trust property is domiciled in Ohio and you comply with all the formalities of the statute, then you can set up a trust that will exist perpetually. You can basically create a fee tail again! Wacky! What this statute does is address one problem: free alienability of land. We have solved that problem because the trustee must be empowered to convey a fee simple absolute. That’s fine. But what the statute doesn’t address in a way Braunstein likes is dead hand control. If it’s your property, you can now tie it up essentially forever. Notice that you must have a lot of money in order for a trust to last that long. You need a big honking trust to be able to continue to pay the trustee over a really, really long period of time.

These statutes started in Alaska and have spread around over the land decade or so. Alaskan banks were trying to generate business for their trust departments. The banks lobbied the legislature to validate these trusts, as long as you have an Alaskan trustee. Then there’s a race to the bottom!!! Ohio banks lobby for their own law because they’re worried that they’ll lose out to the Alaskan banks!

Concurrent ownership

Two people own the same thing, and also have the right to possess the same thing at the same time. When we talk about co-tenants, all of the owners have the right to possess at the same time…but that’s physically impossible! This “metaphysical” concept lends itself to litigation.

Tenancy in common

The modern presumption is in favor of this form. “To A and B” makes A and B tenants in common. This reverses an earlier presumption in favor of the joint tenancy. The tenants own undivided shares: none of them have the right to any particular part of the property. All of them have the right to possess the whole. Their shares are freely alienable.

Joint tenancy

This differs from the tenancy in common in many respects. This is like the tenancy in common in that both parties have the right to possess the whole thing all the time. But it differs from a tenancy in common in that you must use specific language in order to create it (the presumption is against it). It also differs in that there are four “unities” that must exist in order for joint tenancy to exist: (1) time, (2) title, (3) interest, and (4) possession. The interest must be acquired at the same time from the same instrument, they both must have the right to possess the whole, and in addition, the joint tenancy must be proportionate (like each of eight people must have an eighth interest in the tenancy). If you have all this and use the right language, then you get the most important attribute of the joint tenancy, which is the right of survivorship. When one of the joint tenants dies, the other becomes the owner of the entire property by operation of law before the decedent tenant’s will can take effect.

Chosar Corporation v. Owens – Does mining without the consent of all co-owners constitute waste entitling the non-consenting co-owners to an injunction, and if so, can the consenting co-owners allow a third party to transport coal out on adjoining land from an underground passageway?

What can Chosar do with the coal? Not much…they can’t mine the coal without the consent of 100%. They’re just a tenant in common! They have the right to possess the whole, but they don’t have the right to commit waste. The court says that removing a portion of the property without the permission of the co-tenants constitutes waste.

We have this law of waste for the same reason that we had it in estates and future interests. There is an incentive to screw over your co-tenants. The law steps in to prevent some co-tenants from consuming as much as they can in as short a time as possible.

The co-tenant who is deprived of their right to possession has two possible claims: they could ask for an accounting, or ask for damages based on their “ouster”. In the case of an accounting, each co-tenant would get a share of the proceeds actually received by the other co-tenants. If they sue for damages for ouster, they are entitled to the fair market value of the property. For example, maybe the fair market rental value of the coal rights was higher than what was actually paid. This is an important remedy for recovering for what has happened in the past. But how do you prevent this from happening in the future?

Let’s say a brother and sister inherit 40 acres of land jointly, but they can’t get along. What do you do? You can get a judge to partition the land! You can split the tenancy in common into shares, thereby getting rid of the “common pool” problem by converting communal property into separately owned property. That assumes that the property can be split more or less evenly. But what if you inherit a house instead of 40 acres? It would be like a “War of the Roses”-type situation. You could sell the house and split the money if you want. You have it appraised, you establish a minimum value, you auction it off, and you divide the proceeds.

What about the trespass claim? Did the majority or the dissent have the better argument here? The majority simply states that this is a trespass because it’s an exclusion of the non-consenting owners. But the dissent argues that every co-tenant has the right to travel on its own property. As a matter of law, no co-tenant may exclude another: that would constitute ouster. And we all agree that mining will constitute waste without the consent of all the co-tenants (the usual solution here being partition). But this goes further: the use of the subterranean tunnel is said to constitute ouster. All the co-tenants have the right to possess, and this right is transferable! So as long as the non-consenting co-tenants aren’t excluded, the consenting co-tenants are simply exercising the right to possession that all co-tenants have!

You can limit the right to partition for some reasonable time for some reasonable purpose, but you can’t create an absolute ban on partition for all time. We want property used in its most productive form. How long can you have a trust set up for? You’re limited by the Rule Against Perpetuities. At some point, someone will get the fee simple and the trust will end, or else the trust will violate the Rule Against Perpetuities.

But most co-tenancies can be partitioned easily and are not a good way to make sure land is used a certain way into the future.

Let’s say a wife acquired interest in some property before she got married. Can she transfer that interest to herself and her husband? No! There is no unity of time or title! She acquired the property at a different time and with a different instrument. But all she needs to do is convey the interest to a “straw”, like your attorney or something, and then have them transfer it back to you. The need for this has been eliminated by statute in some states, but this is still the safest way to create joint tenancy.

The main attribute of joint tenancy is the right of survivorship. What does severance mean in this context? What do we mean by severing the joint tenancy? We’re talking about “cutting off” the right of survivorship, which converts the joint tenancy into a tenancy in common. You sever a joint tenancy by selling your interest.

Secret severance

One of the problems with joint tenancies is that they are easy to sever. It’s even possible to sever them secretly! Let’s say a husband and wife own property as joint tenants with the right of survivorship. The husband executes a deed conveying his interest in the property to a straw and then the straw reconveys the property to the husband. The husband never tells the wife. What if the wife dies first? He could pretend that the deed never happened and get everything! What if the husband dies first? He’ll leave the deed where his folks can find it, which would mean that the wife only gets half. This seems unfair! But it’s certainly possible to do.

Harms v. Sprague – Here is a mortgage on a farm held as joint tenants by two brothers. The brothers have a falling out. One brother moves out and lends money to a friend by taking out a mortgage on his share of the farm. But then he dies, and it turns out that the mortgage is worthless because the other brother gets the whole farm. The moral of the story is that the bank must require either to have the joint tenancy severed, or have both joint tenants sign off on a loan. In that case, if all tenants join in to sell the property, that doesn’t sever the joint tenancy, they’ll just have a joint tenancy in the proceeds of the sale. In order to have a severance, there must be an intent to sever.

In re Estate of Thompson – Richard opened two joint and survivorship accounts with his wife, Carma Lee, as the other party. Near the end of his wife’s life, they had marital problems and Thompson closed the accounts and transferred the money into accounts solely in his name. Soon thereafter, his wife filed for divorce, but she died before the divorce went through. Carma Lee’s daughter was appointed as executor of her will, and she claimed that Carma Lee’s estate was entitled to half the amounts that were in the joint and survivorship accounts. Richard took exception. The referee found that Richard improperly withdrew the money from the accounts in breach of a fiduciary duty to his wife. The Court of Appeals reversed, saying that all the money properly went to Richard upon Carma Lee’s death because he was simply trying to preserve the funds for both parties’ mutual benefit. The interests in a joint account are proportional to the net contributions of each owner.

Carma Lee’s estate gets whatever proportion of the money she actually contributed.

What happened here? A couple is divorcing. The wife sought a restraining order to try to keep him from withdrawing money from two survivorship accounts. The husband closed the joint accounts, withdrew the money, and then put them into accounts in his name only. He was served with the complaint the next day. Not long after, the wife went into a coma and later died. Her daughter wants to get the money.

Joint accounts are a very common way of holding wealth. But usually, it’s just for convenience. Couples will put money in joint checking accounts because they pay the bills jointly. A lot of times they have no idea what will happen when one of them dies!

Also, joint accounts are frequently used to make gifts to children. Litigation arises over the parties’ actual intent very frequently. What did they intend when they made the contribution to the joint account? (1) What did they intend when they’re both alive? (2) What did they intend upon the death of one of the contributors? You must be able to answer both questions.

How does this court deal with it? The court eventually concludes that the husband should get basically just that money which he put in.

What is the effect of the Ohio statutes? What is their purpose? This is a relativity of title thing. The bank has properly paid out the money if it has paid to one of the joint tenants. But it doesn’t say that the joint tenants don’t have claims against each other. These statutes are designed to protect the banks rather than adjust the relationships between the joint tenants.

This court is concerned that joint tenancy accounts were being used as will substitutes. The court is suspicious of them even though they are very commonly used. The normal formalities of a will are not complied with in the case of these accounts. However, the court will recognize them anyway as an exception to the Ohio statutes dealing with wills.

What about the Uniform Probate Code sections that are quoted? What is their function? A rebuttable presumption is created that during the lifetimes of the joint tenants they mean to own shares proportional to how much money they put in rather than in the form of a present gift. There is also a rebuttable presumption that the whole shebang goes to the survivor upon the death of the other tenant. But there are other reasons you could have a joint tenancy account. You would just introduce evidence to show a contrary intent to the one presumed.

But what’s the problem with this rule? Who will introduce the evidence? The one who isn’t dead! If one of the joint tenants is dead, it will be difficult rebutting the evidence of the living joint tenant. During the lifetime of the parties, things will be easier to handle.

The rule of Thompson has since been overruled in Wright v. Bloom because this rule led to a lot of litigation in Ohio! There really is no good rule. Some people don’t intend survivorship, but some do. If we have a bright line rule, we’ll get some injustice, but if we don’t, we’ll get lots of litigation.

The later case found that the second rebuttable presumption of Thompson actually should not be rebuttable. Once one of the joint tenants dies, the presumption in favor of a survivorship account is irrebuttable. The problem was one of endless litigation. They have gone back to a situation where there will be lower administrative costs, though more of a chance of injustice.

Williams v. Studstill – At the time the will was made, Georgia didn’t recognize joint tenancy at common law. But when Alice died, she left 750 acres in joint tenancy to her two children. But it didn’t seem like joint tenancy was allowed in Georgia at the time of Alice’s death.

Furthermore, did the joint tenancy get severed when Mary transferred her interest to Williams? The court reads the devise of Alice as: “To my two children for life, and then to Mary if Mary survives James and to James if James survives Mary.” What is the significance of that? What happens when Mary conveys her interest to Williams? She retained her life estate, so the only thing she would have conveyed to him was her contingent remainder. James died first. So what happens? It looks like Williams gets everything. So Louise is not happy! James Studstill’s contingent remainder is worth nothing because he didn’t survive his sister!

Tenancy by the entirety

This is recognized in maybe 20-25 states. It is no longer recognized in Ohio, though it was recognized until 1986. There is a fifth “unity” required for this one: the parties must be husband and wife. For this tenancy to come into being and continue to exist, the parties must be married. If you have a tenancy by the entirety, it is much like the joint tenancy in that there is a right of survivorship (when the husband dies, the wife becomes the owner of the whole property). It is better than the joint tenancy, at least in theory, in that the property that is held in tenancy by the entireties is not liable for the debts of just one of the spouses. What’s the policy here? It may be to promote marriage and families by protecting one spouse from the debts incurred by the other spouse.

