b'Open-Source Property: A Free Casebook\n\nWWW.OPENSOURCEPROPERTY.ORG\n\nBUILD AUTHOR: JEREMY SHEFF\nBUILD DATE: AUGUST 2020\nOpen Source Property is copyright 2015 by Stephen Clowney, James Grimmelmann,\nMichael Grynberg, Jeremy Sheff, and Rebecca Tushnet. It may be reused under the\nterms of the Creative Commons Attribution NonCommercial 4.0 International license,\nhttps://creativecommons.org/licenses/by-nc/4.0/.\n\n\x0c\x0cTable of Contents\nPart I: Foundations ................................................ 1\nOwnership ............................................................ 3\nWilliam Blackstone, Commentaries on the Laws of England ....................................... 3\n\nA. The Right to Exclude ................................................................... 4\nJacque v. Steenberg Homes, Inc. .................................................................................. 4\nState of New Jersey v. Shack....................................................................................... 9\nCivil Rights Act of 1964, Title II, Section 201 ........................................................ 15\nAmericans with Disabilities Act of 1990, Section 302-03 ........................................ 16\n\nB. The \xe2\x80\x9cBundle of Rights\xe2\x80\x9d .............................................................. 17\nWesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in Judicial\nReasoning ................................................................................................................. 21\nWesley Newcomb Hohfeld, Some Fundamental Legal Conceptions as Applied in\nJudicial Reasoning..................................................................................................... 24\nThomas W. Merrill & Henry E. Smith, What Happened to Property in Law and\nEconomics? .............................................................................................................. 28\nHenry E. Smith, Property as the Law of Things ....................................................... 31\n\nSubject Matter of Property ................................. 38\nA. Introduction ................................................................................ 38\nFelix Cohen, Transcendental Nonsense and the Functional Approach ....................... 39\nHinman v. Pacific Air Transport ............................................................................. 42\n\nB. Property in Persons ..................................................................... 48\nThe Amistad ............................................................................................................ 48\n\n1.\n2.\n3.\n\nEmancipation and Compensation ............................................................ 53\nOwning Labor ............................................................................................. 54\nAlternatives to Property ............................................................................. 55\nKirksey v. Jernigan.................................................................................................... 55\nWilson v. Wilson ...................................................................................................... 57\n\n4.\n\nBody Parts .................................................................................................... 62\ni\n\n\x0cMargaret Radin, Market-Inalienability..................................................................... 67\n\nC. Intangible Property ..................................................................... 69\nKremen v. Cohen ...................................................................................................... 69\n\nD. Intellectual Property ................................................................... 80\n\nAllocation............................................................ 85\nA. Initial Allocation of Chattels ....................................................... 86\nPierson v. Post .......................................................................................................... 86\nGhen v. Rich ............................................................................................................ 95\nPopov v. Hayashi.................................................................................................... 101\n\nB. Allocation of Land..................................................................... 114\nWilliam Blackstone, Commentaries on the Laws of England ................................... 114\nThomas Hobbes, Leviathan .................................................................................... 115\nWilliam Blackstone, Commentaries on the Laws of England ................................... 116\nJohn Locke, Second Treatise of Civil Government.................................................... 117\nHerman Melville, Moby-Dick................................................................................. 119\nJohnson v. M\xe2\x80\x99Intosh ................................................................................................ 120\nMabo v. Queensland (No. 2) [\xe2\x80\x9cMabo\xe2\x80\x99s Case\xe2\x80\x9d] ...................................................... 127\n\nC. Ratione Soli and Fugitive Resources: Chattels Meet Land ..... 139\n1.\n\nWild Animals on Owned Land ............................................................... 139\n\nKeeble v. Hickeringill .............................................................................................. 139\nA Note on Ratione Soli.......................................................................................... 141\n\n2.\n\nOther Fugitive Resources: Water, Oil, and Gas.................................... 144\nTyler v. Wilkinson ................................................................................................. 146\nCoffin v. Left Hand Ditch Co. ............................................................................... 149\nBriggs v. Southwestern Energy Production Company ................................................ 154\n\nD. Allocation of Intangibles .......................................................... 171\nTribune Co. v. Oak Leaves Broadcasting Station .................................................... 171\n\nPart II: Possession ..............................................181\nProperty Torts and Crimes ................................ 182\nii\n\n\x0cA. Real Property............................................................................. 182\nB. Personal Property ...................................................................... 185\nThe Major Common-Law Property Torts: A Summary .......................................... 188\n\nFound and Stolen Property ............................... 190\nArmory v. Delamirie .............................................................................................. 190\nOther Variations on Armory .................................................................................. 192\nMcAvoy v. Medina ................................................................................................. 195\n\nAdverse Possession ...........................................200\nA. Adverse Possession Rationales ................................................. 201\nTieu v. Morgan ....................................................................................................... 203\n\nB. \xe2\x80\x9cHostility\xe2\x80\x9d and Intent............................................................... 214\nCahill v. Morrow .................................................................................................... 215\nDombkowski v. Ferland ......................................................................................... 222\n\nC. Finer Points of Adverse Possession Law.................................. 226\nD. Adverse Possession of Chattels ................................................ 229\nO\xe2\x80\x99Keeffe v. Snyder................................................................................................... 229\nThe New York Mess .............................................................................................. 241\n\nImprovers and Good-Faith Purchasers .............246\nWetherbee v. Green ................................................................................................. 247\nUniform Commercial Code \xc2\xa7\xc2\xa7 2-312, 2-403 .......................................................... 253\nKotis v. Nowlin Jewelry, Inc. ................................................................................... 254\n\nBailments and Liens .......................................... 261\nA. Bailments .................................................................................. 261\nAllen v. Hyatt Regency-Nashville Hotel.................................................................. 261\nThe Winkfield ........................................................................................................ 273\n\nB. Liens .......................................................................................... 277\niii\n\n\x0cWilliams v. Ford Motor Credit Co. ........................................................................ 277\nM&I Western State Bank v. Wilson ..................................................................... 283\n\nPart III: Interests ............................................... 294\nEstates and Future Interests .............................295\nA. Introduction .............................................................................. 295\nB. Concepts, Vocabulary, and Conventions ................................. 299\nC. Basic Estates and Future Interests .......................................... 302\n1.\n2.\n3.\n4.\n\nThe Fee Simple Absolute ......................................................................... 302\nThe Life Estate .......................................................................................... 303\nThe Reversion ............................................................................................ 304\nThe Remainder (Part 1) ............................................................................ 305\n\nD. Construing Ambiguous Grants................................................. 306\nIn the Estate of Dalton Edward Craigen ................................................................ 306\n\nE. Present vs. Future: The Doctrine of Waste .............................. 311\nJackson v. Brownson ............................................................................................... 312\nA Note on Ameliorative Waste .............................................................................. 317\n\nMore Complex Estates Problems: Strategy and\nMethod .....................................................................320\nA. The Method............................................................................... 321\nStep 1: Building A Chronology ......................................................................... 322\nStep 2.a.i: Parsing a Conveyance ....................................................................... 323\nStep 2.a.ii: Identifying Legal Interests............................................................... 324\na.\nb.\nc.\nd.\n\nIdentifying the Quantum of an Interest ....................................................... 324\nIdentifying the Nature of an Interest ........................................................... 326\nPossessory Estates vs. Future Interests........................................................ 328\nReviewing Familiar Interests.......................................................................... 329\n\nStep 2.a.iii: Identifying Residual Interests ........................................................ 331\nStep 2.b: Construing the Effects of Events on Legal Interests .................... 332\nStep 3: Building a Chain of Title ....................................................................... 334\niv\n\n\x0cB. Other Estates and Future Interests .......................................... 335\n1.\nRemainders, Part 2: Vested and Contingent Remainders .................... 335\n2.\nRemainders, Part 3: Alternative Contingent Remainders .................... 339\n3.\nThe Defeasible Fees .................................................................................. 340\n4.\nRemainders, Part 4: Divestment of Future Interests; Types of Vested\nRemainders ........................................................................................................... 347\n\nC. Future Interests Summary and Review .................................... 350\n\nPreserving Marketability ...................................356\nFord v. Allen ......................................................................................................... 357\nWills v. Pierce......................................................................................................... 364\nSmedley v. City of Waldron .................................................................................... 366\n\nEasements .........................................................369\nA. What Is An Easement? ............................................................. 369\nB. Creating Easements .................................................................. 371\n1.\n2.\n\nExpress easements .................................................................................... 371\nImplied Easements.................................................................................... 373\n\na.\nb.\n\n3.\n\nEasement implied by existing use ................................................................. 373\nEasement by necessity .................................................................................... 376\n\nPrescriptive Easements............................................................................. 378\nFelgenhauer v. Soni ................................................................................................. 379\n\n4.\n\nIrrevocable Licenses ................................................................................. 383\nRichardson v. Franc................................................................................................ 384\n\nC. Transferring Easements ........................................................... 390\nD. Terminating Easements ........................................................... 391\nE. Negative Easements/Conservation Easements ...................... 393\nF. Public Use Rights ..................................................................... 393\nLawrence v. Clark Cnty. ........................................................................................ 394\nMatthews v. Bay Head Imp. Ass\xe2\x80\x99n ......................................................................... 396\n\nv\n\n\x0cTrusts and Corporations ...................................402\nA. Trusts ........................................................................................ 402\nNote on Trusts ....................................................................................................... 402\nRothko v. Reis (In re Estate of Rothko) ................................................................. 404\n\nB. Corporations.............................................................................. 413\nWalkovszky v. Carlton .......................................................................................... 413\n\nCo-ownership and Marital Property .................. 419\nA. Types of Co-Ownership: Introduction ..................................... 420\nU.S. v. Craft .......................................................................................................... 420\n\nB. Tenancy in Common ................................................................ 422\n1.\n\nRights and Duties of Tenants in Common ........................................... 422\n\nMartin v. Martin ................................................................................................... 423\n\n2.\n\nPartition ...................................................................................................... 435\nDelfino v. Vealencis ................................................................................................ 435\n\nC. Joint Tenancy ............................................................................ 447\n1.\n2.\n\nCreating a Joint Tenancy .......................................................................... 448\nSeverance of a Joint Tenancy .................................................................. 451\n\nHarms v. Sprague................................................................................................... 452\n\nD. Marital Interests ........................................................................ 463\n1.\n\nTenancy by the Entirety ........................................................................... 463\n\nU.S. v. Craft .......................................................................................................... 463\n\n2.\n\nCommunity Property ................................................................................ 476\n\nLeasing Real Property .......................................480\nA. The Dual Nature of the Lease .................................................. 480\nB. Creating the Leasehold ............................................................. 481\n1.\n2.\n\nA Lease or Something Else? .................................................................... 481\nTypes of Leasehold ................................................................................... 482\n\na.\n\nThe Term of Years .......................................................................................... 482\n\nvi\n\n\x0cb.\nc.\n\n3.\n\nThe Periodic Tenancy ..................................................................................... 483\nThe Tenancy at Will ........................................................................................ 483\nEffel v. Rosberg ...................................................................................................... 484\nLease Hypotheticals ................................................................................................ 488\n\nThe Problem of Holdovers ...................................................................... 489\na.\nb.\n\n4.\n\nThe Tenancy at Sufferance ............................................................................ 489\nDelivering Possession ..................................................................................... 491\nHannan v. Dusch ................................................................................................... 491\n\nTenant Selection ........................................................................................ 495\na.\nb.\nc.\nd.\ne.\n\nThe Civil Rights Act of 1866 ......................................................................... 495\nThe Fair Housing Act of 1968 ...................................................................... 496\nState Anti-Discrimination Efforts................................................................. 499\nProving Discrimination .................................................................................. 501\nAn Exercise in Advertising ............................................................................ 504\nFair Housing Council of San Fernando Valley v. Roommate.com, LLC................. 505\n\nC. Exiting a Lease ......................................................................... 510\n1.\n2.\n3.\n\nLandlord Exit: Transfer ............................................................................ 510\nTenant Exit: Transfer ............................................................................... 510\nTenant Exit: Limiting the Right to Transfer ......................................... 517\n\nJulian v. Christopher............................................................................................... 517\nNew York Real Property Law \xc2\xa7 226-B ................................................................. 524\n\n4.\n\nTenant Exit: Abandonment and the Duty to Mitigate......................... 526\nSommer v. Kridel .................................................................................................... 527\n\n5.\n\nTenant Exit: Eviction ............................................................................... 535\nBerg v. Wiley .......................................................................................................... 537\n\n6.\n\nTenant Exit: Security Deposits ................................................................ 545\n\nD. The Quest for Clean, Safe, and Affordable Premises .............. 546\n1.\n\nThe Covenant of Quiet Enjoyment ........................................................ 547\n\nFidelity Mutual Life Insurance Co. v. Kaminsky .................................................... 549\n\n2.\n\nThe Implied Warranty of Habitability .................................................... 555\nHilder v. St. Peter .................................................................................................. 555\n\n3.\n\nRetaliatory Eviction .................................................................................. 567\nImperial Colliery Co. v. Fout .................................................................................. 567\n\n4.\n5.\n\nLandlord\xe2\x80\x99s Tort Liability .......................................................................... 573\nGentrification & Rent Control ................................................................ 574\nvii\n\n\x0cE. Wrapping Up ............................................................................. 577\nResidential Rental Agreement and Contract ............................................................ 577\n\nPart IV: Transfers ............................................... 583\nGifts ...................................................................584\nA. Intent ......................................................................................... 585\nB. Delivery ..................................................................................... 585\nIn re Estate of Evans ............................................................................................. 586\nGruen v. Gruen ...................................................................................................... 594\n\nC. Acceptance ................................................................................ 604\nD. Irrevocability of Gifts and Exceptions ..................................... 604\n1.\n2.\n\nGifts causa mortis. ........................................................................................ 605\nConditional gifts ........................................................................................ 609\n\nAlbinger v. Harris .................................................................................................. 610\n\nE. Review Problems ...................................................................... 624\n\nWills and Intestacy ............................................626\nLon L. Fuller, Consideration and Form ................................................................. 626\nJohn H. Langbein, Substantial Compliance with the Wills Act ............................... 627\nStevens v. Casdorph ................................................................................................ 627\nMaryland Code, Estates and Trusts, \xc2\xa7\xc2\xa7 3-101 to 3-104 ........................................ 632\n\nLand Transactions.............................................634\nA. The Deed................................................................................... 634\nIndiana Code Title 32, Art. 21.............................................................................. 634\nHarding v. Ja Laur ................................................................................................ 635\nWalters v. Tucker ................................................................................................... 639\n\nB. Delivery ..................................................................................... 644\nLoughran v. Kummer.............................................................................................. 644\n\nC. Warranties of Title ....................................................................\n648\nviii\n\n\x0cNew York Real Property Law \xc2\xa7 258 ..................................................................... 648\nMcMurray v. Housworth ........................................................................................ 651\n\nD. Disclosure of Defects ................................................................ 656\nEngelhart v. Kramer ............................................................................................... 656\n\nE. Risk of Loss ............................................................................... 665\nBrush Grocery Kart, Inc. v. Sure Fine Market, Inc. ................................................ 665\n\nMortgages and Foreclosures .............................670\nA. Introduction: What is a Mortgage? .......................................... 670\nB. Crystals and Mud in Property Law........................................... 674\nCarol M. Rose, Crystals And Mud In Property Law.............................................. 675\n\nC. The Rise of Mortgage Securitization and the Global Financial\nCrisis of 2008 .................................................................................. 679\nAdam J. Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of\nMortgage Title ........................................................................................................ 679\n\nD. Redlining ................................................................................... 681\n1.\n2.\n3.\n\nRedlining\xe2\x80\x99s History .................................................................................... 682\nRedlining\xe2\x80\x99s Lasting Impact....................................................................... 688\nOvercoming the Legacy of Redlining ..................................................... 697\n\nE. Predatory Lending .................................................................... 702\nMcGlawn v. Pennsylvania Human Relations Commission....................................... 702\n\nF. The Mortgage Crisis ................................................................. 720\nG. Foreclosure Abuses ................................................................... 722\nKlem v. Washington Mutual Bank ......................................................................... 723\n\nH.Chain of Title Problems............................................................ 735\nU.S. Bank National Association, trustee vs. Antonio Ibanez ................................. 735\nNote on Subsequent Purchasers ............................................................................... 755\n\nI. An Additional Puzzle Piece: The Mortgage and the Note ...... 756\nJ. What Now? ................................................................................ 758\nix\n\n\x0cK. Concluding Thoughts ............................................................... 763\n\nRecording Acts ..................................................765\nCarol M. Rose, Crystals And Mud In Property Law.............................................. 767\nArgent Mortgage Co. v. Wachovia Bank N.A. ...................................................... 771\nFLA. STAT. \xc2\xa7 695.01 ........................................................................................... 776\nN.C. STAT. \xc2\xa7 47-18 ............................................................................................. 776\nALASKA STAT. \xc2\xa7 40.17.080 ............................................................................... 776\nHartig v. Stratman ................................................................................................. 776\nBoard of Education of Minneapolis v. Hughes ......................................................... 780\nAdam J. Levitin, The Paper Chase: Securitization, Foreclosure, and the Uncertainty of\nMortgage Title ........................................................................................................ 