Property Rights Generally Recognized in the U.S.
1. The right to exclude
2. The right to possess
3. The right to transfer
4. The right to use
5. The right to fruits and profits
6. The right to destroy
Examples of These Rights
1. Right to Exclude
§ Security guards generally are given the right to exclude.
2. Right to Possess
§ If you take one of the markers from the white board and put it into your bag, you have possession of it, but you don’t own it and don’t have a right to use it.
ú That is an example of pure possession with no other property rights.
§ You’re babysitting a dog – you’re in possession of the dog but you don’t have any of the other rights.
§ Common law bailment is pure possession
3. Right to Transfer (“Power”)
§ Power of attorney.
§ When people create trusts, the trustee may be given power without ownership.
§ A stockbroker – you have given them a stock power so they can transfer the stock even though they don't own it or have any other property rights to is.
ú For the stock market to work, brokers have to have that power to transfer even though they don't own it.
4. Right to Use (“Easements”)
§ Private easements – driving down a private road. You can drive across it, but you can’t stop.
5. Right to Fruits and Profits (“Profits”)
§ You can have the mineral rights without having the rights to go on the property (like oil – you don’t actually have to go onto someone’s land to get the oil, but they still get the money).
§ This way you can have the exclusive rights to a profit and nothing else.
6. Right to Destroy (“Powers, Government, Emergency”)
§ Suppose there's a fire and state officials (firemen/policemen) have to destroy the property to put out the first for the public good.
§ Or, if a flood is coming and the army comes in to build a levee to block the flood and destroys property in the process, they don’t have to pay for the land they damaged because they had the right to destroy.
§ This one gives the courts the most trouble because they don't like to recognize that people have a right to destroy property. But they do recognize it.
Property as a “Bundle of Rights”
When you describe property, think in terms of the property rights, not the physicalness. It’s common to describe property as a “bundle of rights” in relation to things. The most important rights in this metaphorical bundle are: 1) right to exclude, 2) right to transfer, and 3) right to use and possess.
Intentional & Repeated Trespass
§ Any intentional and unprivileged entry onto land owned or occupied by another.
ú A trespasser is strictly liable; good faith and fault are irrelevant.
ú Doctrine only requires that D intend to enter the land as a matter of free choice, no that he had intent to trespass.
To Prove Trespass:
1. Possession (NOT ownership)
2. Entry by D
3. You can prove actual damages, but you don’t have to
Defenses to Trespass:
§ Permission is a defense, not an element. Trespass tries for possession, not the right to exclude others!
§ Prior possession
Two Important Rules of Equity
1. He who seeks equity must do equity (the clean hands requirement).
2. Equity will intervene only when the remedy at law is inadequate.
à Equity usually issues specific performance, common law courts usually award damages.
Baker v. Howard County Hunt
§ Equity will relieve against continuing/repeated trespass (the damage was of a nature that the Bakers could obtain no adequate remedy at law – you can’t really put a price on the enjoyment of your property rights).
§ Rights of the foxhunters were subordinate to the rights of the landowner, so if the hunter himself goes into the lands of another against the owner’s will, he is a trespasser.
§ Common law re: dogs on other people’s land = “the owner of a dog is not liable for its mere trespass on the land of its own volition.”
§ D ‘s believed that Bakers shouldn't be granted the injunction because they had unclean hands from shooting some of the dogs.
ú NORMALLY, YOU DO NOT HAVE THE RIGHT TO DESTROY SOMEONE ELSE’S PROPERTY WHEN IT COMES INTO YOUR LAND.
ú Owner is liable if he either takes the dog where he knows that it will probably damage the property or if with that knowledge he permits the dog to stray beyond his control.
Black Letter Definition: A trespassory invasion – the standard is Pile v. Pedrick; infringement on property of another, invasion of a property owner’s right to exclude (the main stick in bundle of rights).
§ First ask: Is there an encroachment? Always determined by the facts; important to separate liability issues from remedy issues.
ú Liability: Has party encroached? Common law says any encroachment creates liability.
ú Remedy: Can either be injunction or damages.
§ Then ask: If there is encroachment, what remedy should apply?