This one has a fifth unity on top of the four unities of joint tenancy: unity of marriage! How’s that a unity? (Braunstein talks about marriage, hilarity ensues again.)

The key to tenancy by the entirety is that it’s designed to protect the joint tenants (especially the wife) from having their property subject to the debts of the other spouse.

Schwab v. Krauss – The transfer to the bankruptcy trustee did not sever the joint tenancy. Then, when the wife took the property, she took it free of her husband’s debts. It’s not all that different from what we talked about as a survivorship tenancy (or joint life estates with contingent remainders). But it does differ in other respects: tenancies by the entirety predate Married Women’s Property Acts. Prior to the 1920’s, married women had very few property powers with respect to either their husband’s property or their own. Property was considered the domain of the husband! In that respect, tenancies by the entirety make sense to protect women. The Acts say that married women have the same right to manage marital property that their husbands do. But there’s nothing that coordinates the Acts with tenancies by the entirety! So what do we do? Do we say that the wife has a similar power so that she can dispose of the property as well, or will we put the husband in the position that the wife formerly had, that is, neither person can unilaterally dispose of the property? The states went all different ways!

Sawada v. Endo divided up the states into four groups that went four different ways. In four states, the common law is retained and husbands have a lot of power. Braunstein speculates that this would be unconstitutional if anyone cared to challenge it. The other main group, an attempted unilateral conveyance by either spouse is totally void. If they want to act, they must act jointly. In this most common setup, the tenancy by the entirety differs significantly from the survivorship tenancy. With the survivorship tenancy, you can’t unilaterally sever the survivorship right, but you can always transfer the possessory right. But with tenancies by the entirety, neither person has the power to transfer their possessory right. So the main significance of the tenancy by the entirety is to protect a spouse of the tort or contract debt of the other spouse.

Around 1986 or 1987, Ohio abolished the tenancy by the entirety, but it did so prospectively only. If you established a tenancy by the entirety prior to 1986, it’s still valid. It was only in existence for 35 or 40 years. Braunstein has never been able to find a case that would say how we would treat these now in Ohio.

Tenancy by the entirety requires that you’re married. For a survivorship tenancy, it can be between any two human beings. If you have a survivorship tenancy, you have both a present interest (a life estate) and a future interest. Either party can transfer that to whomever they please. With the tenancy by the entirety, the interests are not freely alienable. Neither party unilaterally can transfer the possessory estate or the future interest. You can have a survivorship tenancy even in a state that recognizes joint tenancy. Survivorship tenancy is basically a wad of regular old alienable estates and future interests stuck together.

The landlord-tenant relationship – non-freehold estates

For a long time, nonfreehold estates were looked down on as not of the same “dignity” as the estates in land that we’ve been studying so far (life estate, fees simple, and so on). This used to be more or less like a sharecropping arrangement or a feudal setup. These could also be disguised lending transactions. In Medieval England, it was illegal to charge interest, and a lease was one way around the usury laws. You could use the lease to borrow money but make it look like something else. So the lease was looked down upon.

But the way we look at the lease has changed for a variety of reasons in the United States. Not in the least is the urbanization of the United States: a higher and higher percentage of people live in apartments that they lease rather than homes that they own. This includes all socio-economic strata. More middle- and upper-class people are living in apartments than ever before. Also, the civil rights movement has enfranchised a lot of people in terms of voting who were previously disenfranchised. A lot of people who were relatively poor and living in apartments all of the sudden had more political power. One way this power has been exercised is to change the law of landlord and tenant significantly.

Another aspect is the consumer protection movement. Even though this is a property transaction, it has many elements of the sale of goods. It’s a sort of well-defined package of goods and services that the parties bargained for and looks like any other transaction. There has been a trend to try to apply warranties to leases just like sales of goods.

Non-freehold estates are a present possessory interest followed by a reversion. It’s no different than a life estate or anything like that, except instead of being measured by someone’s life, it has a built-in durational requirement.

The estate for years (which is really a misleading term) is characterized as ending at a certain time which is either specified in the lease or calculable with reference to something else, and it ends without notice. Let’s say I’m leasing this apartment for eight years. Then I have an estate that lasts for eight years, and no notice is required. It will be called an estate for years even if it lasts only part of a year.

If you have a lease, review it closely! Many leases around here say that if you’re going to terminate the lease, you must give a certain amount of notice. Landlords use this as a way of not giving you your security deposit back. Be careful! If you need to give notice, make sure that you give it!

The periodic tenancy can arise in a number of ways. You can bargain for it, for example. The essence of the deal might be that you’ll rent the property for some fixed period, and then the lease will automatically renew if neither the landlord nor the tenant take steps to end the lease. A month-to-month lease is a common one (that’s what I got!). If neither party gives notice, the lease automatically renews. It’s the same lease, but it renews and the term is extended for so long as neither party gives notice. You can bargain for that lease, but most often the parties bargain for a term certain, but then the tenant stays on and keeps paying and the landlord accepts it. Then the estate for years is converted into a periodic tenancy. At common law, the periodic tenancy is limited to whatever the original lease was. But statutes in every state have limited the periodic tenancy such that the period is the term of the lease or six months, whichever is shorter. Typically, what you do is enter into subsequent new leases for a term certain each month.

The tenancy at will is not used much. It arises sometimes because the parties meant to do something else, but what they meant to do was illegal. It may arise consensually, though. Say you want to store your car in my garage, and I say that you can do that and you do it. At common law, these could be at the will of either party and no notice is required. Either party can say “get out” or “I’m leaving” and the tenancy is over. If the landlord terminates, the tenant has a right in the nature of an easement to go on the land to recover her property. The tenancy at will terminates upon the death of either party or upon the sale of the property or the reversion of the landlord. Many states, including Ohio, require notice to terminate a tenancy at will. For all practical purposes, the tenancy at will is very much like the periodic tenancy.

The tenancy at sufferance is not really a tenancy at all. This simply describes the situation where the tenant came into possession lawfully but no longer has a right to be there. The most common example is where the tenant comes in lawfully and then remains after the expiration of the term of the lease. We call that person a tenant at sufferance. At that point, two things can happen: (1) the landlord can bring suit to evict the tenant, or (2) the tenant can tender the month’s rent, the landlord can cash the check, and then the tenancy at sufferance turns into a periodic tenancy.

Statutory tenancy

In fairly recent years, beginning in 1975, there has been more and more regulation of the landlord-tenant relationship, especially in the residential setting. Virtually every state has created some form of regulated tenancy. Sometimes this has been created by judicial action only. For example, every lease may be found to create a implied warranty of inhabitability that can’t be waived. In other states like Ohio, there are statutes that create certain obligations on the landlord and the tenant that also can’t be waived. The tenant, for example, must put trash in the appropriate receptacles and not do any damage to the property. The landlord has to keep up the premises in reasonable condition and not interfere with the tenant’s occupancy. Tenants are entitled to the return of their deposit within 30 days of the end of the lease. If the landlord is going to withhold any portion of the deposit, they must give you written notice of why. So it’s a good idea to take pictures of your apartment to show that it’s in decent condition. If the landlord doesn’t give back your deposit within 30 days, you can sue for double the deposit plus attorney’s fees. By the way, whenever you send notices required by statute, send them by certified mail.

Walls v. Giuliani – This is about some squatters in New York and whether there was a tenancy at sufferance. It depends whether the owner (in this case the city of New York) acquiesced to their presence. What’s the difference between a squatter (a trespasser) who have no rights and tenants, who are entitled to certain rights? The court finds that the plaintiffs have stated a claim, though they have a problem of proving it. What did the city do? The tenant’s entry, though under some circumstances it could be described as a trespass, cannot be so described in this case. There is no dispute that unless there is some political process at work here that the tenants are going to get kicked out.

Will the landlords have to use the Forcible Entry and Detainer statute, or will they be able to use self-help? This is why it matters whether the squatters are tenants or trespassers. Under the statute, even a tenancy at sufferance cannot be terminated without 30 days notice. That means that the tenants will be entitled to stay in the building for at least another 30 days. The FED statutes create a tradeoff: the tenants get some protection, but the landlords get a quicker procedure. For example, consider Housing Court, a branch of the Municipal Court. That’s what a FED statute is.

So what is self-help? The landlords might do things like change the locks, turn off the heat, and other sort of underhanded stuff. When is self-help allowed under the New York statute? You can’t be put off your property in a forcible manner. If you are, then you are entitled to treble damages. But just what do we mean by forcible? It means anything that will tend to result in a confrontation more forcible than a discussion. If a court adopts this view, and most of them have, then there really isn’t any such thing as self-help whether a statute prohibits it or not.

“The state has an interest in monopolizing violence. If there’s going to be violence it’s going to be the police or the sheriff that does it and not private individuals. In that way, it’s controlled.”

This may not apply to commercial leases. Force is much more likely to be permissible as between businesses than between a landlord and a private, individual tenant. In commercial situations, the same policies are not at stake.

The lease

We must distinguish between a lease and other things. A lease may or may not be a contract, but it carries certain rights, including the right not to be dispossessed. If you get kicked out of a movie theatre, you don’t have a lease, but rather a license, which means you don’t have a property right to remain where you are subject to some judicial proceeding terminating that property right. So it’s important to distinguish between leases and licenses.

The statute of frauds applies to leases, but not short-term leases. Generally, all transfers of real property have to be in writing to be effective. One exception is short term leases. If you have a lease for a year or less (or three years or less in some places), it doesn’t need to be written. Also, most courts hold that the Rule Against Perpetuities doesn’t apply to leases because they are a form of vested estate. But options on the renewal of leases may violate the Rule Against Perpetuities. But if you’re in a state where that’s the law, then all you have to do is say that the tenant has the option to renew every year during the tenant’s lifetime or during the tenant’s lifetime plus 21 years. What would kind of get around the problem, but not really, would be to make it a periodic tenancy. But that wouldn’t give the tenant the same thing that this gives the tenant. The tenancy could be terminated with appropriate notice. What is being bargained for in our example is a lease that can be renewed at the same rate basically forever.

What is an indenture? Think of the word “indented”. Indentures were used when people couldn’t read much. If you wanted to know if someone else had a copy of what you have, you would tear a piece of paper with a jagged edge and then you could always check if they fit together. This has no meaning anymore really, but sometimes we’ll call a lease “an indenture of lease”.