783\nNote on Recording Systems and Informal Title ........................................................ 789\n\nEminent Domain...............................................794\nA. Rationales .................................................................................. 794\nB. \xe2\x80\x9cPublic Use\xe2\x80\x9d ............................................................................. 797\nKelo v. City of New London, Conn. ........................................................................ 797\n\nC. Eminent Domain Operations ................................................... 812\nD. Just Compensation .................................................................... 813\n\nPart V: Use ......................................................... 816\nNuisance............................................................ 817\nA. The Problem of Nuisance Definition ....................................... 818\nPuritan Holding Co. v Holloschitz.......................................................................... 819\n\nB. Adjudicating Nuisance ............................................................. 824\nSans v. Ramsey Golf & Country Club, Inc. ........................................................... 824\nNote on the Clarity of Rights and Coase ................................................................. 833\n\nC. Remedies ................................................................................... 837\nBoomer v. Atlantic Cement Co. .............................................................................. 837\n\nx\n\n\x0cNote on \xe2\x80\x9cProperty Rules\xe2\x80\x9d and \xe2\x80\x9cLiability Rules\xe2\x80\x9d .................................................... 846\nSpur Industries, Inc. v. Del E. Webb Development Co............................................ 849\n\nRegulatory Takings ...........................................858\nA. General Principles ..................................................................... 858\nPennsylvania Coal Co. v. Mahon ............................................................................ 858\nPenn Cent. Transp. Co. v. City of New York ......................................................... 870\n\nB. Categorical Rules ...................................................................... 897\nLucas v. South Carolina Coastal Council ............................................................... 897\n\nC. Intellectual Property ................................................................. 920\nD. Exactions................................................................................... 922\nDolan v. City of Tigard .......................................................................................... 923\nKoontz v. St. Johns River Water Management Dist. ............................................... 933\n\nZoning ............................................................... 951\nA. Euclidean Zoning ..................................................................... 953\n1.\n\nThe Euclid Decision and Its History ...................................................... 953\n\nEuclid v. Ambler Realty Co. .................................................................................. 953\nNote: Facial v. As-Applied Challenges ................................................................... 961\nRichard H. Chused, Euclid\xe2\x80\x99s Historical Imagery..................................................... 961\n\n2.\n\nEuclidean Zoning Theory ........................................................................ 968\na.\nb.\nc.\nd.\ne.\nf.\n\n3.\n\nThe Dominance of the Single-Family Home .............................................. 968\nDefining the Family ........................................................................................ 969\nSegregation of uses .......................................................................................... 974\nChurches ........................................................................................................... 975\nOther First Amendment Concerns............................................................... 976\nLongstanding critiques of suburbia. ............................................................. 979\n\nHow Zoning Works (and Doesn\xe2\x80\x99t)......................................................... 980\nMissouri Municipal League, Planning and Zoning Procedures for Missouri\nMunicipalities (Sept. 2004) .................................................................................... 980\n\n4.\n\nTwo examples. ........................................................................................... 984\na.\n\nLadue, Missouri ............................................................................................... 984\nCity of Ladue, Missouri, Comprehensive Plan Update (September 27, 2006).......... 985\n\nxi\n\n\x0cb.\n\nLadue, Missouri Zoning Ordinance, Ordinance 1175, as amended through Jan. 2015\n.............................................................................................................................. 992\nFerguson, Missouri .......................................................................................... 995\nFerguson Master Zoning Map................................................................................. 997\n\nB. Nonconforming Uses, Variances and Exceptions................. 1007\n1.\n\nNonconforming uses .............................................................................. 1007\n\nHoffmann v. Kinealy.............................................................................................1008\n\n2.\n\nVariances .................................................................................................. 1020\na.\nb.\n\nc.\n\n3.\n\nGenerally .........................................................................................................1020\nProcedure........................................................................................................1021\nMatthew v. Smith .................................................................................................1022\nWilliam A. Fischel, The Evolution of Zoning since the 1980s:\nThe Persistence of Localism (Sept. 2010) ..............................................................1030\nThe Americans with Disabilities Act/Fair Housing Act .........................1033\nU.S. Department of Justice, Civil Rights Division, Disability Rights Section, The\nADA and City Governments: Common Problems (n.d.) .......................................1033\n\nSpecial exceptions and zoning amendments ....................................... 1035\na.\nb.\nc.\nd.\n\ne.\nf.\ng.\n\nSpecial exceptions/special uses/conditional uses.....................................1035\nFloating zones ................................................................................................1037\nPlanned Unit Development (PUD). ...........................................................1037\nRezoning .........................................................................................................1038\nMissouri Municipal League, Planning and Zoning Procedures for Missouri\nMunicipalities (Sept. 2004) ..................................................................................1039\nContract zoning .............................................................................................1039\nSpot zoning ....................................................................................................1039\nUpzoning and downzoning..........................................................................1040\n\nRestrictive Covenants ...................................... 1041\nA. Introduction ............................................................................. 1041\nTulk v. Moxhay ...................................................................................................1042\n\nB. Creation of an Enforceable Restrictive Covenant .................. 1049\nNeponsit Prop. Owners\xe2\x80\x99 Ass\xe2\x80\x99n v. Emigrant Indus. Sav. Bank..............................1051\nRestatement (Third) of Property (Servitudes)..........................................................1058\nShelley v. Kraemer ................................................................................................1060\n\nxii\n\n\x0cC. Modification and Termination of Covenants......................... 1070\nEl Di, Inc. v. Town of Bethany Beach...................................................................1071\n\nCommon-Interest Communities ..................... 1078\nA. In General................................................................................ 1078\n1.\n2.\n3.\n\nHomeowners Associations .................................................................... 1079\nCondominiums ........................................................................................ 1080\nCooperatives ............................................................................................ 1081\n\nB. Rulemaking Authority ............................................................ 1083\nHidden Harbour Estates, Inc. v. Norman ............................................................1084\nNahrstedt v. Lakeside Village Condominium Assoc., Inc. ....................................1088\n\nC. Enforcement of Rules and Covenants .................................... 1096\n40 West 67th Street v. Pullman.............................................................................1097\n\nxiii\n\n\x0cxiv\n\n\x0cPart I: Foundations\n\n1\n\n\x0c2\n\n\x0cOwnership\nWilliam Blackstone, Commentaries on the Laws of England\nvol. 1, pp. 131-136 (1765); vol. 2, p. 2\nTHE third absolute right, inherent in every\nEnglishman, is that of property: which consists\nin the free use, enjoyment, and disposal of all his\nacquisitions, without any control or diminution,\nsave only by the laws of the land. The original of\nprivate property is probably founded in nature,\nas will be more fully explained in the second\nbook of the ensuing commentaries: but certainly\nthe modifications under which we at present find\nit, the method of conserving it in the present\nowner, and of translating it from man to man, are\nentirely derived from society; and are some of\nWilliam Blackstone. Source: 6 CASSELL\xe2\x80\x99S\nILLUSTRATED HISTORY OF ENGLAND 582 (1865)\nthose civil advantages, in exchange for which\nevery individual has resigned a part of his natural\nliberty. The laws of England are therefore, in point of honor and justice, extremely\nwatchful in ascertaining and protecting this right. Upon this principle the great charter\nhas declared that no freeman shall be disseised, or divested, of his freehold, or of his\nliberties, or free customs, but by the judgment of his peers, or by the law of the land\xe2\x80\xa6.\nSO great moreover is the regard of the law for private property, that it will not authorize\nthe least violation of it; no, not even for the general good of the whole community. If\na new road, for instance, were to be made through the grounds of a private person, it\nmight perhaps be extensively beneficial to the public; but the law permits no man, or\nset of men, to do this without consent of the owner of the land. In vain may it be urged,\nthat the good of the individual ought to yield to that of the community; for it would be\ndangerous to allow any private man, or even any public tribunal, to be the judge of this\ncommon good, and to decide whether it be expedient or no. Besides, the public good\nis in nothing more essentially interested, than in the protection of every individual\xe2\x80\x99s\nprivate rights, as modelled by the municipal law. In this, and similar cases the legislature\n3\n\n\x0c4\n\nProperty\n\nalone, can, and indeed frequently does, interpose, and compel the individual to\nacquiesce. But how does it interpose and compel? Not by absolutely stripping the\nsubject of his property in an arbitrary manner; but by giving him a full indemnification\nand equivalent for the injury thereby sustained. The public is now considered as an\nindividual, treating with an individual for an exchange. All that the legislature does is\nto oblige the owner to alienate his possessions for a reasonable price; and even this is\nan exertion of power, which the legislature indulges with caution, and which nothing\nbut the legislature can perform.\xe2\x80\xa6\nThere is nothing which so generally strikes the imagination, and engages the affections\nof mankind, as the right of property; or that sole and despotic dominion which one\nman claims and exercises over the external things of the world, in total exclusion of the\nright of any other individual in the universe.\n\nA. The Right to Exclude\nJacque v. Steenberg Homes, Inc.\n563 N.W.2d 154 (Wis. 1997)\nWILLIAM A. BABLITCH, Justice.\nPlaintiffs, Lois and Harvey Jacques, are an elderly couple, now retired from farming,\nwho own roughly 170 acres near Wilke\xe2\x80\x99s Lake in the town of Schleswig. The defendant,\nSteenberg Homes, Inc. (Steenberg), is in the business of selling mobile homes. In the\nfall of 1993, a neighbor of the Jacques purchased a mobile home from Steenberg.\nDelivery of the mobile home was included in the sales price.\nSteenberg determined that the easiest route to deliver the mobile home was across the\nJacques\xe2\x80\x99 land \xe2\x80\xa6 because the only alternative was a private road which was covered in\nup to seven feet of snow and contained a sharp curve which would require sets of\n\xe2\x80\x9crollers\xe2\x80\x9d to be used when maneuvering the home around the curve. Steenberg asked\nthe Jacques on several separate occasions whether it could move the home across the\nJacques\xe2\x80\x99 farm field. The Jacques refused. \xe2\x80\xa6 On the morning of delivery, \xe2\x80\xa6 the\nassistant manager asked Mr. Jacque how much money it would take to get permission.\nMr. Jacque responded that it was not a question of money; the Jacques just did not\nwant Steenberg to cross their land. \xe2\x80\xa6\n\n\x0cOwnership\n\n5\n\nAt trial, one of Steenberg\xe2\x80\x99s employees testified that, upon coming out of the Jacques\xe2\x80\x99\nhome, the assistant manager stated: \xe2\x80\x9cI don\xe2\x80\x99t give a ---- what [Mr. Jacque] said, just get\nthe home in there any way you can.\xe2\x80\x9d \xe2\x80\xa6 The employees, after beginning down the\nprivate road, ultimately used a \xe2\x80\x9cbobcat\xe2\x80\x9d to cut a path through the Jacques\xe2\x80\x99 snowcovered field and hauled the home across the Jacques\xe2\x80\x99 land to the neighbor\xe2\x80\x99s lot. \xe2\x80\xa6\nMr. Jacque called the Manitowoc County Sheriff\xe2\x80\x99s Department. After interviewing the\nparties and observing the scene, an officer from the sheriff\xe2\x80\x99s department issued a $30\ncitation to Steenberg\xe2\x80\x99s assistant manager.\nThe Jacques commenced an intentional tort action in Manitowoc County Circuit Court,\nJudge Allan J. Deehr presiding, seeking compensatory and punitive damages from\nSteenberg. \xe2\x80\xa6[Q]uestions of punitive and compensatory damages were submitted to\nthe jury. The jury awarded the Jacques $1 nominal damages and $100,000 punitive\ndamages. Steenberg filed post-verdict motions claiming that the punitive damage award\nmust be set aside because Wisconsin law did not allow a punitive damage award unless\nthe jury also awarded compensatory damages. Alternatively, Steenberg asked the circuit\ncourt to remit the punitive damage award. The circuit court granted Steenberg\xe2\x80\x99s motion\nto set aside the award. Consequently, it did not reach Steenberg\xe2\x80\x99s motion for\nremittitur\xe2\x80\xa6.\n\xe2\x80\xa6 Steenberg argues that, as a matter of law, punitive damages could not be awarded\nby the jury because punitive damages must be supported by an award of compensatory\ndamages and here the jury awarded only nominal and punitive damages. The Jacques\ncontend that the rationale supporting the compensatory damage award requirement is\ninapposite when the wrongful act is an intentional trespass to land. We agree with the\nJacques.\n\xe2\x80\xa6The rationale for the compensatory damage requirement is that if the individual\ncannot show actual harm, he or she has but a nominal interest, hence, society has little\ninterest in having the unlawful, but otherwise harmless, conduct deterred, therefore,\npunitive damages are inappropriate. \xe2\x80\xa6 The Jacques argue that both the individual and\nsociety have significant interests in deterring intentional trespass to land, regardless of\nthe lack of measurable harm that results. We agree with the Jacques\xe2\x80\xa6.\nWe turn first to the individual landowner\xe2\x80\x99s interest in protecting his or her land from\ntrespass. The United States Supreme Court has recognized that the private landowner\xe2\x80\x99s\n\n\x0c6\n\nProperty\n\nright to exclude others from his or her land is \xe2\x80\x9cone of the most essential sticks in the\nbundle of rights that are commonly characterized as property.\xe2\x80\x9d Dolan v. City of Tigard,\n512 U.S. 374, 384, 114 S.Ct. 2309, 2316, 129 L.Ed.2d 304 (1994). This court has long\nrecognized \xe2\x80\x9c[e]very person[\xe2\x80\x98s] constitutional right to the exclusive enjoyment of his\nown property for any purpose which does not invade the rights of another person.\xe2\x80\x9d\nDiana Shooting Club v. Lamoreux, 114 Wis. 44, 59, 89 N.W. 880 (1902) (holding that the\nvictim of an intentional trespass should have been allowed to take judgment for\nnominal damages and costs). Thus, both this court and the Supreme Court recognize\nthe individual\xe2\x80\x99s legal right to exclude others from private property.\nYet a right is hollow if the legal system provides insufficient means to protect it. Felix\nCohen offers the following analysis summarizing the relationship between the\nindividual and the state regarding property rights:\n[T]hat is property to which the following label can be attached:\nTo the world:\nKeep off X unless you have my permission, which I may grant or withhold.\nSigned: Private Citizen\nEndorsed: The state\nFelix S. Cohen, Dialogue on Private Property, IX Rutgers Law Review 357, 374 (1954).\nHarvey and Lois Jacque have the right to tell Steenberg Homes and any other trespasser,\n\xe2\x80\x9cNo, you cannot cross our land.\xe2\x80\x9d But that right has no practical meaning unless\nprotected by the State\xe2\x80\xa6.\nThe nature of the nominal damage award in an intentional trespass to land case further\nsupports an exception to [the compensatory damage requirement]. Because a legal right\nis involved, the law recognizes that actual harm occurs in every trespass. The action for\nintentional trespass to land is directed at vindication of the legal right. \xe2\x80\xa6 Thus, in the\ncase of intentional trespass to land, the nominal damage award represents the\nrecognition that, although immeasurable in mere dollars, actual harm has occurred.\n\n\x0cOwnership\n\n7\n\nThe potential for harm resulting from intentional trespass also supports an exception\nto [the compensatory damage requirement]. A series of intentional trespasses, as the\nJacques had the misfortune to discover in an unrelated action, can threaten the\nindividual\xe2\x80\x99s very ownership of the land. The conduct of an intentional trespasser, if\nrepeated, might ripen into prescription or adverse possession and, as a consequence,\nthe individual landowner can lose his or her property rights to the trespasser.\nIn sum, the individual has a strong interest in excluding trespassers from his or her\nland. Although only nominal damages were awarded to the Jacques, Steenberg\xe2\x80\x99s\nintentional trespass caused actual harm. We turn next to society\xe2\x80\x99s interest in protecting\nprivate property from the intentional trespasser.\nSociety has an interest in punishing and deterring intentional trespassers beyond that\nof protecting the interests of the individual landowner. Society has an interest in\npreserving the integrity of the legal system. Private landowners should feel confident\nthat wrongdoers who trespass upon their land will be appropriately punished. When\nlandowners have confidence in the legal system, they are less likely to resort to \xe2\x80\x9cselfhelp\xe2\x80\x9d remedies. \xe2\x80\xa6 [O]ne can easily imagine a frustrated landowner taking the law into\nhis or her own hands when faced with a brazen trespasser, like Steenberg, who refuses\nto heed no trespass warnings.\nPeople expect wrongdoers to be appropriately punished. Punitive damages have the\neffect of bringing to punishment types of conduct that, though oppressive and hurtful\nto the individual, almost invariably go unpunished by the public prosecutor. \xe2\x80\xa6 If\npunitive damages are not allowed in a situation like this, what punishment will prohibit\nthe intentional trespass to land? Moreover, what is to stop Steenberg Homes from\nconcluding, in the future, that delivering its mobile homes via an intentional trespass\nand paying the resulting [$30] forfeiture, is not more profitable than obeying the law?\nSteenberg Homes plowed a path across the Jacques\xe2\x80\x99 land and dragged the mobile home\nacross that path, in the face of the Jacques\xe2\x80\x99 adamant refusal. A $30 forfeiture and a $1\nnominal damage award are unlikely to restrain Steenberg Homes from similar conduct\nin the future. An appropriate punitive damage award probably will.\nIn sum, as the court of appeals noted, the [compensatory damage] rule sends the wrong\nmessage to Steenberg Homes and any others who contemplate trespassing on the land\nof another. It implicitly tells them that they are free to go where they please, regardless\n\n\x0c8\n\nProperty\n\nof the landowner\xe2\x80\x99s wishes. As long as they cause no compensable harm, the only\ndeterrent intentional trespassers face is the nominal damage award of $1 \xe2\x80\xa6 and the\npossibility of a Class B forfeiture under Wis. Stat. \xc2\xa7 943.13. We conclude that both the\nprivate landowner and society have much more than a nominal interest in excluding\nothers from private land. Intentional trespass to land causes actual harm to the\nindividual, regardless of whether that harm can be measured in mere dollars.\nConsequently, the [compensatory damage] rationale will not support a refusal to allow\npunitive damages when the tort involved is an intentional trespass to land. Accordingly,\nassuming that the other requirements for punitive damages have been met, we hold\nthat nominal damages may support a punitive damage award in an action for intentional\ntrespass to land. \xe2\x80\xa6 Accordingly, we reverse and remand to the circuit court for\nreinstatement of the punitive damage award.\nReversed and remanded with directions.\nNotes and Questions\n1. Would (or should) the result in Jacque have been different if, instead of a mobile\nhome seller making a scheduled delivery to a customer, the defendant had been\nan ambulance company responding to a call of a suspected heart attack? Of a\nbroken leg? What if the snow-covered private road had instead been a recently\ncollapsed bridge? What if Steenberg had tried to take the road despite the risks,\nand the truck had accidentally tipped and fallen onto the Jacques\xe2\x80\x99 land?\n2. Would (or should) the result in Jacque have been different if, instead of\nsteadfastly refusing to permit Steenberg\xe2\x80\x99s delivery truck to cross their land, the\nJacques had demanded a large sum of money as a condition of permitting the\ncrossing, which Steenberg refused to pay? Would the ultimate monetary award\nhave been different? If so, what incentive does this case give property owners\nfacing requests from third parties for the use of their otherwise idle resources?\nWould Steenberg have been better off not asking permission in the first place?\n3. Blackstone\xe2\x80\x99s description of \xe2\x80\x9cthat sole and despotic dominion which one man\nclaims and exercises over the external things of the world, in total exclusion of\nthe right of any other individual in the universe\xe2\x80\x9d is one of the most famous\xe2\x80\x94\nand quotable\xe2\x80\x94definitions of property ever written in English. But it is also\n\n\x0cOwnership\n\n9\n\nwidely acknowledged to be hyperbolic to the point of falsity. Can you see why?\nWhat aspects of Blackstone\xe2\x80\x99s own discussion of the \xe2\x80\x9cabsolute right\xe2\x80\x9d of property\nare inconsistent with the \xe2\x80\x9ctotal exclusion of the right of any other individual in\nthe universe\xe2\x80\x9d?\n4. Would we really want our system of property to give private owners such \xe2\x80\x9csole\nand despotic dominion\xe2\x80\xa6over the external things of the world\xe2\x80\x9d? The kind of\ndominion exercised by the Jacques? No matter what? Consider this: what kinds\nof problems could a motivated and unscrupulous property owner armed with\nsuch awesome power cause?\nState of New Jersey v. Shack\n58 N.J. 297, 277 A.2d 369 (1971)\nWEINTRAUB, C.J.\nDefendants entered upon private property to aid migrant farmworkers employed and\nhoused there. Having refused to depart upon the demand of the owner, defendants\nwere charged with violating N.J.S.A. 2A:170\xe2\x80\x9431 which provides that \xe2\x80\x9c[a]ny person\nwho trespasses on any lands * * * after being forbidden so to trespass by the owner *\n* * is a disorderly person and shall be punished by a fine of not more than $50.\xe2\x80\x9d\nDefendants were convicted in the Municipal Court of Deerfield Township and again\non appeal in the County Court of Cumberland County on a trial de novo. We certified\ntheir further appeal before argument in the Appellate Division.\nBefore us, no one seeks to sustain these convictions. The complaints were prosecuted\nin the Municipal Court and in the County Court by counsel engaged by the complaining\nlandowner, Tedesco. However Tedesco did not respond to this appeal, and the county\nprosecutor, while defending abstractly the constitutionality of the trespass statute,\nexpressly disclaimed any position as to whether the statute reached the activity of these\ndefendants.\nComplainant, Tedesco, a farmer, employs migrant workers for his seasonal needs. As\npart of their compensation, these workers are housed at a camp on his property.\nDefendant Tejeras is a field worker for the Farm Workers Division of the Southwest\nCitizens Organization for Poverty Elimination, known by the acronym SCOPE, a\n\n\x0c10\n\nProperty\n\nnonprofit corporation funded by the Office of Economic Opportunity pursuant to an\nact of Congress, 42 U.S.C.A. \xc2\xa7\xc2\xa7 2861\xe2\x80\x942864. The role of SCOPE includes providing\nfor the \xe2\x80\x9chealth services of the migrant farm worker.\xe2\x80\x9d\nDefendant Shack is a staff attorney with the Farm Workers Division of Camden\nRegional Legal Services, Inc., known as \xe2\x80\x9cCRLS,\xe2\x80\x9d also a nonprofit corporation funded\nby the Office of Economic Opportunity pursuant to an act of Congress, 42 U.S.C.A. \xc2\xa7\n2809(a)(3). The mission of CRLS includes legal advice and representation for these\nworkers.\nDifferences had developed between Tedesco and these defendants prior to the events\nwhich led to the trespass charges now before us. Hence when defendant Tejeras wanted\nto go upon Tedesco\xe2\x80\x99s farm to find a migrant worker who needed medical aid for the\nremoval of 28 sutures, he called upon defendant Shack for his help with respect to the\nlegalities involved. Shack, too, had a mission to perform on Tedesco\xe2\x80\x99s farm; he wanted\nto discuss a legal problem with another migrant worker there employed and housed.\nDefendants arranged to go to the farm together. Shack carried literature to inform the\nmigrant farmworkers of the assistance available to them under federal statutes, but no\nmention seems to have been made of that literature when Shack was later confronted\nby Tedesco.\nDefendants entered upon Tedesco\xe2\x80\x99s property and as they neared the camp site where\nthe farmworkers were housed, they were confronted by Tedesco who inquired of their\npurpose. Tejeras and Shack stated their missions. In response, Tedesco offered to find\nthe injured worker, and as to the worker who needed legal advice, Tedesco also offered\nto locate the man but insisted that the consultation would have to take place in\nTedesco\xe2\x80\x99s office and in his presence. Defendants declined, saying they had the right to\nsee the men in the privacy of their living quarters and without Tedesco\xe2\x80\x99s supervsion.