§ Injunction is the traditional remedy (box 1 or 3)
ú To impose damages as the default remedy would be the equivalent of forcing parties to contract (forced sale of encroach land). Absolute rule is necessary because cannot replace property regardless of price and land is a limited resource.
§ Damages awarded under equitable doctrines (box 2 or 4) – allow the encroachment but D has to pay P, either determined by bargaining or by court (market value).
Equitable Doctrine of Clean Hands
§ “One who seeks equity must do equity.” Equitable relief is not granted to one who acts in bad faith or bad conscience.
ú Ex: Some courts have denied relief to Ps who have refused to let D onto property to remedy the encroachment (although in Pile, the court granted relief).
Pile v. Pedrick
§ Pile (true owner) sues Pedrick (encroacher) on the issue of a bill of equity, seeking injunction compelling Pedrick to remove party wall that encroached on Pile’s land 2 inches under the surface of the land. Lower ct. granted injunction to Pile. Should loser bear burden of the court costs?
§ Held: No, each party should pay his own costs, and entitlement is given to Pile (Pedrick is given a year to remove that part of the wall).
ú Three available remedies:
1. Permanent trespass (Pedrick would continue paying damages);
2. Pedrick must remove part of the wall; or
3. The entire wall must be removed.
§ Court was mad at Pile for making Pedrick do the most expensive and impractical thing to remedy the problem, so they split the court costs.
§ Court viewed this as a pure property case and felt they had to grant the injunction so as to prevent a permanent trespass.
Golden Press v. Rylands
§ Plaintiff Ryland owned parcel of land, alleged Defendant Golden Press’ foundation extends 1-3 inches into their land for 160 feet. Sought injunction requiring D to remove all footings and foundations that's stuck over onto their property.Trial court properly denied mandatory injunction requiring D to remove the footings.
§ D’s encroachment was unintentional and slight, P’s use was not affected and his damages will be small and fairly compensable, while the cost of removing the footings will be huge and unjustifiable.
§ Court viewed this as a person vs. person situation as opposed to a pure property rights situation.
Property Rules & Liability Rules
Three Types of Entitlement (Rights established and protected by law)
1. Entitlements protected by property rules
§ One that must be brought in a voluntary transaction in which the value of the entitlement is agreed upon by the seller.
§ With an entitlement protected by a property rule, a collective decision is made as to who is to be given the initial entitlement, but not as to the value of the entitlement itself.
2. Entitlements protected by liability rules
§ Involves a collective decision as to the value of the entitlement without the need for a voluntary transaction.
§ A destroyer of an initial entitlement protected by a liability rule must pay an objectively valued sum to the holder of the entitlement.
3. Inalienable entitlements
§ Says that an entitlement is inalienable to the extent that its transfer is not permitted between a willing buyer and a willing seller.
§ The state intervenes to determine the initial entitlement, to forbid its sale or purchase, and to determine compensation to be paid if sold or destroyed.
Calabresis & Melamed – Property Rules, Liability Rules, & Inalienability
Addresses two questions: 1) Who gets entitlement; and 2) How to enforce it.
§ Property Rule: Entitlement can't be removed from party unless he agrees to sell it for a price he sets. Involves least amount of state intervention b/c once the decision is made as to who is given the initial entitlement, the state doesn't decide its value.
§ Liability Rule: Entitlement can be destroyed by a party willing to pay an objectively determined value for it. Has more state intervention.
Rule 1: True owner gets in injunction.
§ This is the rule at common law.
Rule 2: True owner gets entitlement; encroacher gets land. Encroacher has to pay damages set by the true owner.
(Good faith improver, clean hands)
Rule 3: Right to encroach is granted.
§ True owner must pay value at amount set by encroacher
§ No common law doctrine gets you to Rule 3
Rule 4: Encroacher gets the land
§ True owner must pay objective/market value (set by court) to get it back.
Hypo: We have Polluter and Resident, and Polluter’s actions have encroached upon Resident’s passive enjoyment of his property. The scheme of remedies looks like this:
Rule 1: Court issues in injunction against Polluter.