Adrian v. Rabinowitz – The defendant leased a storefront to the plaintiff. However, on the day the plaintiff was supposed to take possession, the previous tenant was still wrongfully occupying the storefront and didn’t leave until about three weeks later after the landlord went to court to have the old tenant removed. The plaintiff sued for breach of the duty to put him in possession on the first day of the lease based on theories of both an express duty and an implied covenant. The trial court found for the plaintiff, and the defendant moved for a nonsuit and a directed verdict.

Did the lease contract impose a duty on the lessor to put the lessee in possession of the storefront on the first day of the lease term? When the term of a lease is set to begin at some point in the future, the lessor has an implied duty to make sure the premises are available for the new tenant’s immediate legal and actual possession on the first day of the lease.

The basic idea is when parties bargain over the lease, they’re not merely bargaining for the right to sue to eject someone who is there wrongfully, but to actually be able to move in. I think this might be a good Coase Theorem problem, because it’s probably a little cheaper to bargain just for the right to sue than for the right to actually possess. The cost of ejecting the previous tenant (or maybe eventually ejecting the lessee) is probably built into the cost of the lease if that responsibility rests on the landlord.

This case says that there is no implied covenant of quiet enjoyment in New Jersey. But New Jersey is the only state where this is true, as far as Braunstein knows. But what is the implied convent and quiet enjoyment? What if someone busts into your property and drinks your beer and watches your TV? That’s a trespass. But if the landlord or someone acting for the landlord does the same thing, that would be a breach of the implied covenant of quiet enjoyment. Basically, this covenant says that your possession will not be disturbed by the landlord, someone acting on behalf of the landlord, or someone with superior title to the landlord.

Does the landlord have to give you possession at the beginning of the term? Yes, they do. The American Rule says that the landlord must only give the legal right to possession, but it’s the tenant’s job to get the other person out. The English Rule says that the landlord has to clear out the premises before the tenant moves in. The tenant must be put in both legal and actual, exclusive possession of the property. The burden of doing a lawsuit goes to the landlord. So which rule is better? The English Rule may make more sense because the landlord is the least cost avoider. The landlord can make it right more cheaply than the tenant. The landlord is likely more sophisticated and is more likely a repeat litigator. Also, the court says that when you rent space, you’re paying for space rather than the right to sue for it. So why would the American Rule be the majority rule? If you conceive of a lease as the sale of an interest in property, and it’s not the landlord who is causing the problem, then once you’ve bought the property, it’s your problem. If we think of the tenant as the owner of a property interest, then we may find that the landlord no longer has an interest. This keeps with early conceptions of the lease.

Whichever rule is adopted, it’s only a default rule that the parties can contract around. Even in a state that follows the American Rule, the lease could provide that the tenant will get actual as well as legal possession at the start of the lease. But the problem is that most tenants wouldn’t think to include the language of the English Rule in the lease. Once you say the American Rule is the default rule and that the parties can bargain for whatever they want, the problem is that the tenant may assume that they’re getting a guarantee of actual possession and they won’t think to bargain for it.

Slater v. Pearle Vision Center, Inc. – Pearle signed a commercial lease to open a vision center in the plaintiffs’ shopping mall. Pearle paid the rent, but never moved into the storefront. The shopping mall owners sue because they feel that having an empty storefront hurts business in their mall overall. They claim that the lease contains a requirement that Pearle actually take possession of the premises. If Pearle is paying the rent, why didn’t they just occupy the premises? If they did move in, they would have operating expenses. The shopping mall doesn’t want to look “suckier”. If you have empty stores, suckyness is manifest.

The court starts out as construing this agreement as mainly a contract rather than a conveyance. But what difference does that make? If we interpret this as a sale, we have a one-time transaction between the parties and the tenant has a property right. That would be the end of it. We would figure out the duties of the parties based on that relationship. But if we construe it as a contract, we get into a whole different set of guidelines for construing contracts, including the implied obligation of good faith. The court will interpret the contract to protect the reasonable expectations of the parties. The modern view of the lease is that it is predominantly a contract and not a conveyance of property interest. Most courts would look at this as an ongoing relationship that is much the same as a contract. This case is consistent with the modern trend of how leases are construed.

The court gets into the doctrine of necessary implication, which is that expectation that the parties must do those things that are just in order for the bargain to be carried out. Then the court delves into some of the specific lease provisions that seem to suggest that both parties contemplated that occupying the property was part of the deal. On the other hand, the lease doesn’t say that the store must remain open on certain days or for certain hours. These provisions give some support to the court’s argument, Braunstein says. The main point is that courts treat leases as contracts and then adopt doctrines of good faith and fair dealing into the contract. This represents a fairly modern view of the lease and how it ought to be construed.

Assignment and subleases

You have an assignment when the tenant transfers his entire interest in the lease and the leased premises to an assignee. The consequence is that the tenant remains liable. The tenant is always liable to the landlord because there is still a contract between the landlord and the tenant. The landlord and tenant are in privity of contract. The tenant has obligated himself to pay the rent and keep up the premises as provided for in the lease, and the tenant will have to do that no matter what, unless there is a novation, where the landlord says that he’ll take the new tenant and let the old one off the hook. In addition, the landlord and tenant are in privity of estate. We talked about this in connection with adverse possession. It’s hard to define, and in fact it might not mean much at all. But privity of estate occurs when landlord and tenant both own interest in the same property at the same time. Another way to put it is that it’s a relationship that exists among parties so that it is reasonable to conclude that they owe obligations to each other. This is a very fuzzy definition, because: just what is that reasonable relationship? Let us say for the time being that landlord and tenant are in privity of estate because they own the same land at the same time.

When there is assignment, and the tenant gives up all his rights to the assignee, then privity of estate no longer exists between the landlord and tenant, but rather between the landlord and the new tenant (the assignee). The original tenant now has nothing! The new privity of estate is sufficient to enforce the provisions of the lease against the assignee. The landlord has two theories of enforcement: privity of contract and privity of estate. Privity of contract will always exist between the landlord and the original tenant. Privity of estate will be between the landlord and the assignee after assignment.

Davis v. Vidal – What’s the difference between an assignment and a sublease? The technical difference is that when a tenant subleases the property, the tenant retains an interest (a reversion). The easiest way to conceive of that is if the tenant has a three year lease and subleases the property to someone for two years. The tenant has a reversion at the end of the sublease because the tenant hasn’t leased for the entire term. When the tenant subleases the property, the tenant retains a reversionary interest. The tenant is, as always, in privity of contract with the landlord, but also remains in privity of estate with the landlord because the tenant continues to hold the estate. The sublessee is neither in privity of estate nor privity of contract with the landlord. The landlord’s only remedies will be against the tenant, not against the sublessee!

Sometimes the courts apply these rules in a mechanical way. Sometimes they’ll look and see if there’s a reversion. If there is, it’s a sublease, and if there isn’t, there’s an assignment. Other courts will consider the intent of the parties. But the problem with the latter approach is that the courts can’t figure out the intent of the parties because the parties didn’t really know what they were doing!

In this case, the instrument states that it’s a “transfer”, “assignment” and “sublease”! In general, in order to enforce a contract you must be in privity of contract. If you promise someone that you’ll do something for them and you don’t do it, I can’t sue. Only the person who has been harmed can sue. But there is an exception: two people can enter into an assumption agreement for the benefit of a third party. The tenant and a sublessee can enter into an assumption agreement under which the sublessee agrees to perform all of the duties required under the lease. Then privity of contract is created between the landlord and the sublessee under the third-party beneficiary assumption agreement. The point is that the property law concepts of assignment and sublease, plus the contract concept of third-party beneficiary agreements.

The landlord leases to the tenant for a three year term. The tenant subleases for the remainder of the term, reserving the right to re-enter. Neither the tenant nor the sublessee pays any rent. What rights does the landlord have, and against whom? This looks like a sublease to me rather than an assignment. In that case, the landlord can only recover against the tenant but not the sublessee. There is still privity of contract between the landlord and the original tenant. The landlord has a contract with the tenant to pay every month! It doesn’t matter what other agreements the tenant has made! But can the landlord recover against the sublessee? There is no assumption agreement in this case. Is there privity of estate between the landlord and the sublessee? This is essentially the same case as Davis v. Vidal. The tenant still has a reversionary interest. Should the sublessee fail to pay the rent, the tenant can exercise his right of entry. In Davis v. Vidal, the court holds that the existence of that right of entry is enough of a reversionary interest that we can say that the tenant has not transferred the entire estate. Thus, the tenant is still in privity of estate with the landlord, and the sublessee is not in privity of anything with the landlord.

Does this opinion make sense? Is reservation of the right of entry to make something not an assignment? If the sublessee doesn’t pay the rent, what could the tenant do? The tenant could pay the rent himself. He could also evict the sublessee using a Forcible Entry and Detainer statute! This isn’t exactly the same, but it is similar to the right of entry. Given that the tenant has this power anyway, many courts would say that such a right of entry is not sufficient to prevent this from being an assignment because this is substantially similar to what the law would allow anyway. That would put the landlord and the sublessee in privity of contract. The reservation of the right of entry seems to be the main factor that the court relied upon. In order to proceed again an assumption agreement, the tenant and the sublessee must enter into such an agreement. That’s not what we had here.

An assignment is a transfer of the entire interest. A sublease is a transfer of less than the entire interest. If the entire interest is transferred, the landlord can sue the tenant based on privity of contract, and sue the sublesse based on privity of estate. The result of the case won’t really be based on what the parties call the transaction, but rather on the intent of the parties as judged by the court.

Another problem: The landlord does a three year lease with the tenant. The tenant transfers the lease to somebody else for the balance of the term. The new tenant pays rent to the landlord for a while, but then the new tenant defaults. The landlord sues the original tenant for the rent past due. Will the original tenant be liable? Let’s say that the new tenant agreed to pay the rent directly to the landlord. So the new tenant has breached his promise to the landlord. There is another theory here besides contract. It’s subrogation! When the tenant pays a debt that is primarily due from someone else, the tenant is subrogating the rights of the landlord, and the tenant can enforce any of the rights that the landlord could have enforced. The landlord could have sued the subtenant, so the tenant could do the same. The subtenant is the one in possession. The subtenant doesn’t. The tenant can step into the landlord’s shoes and sue the subtenant.

An assignment is as simple as saying: “I hereby assign my lease to you.” The lessee signs, and that’s the end of it. The assignee doesn’t have to do anything. In addition, the sublessee could say: “I accept the assignment and promise to do X, Y, and Z.”

Don’t forget, if the lessor retains a reversion, then it’s a sublease. If it were an assignment, the lessor would assign the entire term of the lease to the lessee.

Julian v. Christopher – What if the lease prohibits assignment or subletting without the landlord’s consent? On what basis can the landlord base his refusal? The reason must be reasonable! This case acknowledges that the common law rule is that the landlord can refuse to consent and be as arbitrary as he pleases about it. However, the rule of this case, which is probably the trend, is that if the lease is silent, the landlord must be reasonable. What’s the justification of the rule? Well, people should be reasonable. You have a right, especially once you look at a lease as a contract, to expect that the party you’re contracting with will act reasonably and in good faith.