\nTedesco thereupon summoned a State Trooper who, however, refused to remove\ndefendants except upon Tedesco\xe2\x80\x99s written complaint. Tedesco then executed the\nformal complaints charging violations of the trespass statute.\nI.\nThe constitutionality of the trespass statute, as applied here, is challenged on several\nscores.\n\n\x0cOwnership\n\n11\n\nIt is urged that the First Amendment rights of the defendants and of the migrant\nfarmworkers were thereby offended. Reliance is placed on Marsh v. Alabama, 326 U.S.\n501, 66 S.Ct. 276, 90 L.Ed. 265 (1946) [and its progeny.] * Those cases rest upon the\nfact that the property was in fact opened to the general public. There may be some\nmigrant camps with the attributes of the company town in Marsh and of course they\nwould come within its holding. But there is nothing of that character in the case before\nus, and hence there would have to be an extension of Marsh to embrace the immediate\nsituation.\nDefendants also maintain that the application of the trespass statute to them is barred\nby the Supremacy Clause of the United States Constitution, Art. VI, cl. 2, and this on\nthe premise that the application of the trespass statute would defeat the purpose of the\nfederal statutes, under which SCOPE and CRLS are funded, to reach and aid the\nmigrant farmworker.\xe2\x80\xa6\nThese constitutional claims are not established by any definitive holding. We think it\nunnecessary to explore their validity. The reason is that we are satisfied that under our\nState law the ownership of real property does not include the right a bar access to\ngovernmental services available to migrant workers and hence there was no trespass\nwithin the meaning of the penal statute. The policy considerations which underlie that\nconclusion may be much the same as those which would be weighed with respect to\none or more of the constitutional challenges, but a decision in nonconstitutional terms\nis more satisfactory, because the interests of migrant workers are more expansively\nserved in that way than they would be if they had no more freedom than these\nconstitutional concepts could be found to mandate if indeed they apply at all.\n\nIn Marsh the Court vacated the conviction of a Jehovah\xe2\x80\x99s Witness who had been convicted of criminal\ntrespassing for distributing religious literature without permission on the privately-owned streets and sidewalks\nof the commercial district of a \xe2\x80\x9ccompany town\xe2\x80\x9d\xe2\x80\x94a town built and maintained by a corporation as a place for its\nworkers and their families to live and shop. Justice Black explained the Court\xe2\x80\x99s reasoning as follows:\n*\n\n\xe2\x80\x9cOwnership does not always mean absolute dominion. The more an owner, for his advantage, opens up his\nproperty for use by the public in general, the more do his rights become circumscribed by the statutory and\nconstitutional rights of those who use it\xe2\x80\xa6. Whether a corporation or a municipality owns or possesses the town\nthe public in either case has an identical interest in the functioning of the community in such manner that the\nchannels of communication remain free.\xe2\x80\x9d 326 U.S. at 506-07.\n\n\x0c12\n\nProperty\nII.\n\nProperty rights serve human values. They are recognized to that end, and are limited\nby it. Title to real property cannot include dominion over the destiny of persons the\nowner permits to come upon the premises. Their well-being must remain the\nparamount concern of a system of law. Indeed the needs of the occupants may be so\nimperative and their strength so weak, that the law will deny the occupants the power\nto contract away what is deemed essential to their health, welfare, or dignity.\nHere we are concerned with a highly disadvantaged segment of our society. We are told\nthat every year farmworkers and their families numbering more than one million leave\ntheir home areas to fill the seasonal demand for farm labor in the United States. The\nmigrant farmworkers come to New Jersey in substantial numbers.\xe2\x80\xa6 The migrant\nfarmworkers are a community within but apart from the local scene. They are rootless\nand isolated. Although the need for their labors is evident, they are unorganized and\nwithout economic or political power. It is their plight alone that summoned\ngovernment to their aid. In response, Congress provided under Title III\xe2\x80\x94B of the\nEconomic Opportunity Act of 1964 (42 U.S.C.A. \xc2\xa7 2701 et seq.) for \xe2\x80\x9cassistance for\nmigrant and other seasonally employed farmworkers and their families.\xe2\x80\x9d \xe2\x80\xa6 As we have\nsaid, SCOPE is engaged in a program funded under this section, and CRLS also pursues\nthe objectives of this section although, we gather, it is funded under s 2809(a)(3), which\nis not limited in its concern to the migrant and other seasonally employed farmworkers\nand seeks \xe2\x80\x9cto further the cause of justice among persons living in poverty by mobilizing\nthe assistance of lawyers and legal institutions and by providing legal advice, legal\nrepresentation, counseling, education, and other appropriate services.\xe2\x80\x9d\nThese ends would not be gained if the intended beneficiaries could be insulated from\nefforts to reach them. It is in this framework that we must decide whether the camp\noperator\xe2\x80\x99s rights in his lands may stand between the migrant workers and those who\nwould aid them.\xe2\x80\xa6\nA man\xe2\x80\x99s right in his real property of course is not absolute. It was a maxim of the\ncommon law that one should so use his property as not to injure the rights of others.\nBroom, Legal Maxims (10th ed. Kersley 1939), p. 238; 39 Words and Phrases, \xe2\x80\x9cSic\nUtere Tuo ut Alienum Non Laedas,\xe2\x80\x9d p. 335. Although hardly a precise solvent of actual\ncontroversies, the maxim does express the inevitable proposition that rights are relative\n\n\x0cOwnership\n\n13\n\nand there must be an accommodation when they meet. Hence it has long been true\nthat necessity, private or public, may justify entry upon the lands of another\xe2\x80\xa6.\nWe see no profit in trying to decide upon a conventional category and then forcing the\npresent subject into it. That approach would be artificial and distorting. The quest is\nfor a fair adjustment of the competing needs of the parties, in the light of the realities\nof the relationship between the migrant worker and the operator of the housing facility.\nThus approaching the case, we find it unthinkable that the farmer-employer can assert\na right to isolate the migrant worker in any respect significant for the worker\xe2\x80\x99s wellbeing. The farmer, of course, is entitled to pursue his farming activities without\ninterference, and this defendants readily concede. But we see no legitimate need for a\nright in the farmer to deny the worker the opportunity for aid available from federal,\nState, or local services, or from recognized charitable groups seeking to assist him.\nHence representatives of these agencies and organizations may enter upon the premises\nto seek out the worker at his living quarters. So, too, the migrant worker must be\nallowed to receive visitors there of his own choice, so long as there is no behavior\nhurtful to others, and members of the press may not be denied reasonable access to\nworkers who do not object to seeing them.\nIt is not our purpose to open the employer\xe2\x80\x99s premises to the general public if in fact\nthe employer himself has not done so. We do not say, for example, that solicitors or\npeddlers of all kinds may enter on their own; we may assume or the present that the\nemployer may regulate their entry or bar them, at least if the employer\xe2\x80\x99s purpose is not\nto gain a commercial advantage for himself or if the regulation does not deprive the\nmigrant worker of practical access to things he needs.\nAnd we are mindful of the employer\xe2\x80\x99s interest in his own and in his employees\xe2\x80\x99 security.\nHence he may reasonably require a visitor to identify himself, and also to state his\ngeneral purpose if the migrant worker has not already informed him that the visitor is\nexpected. But the employer may not deny the worker his privacy or interfere with his\nopportunity to live with dignity and to enjoy associations customary among our citizens.\nThese rights are too fundamental to be denied on the basis of an interest in real\nproperty and too fragile to be left to the unequal bargaining strength of the parties.\n\n\x0c14\n\nProperty\n\nIt follows that defendants here invaded no possessory right of the farmer-employer.\nTheir conduct was therefore beyond the reach of the trespass statute. The judgments\nare accordingly reversed and the matters remanded to the County Court with directions\nto enter judgments of acquittal.\nNotes and Questions\n1. Why did the property owner win in Jacque but lose in Shack? Isn\xe2\x80\x99t the property\nright at issue in each of these cases the same\xe2\x80\x94i.e., isn\xe2\x80\x99t it the right to exclude?\nDidn\xe2\x80\x99t Tejeras and Shack commit the acts set forth in the criminal trespassing\nstatute (\xe2\x80\x9ctrespass[ing] on any lands \xe2\x80\xa6 after being forbidden so to trespass by\nthe owner\xe2\x80\x9d)? If they did commit those acts, why aren\xe2\x80\x99t they guilty of the crime\ncharged? And if they are guilty of the crime charged, why does the New Jersey\nSupreme Court order their acquittal?\n2. What types of competing principles, policies, or interests will justify a limit on\nthe right to exclude? Who should decide when such a limit is justified, and how?\nWho decided in Jacque? In Shack?\n3. The federal statute that funded the organizations that employed Tejeras and\nShack was repealed in 1981. Consider the following hypothetical:\n\xe2\x80\xa2 Angela is an attorney at a non-profit public interest law firm funded entirely\nby private charitable donations. Angela\xe2\x80\x99s firm was founded last week. She\nis licensed to practice law in New Jersey.\n\xe2\x80\xa2 Yesterday, Angela entered onto a privately-owned farm in New Jersey in\norder to consult with a migrant worker temporarily residing there about the\npossibility of forming a labor union.\n\xe2\x80\xa2 The migrant worker\xe2\x80\x99s employer (the farm\xe2\x80\x99s owner) confronted Angela and\ndemanded that she leave the employer\xe2\x80\x99s property. She refused and\nremained behind to complete her consultation.\nCan Angela be charged with criminal trespass? Why or why not?\n4. If we decide an interest is important enough to outweigh an owner\xe2\x80\x99s right to\nexclude in one context, does that mean it should do so in all contexts? If we\n\n\x0cOwnership\n\n15\n\nreached such a conclusion, how should the law implement it? Consider the\nfollowing statutes, and their effects on property owners\xe2\x80\x99 right to exclude:\nCivil Rights Act of 1964, Title II, Section 201\nCodified at 42 U.S.C. \xc2\xa7 2000a\nProhibition against discrimination or segregation in places of public\naccommodation\n(a) Equal access\nAll persons shall be entitled to the full and equal enjoyment of the goods, services,\nfacilities, privileges, advantages, and accommodations of any place of public\naccommodation, as defined in this section, without discrimination or segregation on\nthe ground of race, color, religion, or national origin.\n(b) Establishments affecting interstate commerce or supported in their\nactivities by State action as places of public accommodation; lodgings; facilities\nprincipally engaged in selling food for consumption on the premises; gasoline\nstations; places of exhibition or entertainment; other covered establishments\nEach of the following establishments which serves the public is a place of public\naccommodation within the meaning of this subchapter if its operations affect\ncommerce, or if discrimination or segregation by it is supported by State action:\n(1) any inn, hotel, motel, or other establishment which provides lodging to transient\nguests, other than an establishment located within a building which contains not more\nthan five rooms for rent or hire and which is actually occupied by the proprietor of\nsuch establishment as his residence;\n(2) any restaurant, cafeteria, lunchroom, lunch counter, soda fountain, or other facility\nprincipally engaged in selling food for consumption on the premises, including, but not\nlimited to, any such facility located on the premises of any retail establishment; or any\ngasoline station;\n(3) any motion picture house, theater, concert hall, sports arena, stadium or other place\nof exhibition or entertainment.\xe2\x80\xa6\n\n\x0c16\n\nProperty\n\n(e) Private establishments\nThe provisions of this subchapter shall not apply to a private club or other\nestablishment not in fact open to the public, except to the extent that the facilities of\nsuch establishment are made available to the customers or patrons of an establishment\nwithin the scope of subsection (b) of this section.\nAmericans with Disabilities Act of 1990, Section 302-03\nCodified at 42 U.S.C. \xc2\xa7 12182-83\n\xc2\xa7 302 \xe2\x80\x94 Prohibition of discrimination by public accommodations\n(a) General rule\nNo individual shall be discriminated against on the basis of disability in the full and\nequal enjoyment of the goods, services, facilities, privileges, advantages, or\naccommodations of any place of public accommodation by any person who owns,\nleases (or leases to), or operates a place of public accommodation.\n\xc2\xa7 303 \xe2\x80\x94 New construction and alterations in public accommodations and\ncommercial facilities\n(a) Application of term\nExcept as provided in subsection (b) of this section, as applied to public\naccommodations and commercial facilities, discrimination for purposes of section\n12182(a) of this title includes\xe2\x80\x94\n(1) a failure to design and construct facilities for first occupancy later than 30 months\nafter July 26, 1990, that are readily accessible to and usable by individuals with\ndisabilities, except where an entity can demonstrate that it is structurally impracticable\nto meet the requirements of such subsection . . .; and\n(2) . . ., a failure to make alterations in such a manner that, to the maximum extent\nfeasible, the altered portions of the facility are readily accessible to and usable by\nindividuals with disabilities, including individuals who use wheelchairs.\n\n\x0cOwnership\n\n17\nNotes and Questions\n\n1. The passage of the Civil Rights Act of 1964 was an important milestone in\nadvancing the effort by civil rights advocates to dismantle the Jim Crow regime\nthat prevailed in much of the United States through much of the 20th Century,\nthe legacy of which remains with us today. While this regime was enforced in\nmany ways through direct state power\xe2\x80\x94laws requiring segregation of public\nfacilities, limiting access to voting, and allocating public funds according to\nrace\xe2\x80\x94it also depended on the exercise of private power, including private\nproperty rights. Title II particularly addresses the practice of racist business\nowners (or business owners who claimed to be catering to racist customers)\nexercising their right to exclude against Black customers. This interaction of\nprivate decisions about access to resources and state power enforcing those\ndecisions is a distinctive feature of property law, which delegates substantial\nauthority over the allocation and use of resources to private decisionmakers by\nconferring rights of ownership upon them.\n2. The Americans with Disabilities Act similarly uses government authority to\nregulate private property owners, whose decisions collectively had the effect of\ndenying many people with disabilities the ability to participate in many aspects\nof what most would consider a normal life. However, in this case it is not only\nthe exercise of a legal right to exclude that gives rise to discrimination, but also\nthe particular uses an owner has made of their property, which have the effect\nof denying access to people with particular disabilities\xe2\x80\x94decisions as simple as\ninstalling a step rather than a ramp, or a door a few inches too narrow for a\nwheelchair to pass through. The fact that the use of a resource by one person\ncan have unwelcome effects on others is a problem that the law is constantly\ncalled on to address, and offers our first glimpse into property law beyond the\nright to exclude.\n\nB. The \xe2\x80\x9cBundle of Rights\xe2\x80\x9d\nWe began this chapter with Blackstone\xe2\x80\x99s strong statement of the \xe2\x80\x9cabsolute right\xe2\x80\x9d of\nproperty, and have watched it gradually melt away. We have seen courts use a subtle\nand diverse array of tools to vindicate interests that conflict with a property owner\xe2\x80\x99s\n\xe2\x80\x9cabsolute\xe2\x80\x9d rights. In Marsh v. Alabama\xe2\x80\x94discussed in Shack\xe2\x80\x94the Court opined that\n\n\x0c18\n\nProperty\n\nstate-law rights of property must give way to more important principles of expressive\nand religious freedom enshrined in the federal Constitution, at least where the property\nin question had been opened up to the public to serve as a substitute for a downtown\nbusiness district. In Shack itself, however, the court explicitly avoids this kind of\nConstitutional trump card by manipulating the scope of the owner\xe2\x80\x99s rights under the\ncommon law of property to avoid conflict with competing statutory policies. And in\nvarious hypotheticals, we\xe2\x80\x99ve considered whether the right to exclude ought to be\noutweighed by competing concerns that might lack Constitutional or statutory\nauthority. Is there any limit to the scope or variety of these types of manipulations?\nAnd if not, how are we ever to say what property is?\nWe might look to two possible foundations for a more resilient concept of property.\nOne foundation might be that property is a particular cohesive construct: a package deal.\nThus, when we say that a person owns something, we might be saying that the person\nenjoys a predictable set of rights with respect to that thing. And this is one of the most\ncommon ways in which lawyers think about property: as a \xe2\x80\x9cbundle of rights\xe2\x80\x9d\xe2\x80\x94a\nmetaphor we encountered in Jacque.\nThe United States Supreme Court has noted that the right to exclude is \xe2\x80\x9cuniversally\nheld to be a fundamental element of the property right,\xe2\x80\x9d Kaiser Aetna v. United States,\n444 U.S. 164, 179-80 (1979), and \xe2\x80\x9cone of the most essential sticks in the bundle of\nrights that are commonly characterized as property,\xe2\x80\x9d Dolan v. City of Tigard, 512 U.S.\n374, 384 (1994). But property owners typically enjoy a number of additional rights,\nwhich is one source of the \xe2\x80\x9cbundle of rights\xe2\x80\x9d metaphor referred to in Dolan. Among\nthese are:\n\n\x0cOwnership\n\n19\n\n\xe2\x80\xa2 The right of possession (sometimes called a \xe2\x80\x9cpossessory\xe2\x80\x9d right);\n\xe2\x80\xa2 The right of use (sometimes called a \xe2\x80\x9cusufructary\xe2\x80\x9d right);\n\xe2\x80\xa2 The power of alienation\xe2\x80\x94i.e., the right to or transfer ownership to someone\nelse\xe2\x80\x94which can be further decomposed into\no The power to make a gratuitous transfer, i.e., a gift (sometimes called a\n\xe2\x80\x9cdonative\xe2\x80\x9d right)\no The power to transfer in exchange for valuable consideration (sometimes\ncalled the right to \xe2\x80\x9csell\xe2\x80\x9d or \xe2\x80\x9cvend,\xe2\x80\x9d or the right of \xe2\x80\x9cmarket-alienation\xe2\x80\x9d)\no The power to dispose of property owned during life after death by will\n(sometimes called the \xe2\x80\x9ctestamentary\xe2\x80\x9d right, or the right to \xe2\x80\x9cdevise\xe2\x80\x9d)\nAs with the right to exclude, each of these rights may be limited, particularly when they\nhave the potential to conflict with competing rights or interests. Some of those limits\nare hinted at in the Shack: consider the New Jersey Supreme Court\xe2\x80\x99s reference to the\nlatin maxim \xe2\x80\x9csic utere tuo ut alienum non laedas\xe2\x80\x9d. This maxim expresses a long-standing\nlimitation on property owners\xe2\x80\x99 rights of use. Does it make sense for the court to have\ninvoked this maxim in Shack? Do you think Shack is better understood as a case about\nthe right to exclude or some other right of property owners?\nWe will study the law\xe2\x80\x99s protection of possession (and the limits of that protection) in\nour units on Allocation, Found and Stolen Property, and Adverse Possession. We will\nmake an extensive study of the power to alienate in our units on Gifts, Estates and\nFuture Interests, Co-Ownership, and Land Conveyancing. And we will return to limits\non the right of use, and in particular the sic utere tuo principle, in our chapter on Nuisance.\nIf the \xe2\x80\x9cbundle of rights,\xe2\x80\x9d metaphor holds water, it really might help to distinguish\nproperty in a meaningful way from other private law rights\xe2\x80\x94such as those that arise in\n\n\x0c20\n\nProperty\n\ncontract or tort *\xe2\x80\x94and allow us to predict how particular disputes over resources are\nlikely to shake out. Of course, the cases we have already studied\xe2\x80\x94in which courts limit\nor deny owners\xe2\x80\x99 rights depending on the circumstances in which they are asserted\xe2\x80\x94\nmay give us some doubts about our likelihood of success. And we\xe2\x80\x99ve only just begun:\nWe will be encountering more legal authorities that will challenge our ability to think\nabout property as a coherent \xe2\x80\x9cbundle\xe2\x80\x9d of rights, as opposed to an ad hoc and unstable\ncollection of whatever rights and duties we choose to apply in a particular set of\ncircumstances:\n\xe2\x80\xa2 In our unit on the Subject Matter of Property, we will see how some things may\nbe thought of as \xe2\x80\x9cproperty\xe2\x80\x9d even though they are not subject to certain of the\ntraditional rights of ownership\xe2\x80\x94particularly the right to alienate. We will also\nsee how some things that are subject to certain of the traditional rights of\nownership\xe2\x80\x94such as the rights to possess and to exclude\xe2\x80\x94are nevertheless\nexcluded from the legal category of \xe2\x80\x9cproperty.\xe2\x80\x9d\n\xe2\x80\xa2 In our unit on Estates and Future Interests, we will see how property rights can\nbe temporally divided\xe2\x80\x94that a property right that exists today may nevertheless\nnot entitle its owner to possession until some point in the future.\n\xe2\x80\xa2 In our unit on Co-Ownership and Marital Interests, we will see how the division\nof ownership rights among multiple people similarly cabins the rights to exclude,\npossess, alienate, and use\xe2\x80\x94at least among co-owners.\n\nIn case you have not yet encountered these two bodies of private law, here is a very basic introduction: Contract\nclaims are legal claims that arise out of promises: if I make you a promise in exchange for something of value\n(perhaps even a reciprocal promise), I may become legally obligated to either perform the promise or compensate\nyou for my nonperformance. Tort claims are legal claims that arise out of wrongdoing: if I intentionally cause injury\nto your person, damage to your property, or interference with your rights and privileges; or if I engage in\nunreasonable or legally prohibited conduct that causes you such injury, damage, or interference, I may become\nlegally obligated to compensate you for the harm you suffered. The fact that damage to property gives rise to tort\nclaims (such as the trespass claim in Jacque) demonstrates that the two fields do overlap; we will discuss the various\ncommon-law property torts in our unit on Property Torts and Crimes. And the fact that property usually has\nvalue and is alienable means that it can be the subject of contractual promises; we will discuss contracts for the\npurchase and sale of property in our unit on Land Transactions.\n*\n\n\x0cOwnership\n\n21\n\n\xe2\x80\xa2 In our unit on Regulatory Takings, we will see that in some circumstances the\nright to exclude, standing alone, may be a sufficient condition for identifying\n\xe2\x80\x9cproperty.\xe2\x80\x9d\nSo perhaps this approach is not very promising. While there is a menu of rights that\nappear to be consistent with ownership, it appears that the concept or label of \xe2\x80\x9cproperty\xe2\x80\x9d\ndoes not necessarily depend on a particular combination of those rights being present.\nA second possible foundation for our conception of property is that property, at the\nvery least, involves some thing that is the subject of the right (or rights): that it is a right\nin rem. In particular, it might be intimately tied up with an individual\xe2\x80\x99s right to control\nsome thing\xe2\x80\x94principally but not only by excluding others from access to that thing. The\nrequirement of intermediation by some thing might also help distinguish property from\ncontract and tort\xe2\x80\x94which may (but need not) involve competing claims to a thing.\nWe will consider the types of things that might qualify as property in our unit on the\nSubject Matter of Property. But before doing so, we ought to consider whether thinking\nof property in this way\xe2\x80\x94as a relationship between people and things\xe2\x80\x94is sound, or\neven useful. Consider the following scholarly treatments of these ideas.\nWesley Newcomb Hohfeld, Fundamental Legal Conceptions as Applied in\n\nJudicial Reasoning\n\n26 YALE L. J. 710, 713-745 (1917)\nThe phrases in personam and in rem, in spite of the scope and variety of situations to\nwhich they are commonly applied, are more usually assumed by lawyers, judges, and\nauthors to be of unvarying meaning and free of ambiguities calculated to mislead the\nunwary. The exact opposite is, however, true; and this has occasionally been explicitly\nemphasized by able judges whose warnings are worthy of notice\xe2\x80\xa6.\n[A] right in personam \xe2\x80\xa6 is either a unique right residing in a person (or group of persons)\nand availing against a single person (or single group of persons); or else it is one of a\nfew fundamentally similar, yet separate, rights availing respectively against a few definite\npersons. A \xe2\x80\xa6 right in rem \xe2\x80\xa6 is always one of a large class of fundamentally similar yet\nseparate rights, actual and potential, residing in a single person (or single group of\n\n\x0c22\n\nProperty\n\npersons) but availing respectively against persons constituting a very large and\nindefinite class of people.\nProbably all would agree substantially on the meaning and significance of a right in\npersonam, as just explained; and it is easy to give a few preliminary examples: If B owes\nA a thousand dollars, A has an affirmative right in personam, \xe2\x80\xa6 that B shall transfer to A\nthe legal ownership of that amount of money. If, to put a contrasting situation, A\nalready has title to one thousand dollars, his rights against others in relation thereto are\n\xe2\x80\xa6 rights in rem. In the one case the money is owed to A; in the other case it is owned by\nA. If Y has contracted to work for X during the ensuing six months, X has an affirmative\nright in personam that Y shall render such service, as agreed. Similarly as regards all other\ncontractual or quasi-contractual rights of this character\xe2\x80\xa6.\nIn contrast to these examples are those relating to rights, or claims, in rem\xe2\x80\xa6. If A owns\nand occupies Whiteacre, * not only B but also a great many other persons\xe2\x80\x94not\nnecessarily all persons\xe2\x80\x94are under a duty, e.g., not to enter on A\xe2\x80\x99s land. A\xe2\x80\x99s right against\nB is a \xe2\x80\xa6 right in rem, for it is simply one of A\xe2\x80\x99s class of similar, though separate, rights,\nactual and potential, against very many persons. The same points apply as regards A\xe2\x80\x99s\nright that B shall not commit a battery on him, A\xe2\x80\x99s right that B shall not alienate the\naffections of A\xe2\x80\x99s wife, and A\xe2\x80\x99s right that B shall not manufacture a certain article as to\nwhich A has a so-called patent\xe2\x80\xa6.