Rule 2: Court finds a nuisance but permits pollution to continue if Polluter chooses to pay damages.
Rule 3: Court finds the pollution not to be a nuisance and permits the polluter to continue without paying damages.
Rule 4: Court permits Polluter to continue unless Resident chooses to pay Polluter damages in order to prohibit further pollution.
Example from the book: There’s a building encroachment – P is the encroached upon party, D is the encroacher (like Pile and Golden Press).
Rule 1 (Pile)
Rule 2 (Golden Press)
Rule 3 (Hinman)
Rule 1: Award entitlement to P and protect this by a property rule. This means P can insist on an injunction forcing D to tear the building down.
§ Like Pile – court ordered that encroacher tear down the wall.
Rule 2: Award entitlement to P, but this time protect the entitlement with a liability rule. This means that D can take P’s entitlement without P’s consent, typically upon payment of court-determined damages, which here would probably be the fair market value of the land occupied by the encroachment.
§ So encroacher can stay, but has to pay damages and P can’t force D to tear building down.
§ Like Golden Press – allows the encroacher to stay by makes them pay damages.
Rule 3: Award entitlement to D protected by a property rule. This means that the building stays put, and the P can have it removed only by getting D’s consent.
§ Like Hinman – court ruled that the airline companies have the entitlement to use the airspace and the surface owner would have to get their consent to stop them from using it.
Rule 4: Award entitlement to D, but P can force D to transfer the entitlement to P in return for money.
When an owner sits on her right to exclude, and the statute of limitations for challenging the original unlawful entry expires, not only is the original owner barred from asserting the right to exclude, but a new title also springs up in the adverse possessor. Dispute of possession = action in ejectment.
§ Once the owner is barred from suing in ejectment, the adverse possessor has title to the land.
§ In effect, the adverse possessor becomes the new true owner, and can now exercise the right to exclude against the entire world, including the original property owner.
§ This applies to real property and personal property.
à Possession based upon physical entry is always superior to possession based just on title.
Possessor’s Rights Before Acquiring Title
§ Before the statute of limitations bars the true owner, the adverse possessor has all the rights of a possessor (he can evict a subsequent possessor who takes the possession away).
§ But before the expiration of the statutory period, an adverse possessor has no interest in the property valid against the true owner. The true owner may retake possession at any time (relativity of title).
Requirements of Adverse Possession
To establish title by adverse possession, the possessor must show (1) an actual entry/possession (2) giving exclusive possession that is (3) open and notorious, (4) adverse or hostile under a claim of right, (5) continuous and uninterrupted for the statutory period, and (6) the statute of limitations has to have run out.
1. Actual entry giving possession
ú The primary purpose of the entry requirement is to trigger the cause of action, which starts the statute of limitations running. It also shows the extent of the adverse possessor’s claim.
ú Claimant must physically use the particular parcel of land in the same manner that a reasonable owner would, given its nature, character, and location.
ú Constructive Possession of Part
§ If there is an actual entry on part of the land described in a deed, the possessor may be deemed in constructive possession of the rest. But an actual entry on some part of the land is required. (See below for more detail on constructive possession).
2. Exclusive possession
ú Possession must not be shared with either the true owner or the general public, but must be as exclusive as would characterize an owner’s normal use for such land. If the adverse possessor were so sharing possession, the owner would probably not realize the adverse possessor was claiming ownership against him.
§ However, it is possible for two or more persons, acting in concert and sharing only among themselves, to acquire title by adverse possession as tenants in common.
3. Open and notorious possession
ú The adverse possessor must occupy the property in an open, notorious, and visible manner. Her acts must be such as will constitute reasonable notice to the owner that she is claiming dominion, so that the owner can defend his rights.
ú Generally, open and notorious acts are those that look like typical acts of an owner of property; they are acts from which the community, observing them, would infer the actor to be claiming ownership. This of course depends on the type of land involved; the acts must be appropriate to the condition, size, and locality of the land.
ú Possession of Minerals
§ If the same person owns both the surface estate and the mineral rights when adverse possession begins, the adverse possession of the surface includes possession of the minerals. The minerals are treated as part of the adversely possessed land.