Why do we allow the landlord to be involved with the decision to transfer the leasehold estate at all? We don’t like restraints on alienation generally. The landlord retains an interest in the property, and has an interest in making sure the property is taken care of properly. We give the landlord power that we would not give in other sales. We give the landlord the power to approve.

So the landlord must be reasonable. What does reasonable mean? What if the landlord will not consent unless he is paid more money? Is that reasonable? What if the assignee is charging more rent than what was originally agreed to between the landlord and tenant? Should the landlord get that? The case holds no. The landlord wanted an extra $150 or so, and the case holds that this isn’t reasonable.

The landlord doesn’t have to consent to assignment that will harm the interest of other tenants. The landlord doesn’t have to consent to waste. The landlord doesn’t have to consent to assignment to a tenant with bad credit.

If the contract says: “No assignment without the landlord’s consent”, can the tenant sublease? Sure, because these agreements are construed strictly against the landlord because of the policy of free alienation. If you don’t want assignments or subleases, you must say both.

But if the clause is “freely negotiated”, then the landlord is free to unreasonably withhold consent. Who has the bargaining power, though? Don’t tenants get leases on a take-it-or-leave-it basis? How far will this court really take this opinion? Will they decide that these are contracts of adhesion against public policy? Most people don’t try to negotiate their leases.

Servitudes

There are five types: (1) license, (2) easement, (3) profit, (4) real covenant, and (5) equitable servitude.

The license is a revocable permission. Its key is that it is revocable. There is a big debate in the literature: what if a license becomes irrevocable? Does it become an easement, or is it simply an irrevocable license? Braunstein thinks they’re just synonymous.

An easement is the right to use the land of another for a limited purpose. It is not an estate in land, because it will never become possessory. The most common easement is a “right of way”, like if two neighbors share a common driveway. Power companies also get easements to run their power lines across property. There can be other types of easements as well.

A profit is like an easement, but in addition to having the limited right to use somebody’s property, you have the right to take something. Profits are not very important in modern law. Sometimes they’ll crop up in natural resources law, but other than that it’s usually the same as an easement. The right to take or sever something from the land plus the right to go on the land is called a profit.

Real covenants and equitable servitudes will be treated as synonymous, at least for starters. Real covenants are covenants that run with the land. Successors to the land are bound or benefited by the covenant. Future owners of the land will be bound to perform the covenant even though they didn’t enter into a contract to do it if the right circumstances are met. The original example of this is rent that “runs with” the lease. Courts were originally very suspicious to real covenants because they clouded up the title to land and affected the alienability of land. Today, these are seen as actually promoting the free alienability of land.

License

This is a privilege to use the land of another. It’s not an interest in property, and it is revocable at will (this is a key distinguishing factor of this servitude). It may be granted pursuant to a contract. It’s also not subject to the statute of frauds.

Irrevocable licenses

Camp v. Milam – Licenses can become irrevocable! Here’s sort of a parol evidence rule deal: when there are earlier agreements and then a deed, the earlier agreements get merged into the deed and don’t have any further significance.

How long with the license last? This is more or less an easement now. It’s personal to the Milams. It will end when the Milams leave. It doesn’t run with the land and can’t be assigned or conveyed. They will never acquire an easement by prescription because it will always be permissive now. Does this make sense, even in the context of the case? Braunstein thinks that the case isn’t even internally consistent! We’ve already had one transfer, and it didn’t destroy the license. Why is it that a second transfer would do so? The court says that the license is in gross, personal to them, so when they leave, the license will end. That doesn’t make much sense! The First Restatement takes the position that the duration of an irrevocable license is measured by the length of time necessary to “reap the fruits of the expenditures”. In other words, the license lasts as long as the dam lasts. The Milams are being deprived of the value of alienating the land. If the parties had bothered to sit down and put their intentions in writing, things would have been a lot simpler. Once we start implying agreements for the use of real estate, we don’t know what their scope is or who is entitled to use it. We’re leaving the courts to try to figure it out.

Easement

There’s a Restatement definition, but it doesn’t help us very much. It’s not subject to the will of the possessor of the land. It can be created by conveyance or grant. The essential attribute of an affirmative easement is that it gives the holder of the easement the right to use the land of another by going onto that land for some limited purpose. It’s not an estate in land because it will never become possessory. It doesn’t give you the right to possess land in the typical sense.

Easements are classified in a variety of ways: they can be affirmative or negative. They can be appurtenant—meaning that the benefit of the easement benefits a person in his capacity as a landowner—or in gross, meaning that the easement benefits someone without respect to any land.

An example of an easement appurtenant is a right of way. You might give a neighbor a right of way in order to travel to a public highway. That’s of no use to the holder of the easement except as a landowner. If that person sells the property, the easement will go to the next landowner.

An example of an easement in gross would be a conservation easement. You might grant an easement to a conservation society that doesn’t own land, but just doesn’t want certain land developed. This is also the case with utility companies. The telephone company wants to run wires across your land not for the benefit of any other tract of land, but rather to provide phone service to you and all your neighbors.

The other thing to say about easements in gross and easements appurtenant is that we’re taking about the benefit of the easement. The burden of the easement is always appurtenant.

The easement requires a dominant and a servient estate. You must have both in order to have an easement (though there is such a thing as a “quasi-easement”). The dominant estate is benefited, and the servient estate is burdened by the easement.

So far, we have been talking about affirmative easements. They are so called because the owner of the dominant estate has the right to make some use of the servient estate and perform some act on that land. But you can also have negative easements that restrict what the owner of the estate can do with his own land. There are really only four of them: (1) light, (2) air, (3) water, (4) subjacent and lateral support. You have the right to receive sunlight from across your neighbor’s land (“ancient lights”). So a negative easement could be where your neighbor would agree to restrict the height of vegetation or buildings in order to preserve the right to light, air, or water. The last one is an agreement by which they promise not to excavate so close to the boundary line of the property such that the adjacent land would collapse. These were the only four negative easements. If it’s not one of these things, it must be a real covenant. That’s why we have to learn all five of these servitudes.

Creation of easements

Easements can be created by an express conveyance or a grant. They constitute an interest in land and thus fall into the statute of frauds (with some exceptions). Usually, with the statute of frauds it says that certain types of instruments must be signed by the party to be charged. That is not necessarily the case with easements. They may be signed by the owner of the servient estate, but they may not be. If the dominant party is giving something to the servient party but reserving an easement for himself, at common law the servient party doesn’t have to sign.

Williard v. First Church of Christ, Scientist, Pacifica – When does the easement end? It ends when the church property is no longer used as a church. It’s an easement determinable!

Which estate is dominant and which is servient? The dominant estate is the church, and the servient estate is Willard. Who gets the benefit of the easement? The church does. The servient estate is the one with the burden. That’s Willard. The easement is appurtenant to the church because it makes the church’s land better suited for the congregation. This means two things: any subsequent church user of the land will be entitled to the benefit of the easement. Also, if the church moves away to any other parcel so that it can no longer benefit from the easement, it will lose the easement. This easement is part of this one particular parcel of land.

If something other than a church is established on the church land, then the easement will end.

Why does Willard claim that the easement is invalid? Lot 20 wasn’t owned by the church. When we talk about reservation in a stranger, we mean a stranger to the deed: the church was not a party between McGuigan and Petersen. Willard claims that he’s not bound by the easement because it was never validly created. What’s the basis for the rule (which persists in many jurisdictions, though not California)? In the olden days, they didn’t like deeds! That’s why we got the statute of frauds! Landowners preferred livery of seisin to deeds. The church wasn’t out there, so you couldn’t pass a clump of dirt to them representing their easement. The only way you could have a reservation in a stranger or a third party was by deed and not by livery of seisin. Early English courts didn’t like it. This court says that this is a dumb reason to keep the rule hanging around, so they repeal it!

At common law, courts find exceptions and repeal a rule piecemeal. After a while, the exceptions build up and the court decides to state that the rule no longer exists. This is only the rule in California. This kind of conveyance would still cause problems in many states and just ought to be avoided, mainly to avoid needless litigation. What would be an easy way to get around this problem? What’s the difference between an exception and a reservation? An exception isn’t designed to vest in any party. What’s the purpose of an exception? Recall the different types of deeds, like warranty deeds. One thing that the grantor warrants is that the land is unencumbered. Land is unencumbered only when it doesn’t have any easements. So if you sell Lot 20 by warranty deed to Willard, you’re in breach of your warranty! So when you make an exception, you except the easement from the coverage of the warranties in your deed. But what’s a reservation? What’s a reservation to one of the parties to the transaction? Between two parties, the vendor can reserve an easement for herself. The common law viewed it as though the vendor would have conveyed an unencumbered fee simple and then the vendee grants the vendor an easement. That’s a fiction. The problem was reserving an easement in a third party.

So one way to make this work would be to grant the easement to the church then sell the land to Willard and except the easement from the warranties of the deed. Why not sell Lot 20 to the church and then have the church sell Lot 20 to Petersen and reserve the easement itself? Does that work? Sure. Either McGuigan can grant the easement first and then sell the lot subject to the already granted easement, or she can grant the church the whole lot and they can reserve an easement in favor of themselves. It’s only when we reserve an easement for a third party that we run into problems.

The court is going to get rid of the rule, but many people may have relied on this rule. The court says that if someone can show that they relied on the old rule, then it will only be applied prospectively. The court finds that Willard didn’t pay attention to the deed and didn’t rely on the old rule. Therefore, the court finds for the church. Is the court just being hard on Willard and Petersen? There’s no way to know from these facts. The court seems to have a lot of sympathy for McGuigan and the church, plus they think it’s a really bad rule.

When you except something, you’re carving it out of the coverage of your warranty. You can convey land “with full warranty except…” A reservation, on the other hand, is a way of creating an interest in yourself (or, after Willard, a third party).

Cordwell v. Smith – The defendants discover the access problem and try to establish that they have a right of access across the Cordwell property based on two theories which are often confused, but are separate: (1) they have access based on a preexisting, apparent, and continuous use (a quasi-easement or an easement implied from a quasi easement), or (2) they have access based on easement by necessity.

Easement from preexisting, apparent, and continuous use is basically a contract doctrine. You start out with unity of title and then you have subsequent severance. You have one big tract of land, and prior to the severance or division of the property into two parcels, it was used the way that the defendant wants to continue to use it (an apparent continuous use). If the owner of the whole big thing used a road to go between what would later be the two halves, then you have this apparent continuous use. You also must show that the easement is reasonably necessary. If this is the case, then you impute to the grantor and grantee the assumption that the use would continue because it was important. It must be important because we don’t want to restrict property for trivial things. But if it significantly affects the value of the property, then it is reasonable to assume that when the parties bargained, they assumed that the easement would continue.