\n\xe2\x80\xa6[I]t seems necessary to show very concretely and definitely how, because of the\nunfortunate terminology involved, the expression \xe2\x80\x9cright in rem\xe2\x80\x9d is all too frequently\nmisconceived, and meanings attributed to it that could not fail to blur and befog legal\nthought and argument. Some of these loose and misleading usages will now be\nconsidered in detail, it being hoped that the more learned reader will remember that\nthis discussion, being intended for the assistance of law school students more than for\nany other class of persons, is made more detailed and elementary than would otherwise\nbe necessary.\n\n[The study of property law was, for much of its history, mainly the study of land. As such, many teachers\xe2\x80\x99 and\njudges\xe2\x80\x99 hypotheticals required the identification of some fictional parcel of land. By tradition, these parcels take\nthe name \xe2\x80\x9cWhiteacre,\xe2\x80\x9d \xe2\x80\x9cBlackacre,\xe2\x80\x9d \xe2\x80\x9cGreenacre,\xe2\x80\x9d and so on.\xe2\x80\x94eds.]\n\n*\n\n\x0cOwnership\n\n23\n\n(a) A right in rem is not a right \xe2\x80\x9cagainst a thing\xe2\x80\x9d: \xe2\x80\xa6 Any person, be he student or lawyer,\nunless he has contemplated the matter analytically and assiduously, or has been put on\nnotice by books or other means, is likely, first, to translate right in personam as a right\nagainst a person; and then he is almost sure to interpret right in rem, naturally and\nsymmetrically as he thinks, as a right against a thing. \xe2\x80\xa6 Such a notion of rights in rem is,\nas already intimated, crude and fallacious; and it can but serve as a stumbling-block to\nclear thinking and exact expression. A man may indeed sustain close and beneficial\nphysical relations to a given physical thing: he may physically control and use such thing,\nand he may physically exclude others from any similar control or enjoyment. But,\nobviously, such purely physical relations could as well exist quite apart from, or\noccasionally in spite of, the law of organized society: physical relations are wholly\ndistinct from jural relations. The latter take significance from the law; and, since the\npurpose of the law is to regulate the conduct of human beings, all jural relations must,\nin order to be clear and direct in their meaning, be predicated of such human beings.\xe2\x80\xa6\nWhat is here insisted on, \xe2\x80\x94i.e., that all rights in rem are against persons, \xe2\x80\x94is not to be\nregarded merely as a matter of taste or preference for one out of several equally possible\nforms of statement or definition. Logical consistency seems to demand such a\nconception, and nothing less than that. Some concrete examples may serve to make\nthis plain. Suppose that A is the owner of Blackacre and X is the owner of Whiteacre.\nLet it be assumed, further, that, in consideration of $100 actually paid by A to B, the\nlatter agrees with A never to enter on X\xe2\x80\x99s land, Whiteacre. It is clear that A\xe2\x80\x99s right\nagainst B concerning Whiteacre is a right in personam\xe2\x80\xa6; for A has no similar and\nseparate rights concerning Whiteacre availing respectively against other persons in\ngeneral. On the other hand, A\xe2\x80\x99s right against B concerning Blackacre is obviously a\nright in rem\xe2\x80\xa6; for it is but one of a very large number of fundamentally similar (though\nseparate) rights which A has respectively against B, C, D, E, F, and a great many other\npersons. It must now be evident, also, that A\xe2\x80\x99s Blackacre right against B is, intrinsically\nconsidered, of the same general character as A\xe2\x80\x99s Whiteacre right against B. The Blackacre\nright differs, so to say, only extrinsically, that is, in having many fundamentally similar,\nthough distinct, rights as its \xe2\x80\x9ccompanions.\xe2\x80\x9d So, in general, we might say that a right in\npersonam is one having few, if any, \xe2\x80\x9ccompanions\xe2\x80\x9d; whereas a right in rem always has\nmany such \xe2\x80\x9ccompanions.\xe2\x80\x9d\n\n\x0c24\n\nProperty\n\nIf, then, the Whiteacre right, being a right in personam, is recognized as a right against a\nperson, must not the Blackacre right also, being, point for point, intrinsically of the same\ngeneral nature, be conceded to be a right against a person? If not that, what is it? How\ncan it be apprehended, or described, or delimited at all? \xe2\x80\xa6\n(b) A \xe2\x80\xa6 right in rem is not always one relating to a thing, i.e., a tangible object: \xe2\x80\xa6[A] right in rem\nis not necessarily one relating to, or concerning, a thing, i.e., a tangible object. \xe2\x80\xa6 The term\nright in rem \xe2\x80\xa6 is so generic in its denotation as to include: 1. \xe2\x80\xa6[R]ights, or claims,\nrelating to a definite tangible object: e.g., a landowner\xe2\x80\x99s right that any ordinary person shall\nnot enter on his land, or a chattel owner\xe2\x80\x99s right that any ordinary person shall not\nphysically harm the object involved, \xe2\x80\x94be it horse, watch, book, etc. 2. \xe2\x80\xa6[R]ights (or\nclaims) relating neither to definite tangible object nor to (tangible) person, e. g., a\npatentee\xe2\x80\x99s right, or claim, that any ordinary person shall not manufacture articles\ncovered by the patent; 3. \xe2\x80\xa6[R]ights, or claims, relating to the holder\xe2\x80\x99s own person, e. g.,\nhis right that any ordinary person shall not strike him, or that any ordinary person shall\nnot restrain his physical liberty, i.e., \xe2\x80\x9cfalsely imprison\xe2\x80\x9d him; 4. \xe2\x80\xa6[R]ights residing in a\ngiven person and relating to another person, e. g., the right of a father that his daughter\nshall not be seduced, or the right of a husband that harm shall not be inflicted on his\nwife so as to deprive him of her company and assistance; 5. \xe2\x80\xa6[R]ights, or claims, not\nrelating directly to either a (tangible) person or a tangible object, e. g., a person\xe2\x80\x99s right\nthat another shall not publish a libel of him, or a person\xe2\x80\x99s right that another shall not\npublish his picture, the so-called \xe2\x80\x9cright of privacy\xe2\x80\x9d existing in some states, but not in\nall.\nIt is thus seen that some rights in rem\xe2\x80\xa6relate fairly directly to physical objects; some fairly\ndirectly to persons; and some fairly directly neither to tangible objects nor to persons\xe2\x80\xa6.\nWesley Newcomb Hohfeld, Some Fundamental Legal Conceptions as Applied\n\nin Judicial Reasoning\n\n23 YALE L. J. 16, 28-30, 31-33, 45-46, 55 (1913)\nOne of the greatest hindrances to the clear understanding, the incisive statement, and\nthe true solution of legal problems frequently arises from the express or tacit\nassumption that all legal relations may be reduced to \xe2\x80\x9crights\xe2\x80\x9d and \xe2\x80\x9cduties,\xe2\x80\x9d and that\nthese latter categories are therefore adequate for the purpose of analyzing even the\nmost complex legal interests\xe2\x80\xa6 The strictly fundamental legal relations are, after all, sui\n\n\x0cOwnership\n\n25\n\ngeneris; and thus it is that attempts at formal definition are always unsatisfactory, if not\naltogether useless. Accordingly, the most promising line of procedure seems to consist\nin exhibiting all of the various relations in a scheme of \xe2\x80\x9copposites\xe2\x80\x9d and \xe2\x80\x9ccorrelatives,\xe2\x80\x9d\nand then proceeding to exemplify their individual scope and application in concrete\ncases. An effort will be made to pursue this method:\n\n. . .Recognizing, as we must, the very broad and indiscriminate use of the term, \xe2\x80\x9cright,\xe2\x80\x9d\n\nwhat clue do we find, in ordinary legal discourse, toward limiting the word in question\nto a definite and appropriate meaning. That clue lies in the correlative \xe2\x80\x9cduty,\xe2\x80\x9d for it is\ncertain that even those who use the word and the conception \xe2\x80\x9cright\xe2\x80\x9d in the broadest\npossible way are accustomed to thinking of \xe2\x80\x9cduty\xe2\x80\x9d as the invariable correlative. . . .\nIn other words, if X has a right against Y that he shall stay off the former\xe2\x80\x99s land, the\ncorrelative (and equivalent) is that Y is under a duty toward X to stay off the place. If,\nas seems desirable, we should seek a synonym for the term \xe2\x80\x9cright\xe2\x80\x9d in this limited and\nproper meaning, perhaps the word \xe2\x80\x9cclaim\xe2\x80\x9d would prove the best. . . .\nAs indicated in the above scheme of jural relations, a privilege is the opposite of a duty,\nand the correlative of a \xe2\x80\x9cno-right.\xe2\x80\x9d In the example last put, whereas X has a right or\nclaim that Y, the other man, should stay off the land, he himself has the privilege of\nentering on the land; or, in equivalent words, X does not have a duty to stay off. The\nprivilege of entering is the negation of a duty to stay off. As indicated by this case, some\ncaution is necessary at this point, for, always, when it is said that a given privilege is the\nmere negation of a duty, what is meant, of course, is a duty having a content or tenor\nprecisely opposite to that of the privilege in question. Thus, if, for some special reason,\nX has contracted with Y to go on the former\xe2\x80\x99s own land, it is obvious that X has, as\nregards Y, both the privilege of entering and the duty of entering. The privilege is perfectly\nconsistent with this sort of duty,\xe2\x80\x94for the latter is of the same content or tenor as the\nprivilege;\xe2\x80\x94but it still holds good that, as regards Y, X\xe2\x80\x99s privilege of entering is the\nprecise negation of a duty to stay off. . . .\n\n\x0c26\n\nProperty\n\nPassing now to the question of \xe2\x80\x9ccorrelatives,\xe2\x80\x9d it will be remembered, of course, that a\nduty is the invariable correlative of that legal relation which is most properly called a\nright or claim. That being so, if further evidence be needed as to the fundamental and\nimportant difference between a right (or claim) and a privilege, surely it is found in the\nfact that the correlative of the latter relation is a \xe2\x80\x9cno-right,\xe2\x80\x9d there being no single term\navailable to express the latter conception. Thus, the correlative of X\xe2\x80\x99s right that Y shall\nnot enter on the land is Y\xe2\x80\x99s duty not to enter; but the correlative of X\xe2\x80\x99s privilege of\nentering himself is manifestly Y\xe2\x80\x99s \xe2\x80\x9cno-right\xe2\x80\x9d that X shall not enter. . . .\nThe nearest synonym [for power] for any ordinary case seems to be (legal) \xe2\x80\x9cability,\xe2\x80\x9d\xe2\x80\x94\nthe latter being obviously the opposite of \xe2\x80\x9cinability,\xe2\x80\x9d or \xe2\x80\x9cdisability.\xe2\x80\x9d . . . Many examples\nof legal powers may readily be given. Thus, X, the owner of ordinary personal property\n\xe2\x80\x9cin a tangible object\xe2\x80\x9d . . . has the power to transfer his interest to Y,\xe2\x80\x94that is, to\nextinguish his own interest and concomitantly create in Y a new and corresponding\ninterest. . . .\nPerhaps it will also be plain, from the preliminary outline and from the discussion down\nto this point, that a power bears the same general contrast to an immunity that a right\ndoes to a privilege. A right is one\xe2\x80\x99s affirmative claim against another, and a privilege is\none\xe2\x80\x99s freedom from the right or claim of another. Similarly, a power is one\xe2\x80\x99s affirmative\n\xe2\x80\x9ccontrol\xe2\x80\x9d over a given legal relation as against another; whereas an immunity is one\xe2\x80\x99s\nfreedom from the legal power or \xe2\x80\x9ccontrol\xe2\x80\x9d of another as regards some legal relation.\nA few examples may serve to make this clear. X, a landowner, has, as we have seen,\npower to alienate to Y or to any other ordinary party. On the other hand, X has also\nvarious immunities as against Y, and all other ordinary parties. For Y is under a\ndisability (i.e., has no power) so far as shifting the legal interest either to himself or to a\nthird party is concerned . . . .\nNotes and Questions\n1. Hohfeld\xe2\x80\x99s articles are widely recognized as an important source of the \xe2\x80\x9cbundle\nof rights\xe2\x80\x9d conception of property. His point that we can conceive of any\nsupposed right to a thing as a collection of rights against an indeterminate number\nof people with respect to that thing seems indisputably correct as an analytical matter.\nWhat does such a shift in perspective gain us?\n\n\x0cOwnership\n\n27\n\nFor one thing, it reveals some imprecision in the way we often talk about\nproperty rights. When I say \xe2\x80\x9cI have a property right in Blackacre,\xe2\x80\x9d or \xe2\x80\x9cBlackacre\nis my property,\xe2\x80\x9d I haven\xe2\x80\x99t really told you exactly what the law allows me to do\nwith Blackacre, and still less what you are permitted to do with Blackacre. To\nunderstand that set of rights and obligations, you need to know something\nabout what rights, powers, privileges, and immunities the law affords property\nowners with respect to the things they own. And, as we have seen, those\nparticular rights, powers, privileges, and immunities may differ depending on\ncontext\xe2\x80\x94particularly where other rights and interests are at stake. Hohfeld\xe2\x80\x99s\ndeconstructive project thus reveals real deficiencies in lay understandings of\nproperty.\n2. Note that Hohfeld\xe2\x80\x99s decomposition of in rem rights into a collection of in\npersonam rights could provide a different interpretation of the \xe2\x80\x9cbundle of rights\xe2\x80\x9d\nmetaphor than the one we\xe2\x80\x99ve been working with. Rather than being a collection\nof different rights held by one person with respect to a thing (the right to\nexclude, possess, alienate, etc.), perhaps the \xe2\x80\x9cbundle\xe2\x80\x9d really is a reference to the\nvarious rights an owner has against the \xe2\x80\x9clarge and indefinite class of people\xe2\x80\x9d\nwith whom she might come into conflict with respect to the res. Does this\ndistinction matter?\nRecall the questions in Notes 1 and 2 on page 8 (following Jacque). Consider\nthis: if I ask you: \xe2\x80\x9cDoes A have a property right in Whiteacre,\xe2\x80\x9d how confident\nare you that you will be able to answer the question without knowing the answer\nto a different question: \xe2\x80\x9cA right against whom?\xe2\x80\x9d\n3. Can we reframe the holdings of some of the cases we\xe2\x80\x99ve already looked at in\nHohfeldian terms? We might, for example, say that Steenberg has a duty to stay\noff Jacque\xe2\x80\x99s land, and that Jacque has a correlative right (or claim) that\nSteenberg stay off. Likewise, Jacque has a power to exclude others from his\nland, and Steenberg, when his agent entered that land, came under a correlative\nliability to be obligated to pay damages for trespassing upon Jacque\xe2\x80\x99s exercise\nof that power.\nIn contrast, we might say that Shack has a privilege of entering onto Tedesco\xe2\x80\x99s\nland to provide services to migrant workers living there, and that Tedesco has\n\n\x0c28\n\nProperty\na correlative no-right to prevent Shack from doing so. Likewise, Shack has an\nimmunity against Tedesco\xe2\x80\x99s revoking Shack\xe2\x80\x99s privilege to enter Tedesco\xe2\x80\x99s\nfarm, while Tedesco was under a correlative disability to revoke that privilege.\nBut note that this does not mean that Shack has any power to grant or revoke\nany rights to others with respect to Tedesco\xe2\x80\x99s farm\xe2\x80\x94he too is under a disability\nin that respect.\nWhile this might all seem rather formal, technical, and perhaps a bit confusing,\nhere\xe2\x80\x99s the important thing to note: Jacque and Tedesco are, on the in rem view,\nthe same: they both own land. But their Hohfeldian jural relations to Steenberg\nand Shack, respectively, are vastly different. Thinking of the rights of Jacque and\nTedesco as in rem rights\xe2\x80\x94as rights to their land\xe2\x80\x94may make it more difficult to\nidentify and name these differences with any consistency or precision.\n4. Hohfeld\xe2\x80\x99s effort to bring precision to our discussion of property rights by\ndeconstructing them into various types of relations among people with respect to\nthings has been tremendously influential, but it also has its critics. When we\nstop thinking of property as a coherent and stable construct, and instead think\nof it only as any number of combinations of in personam jural relations, the very\nidea that there is such a thing as \xe2\x80\x9cproperty\xe2\x80\x9d may be hard to maintain. This\ndeconstructionist mindset may change how we relate to one another with\nrespect to resources, and may also change the way we think about certain types\nof government involvement in those relations. Consider the following critiques:\n\nThomas W. Merrill & Henry E. Smith, What Happened to Property in Law\n\nand Economics?\n\n*\n\n111 YALE L. J. 357, 357-365 (2001)\nIt is a commonplace of academic discourse that property is simply a \xe2\x80\x9cbundle of rights,\xe2\x80\x9d\nand that any distribution of rights and privileges among persons with respect to things\ncan be dignified with the (almost meaningless) label \xe2\x80\x9cproperty.\xe2\x80\x9d By and large, this view\nhas become conventional wisdom among legal scholars: Property is a composite of\nlegal relations that holds between persons and only secondarily or incidentally involves\n\n*\n\nReproduced by permission of Henry E. Smith.\n\n\x0cOwnership\n\n29\n\na \xe2\x80\x9cthing.\xe2\x80\x9d Someone who believes that property is a right to a thing is assumed to suffer\nfrom a childlike lack of sophistication\xe2\x80\x94or worse.\n\xe2\x80\xa6 In other times and places, a very different conception of property has prevailed. In\nthis alternative conception, property is a distinctive type of right to a thing, good against\nthe world. This understanding of the in rem character of the right of property is a\ndominant theme of the civil law\xe2\x80\x99s \xe2\x80\x9claw of things.\xe2\x80\x9d For Anglo-American lawyers and\nlegal economists, however, such talk of a special category of rights related to things\npresumably illustrates the grip of conceptualism on the civilian mind and a slavish\ndevotion to the gods of Roman law.\nOr does it? In related work, we have argued that, far from being a quaint aspect of the\nRoman or feudal past, the in rem character of property and its consequences are vital\nto an understanding of property as a legal and economic institution. 7 Because core\nproperty rights attach to persons only through the intermediary of some thing, they\nhave an impersonality and generality that is absent from rights and privileges that attach\nto persons directly. When we encounter a thing that is marked in the conventional\nmanner as being owned, we know that we are subject to certain negative duties of\nabstention with respect to that thing\xe2\x80\x94not to enter upon it, not to use it, not to take it,\netc. And we know all this without having any idea who the owner of the thing actually\nis. In effect, these universal duties are broadcast to the world from the thing itself\xe2\x80\xa6.\nProperty rights historically have been regarded as in rem. In other words, property\nrights attach to persons insofar as they have a particular relationship to some thing and\nconfer on those persons the right to exclude a large and indefinite class of other persons\n(\xe2\x80\x9cthe world\xe2\x80\x9d) from the thing. In this sense, property rights are different from in\npersonam rights, such as those created by contracts or by judicial judgments. In\npersonam rights attach to persons as persons and obtain against one or a small number\nof other identified persons. A number of historically significant property theorists have\nrecognized the in rem nature of property rights and have perceived that this feature is\n\nThomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle,\n110 YALE L.J. 1 (2000)\xe2\x80\xa6; Thomas W. Merrill & Henry E. Smith, The Property/Contract Interface, 101 COLUM. L.\nREV. 773 (2001)\xe2\x80\xa6.\n7\n\n\x0c30\n\nProperty\n\nkey because it establishes a base of security against a wide range of interferences by\nothers\xe2\x80\xa6.\n\xe2\x80\xa6 Blackstone perceived that property rights are important because they establish a\nbasis of security of expectation regarding the future use and enjoyment of particular\nresources. By establishing a right to resources that holds against all the world, property\nprovides a guarantee that persons will be able to reap what they have sown\xe2\x80\xa6. In other\nwords, property is important because it gives legal sanction to the efforts of the owner\nof a thing to exclude an indefinite and anonymous class of marauders, pilferers, and\nthieves, thereby encouraging development of the thing.\n\xe2\x80\xa6 In contrast, the role of property emphasized in modem economic discussions\xe2\x80\x94\nproviding a baseline for contractual exchange and a mechanism for resolving disputes\nover conflicting uses of resources\xe2\x80\x94was at most of secondary importance in these\ntraditional accounts. \xe2\x80\xa6 Early in the twentieth century, Wesley Hohfeld provided an\naccount of legal relations that proved to be especially influential in transforming the\nunderlying assumptions about property rights in Anglo-American scholarship. \xe2\x80\xa6\nHohfeld noted \xe2\x80\xa6 that in personam rights are unique rights residing in a person and\navailing against one or a few definite persons; in rem rights, in contrast, reside in a\nperson and avail against \xe2\x80\x9cpersons constituting a very large and indefinite class of\npeople.\xe2\x80\x9d\nSignificantly, however, Hohfeld failed to perceive that in rem property rights are\nqualitatively different in that they attach to persons insofar as they have a certain\nrelationship to some thing. Rather, Hohfeld suggested that in personam and in rem\nrights consist of exactly the same types of rights, privileges, duties, and so forth, and\ndiffer only in the indefiniteness and the number of the persons who are bound by these\nrelations. To use a modern expression, Hohfeld thought that in rem relations could be\n\xe2\x80\x9ccashed out\xe2\x80\x9d into the same clusters of rights, duties, privileges, liabilities, etc., as are\nconstitutive of in personam relations.\nHohfeld did not use the metaphor \xe2\x80\x9cbundle of rights\xe2\x80\x9d to describe property. But his\ntheory of jural opposites and correlatives, together with his effort to reduce in rem\nrights to clusters of in personam rights, provided the intellectual justification for this\nmetaphor, which became popular among the legal realists in the 1920s and 1930s.\nDifferent writers influenced by realism took the metaphor to different extremes. For\n\n\x0cOwnership\n\n31\n\nsome, the bundle-of-rights concept simply meant that property could be reduced to\nrecognizable collections of functional attributes, such as the right to exclude, to use, to\ntransfer, or to inherit particular resources. For others, property had no inherent\nmeaning at all. As one pair of writers put it, the concept of property is nothing more\nthan \xe2\x80\x9ca euphonious collocation of letters which serves as a general term for the\nmiscellany of equities that persons hold in the commonwealth.\xe2\x80\x9d 36\nNotwithstanding these variations, the motivation behind the realists\xe2\x80\x99 fascination with\nthe bundle-of-rights conception was mainly political. They sought to undermine the\nnotion that property is a natural right, and thereby smooth the way for activist state\nintervention in regulating and redistributing property. If property has no fixed core of\nmeaning, but is just a variable collection of interests established by social convention,\nthen there is no good reason why the state should not freely expand or, better yet,\ncontract the list of interests in the name of the general welfare. The realist program of\ndethroning property was on the whole quite successful. The conception of property as\nan infinitely variable collection of rights, powers, and duties has today become a kind\nof orthodoxy. Not coincidentally, state intervention in economic matters greatly\nincreased in the middle decades of the twentieth century, and the constitutional rights\nof property owners generally receded.\nHenry E. Smith, Property as the Law of Things *\n125 HARV. L. REV. 1691, 1696-98, 1700-08 (2012)\nAs an analytical device, the bundle picture can be very useful. It provides a highly\naccurate description of who can do what to whom in a legal (and perhaps nonlegal)\nsense. It provides an interesting theoretical baseline: how would one describe the\nrelation of a property owner to various others if one were writing on a blank slate and\ndoing the description in a fully bottom-up manner, relation by relation, party by party?\n\xe2\x80\xa6The problem with the bundle of rights is that it is treated as a theory of how our\nworld works rather than as an analytical device or as a theoretical baseline. In the realist\n\nWalton H. Hamilton & Irene Till, Property, in 12 ENCYCLOPAEDIA OF THE SOCIAL SCIENCES 528, 528 (Edwin\nR.A. Seligman ed., 1934).\n36\n\n*\n\nReproduced by permission of Henry E. Smith.\n\n\x0c32\n\nProperty\n\nera, the benefits of tinkering with property were expressed in bundle terms without a\ncorresponding theory of the costs of that tinkering. Indeed, in the most tendentious\nversions of the picture, the traditional baselines of the law were mocked, and the idea\nwas to dethrone them in order to remove them as barriers to enlightened social\nengineering. In this version of the bundle picture, Hohfeldian sticks and potentially\nothers are posited to describe the relations holding between persons; the fact that the\nrelations hold with respect to a thing is relatively unimportant or, in some versions, of\nno importance. \xe2\x80\x9cProperty\xe2\x80\x9d is simply a conclusory label we might attach to the\ncollection. In its classic formulation, the bundle picture puts no particular constraints\non the contents of bundles: they are totally malleable and should respond to policy\nconcerns in a fairly direct fashion. These policy-motivated adjustments usually involve\nadding or subtracting sticks and reallocating them among concerned parties or to\nsociety. This version of the bundle explains everything and so explains nothing.\n. . . In recent times, various commentators have argued that property is not fully\ncaptured by the bundle picture. Going beyond the bundle usually involves emphasizing\nexclusion or some robust notion of the right to use. It can be motivated by analytical\njurisprudence, natural rights, or information cost economics. The bundle theory can\nincorporate some of these perspectives. Consider, for example, the recent resurgence\nof interest in the numerus clausus; this principle that property forms come in a finite and\nclosed menu can be added onto the bundle theory as a \xe2\x80\x9cmenu\xe2\x80\x9d of collections of sticks.\nBundle theorists can accommodate this development. But they are being reactive in\nthis regard. . . .\nIn this Article, I present a theory that aims higher. At the most basic level, the extreme\nbundle picture takes too little account of the costs of delineating rights. . . .\n. . . Here, I present an alternative to the bundle picture that I call an architectural or\nmodular theory of property. This theory responds to information costs\xe2\x80\x94it conceives of\nproperty as a law of modular \xe2\x80\x9cthings.\xe2\x80\x9d . . .\nBecause it makes sense in modern property systems to delegate to owners a choice\nfrom a range of uses and because protection allows for stability, appropriability,\nfacilitation of planning and investment, liberty, and autonomy, we typically start with\nan exclusion strategy\xe2\x80\x94and that goes not just for private property but for common and\npublic property as well. \xe2\x80\x9cUse\xe2\x80\x9d can include nonconsumptive uses relating to\n\n\x0cOwnership\n\n33\n\nconservation. The exclusion strategy defines a chunk of the world\xe2\x80\x94a thing\xe2\x80\x94under\nthe owner\xe2\x80\x99s control, and much of the information about the thing\xe2\x80\x99s uses, their\ninteractions, and the user is irrelevant to the outside world. Duty bearers know not to\nenter Blackacre without permission or not to take cars, without needing to know what\nthe owner is using the thing for, who the owner is, who else might have rights and\nother interests, and so on. But dividing the world into chunks is not enough: spillovers\nand scale problems call for more specific rules to deal with problems like odors and\nlateral support, and to facilitate coordination (for example, covenants, common interest\ncommunities, and trusts). These governance strategies focus more closely on narrower\nclasses of use and sometimes make more specific reference to their purposes, and so\nthey are more contextual.