§ On the other hand, if the minerals have been severed by sale to another prior to entry of the adverse possessor on the surface, possession of the surface does not carry possession of the minerals.
ú To start adverse possession running against the owner of the minerals, the adverse possessor must start removing them. Possession of the surface does not give a cause of action to the separate owner of the minerals until the minerals are disturbed.
4. Adverse of hostile possession under a claim of right
ú To be an adverse possessor, a person must hold adversely to the owner and under a claim of right. Sometimes the word hostile is inserted as an element of adverse possession – it means only that the possession is without the owner’s consent – it is not subordinate to the owner.
§ One purpose of the claim of right requirement is to help assure that the true owner is not lulled into believing an occupant will make no claim against him.
ú The key question in determining whether a person is adverse and under a claim of right is: Does the court apply an objective or subjective test?
§ Objective Test: The state of mind of the possessor is not important; what is important are the actions of the possessor. The possessor’s actions, including statements, must look like they are claims of ownership. If they look that way to the community, the claim is adverse and under a claim of right. Under this test, a person can be an adverse possessor even though he is not actually claiming title against the true owner. The important thing is that he is occupying the land without the permission of the owner. Permission negates a claim of right.
§ Subjective Test: Under this test, a claim of right means that the adverse possessor must have a bona fide or good faith belief that he has title. If the possessor knows he has no title, and that someone else has title, his possession is not adverse. Under this view, a mere squatter (a person who enters into possession knowing that the land belongs to someone else) cannot be an adverse possessor.
ú With this view, if the possessor mistakenly believes that he has title but, if he knew the truth, would not claim title, he is not occupying adversely.
ú 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. But this instrument, by definition, is invalid. If it were valid, then you wouldn’t be an adverse possessor (because you would have a good deed).
ú So the instrument, unknown to the claimant, is invalid and defective.
ú Ex: The grantor’s name is forged on the deed; the grantor does not own the land deeded; grantor was mentally incompetent; deed is not properly executed, etc.
§ In all of these cases, the grantee without knowledge of the defect takes possession under color of title.
§ Where a person enters with color of title, no further claim of title or proof of adversity is required.
ú In most states, color of title is not required to be an adverse possessor. Even where a bona fide claim of title is required, color of title is not necessary. Ex: Where O orally gives Blackacre to A, A has no color of title but A – believing the oral transfer was valid – possesses under a claim of title.
ú The Mistaken Improver
§ Suppose that A erects a building or part of a building on neighbor B’s property, mistakenly believing that the building is on A’s own land. When B discovers this mistake, the encroachment has not existed for the period of the statute of limitations; therefore A does not have an adverse possession claim. But what are B’s rights?
ú At common law, B had the right to force A to remove the encroachment.
ú Under modern law, a good faith improver of a neighbor’s lot gets some relief. A court of equity may let A’s encroachment remain if A pays damages to B, or may award the building to B if B pays its value to A, or the court may give B the option of paying A the value of the house or selling A the land at fair market value.
§ If the encroachment is intentional, the person must remove the encroachment if the neighbor so demands. A cannot seize B’s land, but instead must bargain with B for it. Equitable relief is only available to those who act in good faith and improve the adjoining lot by mistake.
5. Continuous, uninterrupted possession
ú Continuous possession requires only the degree of occupancy and use that the average owner would make of the particular type of property given the nature, location, and character of the land. An adverse use is continuous when it’s made without a break in the essential attitude of mind required for adverse use. A person can be in continuous possession even though there are considerable intervals during which the property isn’t used.
§ The purpose of this requirement is to give the owner notice that the possessor is claiming ownership, and that the entries are not just a series of trespasses.
§ Seasonal Use
ú Use of a summer home only during the summer for the statutory period is considered continuous use. Similarly, seasonal use of a hunting cabin during the hunting seasons, or the grazing of cattle on rangelands in the summer, may be sufficiently continuous possession.
§ AbandonmentAbandonment is the intentional relinquishment of possession. If the possessor abandons the property for any period of time, without intent to return, then continuity of adverse possession is lost. The adverse possession comes to an end, and possession returns constructively to the true owner.