The court says that the defendants lose. The court says that for some defendants, there was no unity of ownership. As to the rest of the defendants, the court finds that the road had been used as a logging road and there was nothing to indicate that the roads were to be used after the logging ceased. There was no apparent continuous use. Therefore, the court doesn’t need to get to the third issue of whether the road was reasonably necessary. It probably was, but the court doesn’t have to get to it.

The court held that there was no easement based on preexisting use because the use wasn’t apparent and because for at least some of the people they couldn’t show unity of ownership. But is there an easement by necessity, that is, not contractual but based on public policy?

Easement by necessity

Here are its characteristics: (1) unity of ownership prior to severance, (2) a necessity that existed at the time of severance, (3) the necessity is great, and (4) this easement lasts only as long as the necessity exists. The court finds that since the alternative route was reasonably adequate, there was no great necessity and thus no easement by necessity is implied. It might be that the best way to get to the defendants’ property is through the Cordwell property, but it’s not the only adequate way to get there. But what if there had been an easement by necessity found? We want to make land productive, but we’re not going to force one party to give an easement to another without compensation. In many states, particularly Western states, they have something like private eminent domain statutes. They eliminate easement by necessity, but they create a process by which a neighbor can acquire a right of way and a cost is established for it. This probably had something to do with the “big barbeque” (?) where alternating parcels of land were given to the railroads and private parties. The private parties could get “land-locked” parcels and they would need a way to get in and out.

Where will we place the easement by necessity? How do we balance best access for the dominant party versus inconvenience to the servient party? It’s kind of muddy. There is a famous case in Maine where the only access to land was by sea. The court there said that a lot of land is like that in Maine and that’s okay. But in most places, access by water only is not sufficient; you’ll be entitled to a road. It depends on the location of the land and what it’s used for. But necessity for the purposes of easement by necessity will usually let you get to a “land-locked” piece of land.

Easements by prescription

These are a lot like adverse possession, though there are some differences. There is no statute that authorizes prescriptive easements. Therefore, courts have analogized to adverse possession, including the prescriptive time.

Plettner v. Sullivan – Did the Plettners acquire land west of the chickenhouses by adverse possession? If not, did they acquire a prescriptive easement in the jointly used road? The requirements for getting a prescriptive easement are a little lower than the requirements for adverse possession. The main difference between adverse possession and prescriptive easements has to do with the requirement of exclusivity, which is different for prescriptive easements than for adverse possession.

Let’s say that A owns a tract of land adjoining a public road. Let’s say that A sells the half of his lot that adjoins the public road to B. There has been a driveway that was used by A to get from the back lot to the public road. Compare this situation to a similar one except A keeps the lot adjacent to the road and sells the outlying lot to B. Should there be any difference in the result in these cases? When A sells off the back lot that doesn’t touch the road and B claims a preexisting easement, what is it that B is claiming that he got as a result of the sale? He’ll claim that he got land plus an easement. A gave B a warranty deed. Does any of this breach any of the warranties in the deed? No, because when A says to B that B gets the back lot free of encumbrances, that’s true! A is giving B even more than what the deed states! On the other hand, if A keeps the back lot and B gets the lot adjacent to the road, we have an implied reservation. A is reserving to himself something that is not contained in the deed to B. Does this breach the warranties of the deed or is it inconsistent with the warranties of the deed? Yes, because B is getting land that is encumbered by an easement. For this reason, some courts will not permit this situation, and other courts will say that you can have either an implied grant or an implied reservation to create an easement by preexisting use.

The views are changing! The latest Restatement of Property says that the two cases above should be treated the same. But most courts now would say that an implied reservation will require more necessity than an implied grant.

Aztec Limited, Inc. v. Creekside Investment Company – Did the trial court correctly find that Creekside’s actions did not constitute an actionable trespass? What does Aztec have to lose in this case? Aztec concedes the prescriptive easement for the people who already live on the street. Let’s look at the situation solely in terms of what the easement is worth to Aztec: what’s the six foot strip of land worth? Why would you dispute that the slice of land is worth nothing? Maybe you could graze a very skinny cow there. Why does Aztec care? It’s six feet! They didn’t even know that they owned it when they bought it! Maybe it’s just the principle of the thing. Braunstein thinks that this case is just wrong. It’s not legally wrong, but this isn’t how people ought to behave! Aztec isn’t losing anything except the opportunity to extort Creekside. Braunstein opines that this isn’t the way the law really ought to be working!

Perhaps Idaho has a “private eminent domain” statute. Maybe that would have been the proper remedy for Creekside. But it wouldn’t have mattered how this case was decided: Creekside would get the right to the strip of land because the parties would bargain for it. This is a classic Coase Theorem situation. The assignment of rights doesn’t matter at the level of society because the parties will negotiate between themselves to divide up the property rights.

Now for some more technical issues: Creekside wants to argue that the public has acquired an easement by prescription across the dead-end road. Why do they lose on that issue? Why isn’t there a public easement across the six foot strip? What evidence supported a public easement? There was some evidence. The road was maintained by the city, but it wasn’t used long enough to satisfy the prescriptive period. The city of Pocatello opened up the road to public use.

Here’s the second issue: does the use of the dead-end road by 200 residents constitute a trespass (ignoring the increase in width issue)? Yes, but why? It is said that the burden on the servient estate is increased beyond what was reasonably foreseeable beyond when the easement was granted. What if the easement had first been used for horses and buggies, but now they want to drive cars on the road? Can they do so? The draft of the Restatement Third of Property suggests that there should be a presumption in favor of modernization. Would this case be decided differently if the court had adopted the Restatement Third? No, because there is an explicit proviso regarding “unreasonable damage to the servient estate”. How is the servient estate damaged? Why does it make a difference how many cars cross the six feet? If the six feet can’t be used for anything, then maybe you could find that Aztec couldn’t really be damaged, and thus that the case could be decided differently.

If the change in use of the dominant estate is foreseeable or doesn’t unreasonably interfere with the use and enjoyment of the servient estate, then both in the language of this court and the Restatement Third, then the use of the dominant estate can be changed. But there is a point where the use of the dominant estate could change so much that it could become unreasonable.

What if the public road was widened? That would clearly be a trespass. The remedy would be at least nominal damages for the trespass and then maybe punitive damages as well. The only reason to give punitive damages to Aztec is because they didn’t suffer any actual damages! Braunstein thinks that both sides should have been reasonable and should have come to an agreement.

Any time you have an implied easement based on prescription, preexisting use, executed license, revocable license, or anything else, you have an exception to the statute of frauds and you’ll also have problems with respect to the scope of the easement. That’s because there is no written evidence of what the parties’ intentions were. In all of these cases, we’ll have to struggle to determine how the easement ought to be used: what uses are permissible and what uses are not permissible.

Termination of Easements

Tract Development Service, Inc. v. Kepler – There’s a little strip of land in dispute. Why didn’t the reference to this “Diplomat Avenue” as “now abandoned” mean that they weren’t conveying the easement? The deed kind of suggested that the benefit of the easement didn’t run with the property. But the court says that this isn’t the same as an express exception to the easement. It’s kind of unclear! There is another abandonment issue that will come up later. The court says that these are public streets that had been platted and accepted by the county supervisors. In order to dedicate a street to the public, it must be accepted. In other words, the county gets the benefit of a street they didn’t have to build, but they also get the burden of maintaining the street (like snowplowing and such). But the streets were platted in 1924 and the Keplers made their purchase in 1988. The Keplers didn’t want it as a public street anymore! The public easement in the street might be over, but the court says that the private easement isn’t over.

Was the easement extinguished by merger? The rule is that if the dominant and servient estates come under the same ownership, they merge, and thus the easement would terminate. Was the easement abandoned? There must be an intention by all the owners of the dominant estate to abandon (compare this to merger). Non-use by itself is not enough. There also must be intent to abandon. Recall what we said about fencing when we talked about adverse possession: it shows intent to claim land and shows the extent of the claim. In adverse possession cases, you must prove exclusivity. In prescriptive easement cases, you don’t have to prove exclusivity to create the easement, but you must prove exclusivity to terminate the easement. Fencing is not dispositive.

Exclusivity is not required to establish prescriptive easement; you can share it with the owner of the land. But it is required to terminate a prescriptive easement. When you terminate an easement, you’re ending a use.

Real covenants and equitable servitudes

The benefit and the burden run of a contract between landowners if the requirements for a real covenant are satisfied. The court in Wheeler refers to real covenants as “parasites” that attach to the land. The court intimates that it’s easier for the benefit to run than the burden. Courts used to be concerned that these covenants reduced the alienability of land. But Braunstein disagrees, pointing out that these covenants are very, very popular. If developers are acting rationally to maximize their profit then they think the land is worth more with the covenants than without them. But courts were concerned that any crazy thing you could contract for could become a real covenant and restrict the use of land.

So why are courts more likely to enforce the benefit than the burden? Courts would say that benefits increase the alienability of land but burdens decrease the alienability of land. But the benefit is the reciprocal of the burden. The benefit is not worth much if there is no one to enforce it against. These are often reciprocal promises, so we’ll often have to look at how the litigation comes up to find out whether it’s the benefit or the burden that’s running.

The requirements for real covenants

(1) There must be intent on the part of the parties to have the covenant be binding on successors and assigns. If the subject of the covenant doesn’t exist at the time of the creation of the covenant, the intent must be laid out expressly. (2) The covenant much “touch and concern” land. (3) There must be privity of estate. (4) The statute of frauds must be satisfied.

The most difficult concept here has to do with privity of estate. There are two kinds of privity of estate: “horizontal” and “vertical”. These terms are based solely on how law professors diagram these kinds of cases. Horizontal privity of estate exists between the original covenanting parties. Vertical privity of estate exists between one of the original parties and an assignee or successor.

The first form of horizontal privity of estate is tenurial, or in other words the relationship of landlord and tenant. The second form is mutual. That’s the situation where two people own an interest in the same land at the same time. They are said to be in privity of estate. The third form is simultaneous or successive privity of estate, where privity is entered into as a result of a transfer of an interest in land. So with the neighbors A and B mentioned above, there is no privity of estate and therefore no real covenant is created. Horizontal privity of estate has been largely eliminated in the United States; notice largely substitutes for it.

Vertical privity of estate means that the successors have the same estate or at least an estate of the same duration. When you talk about same duration, we’re usually talking about the same estate. This is the same thing we saw in landlord-tenant law: there was privity of estate between the tenant and the assignee for promises to the landlord that the assignee didn’t himself make.

Wheeler v. Schad – Is the promise to maintain the dam and flume a covenant that runs with the land? To make a covenant run with the land, (1) the covenant must have something to do with the land, and (2) when the covenant imposes a burden on the land, there must be privity of estate between the parties making the covenant. The court finds that the plaintiff and defendant were not in privity of estate at the time that the covenant was created. The defendant also didn’t have notice of any covenants running with the land when he bought the land at foreclosure. Finally, the court finds that there is no binding contractual obligation on the defendants that would survive the statute of frauds.