\nThe exclusion-governance architecture manages complexity in a way totally uncaptured\nby the bundle picture, and importantly, the former is modular while the latter is not.\nThe exclusion strategy defines what a thing is to begin with. A fundamental question is\nhow to classify \xe2\x80\x9cthings,\xe2\x80\x9d and, hence, which aspects of \xe2\x80\x9cthings\xe2\x80\x9d are the most basic units\nof property law. Many important features of property follow from the semitransparent\nboundaries between things. Boundaries carve up the world into semiautonomous\ncomponents\xe2\x80\x94modules\xe2\x80\x94that permit private law to manage highly complex\ninteractions among private parties. . . .\nThe modular theory explains property\xe2\x80\x99s structure, which includes providing some\nreason why those structures are not otherwise. In a zero-transaction-cost world, we\ncould use all governance all the time, whether supplied by government or through super\nfine-grained contracting among all the concerned parties. That is not our world, and\nthe main point of exclusion as a delineation strategy is that it is a shortcut over direct\ndelineation of this more \xe2\x80\x9ccomplete\xe2\x80\x9d set of legal relations. Analytically, it might be\ninteresting to think of property as a list of use rights availing pairwise between all people\nin society, but actually creating such a list would be a potentially intractable problem in\nour world. On the other hand, exclusion is not the whole story either. Causes of action\nlike trespass implement a right to exclude, but the right to exclude is not why we have\nproperty. Rather, the right to exclude is part of how property works. Rights to exclude\nare a means to an end, and the ends in property relate to people\xe2\x80\x99s interests in using\nthings.\n\n\x0c34\n\nProperty\n\n. . . Exclusion is at the core of this architecture because it is a default, a convenient\nstarting point. Exclusion is not the most important or \xe2\x80\x9ccore\xe2\x80\x9d value because it is not a\nvalue at all. Thinking that exclusion is a value usually reflects the confusion of means\nand ends in property law: exclusion is a rough first cut\xe2\x80\x94and only that\xe2\x80\x94at serving the\npurposes of property. It is true that exclusion piggybacks on the everyday morality of\n\xe2\x80\x9cthou shalt not steal,\xe2\x80\x9d whereas governance reflects a more refined Golden-Rule, \xe2\x80\x9cdo\nunto others\xe2\x80\x9d type of morality in more personal contexts. It may be the case that our\nmorality itself is shaped to a certain extent by the ease with which it can be\ncommunicated and enforced in more impersonal settings. I leave that question for\nanother day. But the point here is that the exclusion-governance architecture is\ncompatible with a wide range of purposes for property. Some societies will move from\nexclusion to governance\xe2\x80\x94that is, some systems of laws and norms will focus more on\nindividuated uses of resources\xe2\x80\x94more readily than others, and will do so for different\nreasons than others.\nAt the base of the architectural approach is a distinction that the bundle theory\xe2\x80\x94along\nwith other theories\xe2\x80\x94tends to obscure: the distinction between the interests we have in\nusing things and the devices the law uses to protect those interests. Property serves\npurposes related to use by employing a variety of delineation strategies. Because\ndelineation costs are greater than zero, which strategy one uses and when one uses it\nwill be dictated in part by the costs of delineation\xe2\x80\x94not just by the benefits that\ncorrespond to the use-based purposes of property. . . .\nThe traditional definition of property is a right to a thing good against the world\xe2\x80\x94it is\nan in rem right. The special in rem character of property forms the basis of an\ninformation-cost explanation of the numerus clausus and standardization in property. In\nrem rights are directed at a wide and indefinite audience of duty holders and other\naffected parties, who would incur high information costs in dealing with idiosyncratic\nproperty rights and would have to process more types of information than they would\nin the absence of the numerus clausus. Crucially, parties who might create such\nidiosyncratic property rights are not guaranteed to take such third-party processing\ncosts into account. There is thus an information-cost externality, and the numerus clausus\nis one tool for addressing this externality. Other devices include title records and\ntechnological changes in communication. . . .\n\n\x0cOwnership\n\n35\n\nModularity plays a key role in making the standardization of property possible. First,\nmodularity makes it possible to keep interconnections between packages of rights\nrelatively few, thus allowing much of what goes on inside a package of property rights\nto be irrelevant to the outside world. Second, property rights \xe2\x80\x9cmesh\xe2\x80\x9d with neighboring\nproperty rights and show network effects with more far-flung property rights. The\noutside interfaces make this possible at reasonable cost. Third, the processes of\nproperty are simple enough that they can feed into themselves. Many modular structures\nare hierarchical in that they have modules composed of other modules. . . . In this\nrespect, property forms are like a basic grammar or \xe2\x80\x9cpattern language\xe2\x80\x9d of property.\nNotes and Questions\n1. Are you persuaded by Merrill\xe2\x80\x99s and Smith\xe2\x80\x99s critique of Hohfeld? If Hohfeldian\ndeconstruction has the effect of removing traditional inhibitions against\ngovernment-led \xe2\x80\x9csocial engineering,\xe2\x80\x9d and thereby makes it harder for property\nowners to rely on the future use and enjoyment of resources they currently\ncontrol, does that necessarily make Hohfeld wrong about the nature of property\nrights?\n2. The \xe2\x80\x9clegal realists\xe2\x80\x9d referred to by Merrill and Smith are scholars and judges who\ndeveloped the theoretical school now known as \xe2\x80\x9cAmerican Legal Realism\xe2\x80\x9d\xe2\x80\x94\nan influential movement in the legal profession, bench, and academy in the first\nhalf of the 20th century. Legal realists were reacting against what they called\n\xe2\x80\x9cformalism\xe2\x80\x9d: the view that \xe2\x80\x9cjudges decide cases on the basis of distinctively legal\nrules and reasons, which justify a unique result in most cases (perhaps every case).\xe2\x80\x9d\nBrian Leiter, American Legal Realism, in THE BLACKWELL GUIDE TO THE\nPHILOSOPHY OF LAW AND LEGAL THEORY 50, 50 (Martin P. Golding &\nWilliam A. Edmundson eds., 2008). The realists argued that the outcome of\nlegal cases is not (or at least not completely) determined by the content of legal\nrules, particularly at the appellate level. Instead, they asserted that judges\ndeciding such cases primarily do so by intuitively reaching a sense of the \xe2\x80\x9cright\xe2\x80\x9d\nresult in light of the totality of the facts of the case, and then backfilling a\njustification using convenient legal authorities (and, perhaps, distinguishing\ninconvenient ones). The influence of the legal realists on the American legal\nprofession has been profound, and it is the rare lawyer or judge (and the even\nrarer legal academic) who would deny that social factors\xe2\x80\x94including politics,\n\n\x0c36\n\nProperty\neconomics, morality, psychology, and the like\xe2\x80\x94play a substantial role in\ndeciding the outcomes of legal disputes, particularly the most difficult and\ncontentious ones.\nIn denying that legal rules are the exclusive determinant of legal outcomes, the\nrealists were not claiming that this is how cases ought to be decided, or even that\njudges consciously rely on intuitionistic responses to the facts of cases; only that\nsuch decisionmaking is unavoidable. They thus placed an emphasis on\ndistinguishing between what courts say they are doing, and what they actually do.\nWhy might Merrill and Smith draw a connection between American Legal\nRealism and Hohfeld? Why might they think that Hohfeld\xe2\x80\x99s analysis would be\nuseful to a supposedly redistributivist political agenda?\n3. What is the difference between\xe2\x80\x94in Smith\xe2\x80\x99s words\xe2\x80\x94\xe2\x80\x9ca theory of how our\nworld works\xe2\x80\x9d and \xe2\x80\x9can analytical device\xe2\x80\x9d? Which is more useful to legal\nprofessionals? Which category does Smith\xe2\x80\x99s \xe2\x80\x9cmodular\xe2\x80\x9d or \xe2\x80\x9carchitectural\xe2\x80\x9d\nexclusion-governance approach fall into? Does his approach convincingly\nrescue the idea that property can be thought of as a cohesive construct or\n\xe2\x80\x9cpackage deal\xe2\x80\x9d? (Or maybe a \xe2\x80\x9cstandard package\xe2\x80\x9d of exclusion with governance\n\xe2\x80\x9coptions\xe2\x80\x9d and \xe2\x80\x9cextras\xe2\x80\x9d on the side?)\nIs Smith\xe2\x80\x99s approach compatible with Hohfeld\xe2\x80\x99s analysis, or are the two\nnecessarily inconsistent with each other? If they are compatible, what is the\ndifference between them? Do we need both? Is one better than the other? Do\nthe answers to these questions depend on the use to which either Smith\xe2\x80\x99s or\nHohfeld\xe2\x80\x99s framework might be put, or on the person using them?\n4. Consider the following two propositions:\n\xe2\x80\xa2 \xe2\x80\x9cProperty\xe2\x80\x9d is a relationship between a person and a thing.\n\xe2\x80\xa2 \xe2\x80\x9cProperty\xe2\x80\x9d is a set of rights and obligations among people with respect to\nthings.\nDo you think either of these propositions, standing alone, adequately describes\nwhat we mean by the word \xe2\x80\x9cproperty\xe2\x80\x9d? Do you think these two propositions\nare meaningfully different from one another? If so, what is the difference? Do\n\n\x0cOwnership\n\n37\n\nyou think the difference might have an effect on the outcome of legal disputes?\nIf so, what effect? And if not, does the difference matter?\n5. Hohfeld observes that, when it comes to property rights, \xe2\x80\x9cthing\xe2\x80\x9d doesn\xe2\x80\x99t\nnecessarily mean \xe2\x80\x9ctangible thing in the physical world.\xe2\x80\x9d Indeed, legal authorities\nidentify property rights in all sorts of intangible things, as well as in admittedly\nphysical substances that resist the label of \xe2\x80\x9cthing\xe2\x80\x9d\xe2\x80\x94like animals, or even human\nbeings. We will discuss this complication of the notion of property as a legal\nright in \xe2\x80\x9cthings\xe2\x80\x9d in our unit on the Subject Matter of Property.\n\n\x0cSubject Matter of Property\nA. Introduction\nIn this unit we will consider the various types of things that attract the legal label\n\xe2\x80\x9cproperty.\xe2\x80\x9d Let us begin with some examples to pump our intuitions. In light of our\ndiscussion of what it means to own something, which of the following things can be\nusefully thought of as your \xe2\x80\x9cproperty\xe2\x80\x9d?\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\nyour home or apartment\nyour car or bike\nyour computer\nthe software on your computer\nthe emails stored on your computer\nthe emails stored on your cloud-based email service\nyour bank account\nthe money in your bank account\nthe money you lent to your friend that hasn\xe2\x80\x99t been repaid\nthe money your friend lent to you that you haven\xe2\x80\x99t paid back\nthe things you bought with the money your friend lent to you that you haven\xe2\x80\x99t paid\nback\nyour pet dog\nthe rats in your animal research lab\nyour dairy cow\nthe pig you\xe2\x80\x99re raising for meat\nyour prescription medications\nyour doctor\xe2\x80\x99s/pharmacist\xe2\x80\x99s/insurance company\xe2\x80\x99s records of your prescription\nmedications\nyour medical history\n\n38\n\n\x0cSubject Matter of Property\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\xe2\x80\xa2\n\n39\n\nyour handwritten diary\nyour unpublished novel\nyour published novel\nyour social media profiles and content\nyour password-protected blog\n\nDoes categorizing any of these items as \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9cnot property\xe2\x80\x9d meaningfully\nassist in the analysis of any legal problems? Particularly legal disputes that arise over\nquestions of access to or use of any of these things? Why might we choose to recognize\n(or refuse to recognize) these or other items as \xe2\x80\x9cproperty\xe2\x80\x9d?\nYou may notice there is something of a chicken-and-egg problem here. Is the label\n\xe2\x80\x9cproperty\xe2\x80\x9d a premise or a conclusion? Can we arrive at the label without resorting to\ncircular reasoning? When we say something is a person\xe2\x80\x99s property, or that someone has\na \xe2\x80\x9cproperty right,\xe2\x80\x9d is that because we have examined the qualities and characteristics\nof the thing and its relation to the person, and determined that they are all consistent with\nsome coherent notion of property ownership? Or is calling something \xe2\x80\x9cproperty\xe2\x80\x9d a\nmere assertion, unconstrained by circumstances, that we make because we want the\nconsequences of the label \xe2\x80\x9cproperty\xe2\x80\x9d to attach to that thing for independent reasons? Is\nthere a difference? Consider the following classic discussion (by one of the leading\nAmerican Legal Realists) of this question:\nFelix Cohen, Transcendental Nonsense and the Functional Approach\n35 COLUM. L. REV. 809, 814-817 (1935)\nThere was once a theory that the law of trade marks and trade-names was an attempt\nto protect the consumer against the \xe2\x80\x9cpassing off\xe2\x80\x9d of inferior goods under misleading\nlabels. Increasingly the courts have departed from any such theory and have come to\nview this branch of law as a protection of property rights in divers economically\nvaluable sale devices. In practice, injunctive relief is being extended today to realms\nwhere no actual danger of confusion to the consumer is present, and this extension has\nbeen vigorously supported and encouraged by leading writers in the field. Conceivably\nthis extension might be justified by a demonstration that privately controlled sales\ndevices serve as a psychologic base for the power of business monopolies, and that\nsuch monopolies are socially valuable in modern civilization. But no such line of\nargument has ever been put forward by courts or scholars advocating increased legal\n\n\x0c40\n\nProperty\n\nprotection of trade names and similar devices. For if they advanced any such argument,\nit might seem that they were taking sides upon controversial issues of politics and\neconomics. Courts and scholars, therefore, have taken refuge in a vicious circle to\nwhich no obviously extra-legal facts can gain admittance. The current legal argument\nruns: One who by the ingenuity of his advertising or the quality of his product has\ninduced consumer responsiveness to a particular name, symbol, form of packaging,\netc., has thereby created a thing of value; a thing of value is property; the creator of\nproperty is entitled to protection against third parties who seek to deprive him of his\nproperty. This argument may be embellished, in particular cases, with animadversions\nupon the selfish motives of the infringing defendant, a summary of the plaintiff\xe2\x80\x99s\nevidence (naturally uncontradicted) as to the amount of money he has spent in\nadvertising, and insinuations (seldom factually supported) as to the inferiority of the\ninfringing defendant\xe2\x80\x99s product.\nThe vicious circle inherent in this reasoning is plain. It purports to base legal protection\nupon economic value, when, as a matter of actual fact, the economic value of a sales\ndevice depends upon the extent to which it will be legally protected. If commercial\nexploitation of the word \xe2\x80\x9cPalmolive\xe2\x80\x9d is not restricted to a single firm, the word will be\nof no more economic value to any particular firm than a convenient size, shape, mode\nof packing, or manner of advertising, common in the trade. Not being of economic\nvalue to any particular firm, the word would be regarded by courts as \xe2\x80\x9cnot property,\xe2\x80\x9d\nand no injunction would be issued. In other words, the fact that courts did not protect\nthe word would make the word valueless, and the fact that it was valueless would then\nbe regarded as a reason for not protecting it. Ridiculous as this vicious circle seems, it\nis logically as conclusive or inconclusive as the opposite vicious circle, which accepts\nthe fact that courts do protect private exploitation of a given word as a reason why\nprivate exploitation of that word should be protected.\nThe circularity of legal reasoning in the whole field of unfair competition is veiled by\nthe \xe2\x80\x9cthingification\xe2\x80\x9d of property. Legal language portrays courts as examining commercial\nwords and finding, somewhere inhering in them, property rights. It is by virtue of the\nproperty right which the plaintiff has acquired in the word that he is entitled to an\ninjunction or an award of damages. According to the recognized authorities on the law\nof unfair competition, courts are not creating property, but are merely recognizing a preexistent Something.\n\n\x0cSubject Matter of Property\n\n41\n\nThe theory that judicial decisions in the field of unfair competition law are merely\nrecognitions of a supernatural Something that is immanent in certain trade names and\nsymbols is, of course, one of the numerous progeny of the theory that judges have\nnothing to do with making the law, but merely recognize pre-existent truths not made\nby mortal men. The effect of this theory, in the law of unfair competition as elsewhere,\nis to dull lay understanding and criticism of what courts do in fact.\nWhat courts are actually doing, of course, in unfair competition cases, is to create and\ndistribute a new source of economic wealth or power. Language is socially useful apart\nfrom law, as air is socially useful, but neither language nor air is a source of economic\nwealth unless some people are prevented from using these resources in ways that are\npermitted to other people. That is to say, property is a function of inequality. If courts,\nfor instance, should prevent a man from breathing any air which had been breathed by\nanother (within, say, a reasonable statute of limitations), those individuals who breathed\nmost vigorously and were quickest and wisest in selecting desirable locations in which\nto breathe (or made the most advantageous contracts with such individuals) would, by\nvirtue of their property right in certain volumes of air, come to exercise and enjoy a\npeculiar economic advantage, which might, through various modes of economic\nexchange, be turned into other forms of economic advantage, e.g. the ownership of\nnewspapers or fine clothing. So, if courts prevent a man from exploiting certain forms\nof language which another has already begun to exploit, the second user will be at the\neconomic disadvantage of having to pay the first user for the privilege of using similar\nlanguage or else of having to use less appealing language (generally) in presenting his\ncommodities to the public.\nCourts, then, in establishing inequality in the commercial exploitation of language are\ncreating economic wealth and property, creating property not, of course, ex nihilo, but\nout of the materials of social fact, commercial custom, and popular moral faiths or\nprejudices. It does not follow, except by the fallacy of composition, that in creating\nnew private property courts are benefiting society. Whether they are benefiting society\ndepends upon a series of questions which courts and scholars dealing with this field of\nlaw have not seriously considered. Is there, for practical purposes, an unlimited supply\nof equally attractive words under which any commodity can be sold, so that the second\nseller of the commodity is at no commercial disadvantage if he is forced to avoid the\nword or words chosen by the first seller? If this is not the case, i.e. if peculiar emotional\n\n\x0c42\n\nProperty\n\ncontexts give one word more sales appeal than any other word suitable for the same\nproduct, should the peculiar appeal of that word be granted by the state, without\npayment, to the first occupier? Is this homestead law for the English language necessary\nin order to induce the first occupier to use the most attractive word in selling his\nproduct? If, on the other hand, all words are originally alike in commercial potentiality,\nbut become differentiated by advertising and other forms of commercial exploitation,\nis this type of business pressure a good thing, and should it be encouraged by offering\nlegal rewards for the private exploitation of popular linguistic habits and prejudices?\nTo what extent is differentiation of commodities by trade names a help to the consumer\nin buying wisely? To what extent is the exclusive power to exploit an attractive word,\nand to alter the quality of the things to which the word is attached, a means of deceiving\nconsumers into purchasing inferior goods?\nWithout a frank facing of these and similar questions, legal reasoning on the subject of\ntrade names is simply economic prejudice masquerading in the cloak of legal logic. The\nprejudice that identifies the interests of the plaintiff in unfair competition cases with\nthe interests of business and identifies the interests of business with the interests of\nsociety, will not be critically examined by courts and legal scholars until it is recognized\nand formulated. It will not be recognized or formulated so long as the hypostatization\nof \xe2\x80\x9cproperty rights\xe2\x80\x9d conceals the circularity of legal reasoning.\nHinman v. Pacific Air Transport\n84 F.2d 755 (9th Cir. 1936)\nHANEY, Circuit Judge.\nAppellants allege\xe2\x80\xa6 that they are the owners and in possession of 72 1/2 acres of real\nproperty in the city of Burbank, Los Angeles county, Cal., \xe2\x80\x9ctogether with a stratum of\nair-space superjacent to and overlying said tract * * * and extending upwards * * * to\nsuch an altitude as plaintiffs * * * may reasonably expect now or hereafter to utilize,\nuse or occupy said airspace. Without limiting said altitude or defining the upward extent\nof said stratum of airspace or of plaintiff\xe2\x80\x99s ownership, utilization and possession\nthereof, plaintiffs allege that they * * * may reasonably expect now and hereafter to\nutilize, use and occupy said airspace and each and every portion thereof to an altitude\nof not less than 150 feet above the surface of the land * * * \xe2\x80\x9d \xe2\x80\xa6.\n\n\x0cSubject Matter of Property\n\n43\n\nIt is then alleged that defendants are engaged in the business of operating a commercial\nair line, and that at all times \xe2\x80\x9cafter the month of May, 1929, defendants daily, repeatedly\nand upon numerous occasions have disturbed, invaded and trespassed upon the\nownership and possession of plaintiffs\xe2\x80\x99 tract\xe2\x80\x9d; that at said times defendants have\noperated aircraft in, across, and through said airspace at altitudes less than 100 feet\nabove the surface; that plaintiffs notified defendants to desist from trespassing on said\nairspace; and that defendants have disregarded said notice, unlawfully and against the\nwill of plaintiffs, and continue and threaten to continue such trespasses\xe2\x80\xa6. The prayer\nasks an injunction restraining the operation of the aircraft through the airspace over\nplaintiffs\xe2\x80\x99 property and for [damages].\nAppellees contend that it is settled law in California that the owner of land has no\nproperty rights in superjacent airspace, either by code enactments or by judicial decrees\nand that the ad coelum doctrine does not apply in California. We have examined the\nstatutes of California, \xe2\x80\xa6but we find nothing therein to negative the ad coelum\nformula\xe2\x80\xa6.If we could accept and literally construe the ad coelum doctrine, it would\nsimplify the solution of this case; however, we reject that doctrine. We think it is not\nthe law, and that it never was the law.\nThis formula \xe2\x80\x9cfrom the center of the earth to the sky\xe2\x80\x9d was invented at some remote\ntime in the past when the use of space above land actual or conceivable was confined\nto narrow limits, and simply meant that the owner of the land could use the overlying\nspace to such an extent as he was able, and that no one could ever interfere with that\nuse.\nThis formula was never taken literally, but was a figurative phrase to express the full\nand complete ownership of land and the right to whatever superjacent airspace was\nnecessary or convenient to the enjoyment of the land.\nIn applying a rule of law, or construing a statute or constitutional provision, we cannot\nshut our eyes to common knowledge, the progress of civilization, or the experience of\nmankind. A literal construction of this formula will bring about an absurdity. The sky\nhas no definite location. It is that which presents itself to the eye when looking upward;\nas we approach it, it recedes. There can be no ownership of infinity, nor can equity\nprevent a supposed violation of an abstract conception.\n\n\x0c44\n\nProperty\n\nThe appellants\xe2\x80\x99 case, then, rests upon the assumption that as owners of the soil they\nhave an absolute and present title to all the space above the earth\xe2\x80\x99s surface, owned by\nthem, to such a height as is, or may become, useful to the enjoyment of their land. This\nheight, the appellants assert in the bill, is of indefinite distance, but not less than 150\nfeet.\nIf the appellants are correct in this premise, it would seem that they would have such a\ntitle to the airspace claimed, as an incident to their ownership of the land, that they\ncould protect such a title as if it were an ordinary interest in real property. Let us then\nexamine the appellants\xe2\x80\x99 premise. They do not seek to maintain that the ownership of\nthe land actually extends by absolute and exclusive title upward to the sky and\ndownward to the center of the earth. They recognize that the space claimed must have\nsome use, either present or contemplated, and connected with the enjoyment of the\nland itself.\nTitle to the airspace unconnected with the use of land is inconceivable. Such a right has\nnever been asserted. It is a thing not known to the law.\nSince, therefore, appellants must confine their claim to 150 feet of the airspace above\nthe land, to the use of the space as related to the enjoyment of their land, to what extent,\nthen, is this use necessary to perfect their title to the airspace? Must the use be actual,\nas when the owner claims the space above the earth occupied by a building constructed\nthereon; or does it suffice if appellants establish merely that they may reasonably expect\nto use the airspace now or at some indefinite future time?\nThis, then, is appellants\xe2\x80\x99 premise, and upon this proposition they rest their case. Such\nan inquiry was never pursued in the history of jurisprudence until the occasion is\nfurnished by the common use of vehicles of the air.\nWe believe, and hold, that appellants\xe2\x80\x99 premise is unsound. The question presented is\napplied to a new status and little aid can be found in actual precedent. The solution is\nfound in the application of elementary legal principles. The first and foremost of these\nprinciples is that the very essence and origin of the legal right of property is dominion\nover it. Property must have been reclaimed from the general mass of the earth, and it\nmust be capable by its nature of exclusive possession. Without possession, no right in\nit can be maintained.\n\n\x0cSubject Matter of Property\n\n45\n\nThe air, like the sea, is by its nature incapable of private ownership, except in so far as\none may actually use it. This principle was announced long ago by Justinian. It is in fact\nthe basis upon which practically all of our so-called water codes are based.\nWe own so much of the space above the ground as we can occupy or make use of, in\nconnection with the enjoyment of our land. This right is not fixed. It varies with our\nvarying needs and is coextensive with them. The owner of land owns as much of the\nspace above him as he uses, but only so long as he uses it. All that lies beyond belongs\nto the world. \xe2\x80\xa6 Any use of such air or space by others which is injurious to his land,\nor which constitutes an actual interference with his possession or his beneficial use\nthereof, would be a trespass for which he would have remedy. But any claim of the\nlandowner beyond this cannot find a precedent in law, nor support in reason.\n\xe2\x80\xa6We cannot shut our eyes to the practical result of legal recognition of the asserted\nclaims of appellants herein, for it leads to a legal implication to the effect that any use\nof airspace above the surface owner of land, without his consent would be a trespass\neither by the operator of an airplane or a radio operator. We will not foist any such\nchimerical concept of property rights upon the jurisprudence of this country\xe2\x80\xa6.\nAppellants are not entitled to injunctive relief upon the bill filed here, because no facts\nare alleged with respect to circumstances of appellants\xe2\x80\x99 use of the premises which will\nenable this court to infer that any actual or substantial damage will accrue from the acts\nof the appellees complained of.\nThe case differs from the usual case of enjoining a trespass. Ordinarily, if a trespass is\ncommitted upon land, the plaintiff is entitled to at least nominal damages without\nproving or alleging any actual damage. In the instant case, traversing the airspace above\nappellants\xe2\x80\x99 land is not, of itself, a trespass at all, but it is a lawful act unless it is done\nunder circumstances which will cause injury to appellants\xe2\x80\x99 possession.\nAppellants do not, therefore, in their bill state a case of trespass, unless they allege a\ncase of actual and substantial damage. The bill fails to do this. It merely draws a naked\nconclusion as to damages without facts or circumstances to support it. It follows that\nthe complaint does not state a case for injunctive relief\xe2\x80\xa6.\n\n\x0c46\n\nProperty\nNotes and Questions\n1. Did the court in Hinman \xe2\x80\x9cfind\xe2\x80\x9d the law of property as it applies to the airspace\nabove land? Did it \xe2\x80\x9cchange\xe2\x80\x9d the law in this regard? Or did it\xe2\x80\x94as Felix Cohen\nargued\xe2\x80\x94\xe2\x80\x9ccreate and distribute a new source of economic wealth or power\xe2\x80\x9d?\n2. Does the court say that Hinman will never be able to obtain the relief sought?\nAre there any circumstances in which an injunction to restrict overflights to an\naltitude of over 150 feet (or any altitude) could be awarded under the court\xe2\x80\x99s\nanalysis? Cf. United States v. Causby, 328 U.S. 256 (1946).\n3. The court justified its ruling in Hinman, at least in part, by reference to the\n\xe2\x80\x9cpractical result\xe2\x80\x9d that would follow a finding in the landowner\xe2\x80\x99s favor. What\nwould that \xe2\x80\x9cpractical result\xe2\x80\x9d be, and why did the court feel the need to avoid it?\nIs avoiding such undesirable \xe2\x80\x9cpractical results\xe2\x80\x9d an acceptable basis for making\na determination as to whether something is a person\xe2\x80\x99s \xe2\x80\x9cproperty\xe2\x80\x9d?\n4. Drones. The increasing availability of personal aerial robots (\xe2\x80\x9cdrones\xe2\x80\x9d) is\nthreatening to bring Hinman back into the spotlight. In November of 2014, a\nhobbyist was flying a custom-built \xe2\x80\x9chexacopter\xe2\x80\x9d over his parents\xe2\x80\x99 farm in\nCalifornia, when a neighbor\xe2\x80\x99s son shot it out of the sky with a shotgun. The\nneighbor claimed the drone had been flying over his land, though the drone\nowner disputed this. In any event, the drone owner demanded compensation\nfor damage to the drone, and the neighbor refused. They ended up in small\nclaims court where the neighbor was held liable for $850 in damages and court\ncosts, on grounds that he \xe2\x80\x9cacted unreasonably in having his son shoot the drone\ndown regardless of whether it was over his property or not.\xe2\x80\x9d Jason Koebler, The\nSky\xe2\x80\x99s Not Your Lawn: Man Wins Lawsuit After Neighbor Shotgunned His Drone,\nMOTHERBOARD (June 28, 2015), http://motherboard.vice.com/read/the-skysnot-your-lawn-man-wins-lawsuit-after-neighbor-shotgunned-his-drone.\nImagine that instead of (or in addition to) having his son use the drone for target\npractice, the farmer had called the police to make a complaint of criminal\ntrespass, or sued the drone owner for trespass. What result? Would it matter\nhow high the drone was flying? Would it matter whether the drone was\nequipped with a camera? (Recall that the right to exclude is not the only right of\n\n\x0cSubject Matter of Property\n\n47\n\nowners; trespass may not be our farmer\xe2\x80\x99s only recourse. We will consider some\nanalogous factual scenarios in our unit on Nuisance.)\n5. Would the \xe2\x80\x9cpractical result\xe2\x80\x9d of a finding for the landowner in Hinman\nnecessarily be the same as the \xe2\x80\x9cpractical result\xe2\x80\x9d of a finding in favor of a\nlandowner suing the operator of a drone in the airspace over her land? Again,\nwould it matter how high the drone was flying, or whether it was equipped with\na camera?\n\n\x0c48\n\nProperty\n\nB. Property in Persons\n\nThe Illustrated London News, Sept. 27, Sept. 27, 1856, p. 315. \xe2\x80\x9cSlave auction at Richmond, Virginia,\xe2\x80\x9d 1856. Prints and\nPhotographs Division, Library of Congress. Reproduction Number LC-USZ62-15398\n\nThe Amistad\n40 U.S. 518 (1841)\nSTORY, Justice, delivered the opinion of the Court.\n[The Amistad was a ship bound from one part of Cuba to another. On board were\nthree Spanish subjects: Captain Ransom Ferrer, Jose Ruiz, and Pedro Montez. Also on\nboard were 53 Africans, recently kidnapped from their home country and transported\nto Cuba, a Spanish territory, where Ruiz and Montez had purchased them as slaves.\nSlavery was legal in Cuba at the time, though Spanish law banned the importation of\nslaves from Africa to the Americas. At sea, the Africans rose up, killed Ferrer, and took\ncontrol of the Amistad, attempting to sail it back to Africa. Instead, they ended up off\nthe coast of Long Island, where they and the ship were taken into custody by the U.S.\nNavy and brought to port in Connecticut. Ruiz and Montez filed libels\xe2\x80\x94a type of\nproperty claim in admiralty law\xe2\x80\x94seeking to recover the Africans and cargo they had\non board. Their claim was backed by both the Spanish crown and the Federal\ngovernment, both of which cited a treaty between the two countries (discussed by the\nCourt below). The district court denied the Spaniards\xe2\x80\x99 claim for the Africans, but\ngranted their claim for the cargo, and the Circuit Court summarily affirmed.]\n\xe2\x80\xa6 [T]he only parties now before the Court on one side, are the United States,\nintervening for the sole purpose of procuring restitution of the property as Spanish\n\n\x0cSubject Matter of Property\n\n49\n\nproperty, pursuant to the treaty, upon the grounds stated by the other parties claiming\nthe property in their respective libels. The United States do not assert any property in\nthemselves\xe2\x80\xa6. They simply confine themselves to the right of the Spanish claimants to\nthe restitution of their property, upon the facts asserted in their respective allegations.\nIn the next place, the parties before the Court on the\nother side as appellees, are \xe2\x80\xa6 the negroes, (Cinque,\nand others,) asserting themselves in their answer, not\nto be slaves, but free native Africans, kidnapped in\ntheir own country, and illegally transported by force\nfrom that country; and now entitled to maintain their\nfreedom.\nNo question has been here made, as to the\nproprietary interests in the vessel and cargo. It is\nadmitted that they belong to Spanish subjects, and\nthat they ought to be restored. \xe2\x80\xa6 The main\ncontroversy is, whether these negroes are the\nproperty of Ruiz and Montez, and ought to be\ndelivered up; and to this, accordingly, we shall first\ndirect our attention.\n\nSING-GBE (CINQU\xc3\x89)\nSource: John Sartain, (Engraver), and\nNathaniel Jocelyn, (Painter), Cinque The Chief of\nthe Amistad Captives (1840)\n\nIt has been argued on behalf of the United States, that the Court are bound to deliver\nthem up, according to the treaty of 1795, with Spain\xe2\x80\xa6. The ninth article provides, \xe2\x80\x98that\nall ships and merchandise, of what nature soever, which shall be rescued out of the\nhands of any pirates or robbers, on the high seas, shall be brought into some port of\neither state, and shall be delivered to the custody of the officers of that port, in order\nto be taken care of and restored entire to the true proprietor, as soon as due and\nsufficient proof shall be made concerning the property thereof.\xe2\x80\x99 This is the article on\nwhich the main reliance is placed on behalf of the United States, for the restitution of\nthese negroes. To bring the case within the article, it is essential to establish, First, That\nthese negroes, under all the circumstances, fall within the description of merchandise,\nin the sense of the treaty. Secondly, That there has been a rescue of them on the high\nseas, out of the hands of the pirates and robbers; which, in the present case, can only\nbe, by showing that they themselves are pirates and robbers, and Third, That Ruiz and\n\n\x0c50\n\nProperty\n\nMontez, the asserted proprietors, are the true proprietors, and have established their\ntitle by competent proof.\nIf these negroes were, at the time, lawfully held as slaves under the laws of Spain, and\nrecognized by those laws as property capable of being lawfully bought and sold; we see\nno reason why they may not justly be deemed within the intent of the treaty, to be\nincluded under the denomination of merchandise, and, as such ought to be restored to\nthe claimants: for, upon that point, the laws of Spain would seem to furnish the proper\nrule of interpretation. But, admitting this, it is clear, in our opinion, that \xe2\x80\xa6 these\nnegroes never were the lawful slaves of Ruiz or Montez, or of any other Spanish\nsubjects. They are natives of Africa, and were kidnapped there, and were unlawfully\ntransported to Cuba, in violation of the laws and treaties of Spain, and the most solemn\nedicts and declarations of that government. By those laws, and treaties, and edicts, the\nAfrican slave trade is utterly abolished; the dealing in that trade is deemed a heinous\ncrime; and the negroes thereby introduced into the dominions of Spain, are declared\nto be free. Ruiz and Montez are proved to have made the pretended purchase of these\nnegroes, with a full knowledge of all the circumstances\xe2\x80\xa6.\nIf then, these negroes are not slaves, but are kidnapped Africans, who, by the laws of\nSpain itself, are entitled to their freedom, and were kidnapped and illegally carried to\nCuba, and illegally detained and restrained on board the Amistad; there is no pretence\nto say, that they are pirates or robbers. We may lament the dreadful acts, by which they\nasserted their liberty, and took possession of the Amistad, and endeavored to regain\ntheir native country; but they cannot be deemed pirates or robbers in the sense of the\nlaw of nations, or the treaty with Spain, or the laws of Spain itself; at least so far as\nthose laws have been brought to our knowledge. Nor do the libels of Ruiz or Montez\nassert them to be such.\n\xe2\x80\xa6It is also a most important consideration in the present case, which ought not to be\nlost sight of, that, supposing these African negroes not to be slaves, but kidnapped,\nand free negroes, the treaty with Spain cannot be obligatory upon them; and the United\nStates are bound to respect their rights as much as those of Spanish subjects. The\nconflict of rights between the parties under such circumstances, becomes positive and\ninevitable, and must be decided upon the eternal principles of justice and international\nlaw. If the contest were about any goods on board of this ship, to which American\n\n\x0cSubject Matter of Property\n\n51\n\ncitizens asserted a title, which was denied by the Spanish claimants, there could be no\ndoubt of the right to such American citizens to litigate their claims before any\ncompetent American tribunal, notwithstanding the treaty with Spain. A fortiori, the\ndoctrine must apply where human life and human liberty are in issue; and constitute\nthe very essence of the controversy. The treaty with Spain never could have intended\nto take away the equal rights of all foreigners, who should contest their claims before\nany of our Courts, to equal justice; or to deprive such foreigners of the protection given\nthem by other treaties, or by the general law of nations. Upon the merits of the case,\nthen, there does not seem to us to be any ground for doubt, that these negroes ought\nto be deemed free; and that the Spanish treaty interposes no obstacle to the just\nassertion of their rights.\n\xe2\x80\xa6Upon the whole, our opinion is, that the decree of the Circuit Court, affirming that\nof the District Court, ought to be affirmed, \xe2\x80\xa6 and that the said negroes be declared to\nbe free, and be dismissed from the custody of the Court, and go without day.\nBALDWIN, Justice, dissented.\nNotes and Questions\n1. James Somerset was an enslaved African man who had been transported from\ncolonial Massachusetts to England. Once in England he escaped, but was\nrecaptured and imprisoned on a ship docked in the Thames, soon to depart for\nJamaica. Somerset petitioned the King\xe2\x80\x99s Bench for a writ of habeas corpus\nchallenging his confinement against his will by the ship\xe2\x80\x99s captain. In Somerset v.\nStewart, 98 Eng. Rep. 499 (1772), Lord Chief Justice Mansfield, noting that\nslavery was legal in both the North American colonies and Jamaica but had\nnever been formally recognized as legal by the English Parliament, granted the\nwrit, saying:\n\xe2\x80\x9c[T]he slave departed and refused to serve; whereupon he was\nkept, to be sold abroad. So high an act of dominion must be\nrecognized by the law of the country where it is used. The power\nof a master over his slave is of such a nature, that it is incapable\nof being introduced on any reasons, moral or political; but only\npositive law, which preserves its force long after the reasons,\n\n\x0c52\n\nProperty\noccasion, and time itself from whence it was created, is erased\nfrom memory: it\xe2\x80\x99s so odious, that nothing can be suffered to\nsupport it, but positive law. Whatever inconveniences, therefore,\nmay follow from a decision, I cannot say this case is allowed or\napproved by the law of England; and therefore the black must be\ndischarged.\xe2\x80\x9d\nThe result in Somerset is, on some level, the same as in Amistad\xe2\x80\x94both courts\norder captured and enslaved human beings to be set free. But the facts that put\nthe question and the justifications for the result are subtly different in each case.\nCan you articulate the distinction(s) between Lord Mansfield\xe2\x80\x99s reasoning and\nJustice Story\xe2\x80\x99s? What are the implications of these distinctions for the law of\nproperty in England and America, respectively, as it applies to property rights\nin human beings?\n2. Do either the Amistad or Somerset courts say that human beings can never be\nproperty? Recall our discussion of the notion of \xe2\x80\x9cpositive law\xe2\x80\x9d in note Error!\nReference source not found. on page Error! Bookmark not defined.. Lord\nMansfield explicitly refers to positive law in justifying the result in Somerset, while\nin contrast Justice Story invokes \xe2\x80\x9ceternal principles of justice\xe2\x80\x9d in Amistad. What\nare they saying about the possibility of, and possible justifications for, allowing\none human being to treat another human being as property? Do either deny\nthat such treatment could be lawful?\n3. Is your body your \xe2\x80\x9cproperty\xe2\x80\x9d? The English philosopher John Locke, who\nheavily influenced Blackstone and the Anglo-American legal tradition generally,\nseemed to think so. In his Second Treatise on Government, Chapter V, Section 27,\nLocke wrote:\n\xe2\x80\x9cThough the earth, and all inferior creatures, be common to all men, yet\nevery man has a property in his own person: this no body has any right\nto but himself. The labour of his body, and the work of his hands, we\nmay say, are properly his.\xe2\x80\x9d\n(It is not accidental that Locke said that every \xe2\x80\x9cman\xe2\x80\x9d has a property in his own\nperson; he didn\xe2\x80\x99t include women.) What are the implications of the view of the\n\n\x0cSubject Matter of Property\n\n53\n\nhuman body as \xe2\x80\x9cproperty\xe2\x80\x9d? If you can own your own body, why can\xe2\x80\x99t someone\nelse own it? At the very least, could you sell yourself into slavery? Why don\xe2\x80\x99t\nbiological mothers own their children, who are produced from their bodies?\nCurrently, the law insists that people are not property, even if the relation\nbetween a person and her own body, or her own labor, can be described in\nproperty terms. But as we will see, this does not mean courts do not still face\ndifficult questions regarding property claims that involve human beings.\n\n1. Emancipation and Compensation\nGenerally, if the government \xe2\x80\x9ctakes\xe2\x80\x9d \xe2\x80\x9cproperty\xe2\x80\x9d for its own use, the government has\nto pay the former owner the fair market value of that property, as we will discuss in the\nsection on takings.\nThe Constitution, as amended, provides: \xe2\x80\x9cNeither slavery nor involuntary servitude,\nexcept as a punishment for crime whereof the party shall have been duly convicted,\nshall exist within the United States, or any place subject to their jurisdiction.\xe2\x80\x9d U.S.\nConst., amend. XIII. The Thirteenth Amendment, along with its cousins the\nFourteenth and Fifteenth Amendments, were designed to embed the results of the Civil\nWar into the Constitution.\nBefore the Civil War, slavery\xe2\x80\x99s defenders considered enslaved people to be property,\nand many of slavery\xe2\x80\x99s opponents conceded that enslaved people were property\naccording to the law of the land. Henry Clay, speaking against abolition, contended:\n\xe2\x80\x9cThe total value \xe2\x80\xa6 of the slave property in the United States, is twelve hundred\nmillions of dollars. \xe2\x80\xa6 It is the subject of mortgages, deeds of trust, and family\nsettlements. It \xe2\x80\xa6 is the sole reliance, in many instances, of creditors within and without\nthe slave States \xe2\x80\xa6. That is property which the law declares to be property.\xe2\x80\x9d Was he right? If\nhe was wrong, how are we to determine what is property?\nThe U.S. did not compensate enslavers upon emancipation; nor did it compensate\nenslaved people. But see Roy E. Finkenbine, Belinda\xe2\x80\x99s Petition: Reparations for Slavery in\nRevolutionary Massachusetts, 64 WM. & MARY Q. 95 (2007) (discussing a rare example of\na pension being granted to an aged ex-slave by the Massachusetts legislature, in\nconsideration of her long enslavement). By contrast, in 1833, Britain abolished slavery\n\n\x0c54\n\nProperty\n\nbut also provided for the compensation of enslavers for their lost \xe2\x80\x9cproperty,\xe2\x80\x9d\nrepresenting roughly 800,000 enslaved people. The \xc2\xa320 million the government set\naside to pay enslavers off represented 40% of the total government expenditure for\n1834, and is the equivalent of between \xc2\xa316 and \xc2\xa317 billion, or $26 billion, in 2015\nterms. Until the bank bailouts of 2009, this payout\xe2\x80\x94to 46,000 enslavers\xe2\x80\x94was the\nlargest in British history. Moreover, enslaved people were compelled to provide 45\nhours of unpaid labor each week for their former masters for a further four years.\nMany well-known Britons can trace their ancestors\xe2\x80\x94and some fraction of their family\nwealth\xe2\x80\x94to\nenslavers.\nSee\nLegacies\nof\nBritish\nSlave-Ownership,\nhttps://www.ucl.ac.uk/lbs/.\nLikewise, in 1825, France, warships at the ready, demanded that its former colony Haiti\ncompensate France for its loss of plantations and enslaved people. Enslavers\nsubmitted detailed claims, which were later reduced to 90 billion francs (roughly $14\nbillion in modern terms) to be paid over thirty years. Haiti took until 1947 to pay off\nboth the original claim to France and the additional interest accrued from borrowing\nfrom French banks to meet France\xe2\x80\x99s deadlines. Haiti is currently the poorest country\nin the Americas.\n\n2. Owning Labor\nThe Thirteenth Amendment is notable, among other things, for its lack of any state\naction requirement. While the other provisions of the Constitution control what the\ngovernment may do and how it may do it, the Thirteenth Amendment is a command\nto everyone: there shall be no slavery in the United States. Why write it this way, rather\nthan as a constraint on government action?\nConsider employment contracts that bar employees from competing if they leave, or\nbar them from working in the same area or the same industry, or bar them from using\nany information they learned while working for the employer. These restrictive\ncovenants may mean that a person may be unable to work in the only field for which\nshe is trained if she leaves her current employer, which is likely to give her employer\nsubstantial leverage in negotiating salary and other terms of employment. Do these\nattempted contractual restrictions raise any Thirteenth Amendment issues? See Orly\nLobel, The New Cognitive Property: Human Capital Law and the Reach of Intellectual Property,\n93 TEXAS L. REV. 789 (2015) (discussing multiple restrictions employers have used to\n\n\x0cSubject Matter of Property\n\n55\n\nrestrict former employees\xe2\x80\x99 use of their own knowledge); Dave Jamieson, Jimmy John\xe2\x80\x99s\n\xe2\x80\x98Oppressive\xe2\x80\x99 Noncompete Agreement Survives Court Challenge, Huffington Post, Apr.\n10, 2015 (discussing fast food restaurant\xe2\x80\x99s noncompete agreement that precludes lowwage employees from working for any competitor).\nSeparately, consider the Thirteenth Amendment\xe2\x80\x99s exception for \xe2\x80\x9cinvoluntary servitude\xe2\x80\x9d\nas punishment for crime. Prison takes away prisoners\xe2\x80\x99 liberty and their ability to use\ntheir own property, and also coerces their labor. Does this mean that prisoners are\nproperty? In 1871, the Virginia Supreme Court declared prisoners to be \xe2\x80\x9cslaves of the\nstate.\xe2\x80\x9d Ruffin v. Commonwealth, 62 Va. 1024 (1871). After the Civil War, AfricanAmericans in the South were routinely arrested for almost any reason, and local\ngovernments then sold their labor to white landowners for agricultural work. Prison\nlabor currently produces over $2 billion worth of goods every year, though most\nproduction now takes place within prison walls. All able-bodied federal prisoners are\nrequired to work, at a pay scale ranging from $0.25 to $1.15 per hour. Texas and\nGeorgia require prisoners to work without any pay.\n\n3. Alternatives to Property\nIf the relationship between a prisoner and the state, or between a child and a parent,\nisn\xe2\x80\x99t a property relationship, what kind of relationship is it? What other types of things\nmight be subject to such a relationship? Can cats be property? What about\nchimpanzees? When there is a dispute between two people over the physical control\nof something that we are reluctant to label as \xe2\x80\x9cproperty,\xe2\x80\x9d is arguing over the label\nhelpful? Is it necessary to resolve the underlying dispute? If not, how else might such\na dispute be resolved?\nThese types of questions arise in emotionally charged disputes concerning human\nremains. Consider the following cases:\nKirksey v. Jernigan\n45 So.2d 188 (Fla. 1950)\nROBERTS, Justice.\nOn October 20, 1948, the plaintiff\xe2\x80\x99s five-year-old child was accidentally shot and killed\nat her home while she was temporarily absent. She was immediately notified and arrived\n\n\x0c56\n\nProperty\n\nat the scene soon after the accident occurred. Prior to her arrival, the defendant, an\nundertaker, had taken the body of the child to his undertaking establishment \xe2\x80\x98without\nthe authority of plaintiff, or of anyone authorized to act in her behalf\xe2\x80\x99, it is alleged.\nUpon learning this, the plaintiff went to the establishment of defendant, advised him\nthat she was the mother of the child, and made demand for the body, directing that it\nbe turned over immediately to the undertaker of her choice. It is alleged that she made\nthis demand within two hours after the accident. Defendant refused to surrender the\nbody at that time, or upon repeated requests for the body made thereafter by plaintiff,\nor others acting on her behalf, and held the body for two or three days. The defendant\nalso embalmed the body, it is alleged, \xe2\x80\x98wrongfully and without authority from plaintiff,\nor anyone authorized to act in her behalf, and thereby mutilated said body in deliberate\nand wanton disregard of the known rights of plaintiff and arbitrarily set his charge or\nfee in the sum of $50.00.\xe2\x80\x99 It was also alleged that he refused to deliver the body to\nplaintiff or anyone else until plaintiff had paid the $50.00 fee, and \xe2\x80\x98wrongfully held said\nbody as security for said charge or fee or $50.00.\xe2\x80\x99\nThe declaration was in three counts, the first of which was based on the wrongful\nwithholding of the body, and the second on this same ground and, in addition, the\nunauthorized embalming and the holding of the body as security for the payment of\nthe $50.00 fee. The third count contained the allegations of the first two counts and\nalleged further that the charge of $50.00 for embalming was excessive, the usual fee\nbeing $25.00; that the defendant, knowing the plaintiff to be a poor and impecunious\ncolored woman, refused to accept the usual charge of $25.00 or $30.00 to release the\nbody, held the body as security for the fee, and forced her to borrow money to pay the\nexcessive amount demanded. [The defendant\xe2\x80\x99s demurrer was sustained \xe2\x80\x9con the ground\nthat neither compensatory damages for mental pain and anguish nor punitive damages\nwere recoverable,\xe2\x80\x9d and the plaintiff appealed.]\nThis court is committed to the rule, and we re-affirm it herein, that there can be no\nrecovery for mental pain and anguish unconnected with physical injury in an action\narising out of the negligent breach of a contract whereby simple negligence is involved.\nBut we do not feel constrained to extend this rule to cases founded purely in tort, where\nthe wrongful act is such as to reasonably imply malice, or where, from the entire want\nof care of attention to duty, or great indifference to the persons, property, or rights of\n\n\x0cSubject Matter of Property\n\n57\n\nothers, such malice will be imputed as would justify the assessment of exemplary or\npunitive damages. The right to recover, in such cases, is especially appropriate to\ntortious interference with rights involving dead human bodies, where mental anguish\nto the surviving relatives is not only the natural and probable consequence of the\ncharacter of wrong committed, but indeed is frequently the only injurious consequence\nto follow from it.\nIt is well settled that, in the absence of testamentary disposition to the contrary, a\nsurviving spouse or next of kin has the right to the possession of the body of a deceased\nperson for the purpose of burial, sepulture or other lawful disposition which they may\nsee fit. And the invasion of such right by unlawfully withholding the body from the\nrelative entitled thereto is an actionable wrong, for which substantial damages may be\nrecovered.