The Hurd group transfers a portion of the mill site to the Doescher group. Six days later, the parties enter into an agreement whereby they agree to share the cost of constructing an aqueduct that will convey water to their respective mill sites. They also agree for the future that they will both be responsible for half the cost of maintaining the aqueduct if it needs maintenance or repairs. That contract is perfectly enforceable between the two parties.

The Hurd group sells to Wheeler, and Schad becomes the successor to the Doescher group by way of mortgage foreclosure. So is the covenant enforceable by Wheeler against Schad? Neither of them are original covenanting parties. Neither Wheeler nor Schad agreed to pay half the price of fixing the aqueduct. It turns out that the covenant does not run with the land.

The first argument that is made is that the two agreements were really one because they were only made six days apart. What’s the purpose of that argument? If this argument were accepted, the plaintiff would be able to say that they were in simultaneous privity of estate. The court says, however, that at the time of the sale it hasn’t entered anyone’s mind to enter into this covenant. If they had intended at the time of the sale to enter into this covenant, that perhaps could have satisfied the successive privity of estate requirement. What’s the issue here? Is it the benefit that is running here, or is it the burden? It seems to be the benefit to Wheeler of having help in fixing up the mill. What if only the benefit was running? Would Wheeler have been able to enforce the agreement against Doescher’s group? Doescher hadn’t agreed with Wheeler to maintain the dam! You must have horizontal privity of estate in order for either the benefit or the burden to run, according to the court. It is said that even without privity of estate, benefit might run in cases where the burden doesn’t run. But the court says that we don’t need to get to that issue.

What about the Coke example regarding the “chappell”? There is privity of estate because D has given a freehold estate to the church. The chapel is a portion of the manor, and the court says that’s fine because it’s an example of mutual privity of estate because they both own an interest in the estate at the same time. But that has nothing to do with the relationship between Wheeler and Schad in this case. That’s what mutual privity of estate is all about. But the most likely privity of estate to exist is simultaneous or successive. What purpose does horizontal privity of estate serve? If we assume that if they had done the agreement five or six days earlier that it would have run, then all we’re left with is that successive privity of estate is basically a roadblock set up by courts to keep covenants from running because the courts distrusted them.

It turns out that Wheeler pays the whole cost of repairing the aqueduct. It benefits Schad, but Schad doesn’t have to pay anything!

Creation of real covenants

You can create these by express agreement if all of the requirements are present. They are subject to the statute of frauds (with an exception). Usually, when you have real covenants affecting large parcels of land, they are creating by recording a plat of a subdivision that divides up land into parcels. Attached to the plat is a description of all of the restrictions on the land. If you buy the land, then you take subject to the restrictions. Another way to do this would be to transfer all the land to a straw and have the straw reconvey it with a deed containing all the restrictions and covenants. The third, and least reliable way to do it is to insert the restrictions in every deed. But the problem is that people forget! The restrictions may be in some deeds, but not in others. This is what happens in…

Warren v. Detlefsen – Warren Construction developed three subdivisions. They had built a number of single-family homes and were now starting to build two duplexes. The residents sued to enjoin them to build the duplexes, claiming that they were promised that all the lots in the development would be built up with single family homes. The trial court found that a restrictive covenant existed that restricted the use of the subdivisions for single family homes only. Warren appealed. Did the trial court rule correctly that a restrictive covenant was created such that Warren may not build duplexes? Basically, the court finds two grounds for a negative covenant: the actual language of the deed, and the statements of the Warrens plus the reliance upon those statements by the residents.

We have a sloppy situation here. There are a substantial number of unrestricted deeds in the subdivision! What was the restriction? The restriction seems to have been “for residential purposes only”. Who was restricted? The deeds contain covenants restricting the use of the land that is being sold to residential purposes only. The deeds do not restrict what the builder can do with his property. If we did, we would just have a contract between the builder and the residents and it would be enforced. The developer wants to use some of his land, which is not subject to an express restriction, for the purpose of building duplexes. The developer says that business conditions have changed. Some of the purchasers in the area are upset and sue the owner to stop him from doing that.

There are two issues: (1) Was there a common plan or scheme for the development of this land? The court says yes and bases its answer entirely on parol evidence. Such parol evidence can’t be used to modify the written covenants, but it can be used to show a common plan or scheme. (2) When there is such a common plan or scheme, the restrictions upon the lot holders to the benefit of the developer, that restriction becomes reciprocal by implication. The developer’s use of his land is restricted too!

Implied covenants and the statute of frauds

Do implied covenants violate the statute of frauds, and what did the court say in Warren v. Detlefsen? The court didn’t say anything. But why not? We started out saying that covenants and equitable servitudes are interests in land, and they must be written down to satisfy the statute of frauds. But implied covenants are not written down. So why is there apparently no statute of frauds problem? The statute of frauds doesn’t require the contract be in writing, it only requires that some memorandum of the contract be in writing. So maybe you can say that the restriction in deed from Warren to Detlefsen was enough of a memorandum to satisfy the statute of frauds, even though the complete agreement isn’t in the memorandum. There are a few cases that suggest that this doctrine is barred by the statute of frauds. There is no writing that suggests any restriction on the land retained by the grantor. The statute of frauds would then prevent evidence from coming in that would go to prove that there was some implied contract to the contrary.

Implied reciprocal negative easements

What if Warren sells land to Detlefsen and then sells some retained land to X, and then X wants to enforce the restriction against Detlefsen? Is there any problem with that? Can X sue D? Is there privity of estate? Is there a statute of frauds problem? Is the restriction that X is suing to enforce in writing? Yes! It’s the promise that D made to Warren. Now we’re saying that the promise runs with the land and so X gets the benefit of the restriction. There is no statute of frauds problem at all! X is suing to enforce a written covenant. X can enforce an agreement to which he was not a party because of the doctrine of covenants that run with the land.

Could D enforce the restrictions in his earlier deed against X? Let’s say that Warren doesn’t put any restriction in the deed to X. So D sues X. There are no restrictions against X in writing! It’s a different contract! The agreement between Warren and Detlefsen only restricts what Detlefsen can do with his own land. Now Warren sells some of his remaining land to someone else and doesn’t put in a restriction. But Detlefsen want to enforce a restriction against X! Where does he get that idea? It’s implied. We can say there is an implied burden on Warren that runs with the land, and the statute of frauds is not violated. This is the holding of Warren v. Detlefsen. The restriction that D seeks to enforce is not in a writing. In a state like California, there would be a statute of frauds problem. In Arkansas, for example, you can look through the deeds that Warren gave to prior purchasers and see what restrictions were placed.

What if Warren sells the lot to X and restricts the use that X can make of the lot? Let’s say Warren says that X can only use the land for a single-family residence. If X wants to sue D, it’s the same case as before because X is suing on the restriction contained in Detlefsen’s deed. But what if Detlefsen wants to sue X? Can D win? If so, how? This is a written agreement between Warren and X. Also, we could say that there was an implied restriction on Warren’s land that ran with the land.

But what if we’re in California and we can’t rely on the theory of implied reciprocal negative covenants? Well, there is an agreement restricting X’s use of his land. But does that run to Detlefsen? Sure! Detlefsen is a third-party beneficiary! The covenant can’t run with the land because D isn’t acquiring any more land. We can construe this as a contract entered into for the benefit for D and other prior purchasers. This is like what we talked about with respect to assumption agreements. How are you going to prove who the intended beneficiaries are, though? We’ll do the same thing that we do when we implied the covenant, but we’ll do it for a different reason. We’ll look at the common plan or scheme of development. Those people who are within the common plan or scheme are the intended beneficiaries.

When we have a prior purchaser suing a subsequent purchaser and there are restrictions in the subsequent purchaser’s deed, there are two theories available to you. There is the theory of implied reciprocal negative servitudes, and there is also the third-party beneficiary agreement theory. But if there isn’t an agreement between W and X, you lose on the third-party beneficiary theory. It’s only when the restrictions are contained in the subsequent deed that even though D isn’t a party, he can claim that under the common scheme of development that he is a third-party beneficiary. If all the restrictions were the same, then we would imply what was in all the other restrictions. But they’re not all the same! Some of them deal with price, some with square footage, and some with other stuff. The only thing that the court will imply is that the houses must be single family. When we work with a theory of implication, one question is always: just what are we implying?

The doctrine of ancient lights

If you’ve been getting light to your structure through windows or doors or air for some period of time, your neighbor can’t build in such a way as to unreasonably interfere with your access to light and air. The English standard was getting enough light so that a person of ordinary eyesight can read. What you get under this doctrine is a prescriptive easement. If you satisfy the doctrine (the building has been there long enough), you can acquired a negative easement by prescription.

American courts pretty much uniformly reject the doctrine, though. This doctrine doesn’t say anything about protecting a scenic view. Also, solar collectors need direct sunlight. The doctrine that says you just need to be able to read may suggest that you only need indirect light. So this doctrine is probably universally rejected in the United States. The policy reason is that when these issues began to arise in the United States in the 19^th century, we were in a process of modernization. People were building apartments close to each other. The doctrine was seen as one that impeded development. The courts and legislatures were trying to promote the development of cities. Second, you can’t acquire a negative easement by prescription. There must be a wrongful entry that starts the statute of limitations running. Just enjoying looking at someone’s land or collecting the sunlight that flows over someone’s land is not a wrongful act. The statute of limitations never started to run, and therefore it will never run out. In the United States, you can never acquire a negative easement by prescription.

What are the requirements for establishing an easement from a preexisting use? There must be common ownership: somebody would have had to have owned both pieces of land at some point. Also, there must have been a preexisting use that was continuous and apparent! Even if all that is satisfied, you must show some reasonable necessity.

Could there be an easement by necessity? You’ll have a lot of the same problems: common ownership, showing that there was some necessity created when the parcels were severed from each other, but then you also have to show strict necessity now. The degree of necessity is stronger here than when you’re talking about an easement based on preexisting use.

Moseley v. Bishop – Moseley owns some farmland. Bohn does too. There was an easement for a drainage ditch to go across Bohn’s property from Moseley’s property. Moseley’s property goes to one of his descendents. Bohn sells to Gates and others. Gates has the portion of the farm with the pipeline running through it. So what was the covenant here? They put some tiles into the drain. The drain was on Bohn’s property, and Bohn agreed to maintain the drain tiles. Moseley gave him some money in consideration. So Bohn will permanently maintain the drain tile so that Moseley’s land will drain properly. But his successors failed to maintain the tiles.