\nWe hold that the declaration in the instant case stated a cause of action against the\ndefendant and alleged facts which, if established upon the trial, could justify a recovery\nof punitive damages as well as damages for mental suffering and anguish to the plaintiff.\nThe judgment is, accordingly, reversed and the cause remanded for trial.\nWilson v. Wilson\n138 So.3d 1176 (Fla. Dist. Ct. App. 2014)\nMAY, J.\nA father appeals a probate order determining that the son\xe2\x80\x99s ashes were not \xe2\x80\x9cproperty\xe2\x80\x9d\nas defined by section 731.201(32), Fla. Stat. (2012), and therefore not subject to\npartition. We affirm.\n\n\x0c58\n\nProperty\n\nThe twenty-three year old son, single and without children, died in a tragic automobile\naccident. * He left no will and no written or verbal instructions for disposition of his\nbody. His parents are co-personal representatives of their son\xe2\x80\x99s estate, and the sole\nbeneficiaries. 1\nAfter their son\xe2\x80\x99s death, the parents agreed to have his body cremated. They were unable,\nhowever, to agree on the final disposition of his ashes. The mother wanted to bury the\nson\xe2\x80\x99s ashes in West Palm Beach, Florida. The father wanted to bury the son\xe2\x80\x99s ashes in\na family burial plot in Blue Ridge, Georgia.\nThe father petitioned the court to declare the ashes \xe2\x80\x9cproperty\xe2\x80\x9d to be partitioned under\nthe probate code. This would allow each parent to dispose of half of the ashes as they\ndesired. For religious reasons, the mother opposed having the ashes divided\xe2\x80\xa6. After\nan evidentiary hearing, the trial court found that the ashes were not \xe2\x80\x9cproperty\xe2\x80\x9d subject\nto partition, and denied the father\xe2\x80\x99s petition.\nThe court gave the co-personal representatives 30 days \xe2\x80\x9cto carry out their duties and\nresponsibilities to finally dispose of [their son\xe2\x80\x99s] remains ....\xe2\x80\x9d If they were unable to\nreach agreement, the court indicated that it might appoint a curator or other suitable\nperson to carry out the task. From this order, the father has now appealed.\n\xe2\x80\xa6 We are presented with an issue of first impression, for no Florida court has\nanswered the precise issue posed. And so, we start by traveling back in history to reflect\non how deceased bodies and ashes have been viewed over time. In 1753, Sir William\nBlackstone commented:\n\n[Eds.\xe2\x80\x94Scott Wilson was driving home for his sister\xe2\x80\x99s birthday when millionaire polo club founder John\nGoodman\xe2\x80\x94heir to a major air conditioning manufacturing company\xe2\x80\x94slammed into Scott\xe2\x80\x99s Subaru with his\nBentley, pushing the Subaru into a canal, where Scott drowned. Goodman fled the scene, and a blood test three\nhours later showed he had a blood-alcohol level more than twice the legal limit for driving in Florida. After\nlengthy legal proceedings, Goodman was convicted of several counts and sentenced to 16 years in prison. Marc\nFreeman, Wellington polo club founder John Goodman loses appeal of DUI manslaughter conviction, SUN SENTINEL (July 26,\n2017), http://www.sun-sentinel.com/local/palm-beach/fl-pn-john-goodman-loses-dui-manslaughter-appeal20170726-story.html.]\n*\n\n1\n\nThe parents were divorced prior to their son\xe2\x80\x99s death.\n\n\x0cSubject Matter of Property\n\n59\n\nPews in the church are somewhat of the same nature, which may\ndescend by custom immemorial (without any ecclesiastical concurrence)\nfrom the ancestor to the heir. But though the heir has a property in the\nmonuments and escutcheons of his ancestors, yet he has none in their\nbodies or ashes; nor can he bring any civil action against such as\nindecently at least, if not impiously, violate and disturb their remains,\nwhen dead and buried.\n1 Sir William Blackstone, Commentaries on the Laws of England in Four Books 429\n(Philadelphia,\nJ.B.\nLippencott\nCo.\n1893),\navailable\nat\nhttp://oll.libertyfund.org/title/2140 (emphasis added). \xe2\x80\xa6 The historical basis for this\nthinking was derived in part from the English view that \xe2\x80\x9cthe secular tribunals would\nprotect the monument, the winding-sheet, the grave-clothes, even down to the ribbon\n(now extant) which tied the queue; but the Church would guard the skull and bones.\xe2\x80\x9d\nIn re Widening of Beekman Street, 4 Bradf. 503, 522 app. (1856) (historical note on the law\nof burial by the Honorable Samuel B. Ruggles, Referee)\nFast forward to today. Our probate code defines \xe2\x80\x9cproperty\xe2\x80\x9d as \xe2\x80\x9cboth real and personal\nproperty or any interest in it and anything that may be the subject of ownership.\xe2\x80\x9d\n\xc2\xa7 731.201(32), Fla. Stat. (2012). That definition has existed since 1975. Yet, as our\nsupreme court has articulated, \xe2\x80\x9c[a]ll authorities generally agree that the next of kin have\nno property right in the remains of a decedent.\xe2\x80\x9d State v. Powell, 497 So.2d 1188, 1191\n(Fla. 1986) (emphasis added). The supreme court clarified its position in Kirksey v.\nJernigan \xe2\x80\x9cto be consistent with the majority view that the right [to the remains] is limited\nto \xe2\x80\x98possession of the body ... for the purpose of burial, sepulture or other lawful\ndisposition ....\xe2\x80\x99 \xe2\x80\x9d Id. at 1191\xe2\x80\x9392 (citing Kirksey v. Jernigan, 45 So.2d 188, 189 (Fla.1950)).\nIt reiterated its position again in 2001 in Crocker v. Pleasant, 778 So.2d 978, 988 (Fla.\n2001), acknowledging that \xe2\x80\x9cthere is a legitimate claim of entitlement by the next of kin\nto possession of the remains of a decedent for burial or other lawful disposition.\xe2\x80\x9d But\na claim of entitlement is not a property right, nor does it make the remains \xe2\x80\x9cproperty.\xe2\x80\x9d\nAshes are the decedent\xe2\x80\x99s remains. Common law, our supreme court, and this Court\nhave always held that a decedent\xe2\x80\x99s remains are not property. See id.; see also Cohen v.\nGuardianship of Cohen, 896 So.2d 950, 954 (Fla. 4th DCA 2005) (\xe2\x80\x9ca dead body is not\nproperly viewable as property or assets\xe2\x80\x9d).\n\n\x0c60\n\nProperty\n\nThe father relied on In re Estate of K.A., 807 N.E.2d 748 (Ind.Ct.App. 2004), to support\nhis request to partition the ashes. There, the child of a divorced couple was killed in an\nautomobile accident. The mother and father agreed to cremate the child\xe2\x80\x99s remains, but\ndisagreed on the disposition of the ashes. Id. Like here, the father petitioned for an\norder equally dividing the ashes. Id. After an evidentiary hearing, the trial court ordered\nthat the ashes be divided, and the mother appealed. Id. The Indiana Court of Appeals\naffirmed, recognizing that \xe2\x80\x9cthe practice of dividing the remains of a decedent among\nthe survivors is common and acceptable in the funeral service industry\xe2\x80\x9d and \xe2\x80\x9cmemento\nurns or keepsakes have been marketed to preserve divided ashes for surviving family\nmembers.\xe2\x80\x9d Id. at 751.\nWe, however, find K.A. easily distinguishable both legally and factually. First, the court\nspecifically stated that the \xe2\x80\x9ctrial court did not find that the cremated remains of K.A.\nwere subject to division between her heirs as inherited property.\xe2\x80\x9d Id. at 751 n. 1. And\nsecond, applying the \xe2\x80\x9cclearly erroneous\xe2\x80\x9d standard of review, the appellate court held\nthe evidence supported the trial court\xe2\x80\x99s finding that K.A. wanted her ashes divided and\nspread at different locations. Id. at 750\xe2\x80\x9351.\nThe mother and trial court relied instead on Kulp v. Kulp, 920 A.2d 867 (Pa.Super.Ct.\n2007). There, a couple disagreed over who should keep their child\xe2\x80\x99s cremated remains\nin a divorce proceeding. Id. at 869. The trial court ordered that the ashes be divided\nevenly between the two parents, and the father appealed. Id. The appellate court\nreversed. Id. at 868.\n[T]he issue is an extremely sensitive one. While the division of cremated\nremains may be common in the funeral industry and may be acceptable\nin many instances to the next of kin, in other cases, as in the case of\nHusband herein, the next of kin may believe that the division of\ncremated remains is offensive. The question thus presented is whether\nthe trial court in the instant case abused its discretion in ordering the\ndivision of Son\xe2\x80\x99s remains.\nId. at 872\xe2\x80\x9373. The appellate court held the trial court had \xe2\x80\x9cabused its discretion in using\nits equitable powers to override the desires of one of the next of kin as to the division\nof Son\xe2\x80\x99s remains.\xe2\x80\x9d Id. at 873.\n\n\x0cSubject Matter of Property\n\n61\n\nWe need not rely on either out-of-state case, but need only adhere to our own Florida\nprecedent in declaring that the decedent\xe2\x80\x99s remains are not \xe2\x80\x9cproperty.\xe2\x80\x9d In doing so, we\nadopt the words of Judge Warner in Cohen:\nIt is a sorrowful matter to have relatives disputing in court over the\nremains of the deceased. In this case in particular, there is no solution\nthat will bring peace to all parties. We express our sympathies to both\nsides in their loss, which must be magnified by these proceedings. Cases\nsuch as this require the most sensitive exercise of the equitable powers\nof the trial courts. We are confident that the experienced trial judge\nexercised his power with due regard for the serious and emotional issues\npresented.\nCohen, 896 So.2d at 955.\nGiven the sensitive nature of the subject matter, and the fact that, historically, cremated\nremains have been treated the same as a body, neither constituting \xe2\x80\x9cproperty,\xe2\x80\x9d we\ndecline to craft a policy at odds with our history and precedent. This is a matter best\nleft to our legislature should it decide to address this sensitive policy issue.\nAffirmed.\nNotes and Questions\n1. According to Amy Bello\xe2\x80\x94Lili Wilson\xe2\x80\x99s attorney\xe2\x80\x94after the Florida Supreme\nCourt\xe2\x80\x99s ruling the circuit court held a hearing at which Judge Colin indicated he\nwas prepared to enter an order to dispose of Scott\xe2\x80\x99s remains, and implored the\nparties to try once more to reach agreement. They did so. While the terms of\nthe agreement are confidential, they did result in the disposition of Scott\xe2\x80\x99s ashes.\nIn 2016, the Florida Legislature\xe2\x80\x94at the behest of the funeral services\nindustry\xe2\x80\x94codified Wilson\xe2\x80\x99s rule that cremated remains \xe2\x80\x9care not property\xe2\x80\xa6and\nare not subject to partition for purposes of distibution.\xe2\x80\x9d 2016 Fla. Sess. Law.\nServ. Ch. 2016-172 \xc2\xa7 30, codified at FLA. STAT. \xc2\xa7 497.607(2).\n2. When the Kirksey court says that a dead person\xe2\x80\x99s next of kin has \xe2\x80\x9cthe right to\nthe possession of the body of a deceased person for the purpose of burial,\nsepulture or other lawful disposition which they may see fit,\xe2\x80\x9d and to recover\n\n\x0c62\n\nProperty\ndamages for the invasion of that right, how (if at all) is that different from saying\nthat the remains are the next of kin\xe2\x80\x99s property? How, for example, is Ms.\nKirksey\xe2\x80\x99s legal relationship to her daughter\xe2\x80\x99s body different from the Jacques\xe2\x80\x99\nlegal relationship to their land? Is the difference sufficient to say that the latter\nis property but the former is not? Why?\n3. Would the outcome for Ms. Kirksey or for the Wilsons have been any different\nif the Florida Supreme Court had ruled that their children\xe2\x80\x99s remains were\n\xe2\x80\x9cproperty\xe2\x80\x9d? If so, how? If not, does it matter whether or not we call something\n\xe2\x80\x9cproperty\xe2\x80\x9d?\nCould we, for example, say that human remains (or animals, or what-have-you)\nare subject to all the rights of ownership you might exercise over a plot of land\nor a car or a pair of shoes, and at the same time maintain that they are not\n\xe2\x80\x9cproperty\xe2\x80\x9d? How? Why might anybody want to do that?\n\n4. Body Parts\nState and federal statutes implicitly recognize some kind of property rights in body\nparts, permitting gifts from both living persons and dead donors and even permitting\nsales, except for sales for the purpose of transplantation. Thus, Section 301 of the\nNational Organ Transplant Act of 1984, Pub. L. 98-507, 98 Stat. 2339, codified at 42\nU.S.C. \xc2\xa7 274e, makes it a crime \xe2\x80\x9cfor any person to knowingly acquire, receive, or\notherwise transfer any human organ for valuable consideration for use in human\ntransplantation if the transfer affects interstate commerce,\xe2\x80\x9d while the Uniform\nAnatomical Gift Act, which as of this writing has been adopted in 46 states and the\nDistrict of Columbia, permits individuals to make \xe2\x80\x9ca donation of all or part of a human\nbody to take effect after the donor\xe2\x80\x99s death for the purpose of transplantation, therapy,\nresearch, or education.\xe2\x80\x9d Body parts are therefore alienable\xe2\x80\x94the right to possess and\nuse them for certain purposes can be transferred\xe2\x80\x94even though they can\xe2\x80\x99t be sold in\nsome contexts.\nThis middle position can lead to some hard line-drawing problems\xe2\x80\x94particularly where\nother consequences of the \xe2\x80\x9cproperty\xe2\x80\x9d label come into play:\n\n\x0cSubject Matter of Property\n\n63\n\n1. Property or Tort? In Moore v. Regents of University of California, 793 P.2d 479 (Cal.\n1990), a leukemia patient sued his doctors who had used cells and tissues\ngathered during his treatment to create a cell line for research purposes and to\nobtain a potentially lucrative patent for the production of therapeutic proteins\nfrom that cell line. Moore\xe2\x80\x99s theory was that the doctors had taken and used his\nproperty\xe2\x80\x94i.e., parts of his body that had been removed during his cancer\ntreatment\xe2\x80\x94without his consent. Over multiple dissents, the court held that\nMoore\xe2\x80\x99s property claim must fail because he had no property right in cells\nexcised from his body\xe2\x80\x94but that he could recover in tort against his doctors if\nthey had failed to inform him of their intent to use his cells for research and\nobtain his consent to such use prior to treating him. Does this distinction in the\ncauses of action available to Moore make a difference? (Hint: consider Moore\xe2\x80\x99s\npotential claims against other researchers who use the cell line derived from his\ncells.)\n2. An Inadequate Remedy? The unavailability of a conversion claim for the\nunauthorized taking of body parts may remove an obstacle to important medical\nresearch, but it can lead to problematic consequences for patients and their\nfamilies. In January 1951, a 31-year-old African-American woman named\nHenrietta Lacks was diagnosed with cervical cancer. She died, painfully, in\nOctober 1951, leaving five children. Without her knowledge or consent, or that\nof her family, doctors gave a sample of her tumor to Dr. George Gey, a Johns\nHopkins researcher who was trying to find cells that would live indefinitely in\nculture so researchers could more easily experiment on them. Her cells were\nhis first success, and the cell line developed from her body was known as HeLa\n(for Henrietta Lacks). Dr. Jonas Salk used HeLa cells to develop the first polio\nvaccine, and they also helped in the development of numerous other drugs,\ntreating diseases as diverse as Parkinson\xe2\x80\x99s, leukemia and the flu. More than\n60,000 articles have been written about research based on HeLa cells. Though\nDr. Gey didn\xe2\x80\x99t make money from them, other researchers did. Selling HeLa\ncells has generated millions in profits, but none for the Lacks family, the\nmembers of which suffered from poverty and lack of education.\nIn fact, some Lacks family members suffered serious health problems, but they\nonly found out about HeLa cells by accident, more than two decades later. Mrs.\n\n\x0c64\n\nProperty\nLacks\xe2\x80\x99s daughter-in-law met someone who recognized her surname and said he\nwas working with cells from \xe2\x80\x9ca woman named Henrietta Lacks.\xe2\x80\x9d She then told\nMrs. Lacks\xe2\x80\x99s son: \xe2\x80\x9cPart of your mother, it\xe2\x80\x99s alive!\xe2\x80\x9d The family was proud their\nmother\xe2\x80\x99s cells had saved lives, but also felt exploited. Some members of the\nfamily had given blood to Johns Hopkins researchers, believing they were being\ntested for cancer, but in fact the researchers wanted to use their blood to\ndetermine whether HeLa cells were contaminating other cultures. (For more,\nsee REBECCA SKLOOT, THE IMMORTAL LIFE OF HENRIETTA LACKS (2010).)\nUltimately, the National Institutes of Health agreed with the Lacks family that\nher full genome data would only be available to researchers, in order to preserve\nthe family\xe2\x80\x99s privacy; that two representatives of the Lacks family would serve\non the NIH group responsible for reviewing biomedical researchers\xe2\x80\x99\napplications for controlled access to HeLa cells; and that any researcher who\nuses that data would be asked to include an acknowledgement to the Lacks\nfamily in their publications. However, no one would provide any compensation\nto the Lacks family. Art Caplan, NIH finally makes good with Henrietta Lacks\xe2\x80\x99\nfamily, Sept. 3, 2014, NBC News.com. Is this a good solution? Can you\ndistinguish \xe2\x80\x9cproperty\xe2\x80\x9d interests from \xe2\x80\x9cprivacy\xe2\x80\x9d or \xe2\x80\x9cdignity\xe2\x80\x9d interests in this\nstory?\n3. Markets for Body Parts. Should we allow organs to be fully market-alienable,\nso that willing sellers could, say, offer up a kidney for compensation? See, e.g.,\nRichard A. Epstein, The Human and Economic Dimensions of Altruism: The Case of\nOrgan Transplantation, 37 J. LEGAL STUD. 459, 485-497 (2008); Radhika Rao,\nProperty, Privacy, and the Human Body, 80 B.U. L. REV. 359 (2000); Julia D.\nMahoney, The Market for Human Tissue, 86 VA. L. REV. 163 (2000).\nConsider the following arguments for market-alienability: There is currently a\ngreat shortage of transplantable organs such as hearts, lungs, livers, and kidneys,\nleading to tens of thousands of deaths a year. Each day, 79 people receive\ntransplants, but 22 people die while waiting for a transplant.\nhttp://www.organdonor.gov/about/data.html. The U.S. has an opt-in system\nfor organ donation at death, resulting in the fourth-highest organ donor rate (26\ndonors per million people in the population). Spain has the highest rate, with\n\n\x0cSubject Matter of Property\n\n65\n\n35.3 donors per million people. Spain, like several other European countries,\nin theory has an opt-out regime in which organs will be donated at death in the\nabsence of an opt-out, but in practice doctors will ask relatives for consent\nregardless, and that consent is often denied.\nWhat if we allowed people to be paid during life for their agreement to be\ndonors at death? What objections or obstacles do you foresee to such a scheme?\nWhat about sales by living donors? People can already sell semen, skin tissue,\nand blood. Poor people would likely be most of the sellers, but proponents\nnote that using the market to obtain a supply of organs doesn\xe2\x80\x99t mean that they\nneed to be distributed only to those who can pay; Medicaid pays for dialysis,\nwhich is quite expensive, and could also pay for a kidney for poor patients. In\nIran, which does allow payments for kidney donations to Iranian recipients,\n84% of donors are poor, but 50% of recipients are also poor, and Iran\neliminated its transplant list of people awaiting kidneys. Ahad J. Ghods &\nShekoufeh Savaj, Iranian Model of Paid and Regulated Living-Unrelated Kidney\nDonation, 1 CLINICAL J. AM. SOC. NEPHROLOGY 1136 (2006).\nTo those who say that such a system would coerce the poor to sell their organs,\nproponents respond that those sellers would be better off than they are in the\npresent system, where they\xe2\x80\x99re still poor and have fewer options for earning\nmoney, many of which are equally or more dangerous and unpleasant. Sellers\nwho later suffered kidney failure could get transplants.\nOpponents note that there\xe2\x80\x99s evidence that donated blood is higher quality than\npaid-for blood, though the significance of those studies is contested. Donating\nbodily products, opponents argue, is an altruistic act that improves the human\ncondition and provides a better guarantee of quality. Selling, by contrast, leads\nto attempts to sell shoddy products\xe2\x80\x94here, unhealthy organs\xe2\x80\x94for gain.\nProponents of organ sales respond that poor-quality organs can be screened out.\nTo this, opponents rejoin that there\xe2\x80\x99s evidence of \xe2\x80\x9ccrowding out\xe2\x80\x9d of altruistic\nmotives by commercial motives: when money enters a system, people who\npreviously participated out of the goodness of their hearts may withdraw. They\ndon\xe2\x80\x99t want to feel like suckers when they aren\xe2\x80\x99t getting paid and other people\n\n\x0c66\n\nProperty\nare. Payment, then, might even lead to a reduced supply of organs compared\nto the present system.\nOpponents also argue that organ sales are degrading, reducing a person to the\ncommodified sum of her parts. Proponents respond that dying of a curable\nillness is also degrading, and that Western societies used to consider surgery,\nartificial insemination, and autopsies degrading. Life insurance used to be\nrejected on the ground that it wrongly commodified the value of a human life.\nIt\xe2\x80\x99s widely accepted now\xe2\x80\x94did it degrade our humanity? Likewise, people can\nsell their time and the intellectual products of their minds.\nBut on this argument, we should be open to selling everything\xe2\x80\x94why not let a\nliving donor sell her heart to provide for her family? Why not let her sell her\nchild? Not reassuringly, some proponents of organ sales believe that these\noptions should at least be considered, with appropriate safeguards. They\ncontend that proper boundaries between market and non-market activity can\nbe maintained even if new aspects of life enter the market. The same society\nthat came to accept life insurance and artificial insemination also eventually\noutlawed slavery and child labor. In fact, it can be harder to get people to accept\nmarkets than it perhaps should be.\nConversely, even limiting alienability of one\xe2\x80\x99s body to gratuitous donation\ndoesn\xe2\x80\x99t necessarily hold market forces at bay. Many people leave directives for\ntheir bodies to be donated for scientific uses after their deaths, supplying a\nresource that is desperately needed in medical education and research. But\nunlike live tissues, traffic in dead bodies and body parts after donation is largely\nunregulated. This has led to the growth of a substantial industry around the\ncollection, preservation, and dissection of donated human cadavers, and their\ndistribution (for hefty fees) to the research and educational institutions that\nrequire them. An extensive investigation by Reuters journalists into this industry\nfound a number of macabre abuses and shady operators seemingly attracted by\nan easy profit. As one \xe2\x80\x9cbody broker\xe2\x80\x9d told Reuters: \xe2\x80\x9cIf you can\xe2\x80\x99t make a business\nwhen you\xe2\x80\x99re getting raw materials for free, \xe2\x80\xa6 you\xe2\x80\x99re dumb as a box of rocks.\xe2\x80\x9d\nBrian Grow & John Shiffman, The Body Trade, Part 1: Body Brokers, REUTERS\n(Oct. 24, 2017), https://www.reuters.com/investigates/special-report/usa-\n\n\x0cSubject Matter of Property\n\n67\n\nbodies-brokers/. Interestingly, these body brokers\xe2\x80\x94or \xe2\x80\x9cnon-transplant tissue\nbanks\xe2\x80\x9d as they prefer to be called\xe2\x80\x94seem to go to great lengths not to label their\ntransactions as sales of body parts. Instead, they bill their customers \xe2\x80\x9cservice\nfees,\xe2\x80\x9d \xe2\x80\x9cpreparation fees,\xe2\x80\x9d and \xe2\x80\x9cprocessing fees.\xe2\x80\x9d Why do you think that is? Does\nit change your view to learn that some of these same brokers later listed their\ninventory of human tissues as assets in bankruptcy filings?\nIn light of all this complexity, is the language of property helpful in crafting rules and\ndrawing lines regarding permissible uses of the human body? Consider the following\nanti-propertization argument, applied to rape:\nMargaret Radin, Market-Inalienability\n100 HARV. L. REV. 1849 (1987):\n\xe2\x80\xa6 In some cases market discourse itself might be antagonistic to interests of\npersonhood. [Judge Richard] Posner conceives of rape in terms of a marriage and sex\nmarket. Posner concludes that \xe2\x80\x9cthe prevention of rape is essential to protect the\nmarriage market . . . and more generally to secure property rights in women\xe2\x80\x99s persons.\xe2\x80\x9d\nCalabresi and Melamed also use market rhetoric to discuss rape. In keeping with their\nview that \xe2\x80\x9cproperty rules\xe2\x80\x9d are prima facie more efficient than \xe2\x80\x9cliability rules\xe2\x80\x9d for all\nentitlements, they argue that people should hold a \xe2\x80\x9cproperty rule\xe2\x80\x9d entitlement in their\nown bodily integrity. Further, they explain criminal punishment by the need for an\n\xe2\x80\x9cindefinable kicker,\xe2\x80\x9d an extra cost to the rapist \xe2\x80\x9cwhich represents society\xe2\x80\x99s need to\nkeep all property rules from being changed at will into liability rules.\xe2\x80\x9d \xe2\x80\xa6 [L]ike Posner\xe2\x80\x99s,\ntheir view conceives of rape in market rhetoric. Bodily integrity is an owned object with\na price.\nWhat is wrong with this rhetoric? The risk-of-error argument . . . is one answer.\nUnsophisticated practitioners of cost-benefit analysis might tend to undervalue the\n\xe2\x80\x9ccosts\xe2\x80\x9d of rape to the victims. But this answer does not exhaust the problem. Rather,\nfor all but the deepest enthusiast, market rhetoric seems intuitively out of place here,\nso inappropriate that it is either silly or somehow insulting to the value being discussed.\nOne basis for this intuition is that market rhetoric conceives of bodily integrity as a\nfungible object. A fungible object is replaceable with money or other objects; in fact,\npossessing a fungible object is the same as possessing money. A fungible object can\n\n\x0c68\n\nProperty\n\npass in and out of the person\xe2\x80\x99s possession without effect on the person as long as its\nmarket equivalent is given in exchange. To speak of personal attributes as fungible\nobjects \xe2\x80\x94 alienable \xe2\x80\x9cgoods\xe2\x80\x9d \xe2\x80\x94 is intuitively wrong. Thinking of rape in market\nrhetoric implicitly conceives of as fungible something that we know to be personal, in\nfact conceives of as fungible property something we know to be too personal even to\nbe personal property. Bodily integrity is an attribute and not an object. \xe2\x80\xa6\nSystematically conceiving of personal attributes as fungible objects is threatening to\npersonhood, because it detaches from the person that which is integral to the person.\nSuch a conception makes actual loss of the attribute easier to countenance. For\nsomeone who conceives bodily integrity as \xe2\x80\x9cdetached,\xe2\x80\x9d the same person will remain\neven if bodily integrity is lost; but if bodily integrity cannot be detached, the person\ncannot remain the same after loss. Moreover, if my bodily integrity is an integral\npersonal attribute, not a detachable object, then hypothetically valuing my bodily\nintegrity in money is not far removed from valuing me in money. For all but the\nuniversal commodifier, that is inappropriate treatment of a person. . . .\n\n\x0cSubject Matter of Property\n\n69\n\nC. Intangible Property\nThis section considers forms of property that cannot be seen with the eye or held in\nthe hand. Such property raises significant conceptual issues, but, simply put, it is too\nsignificant for the legal system to ignore. As you read the cases in this section, consider\nnot just whether the things they describe are \xe2\x80\x9cproperty,\xe2\x80\x9d but also whether they are\n\xe2\x80\x9cthings\xe2\x80\x9d in the first place. To create a system of property rights, a legal system needs\nto be able to identify the things that are the subject of those rights, to decide who owns\nthose things, and to be able to say when an owner\xe2\x80\x99s rights have been violated. Are these\ntasks systematically harder for intangibles, and if so, why?