Did this covenant “touch and concern” the land? Yes! It related directly to the use of the land. “Drain tile” is like pipe! Was there vertical privity of estate? Yes there is! How come? You’re in vertical privity if you own the same property that one of the covenanters held. What about horizontal privity of estate? The court says that it’s mutual privity of estate in that they are covenanting with respect to property for which they both own an easement. The court holds that there is horizontal privity of estate.

Then there is a long footnote. What is it all about? There is some debate whether horizontal privity should be required. Horizontal privity of estate is frequently said to be a “roadblock” that courts put up that don’t really fulfill any useful purpose. The court says that they doubt whether the requirement of horizontal privity of estate is useful anymore.

Why not enforce this as an equitable servitude? Equitable servitudes must be done in equity. In this case, the plaintiff is looking for money damages, not an injunction. The Moseleys had to pay the farm bureau to clean out the tile, and they want Gates and others to pay a share of the cost. If they were trying for enforcement in equity, they wouldn’t have to show horizontal privity of estate. Therefore, the issue here is whether the covenant runs at law. This is probably the only remaining distinction between a real covenant and an equitable servitude: the remedy. In fact, there may be no difference.

Touch and concern

At least for real covenants, and maybe also for equitable servitudes, both the benefit and the burden must concern the land. That means that all real covenants are appurtenant to land. You can’t have a real covenant in gross. But you may be able to have an equitable servitude in gross.

Things are going to affect value if the law enforces them! If it is enforced, it will change the value of the land. Value is determined by law and by what the law recognizes as property rights. You can’t use increases and decreases in value as your guide in trying to decide whether to enforce these agreements. Some people argue that we should get away from this touch and concern requirement altogether and talk more explicitly about policy.

Whitinsville Plaza, Inc. v. Kotseas – Does this case shed any light on the touch and concern requirement? What is the horizontal privity of estate here? How does the court find out that it exists? There are mutual easements running across the land, and the court says that’s enough to satisfy the requirement. They look at the decision of Oliver Wendell Holmes written long ago. What’s wrong with Norcross? It says that non-competition clauses don’t “touch and concern” land. This court says that they do touch and concern land. This makes the same criticism of Holmes that we made of Clark. The point of all restrictions is to increase the market value of the promisee’s land while decreasing the value of the promisor’s land. They all involve value. Holmes says that if it simply tends to increase value, then it doesn’t touch and concern. This court says that they all do, so this isn’t much of a test.

The court also says that you must recognize the historical context of Norcross. Courts were just starting to recognize real covenants and equitable servitudes, and the courts were cautious about allowing too many of them. They had a concern that the alienability of land would be reduced because the land would be tied up with all these promises. The court overrules Norcross, saying that reasonable covenants against competition may run with the land when they help facilitate “orderly and harmonious” development for commercial use. But what if the covenant is just to keep out discount stores? These anti-competition covenants are valid if they serve that purpose. The court says that they won’t enforce boilerplate provisions. These covenants must be tailored to some specific need related to the development of the property. Now we know most of the answer, but there are a lot of creative people out there thinking up things that the courts haven’t considered.

If you compare this to Willard or the Indiana case, the court says that this decision is prospective only. But there is an exception. The decision is made retroactive back to the date of a case where they intimated that they were going to overrule Norcross. That’s kind of weird. The court claims that fair notice was given that they were going to overrule Norcross soon. The Indiana court also gives sort of fair warning, although that case is from the intermediate appellate court.

Policy restrictions on servitudes

You can’t have racially restrictive covenants in this country anymore, but they were very common up to the 50’s and 60’s. Some of these covenants are still on the deed, but they won’t be enforced anymore. Shelly v. Kraemer said that for a court to enforce a real covenant with a racial restriction was unconstitutional under the Fourteenth Amendment because it involves state action. In order to violate the Constitution, there must be something done by the state or federal government or an instrumentality of the government. The courts are an instrumentality of the state, according to this holding. The only case that has expanded Shelly is an Ohio common pleas court. All higher courts that have looked at this say that the case deals with a particular problem and doesn’t apply to any other covenants. That particular kind of restrictive covenants are unenforceable. But what about covenants dealing with religion or ethnicity? Can you place restrictions such that only rich people can live in your neighborhood? Should they be allowed to do it? When we ask how should we enforce equitable servitudes, this is one thing we have to think about.

Blevins v. Barry-Lawrence County Association for Retarded Citizens – Not In My Backyard!!! I need it, the community needs it, I think we ought to have it, just don’t locate it near me. That’s what’s going on in Blevins. These types of facilities are needed, yet your own selfish interests could make you try to keep the place from being built near you.

What was the covenant here? It’s a restrictive covenant that says the land must be used for residential purposes only, and no buildings may be erected other than single or double family dwellings. What do we mean by residential purposes? The court favors a definition of a place where “people reside or dwell”. It’s also not used for commercial or business purposes. It does include apartment buildings, and we think that it includes use as a home for mentally retarded persons. It’s also a non-profit purpose. In a way, it’s close to a business. It’s sort of almost like an educational institution. But the court doesn’t really discuss that.

The court says that this is a residential purpose. But is it a single family dwelling? It’s doesn’t have to be used for a single family residence. The property must be used for residential purposes, and nothing is to be constructed on the property other than a single or double family dwelling. All this covenant is doing is regulating what can be built, not what it can be used for.

So if you live in a subdivision with a covenant that says that you can only build a single family residence on it, and then a funeral home moves in and builds a funeral home that is designed like a single-family house. Does that mean you can build a funeral home in a subdivision where it says that you can only build “single-family dwellings”? Maybe you can build something that looks like a house and then use it for anything you want. Braunstein thinks it’s unlikely they would not allow this. The court would probably say that no matter how much they try to make it look like a house, it doesn’t look like a house. The court would figure out some way not to let funeral homes in. But there’s a difference between use requirements and construction requirements. The court reads the covenant fairly narrowly so it doesn’t have to determine whether the people living in the house are a family. What if someone works out of their home? It depends on how specific the restrictive covenant is.

Equitable servitudes versus real covenants

The only difference between the two is that the horizontal privity of estate requirement is replaced with notice when it comes to equitable servitudes. Otherwise, both kinds of servitudes require: (1) intent to be bound, (2) touch and concern, (3) vertical privity of estate, and (4) formalities. Except for damages as opposed to injunction, there is no difference anymore between an equitable servitude and a real covenant because notice is a requirement for real covenants as well due to the Recording Acts.

Under the Recording Acts, if someone purchases property without notice of some restriction on the property, the third party purchaser without notice “takes” free of the restriction and is not bound by it. For example, A and B enter into a restrictive covenant that restricts B’s lot. If B sells to C, then the burden is binding on C unless C doesn’t have notice of the restriction. What this means in practice is that subsequent takers must have notice or they won’t be bound. The real covenant runs without notice, but, because of the Recording Acts the good faith purchaser is protected from them. So real covenants require horizontal privity and notice; equitable servitudes require just notice.

There are three kinds of notice: (1) actual notice, (2) constructive notice, or (3) inquiry notice. Actual notice is when someone actually tells you that the land is restricted by some covenant. Constructive notice is fictional, and what we mean by that is that the information is contained in the public records. Whether you look at the records or not, you’re deemed to have notice of what’s in there. The third kind of notice is especially relevant in these kinds of cases: inquiry notice. If you have notice of certain facts that would make a reasonable person curious, then you’re deemed to know what a reasonable inquiry would reveal. You have a duty to ask. When we’re talking about residential subdivisions or office parks where there is an obvious plan of construction, you have a duty to ask whether there are restrictions on building there.

Bishop v. Rueff – There were two neighbors, and one put up a wooden fence (a “spite fence”, Braunstein speculates). The fence affected the water flow across the property. Damages are awarded because it is found that the fence was built in such a way as to interfere with the free flow of water.

There was a guy named Imorde who sells one lot to Bishop, and then Imorde sells other lots to someone else. That person divides up the land into lots of little lots, including one to Rueff. Does the restriction between Imorde and Bishop apply to Rueff? The issue becomes whether Rueff had notice of the restrictions. Note that implied reciprocal servitudes seem to arise “at the drop of a hat” in Kentucky.

What’s wrong with saying that Rueff had notice? This case is later overruled. If you want to impose servitudes on lots, you ought to file a plat of subdivision so that the restrictions are in the grantor’s chain of title. That way, all of the successors will have notice. In a regular title search, Rueff wouldn’t come across this particular covenant.

Termination of servitudes

There are lots of ways to end servitudes: (1) release, (2) merger, (3) abandonment, (4) estoppel, (5) waiver, (6) unclean hands, and (7) changed conditions. Estoppel is an equitable doctrine that applies only when you’re seeking an equitable remedy. It might end equitable servitudes but not real covenants. Unclean hands is the same: it won’t terminate real covenants. Unclean hands means that one who is seeking equity must do equity. If you violate a restrictive covenant, you can’t fairly sue someone else for doing the same thing. That doesn’t really terminate the servitude, but it means that the particular person suing to enforce the servitude will not be allowed to do it. The most important is changed conditions. Changed conditions is important because servitudes can last a very, very long time and it’s quite possible that they will become obsolete and incapable of accomplishing the purpose for which they were intended or that they become impractically expensive. Some states terminate servitudes by statute. Others use the doctrine of changed conditions.

El Di, Inc. v. Town of Bethany Beach – El Di has a fee simple determinable! There’s a reversion in the restriction! Is there any “for so long as” type language? There’s an automatic reversion, so we would classify their property interest as a fee simple determinable. So what happens to the possibility of reverter? If it’s a fee simple determinable, the original grantor (the Bethany Beach Improvement Company) should automatically get the property back. The court doesn’t even mention the possibility of reverter! They just skip over it! When you’re talking about equitable servitudes, the courts tend to not enforce forfeitures. It is said that “equity abhors a forfeiture”. The court is more likely to use an injunction.

Some conditions had changed. But were these changes enough to relieve them of the condition to not serve alcoholic beverages? Many of the lots in the original development were unrestricted. There was widespread tolerance of the practice of “brown-bagging”. You could BYOB. So should the covenant be declared unenforceable? What’s the standard for terminating a servitude on the basis of changed conditions? “A court will not enforce a restrictive covenant where a fundamental change has occurred in the intended character of the neighborhood that renders the benefits underlying imposition of the restrictions incapable of enjoyment.” Was the benefit that the Christian Missionary Society sought to obtain from these covenants no longer capable of enjoyment? What was the goal of the people who imposed the restrictions? They were trying to create a small family community. They may also have been part of the temperance movement. But Bethany Beach has really changed: it attracts thousands of tourists every summer.

What is the significance of the fact that the area was zoned for commercial purposes? If the city comes in and rezones an area, that doesn’t wipe out restrictions. Zoning is hierarchical. The “best use of all” is single family residences, and then it “goes down” from that. All uses are permitted that are “above” the category that you’re talking about. So in a commercially zoned lot, you can have commercial, multi-family, and single family use. Zoning establishes a floor, and as long as you’re above that floor, the restrictive covenants are okay. In this case, the town council has declared as public policy that this area is not a residential area anymore, but rather a commercial area.

Private nuisance

What is a nuisance? It’s an invasion of property that isn’t a trespass. It’s a “nontrespass invasion of the property rights of another”. But why do we draw a distinction between trespass and nuisance? What is the distinction between the two? There are some annoyances that a landowner is expected to tolerate. But there are no trespasses that you’re expected to suffer. But you have to just deal with traffic and noisy neighbors as long as they’re not unreasonable. To get to the level of nuisance, it must be more annoying than merely somewhat annoying. But trespass is a violation per se. The laws with respect to nuisance deal with two neighbor’s correlative rights. When there’s a complaint, which neighbor is liable for injuring the other? It’s frequently, perhaps almost always, both neighbors that are causing the harm. One may insist on cleanliness while the other insists on having a dog kennel that they never clean. It’s like the Odd Couple! If they were both slobs, it would be fine, and if they were both neat, it would be fine, and if they weren’t both there, it would also be fine.

This is a place where contracts and torts come together in property law. Nuisance is a tort, but it’s also a lot like a servitude. Nuisance says that I have the right to restrict what you can do on your own land. That’s the same as what a negative servitude does. When you have a covenant, you accomplish that restriction by contract. When there’s no contract, but the use of your land is unreasonable, the restriction can be imposed in tort.

The rule of nuisance is that you can’t use your land so as to unreasonably harm your neighbor. But that doesn’t really tell you anything. It’s at best circular and maybe just doesn’t mean anything at all. It’s always a problem between two people, so it has to do with two competing uses being made of the land.

The law of nuisance is like the law of servitudes in that it restricts what one can do with one’s own land, which would make it like a negative servitude. But it’s also in a sense like an affirmative servitude. If we deny someone an injunction for a neighbor’s annoyance, then it gives the neighbor an affirmative servitude. The denial of an injunction is kind of an implicit endorsement of the annoying use of someone else’s property. The law of nuisance is complicated by the fact that there is no agreement between the parties.

Blanks v. Rawson – Private nuisance is determined on a case-by-case basis, and not every annoyance or disturbance is a nuisance. Only when someone’s legal rights have been violated will a nuisance be found.

The developer in this case had the authority to basically change the rules at will. You might want to be careful about buying into a subdivision where the developer can change the servitudes at will. You don’t know what the servitudes are going to be, and the servitudes may not run. The question is whether the covenant “touches and concerns”. If the developer has the right to change the servitudes at will, it looks like the benefit is personal to the developer, and thus is in gross. The biggest problem, of course, is that you simply don’t know what you’re buying into.

What’s a nuisance per se? It is something that is inherently a nuisance. What would be an example of this? Braunstein says that the only thing that is a true nuisance per se is something that is prohibited by law, for example, having a house of prostitution. It doesn’t matter where you do it or how you do it, it’s a nuisance because it violates the law.

Carpenter v. Double R Cattle Company, Inc. – Damages may be awarded for nuisance even if that nuisance is caused by a “socially valuable” activity. The role of the law of nuisance is to internalize externalities. The court basically abandons existing state law which was based on the First Restatement and instead adopts the Second Restatement. The essential difference between the old rule and the new rule is that the “social value” of the source of the nuisance can excuse all liability. The social utility of an activity should be taken into consideration, but damages can still be awarded even if the nuisance is useful.

Nuisance law is a problem! If you think about it, nuisance tends to protect the status quo. If you’re out in the middle of nowhere and you’re making bricks and making dust and smoke, then it’s not a nuisance. What happens if someone wants to move in near you? We may continue to say that this activity is not a nuisance because you were there first, and thus the person moving near you assumes the risk. If the law of nuisance takes that position, then you “engrave” whatever the existing uses are in the law, so they become protected. As development occurs, it becomes more and more likely that something will be a nuisance. From the Industrial Revolution on, cities developed rapidly and development was seen as a good in itself in ways that we don’t think of it today. Nuisance was seen as hostile to development, especially because the traditional remedy for nuisance was an injunction. That is, if you could prove that your neighbor was doing something that constitutes a nuisance, you can enjoin your neighbor from doing that thing. But the problem is that socially desirable activities might be entirely blocked! These activities may impose externalities, but overall they may be beneficial.

Courts deal with this problem in one of two ways, as this case points out. The first was to limit the situation in which injunctions would be granted, but not to limit the definition of nuisance, so that we would continue to say that something is a nuisance but say that it can be enforced by not just an injunction, but alternatively by money damages. The second option was to limit the situations where a nuisance is found to exist. The First Restatement says that there is only a nuisance if the annoyance outweighs the utility to the actor and to society as a whole. This is a pretty unfair comparison between the two parties! This is the doctrine of comparative utility.

The Second Restatement rule is that the court uses comparative utility to determine a remedy: if the utility is great and the harm is less, then we will award damages rather than a permanent injunction. Notice that this is a classic Coase Theorem problem! Whatever remedy the court grants, the highest valued use will continue. The idea is that if you have a well-organized scheme of property rights and transactions are cheap and lawful, then the highest-valued use is the one that will continue. The thing that it overlooks is that while it’s good for society as a whole, there are real wealth effects as between the parties. If you enjoin the feedlot, the feedlot will buy off the plaintiffs, and the plaintiffs will be richer. If you don’t enjoin the feedlot, the plaintiffs will buy off the feedlot and they will be poorer.

Let’s try to make sense out of the Second Restatement: what does intentional mean in the Second Restatement? Does it mean that you have to have malice? You just need to know that a problem will happen or know that it is substantially certain to result. Knowing includes not just what you know at the outset, but also what you know as you continue the activity. Even if you didn’t know at the beginning that you were going to be causing these problems, you keep on with the activity even after you learn that there was a problem: that makes the nuisance intentional. What’s unreasonable? It’s defined in § 826. If the utility of an activity is greater than the harm, it is not unreasonable under § 826 (a). If the utility is greater than the harm, then an injunction is not available. Under § 826 (b), in order to be a nuisance, the activity must be serious, and the cost of compensating the current plaintiff and others who are harmed won’t put you out of business if you pay. The idea of (b) is that damages and injunctions are both available when they would have the same effect.

In order to make cement useful, you must be located near where it’s going to be used, and that’s going to be in urban areas. Do you automatically get an injunction if you can’t get damages? Say we decide that it’s not feasible for the action to continue. Does that mean that you get an injunction automatically? Let’s say the social utility of doing something is 20 and the cost of compensating people for the harm that’s being caused to them and others similarly situated is 21. That activity should not continue! Damages would have the same effect as an injunction: if you can’t afford to compensate for the harm you’re causing, you ought to go out of business! You’re in business because you have created a situation where you impose externalities on your neighbors. Maybe you make money because you are located close to the big city and you save lots of money because you can blow crap all over your neighbors houses without paying for it. But utility and harm are not easy to measure! Especially when it comes to environmental nuisances it is difficult to prove causality.

What the Restatement is trying to do is say that if the harm of the activity outweighs the utility, you get an injunction. If the harm is serious, and it’s possible for the activity to feasibly continue, you may impose damages. But if taking damages would cause them to go out of business, you’re back to part (a).

What if there’s a guy with a metal plate in his head who lives next to a church, and whenever the bell rings, his experiences horrible pain. So he sues the church…what happens? Hypersensitive plaintiffs will generally not win their case. This is basically the law of torts. An unreasonable interference with a reasonable person using their land will not be allowed. Also, if you look at nuisance as a kind of servitude, then the nature of the servitude is not changed based on who owns the servient estate.

Coming to the nuisance

There was a case involving the first major developer of neighborhoods that were exclusively or almost exclusively for people 55 and older. The guy developed one in Phoenix right next to a feedlot. The feedlot’s defense is that the developer came to the nuisance. The feedlot was already there and had been operating in the same way for years! Now, all of the sudden, all these single family residences are being built around it and senior citizens are complaining about the million pounds of manure. So who wins? If we say that the developer “came to the nuisance”, what happens to the development of cities? The old use would be “cast in stone”! The court have said the coming to the nuisance is a factor in determining whether there is a nuisance or not. But it’s just one factor. Just because one activity is first doesn’t mean that the activity gets to remain.

What would be the appropriate remedy in these coming to the nuisance cases? The court in this case granted a conditional injunction on the condition that the developer paid the feedlot for moving. It didn’t make sense to enjoin the nuisance, and it didn’t make sense to force the parties to be in close contact. The developer gets their “fly-free” environment, but they have to pay for it.

Water

This is an increasingly important issue! All over the country, land that would have been considered marginal or not even suitable for development (because it is low-lying or very sensitive to increased loads of water) is now being developed because demand is increasing. When such land is developed, the flow of water is changed. The flow of water tends to increase! When you have farmland, the ground will absorb rainwater naturally. But if you replace that with hard surfaces like concrete, you get an increased flow of water off that land onto the downstream land, and this can cause very serious problems. It can be a minor inconvenience, or it can be a major problem.

One solution to this problem is to require developers to build retaining ponds. You’ll see this in the middle of lots of places (often with fountains). These ponds accumulate surface water and let it out at a constant flow rate. Instead of having an hour’s rain run off the uphill land to the downhill land in an hour, with a retaining pond it make take 24 hours instead. This was thought of as a pretty good solution, but as we start developing land that is more prone to flooding, you don’t really decrease the amount of water flowing on the land. You only decrease the flow rate. So a higher volume of water flows for a longer time, and that can damage the downhill land too!

Westland Skating Center, Inc. v. Gus Machado Buick, Inc. – The common enemy rule says that the landowners have an unlimited privilege to deal with the surface water on their land without regard to the effect on others. It’s a free-for-all! Water is the common enemy of all landowners, and they’re allowed to deal with it how they see fit! It’s the next guy’s problem to deal with it on his own land. This rule sounds cheap to administer! The people will just fight back and forth, though. It’s cheap from the legal point of view, but in terms of the social cost, it can be very expensive, as it was here. The other problem is that the new person is allowed to impose the cost on the person who has been there already. That seems questionable as a matter of policy and fairness.

The civil law rule says that the higher elevation has an easement over the lower elevation for all surface water that naturally flowed downhill. But this rule had problems too. It impedes the development of land.

This court adopts the reasonable use rule. But once we introduce the concept of “reasonable”, it becomes a jury question and becomes fact-specific in every case!

This is an area where Braunstein thinks that a regulatory solution could be much better and less expensive than having a case-by-case judicial solution. It seems preferable to him to go to the development commission and find out what to do about the water on the land you want to develop. There could be a system of inspections and permits that balance the interests of the uphill and downhill landowners. Frequently, it’s not just the two parties involved. The water is going to keep going downhill! So Braunstein suggests that a comprehensive regulatory solution might be better here than a common law judicial system.