\nKremen v. Cohen\n337 F. 3d 1024 (9th Cir. 2003)\nKOZINSKI, Circuit Judge. *\nWe decide whether Network Solutions may be liable for giving away a registrant\xe2\x80\x99s\ndomain name on the basis of a forged letter.\nBACKGROUND\n\xe2\x80\x9cSex on the Internet?,\xe2\x80\x9d they all said. \xe2\x80\x9cThat\xe2\x80\x99ll never make any money.\xe2\x80\x9d But computergeek-turned-entrepreneur Gary Kremen knew an opportunity when he saw it. The year\nwas 1994; domain names were free for the asking, and it would be several years yet\nbefore Henry Blodget and hordes of eager NASDAQ day traders would turn the\nInternet into the Dutch tulip craze of our times. With a quick e-mail to the domain\nname registrar Network Solutions, Kremen became the proud owner of sex.com. He\nregistered the name to his business, Online Classifieds, and listed himself as the contact.\nCon man Stephen Cohen, meanwhile, was doing time for impersonating a bankruptcy\nlawyer. He, too, saw the potential of the domain name. Kremen had gotten it first, but\nthat was only a minor impediment for a man of Cohen\xe2\x80\x99s boundless resource and\nbounded integrity. Once out of prison, he sent Network Solutions what purported to\n[In 2009, Judge Kozinski was admonished by a judicial disciplinary panel for maintaining a publicly accessible\nweb server that included sexually explicit material. In 2017, he abruptly resigned after being accused of sexual\nmisconduct by numerous women, including former law clerks. \xe2\x80\x93Eds.]\n\n*\n\n\x0c70\n\nProperty\n\nbe a letter he had received from Online Classifieds. It claimed the company had been\n\xe2\x80\x9cforced to dismiss Mr. Kremen,\xe2\x80\x9d but \xe2\x80\x9cnever got around to changing our administrative\ncontact with the internet registration [sic] and now our Board of directors has decided\nto abandon the domain name sex.com.\xe2\x80\x9d Why was this unusual letter being sent via\nCohen rather than to Network Solutions directly? It explained:\nBecause we do not have a direct connection to the internet, we request that you\nnotify the internet registration on our behalf, to delete our domain name\nsex.com. Further, we have no objections to your use of the domain name\nsex.com and this letter shall serve as our authorization to the internet\nregistration to transfer sex.com to your corporation. 2\nDespite the letter\xe2\x80\x99s transparent claim that a company called \xe2\x80\x9cOnline Classifieds\xe2\x80\x9d had\nno Internet connection, Network Solutions made no effort to contact Kremen. Instead,\nit accepted the letter at face value and transferred the domain name to Cohen. When\nKremen contacted Network Solutions some time later, he was told it was too late to\nundo the transfer. Cohen went on to turn sex.com into a lucrative online porn empire.\nAnd so began Kremen\xe2\x80\x99s quest to recover the domain name that was rightfully his. He\nsued Cohen and several affiliated companies in federal court, seeking return of the\ndomain name and disgorgement of Cohen\xe2\x80\x99s profits. The district court found that the\nletter was indeed a forgery and ordered the domain name returned to Kremen. It also\ntold Cohen to hand over his profits, invoking the constructive trust doctrine and\nCalifornia\xe2\x80\x99s \xe2\x80\x9cunfair competition\xe2\x80\x9d statute, Cal. Bus. & Prof.Code \xc2\xa7 17200 et seq. It\nawarded $40 million in compensatory damages and another $25 million in punitive\ndamages.\nKremen, unfortunately, has not had much luck collecting his judgment. The district\ncourt froze Cohen\xe2\x80\x99s assets, but Cohen ignored the order and wired large sums of\nmoney to offshore accounts. His real estate property, under the protection of a federal\nreceiver, was stripped of all its fixtures\xe2\x80\x94even cabinet doors and toilets\xe2\x80\x94in violation\n\nThe letter was signed \xe2\x80\x9cSharon Dimmick,\xe2\x80\x9d purported president of Online Classifieds. Dimmick was actually\nKremen\xe2\x80\x99s housemate at the time; Cohen later claimed she sold him the domain name for $1000. This story might\nhave worked a little better if Cohen hadn\xe2\x80\x99t misspelled her signature.\n\n2\n\n\x0cSubject Matter of Property\n\n71\n\nof another order. The court commanded Cohen to appear and show cause why he\nshouldn\xe2\x80\x99t be held in contempt, but he ignored that order, too. The district judge finally\ntook off the gloves \xe2\x80\x94he declared Cohen a fugitive from justice, signed an arrest\nwarrant and sent the U.S. Marshals after him.\nThen things started getting really bizarre. Kremen put up a \xe2\x80\x9cwanted\xe2\x80\x9d poster on the\nsex.com site with a mug shot of Cohen, offering a $50,000 reward to anyone who\nbrought him to justice. Cohen\xe2\x80\x99s lawyers responded with a motion to vacate the arrest\nwarrant. They reported that Cohen was under house arrest in Mexico and that gunfights\nbetween Mexican authorities and would-be bounty hunters seeking Kremen\xe2\x80\x99s reward\nmoney posed a threat to human life. The district court rejected this story as\n\xe2\x80\x9cimplausible\xe2\x80\x9d and denied the motion. Cohen, so far as the record shows, remains at\nlarge.\nGiven his limited success with the bounty hunter approach, it should come as no\nsurprise that Kremen seeks to hold someone else responsible for his losses. That\nsomeone is Network Solutions, the exclusive domain name registrar at the time of\nCohen\xe2\x80\x99s antics. Kremen sued it for mishandling his domain name, invoking four\ntheories at issue here. He argues that he had an implied contract with Network\nSolutions, which it breached by giving the domain name to Cohen. He also claims the\ntransfer violated Network Solutions\xe2\x80\x99s cooperative agreement with the National Science\nFoundation \xe2\x80\x94the government contract that made Network Solutions the .com\nregistrar. His third theory is that he has a property right in the domain name sex.com,\nand Network Solutions committed the tort of conversion by giving it away to Cohen.\nFinally, he argues that Network Solutions was a \xe2\x80\x9cbailee\xe2\x80\x9d of his domain name and seeks\nto hold it liable for \xe2\x80\x9cconversion by bailee.\xe2\x80\x9d\nThe district court granted summary judgment in favor of Network Solutions on all\nclaims. [Kremen appealed. His contract claim failed on appeal because he was not a\npaying customer and Network Solutions made no promises to him. He was not an\nintended third-party beneficiary of Network Solutions\xe2\x80\x99 contract with the NSF. And\n\xe2\x80\x9cconversion by bailee\xe2\x80\x9d was not an independent tort from conversion under California\nlaw. That left his conversion claim.]\nCONVERSION\n\n\x0c72\n\nProperty\n\nKremen\xe2\x80\x99s conversion claim is another matter. To establish that tort, a plaintiff must\nshow \xe2\x80\x9cownership or right to possession of property, wrongful disposition of the\nproperty right and damages.\xe2\x80\x9d G.S. Rasmussen & Assocs., Inc. v. Kalitta Flying Serv., Inc.,\n958 F.2d 896, 906 (9th Cir. 1992). The preliminary question, then, is whether registrants\nhave property rights in their domain names. Network Solutions all but concedes that\nthey do. This is no surprise, given its positions in prior litigation. See Network Solutions,\nInc. v. Umbro Int\xe2\x80\x99l, Inc., 529 S.E.2d 80, 86 (2000) (\xe2\x80\x9c[Network Solutions] acknowledged\nduring oral argument before this Court that the right to use a domain name is a form\nof intangible personal property.\xe2\x80\x9d). 5 The district court agreed with the parties on this\nissue, as do we.\nProperty is a broad concept that includes \xe2\x80\x9cevery intangible benefit and prerogative\nsusceptible of possession or disposition.\xe2\x80\x9d Downing v. Mun. Court, 198 P.2d 923 (1948).\nWe apply a three-part test to determine whether a property right exists: \xe2\x80\x9cFirst, there\nmust be an interest capable of precise definition; second, it must be capable of exclusive\npossession or control; and third, the putative owner must have established a legitimate\nclaim to exclusivity.\xe2\x80\x9d G.S. Rasmussen, 958 F.2d at 903. Domain names satisfy each\ncriterion. Like a share of corporate stock or a plot of land, a domain name is a welldefined interest. Someone who registers a domain name decides where on the Internet\nthose who invoke that particular name\xe2\x80\x94whether by typing it into their web browsers,\nby following a hyperlink, or by other means\xe2\x80\x94are sent. Ownership is exclusive in that\nthe registrant alone makes that decision. Moreover, like other forms of property,\ndomain names are valued, bought and sold, often for millions of dollars, and they are\nnow even subject to in rem jurisdiction, see 15 U.S.C. \xc2\xa7 1125(d)(2).\nFinally, registrants have a legitimate claim to exclusivity. Registering a domain name is\nlike staking a claim to a plot of land at the title office. It informs others that the domain\nname is the registrant\xe2\x80\x99s and no one else\xe2\x80\x99s. Many registrants also invest substantial time\nand money to develop and promote websites that depend on their domain names.\n\nNetwork Solutions \xe2\x80\xa6 stresses that Kremen didn\xe2\x80\x99t develop the sex.com site before Cohen stole it. But this focus\non the particular domain name at issue is misguided. The question is not whether Kremen\xe2\x80\x99s domain name in\nisolation is property, but whether domain names as a class are a species of property.\n\n5\n\n\x0cSubject Matter of Property\n\n73\n\nEnsuring that they reap the benefits of their investments reduces uncertainty and thus\nencourages investment in the first place, promoting the growth of the Internet overall.\nKremen therefore had an intangible property right in his domain name, and a jury could\nfind that Network Solutions wrongfully disposed of that right to his detriment by\nhanding the domain name over to Cohen. The district court nevertheless rejected\nKremen\xe2\x80\x99s conversion claim. It held that domain names, although a form of property,\nare intangibles not subject to conversion. This rationale derives from a distinction tort\nlaw once drew between tangible and intangible property: Conversion was originally a\nremedy for the wrongful taking of another\xe2\x80\x99s lost goods, so it applied only to tangible\nproperty. SEE PROSSER AND KEETON ON THE LAW OF TORTS \xc2\xa7 15, at 89, 91 (W. Page\nKeeton ed., 5th ed. 1984). Virtually every jurisdiction, however, has discarded this rigid\nlimitation to some degree. Many courts ignore or expressly reject it. See Kremen, 325\nF.3d at 1045-46 n. 5 (Kozinski, J., dissenting) (citing cases); Astroworks, Inc. v.\nAstroexhibit, Inc., 257 F.Supp.2d 609, 618 (S.D.N.Y.2003) (holding that the plaintiff\ncould maintain a claim for conversion of his website); Val D. Ricks, The Conversion of\nIntangible Property: Bursting the Ancient Trover Bottle with New Wine, 1991 B.Y.U. L. REV.\n1681, 1682. Others reject it for some intangibles but not others. The Restatement, for\nexample, recommends the following test:\n(1) Where there is conversion of a document in which intangible rights are\nmerged, the damages include the value of such rights.\n(2) One who effectively prevents the exercise of intangible rights of the kind\ncustomarily merged in a document is subject to a liability similar to that for\nconversion, even though the document is not itself converted.\nRESTATEMENT (SECOND) OF TORTS \xc2\xa7 242 (1965) (emphasis added). An intangible is\n\xe2\x80\x9cmerged\xe2\x80\x9d in a document when, \xe2\x80\x9cby the appropriate rule of law, the right to the\nimmediate possession of a chattel and the power to acquire such possession is represented\nby [the] document,\xe2\x80\x9d or when \xe2\x80\x9can intangible obligation [is] represented by [the]\ndocument, which is regarded as equivalent to the obligation.\xe2\x80\x9d Id. cmt. a (emphasis\n\n\x0c74\n\nProperty\n\nadded). 6 The district court applied this test and found no evidence that Kremen\xe2\x80\x99s\ndomain name was merged in a document. \xe2\x80\xa6\nWe conclude that California does not follow the Restatement\xe2\x80\x99s strict merger\nrequirement. Indeed, the leading California Supreme Court case rejects the tangibility\nrequirement altogether. In Payne v. Elliot, 54 Cal. 339, 1880 WL 1907 (1880), the Court\nconsidered whether shares in a corporation (as opposed to the share certificates\nthemselves) could be converted. It held that they could, reasoning: \xe2\x80\x9c[T]he action no\nlonger exists as it did at common law, but has been developed into a remedy for the\nconversion of every species of personal property.\xe2\x80\x9d Id. at 341 (emphasis added). While\nPayne\xe2\x80\x99s outcome might be reconcilable with the Restatement, its rationale certainly is\nnot: It recognized conversion of shares, not because they are customarily represented\nby share certificates, but because they are a species of personal property and, perforce,\nprotected. 7\nNotwithstanding Payne\xe2\x80\x99s seemingly clear holding, the California Court of Appeal held\nin Olschewski v. Hudson, 87 Cal.App. 282, 262 P. 43 (1927), that a laundry route was not\nsubject to conversion. It explained that Payne\xe2\x80\x99s rationale was \xe2\x80\x9ctoo broad a statement\nas to the application of the doctrine of conversion.\xe2\x80\x9d Id. at 288, 262 P. 43. Rather than\nfollow binding California Supreme Court precedent, the court retheorized Payne and\nheld that corporate stock could be converted only because it was \xe2\x80\x9crepresented by\xe2\x80\x9d a\ntangible document. Id.; see also Adkins v. Model Laundry Co., 268 P. 939 (1928) (relying\non Olschewski and holding that no property right inhered in \xe2\x80\x9cthe intangible interest of\nan exclusive privilege to collect laundry\xe2\x80\x9d).\nWere Olschewski the only relevant case on the books, there might be a plausible\nargument that California follows the Restatement. But in Palm Springs-La Quinta\nDevelopment Co. v. Kieberk Corp., 115 P.2d 548 (1941), the court of appeal allowed a\nThe Restatement does note that conversion \xe2\x80\x9chas been applied by some courts in cases where the converted\ndocument is not in itself a symbol of the rights in question, but is merely essential to their protection and\nenforcement, as in the case of account books and receipts.\xe2\x80\x9d Id. cmt. b.\n\n6\n\nIntangible interests in real property, on the other hand, remain unprotected by conversion, presumably because\ntrespass is an adequate remedy. See Goldschmidt v. Maier, 73 P. 984, 985 (Cal.1903) (per curiam) (\xe2\x80\x9c[A] leasehold of\nreal estate is not the subject of an action of trover.\xe2\x80\x9d); Vuich v. Smith, 35 P.2d 365 (1934) (same). Some California\ncases also preserve the traditional exception for indefinite sums of money. See 5 Witkin Torts \xc2\xa7 614.\n\n7\n\n\x0cSubject Matter of Property\n\n75\n\nconversion claim for intangible information in a customer list when some of the index\ncards on which the information was recorded were destroyed. The court allowed\ndamages not just for the value of the cards, but for the value of the intangible\ninformation lost. Section 242(1) of the Restatement, however, allows recovery for\nintangibles only if they are merged in the converted document. Customer information\nis not merged in a document in any meaningful sense. A Rolodex is not like a stock\ncertificate that actually represents a property interest; it is only a means of recording\ninformation.\nPalm Springs and Olschewski are reconcilable on their facts\xe2\x80\x94the former involved\nconversion of the document itself while the latter did not. But this distinction can\xe2\x80\x99t be\nsquared with the Restatement. The plaintiff in Palm Springs recovered damages for the\nvalue of his intangibles. But if those intangibles were merged in the index cards for\npurposes of section 242(1), the plaintiffs in Olschewski and Adkins should have\nrecovered under section 242(2)\xe2\x80\x94laundry routes surely are customarily written down\nsomewhere. \xe2\x80\x9cMerged\xe2\x80\x9d can\xe2\x80\x99t mean one thing in one section and something else in the\nother.\nCalifornia courts ignored the Restatement again in A & M Records, Inc. v. Heilman, 75\nCal.App.3d 554 (1977), which applied the tort to a defendant who sold bootlegged\ncopies of musical recordings. The court held broadly that \xe2\x80\x9csuch misappropriation and\nsale of the intangible property of another without authority from the owner is\nconversion.\xe2\x80\x9d Id. at 570. It gave no hint that its holding depended on whether the\nowner\xe2\x80\x99s intellectual property rights were merged in some document. One might\nimagine physical things with which the intangible was associated \xe2\x80\x93for example, the\nmedium on which the song was recorded. But an intangible intellectual property right\nin a song is not merged in a phonograph record in the sense that the record represents\nthe composer\xe2\x80\x99s intellectual property right. The record is not like a certificate of\nownership; it is only a medium for one instantiation of the artistic work.\nFederal cases applying California law take an equally broad view. We have applied A\n& M Records to intellectual property rights in an audio broadcast, see Lone Ranger\nTelevision, Inc. v. Program Radio Corp., 740 F.2d 718, 725 (9th Cir. 1984), and to a\nregulatory filing, see G.S. Rasmussen, 958 F.2d at 906-07. Like A & M Records, both\ndecisions defy the Restatement\xe2\x80\x99s \xe2\x80\x9cmerged in a document\xe2\x80\x9d test. An audio broadcast may\n\n\x0c76\n\nProperty\n\nbe recorded on a tape and a regulatory submission may be typed on a piece of paper,\nbut neither document represents the owner\xe2\x80\x99s intangible interest.\nThe Seventh Circuit interpreted California law in FMC Corp. v. Capital Cities/ABC, Inc.,\n915 F.2d 300 (7th Cir. 1990). Observing that \xe2\x80\x9c`[t]here is perhaps no very valid and\nessential reason why there might not be conversion\xe2\x80\x99 of intangible property,\xe2\x80\x9d id. at 305\n(quoting PROSSER & KEETON, supra, \xc2\xa7 15, at 92), it held that a defendant could be\nliable merely for depriving the plaintiff of the use of his confidential information. In\nrejecting the tangibility requirement, FMC echoes Payne\xe2\x80\x99s holding that personal\nproperty of any species may be converted. And it flouts the Restatement because the\nintangible property right in confidential information is not represented by the\ndocuments on which the information happens to be recorded. \xe2\x80\xa6\nIn short, California does not follow the Restatement\xe2\x80\x99s strict requirement that some\ndocument must actually represent the owner\xe2\x80\x99s intangible property right. On the\ncontrary, courts routinely apply the tort to intangibles without inquiring whether they\nare merged in a document and, while it\xe2\x80\x99s often possible to dream up some document\nthe intangible is connected to in some fashion, it\xe2\x80\x99s seldom one that represents the\nowner\xe2\x80\x99s property interest. To the extent Olschewski endorses the strict merger rule, it is\nagainst the weight of authority. That rule cannot be squared with a jurisprudence that\nrecognizes conversion of music recordings, radio shows, customer lists, regulatory\nfilings, confidential information and even domain names.\nWere it necessary to settle the issue once and for all, we would toe the line of Payne and\nhold that conversion is \xe2\x80\x9ca remedy for the conversion of every species of personal\nproperty.\xe2\x80\x9d 54 Cal. at 341. But we need not do so to resolve this case. Assuming\narguendo that California retains some vestigial merger requirement, it is clearly minimal,\nand at most requires only some connection to a document or tangible object\xe2\x80\x94not\nrepresentation of the owner\xe2\x80\x99s intangible interest in the strict Restatement sense.\nKremen\xe2\x80\x99s domain name falls easily within this class of property. He argues that the\nrelevant document is the Domain Name System, or \xe2\x80\x9cDNS\xe2\x80\x9d\xe2\x80\x94the distributed electronic\ndatabase that associates domain names like sex.com with particular computers\nconnected to the Internet. We agree that the DNS is a document (or perhaps more\naccurately a collection of documents). That it is stored in electronic form rather than\non ink and paper is immaterial. It would be a curious jurisprudence that turned on the\n\n\x0cSubject Matter of Property\n\n77\n\nexistence of a paper document rather than an electronic one. Torching a company\xe2\x80\x99s\nfile room would then be conversion while hacking into its mainframe and deleting its\ndata would not. That is not the law, at least not in California. 11\nThe DNS also bears some relation to Kremen\xe2\x80\x99s domain name. We need not delve too\nfar into the mechanics of the Internet to resolve this case. It is sufficient to observe\nthat information correlating Kremen\xe2\x80\x99s domain name with a particular computer on the\nInternet must exist somewhere in some form in the DNS; if it did not, the database\nwould not serve its intended purpose. Change the information in the DNS, and you\nchange the website people see when they type \xe2\x80\x9cwww.sex.com.\xe2\x80\x9d\nNetwork Solutions quibbles about the mechanics of the DNS. It points out that the\ndata corresponding to Kremen\xe2\x80\x99s domain name is not stored in a single record, but is\nfound in several different places: The components of the domain name (\xe2\x80\x9csex\xe2\x80\x9d and\n\xe2\x80\x9ccom\xe2\x80\x9d) are stored in two different places, and each is copied and stored on several\nmachines to create redundancy and speed up response times. Network Solutions\xe2\x80\x99s\ntheory seems to be that intangibles are not subject to conversion unless they are\nassociated only with a single document.\nEven if Network Solutions were correct that there is no single record in the DNS\narchitecture with which Kremen\xe2\x80\x99s intangible property right is associated, that is no\nimpediment under California law. A share of stock, for example, may be evidenced by\nmore than one document. See Payne, 54 Cal. at 342 (\xe2\x80\x9c[T]he certificate is only evidence\nof the property; and it is not the only evidence, for a transfer on the books of the\ncorporation, without the issuance of a certificate, vests title in the shareholder: the\ncertificate is, therefore, but additional evidence of title....\xe2\x80\x9d). A customer list is protected,\neven if it\xe2\x80\x99s recorded on index cards rather than a single piece of paper. Audio recordings\n\nThe Restatement requires intangibles to be merged only in a \xe2\x80\x9cdocument,\xe2\x80\x9d not a tangible document.\nRESTATEMENT (SECOND) OF TORTS \xc2\xa7 242. Our holding therefore does not depend on whether electronic records\nare tangible. Compare eBay, Inc. v. Bidder\xe2\x80\x99s Edge, Inc., 100 F. Supp. 2d 1058, 1069 (N.D. Cal. 2000) (\xe2\x80\x9c[I]t appears\nlikely that the electronic signals sent by [Bidder\xe2\x80\x99s Edge] to retrieve information from eBay\xe2\x80\x99s computer system\nare ... sufficiently tangible to support a trespass cause of action.\xe2\x80\x9d), with Intel Corp. v. Hamidi, 71 P.3d 296, (2003)\n(implying that electronic signals are intangible).\n\n11\n\n\x0c78\n\nProperty\n\nmay be duplicated, and confidential information and regulatory filings may be\nphotocopied. Network Solutions\xe2\x80\x99s \xe2\x80\x9csingle document\xe2\x80\x9d theory is unsupported.\nNetwork Solutions also argues that the DNS is not a document because it is refreshed\nevery twelve hours when updated domain name information is broadcast across the\nInternet. This theory is even less persuasive. A document doesn\xe2\x80\x99t cease being a\ndocument merely because it is often updated. If that were the case, a share registry\nwould fail whenever shareholders were periodically added or dropped, as would an\naddress file whenever business cards were added or removed. Whether a document is\nupdated by inserting and deleting particular records or by replacing an old file with an\nentirely new one is a technical detail with no legal significance.\nKremen\xe2\x80\x99s domain name is protected by California conversion law, even on the\ngrudging reading we have given it. Exposing Network Solutions to liability when it\ngives away a registrant\xe2\x80\x99s domain name on the basis of a forged letter is no different\nfrom holding a corporation liable when it gives away someone\xe2\x80\x99s shares under the same\ncircumstances. We have not \xe2\x80\x9ccreat[ed] new tort duties\xe2\x80\x9d in reaching this result. Cf. Moore\nv. Regents of the Univ. of Cal., 793 P.2d 479 (1990). We have only applied settled principles\nof conversion law to what the parties and the district court all agree is a species of\nproperty.\nThe district court supported its contrary holding with several policy rationales, but\nnone is sufficient grounds to depart from the common law rule. The court was reluctant\nto apply the tort of conversion because of its strict liability nature. This concern rings\nsomewhat hollow in this case because the district court effectively exempted Network\nSolutions from liability to Kremen altogether, whether or not it was negligent. Network\nSolutions made no effort to contact Kremen before giving away his domain name,\ndespite receiving a facially suspect letter from a third party. A jury would be justified in\nfinding it was unreasonably careless.\nWe must, of course, take the broader view, but there is nothing unfair about holding a\ncompany responsible for giving away someone else\xe2\x80\x99s property even if it was not at fault.\nCohen is obviously the guilty party here, and the one who should in all fairness pay for\nhis theft. But he\xe2\x80\x99s skipped the country, and his money is stashed in some offshore bank\naccount. Unless Kremen\xe2\x80\x99s luck with his bounty hunters improves, Cohen is out of the\npicture. The question becomes whether Network Solutions should be open to liability\n\n\x0cSubject Matter of Property\n\n79\n\nfor its decision to hand over Kremen\xe2\x80\x99s domain name. Negligent or not, it was Network\nSolutions that gave away Kremen\xe2\x80\x99s property. Kremen never did anything. It would not\nbe unfair to hold Network Solutions responsible and force it to try to recoup its losses\nby chasing down Cohen. This, at any rate, is the logic of the common law, and we do\nnot lightly discard it.\nThe district court was worried that \xe2\x80\x9cthe threat of litigation threatens to stifle the\nregistration system by requiring further regulations by [Network Solutions] and\npotential increases in fees.\xe2\x80\x9d Given that Network Solutions\xe2\x80\x99s \xe2\x80\x9cregulations\xe2\x80\x9d evidently\nallowed it to hand over a registrant\xe2\x80\x99s domain name on the basis of a facially suspect\nletter without even contacting him, \xe2\x80\x9cfurther regulations\xe2\x80\x9d don\xe2\x80\x99t seem like such a bad\nidea. And the prospect of higher fees presents no issue here that it doesn\xe2\x80\x99t in any other\ncontext. A bank could lower its ATM fees if it didn\xe2\x80\x99t have to pay security guards, but\nwe doubt most depositors would think that was a good idea.\nThe district court thought there were \xe2\x80\x9cmethods better suited to regulate the vagaries\nof domain names\xe2\x80\x9d and left it \xe2\x80\x9cto the legislature to fashion an appropriate statutory\nscheme.\xe2\x80\x9d Id. The legislature, of course, is always free (within constitutional bounds) to\nrefashion the system that courts come up with. But that doesn\xe2\x80\x99t mean we should throw\nup our hands and let private relations degenerate into a free-for-all in the meantime.\nWe apply the common law until the legislature tells us otherwise. And the common law\ndoes not stand idle while people give away the property of others.\nThe evidence supported a claim for conversion, and the district court should not have\nrejected it.\nNotes and Questions\n1. Is your name your property? What is it about a domain name that makes it\n\xe2\x80\x9cwork\xe2\x80\x9d as property?\n2. Does Kremen\xe2\x80\x99s three-part test for the existence of \xe2\x80\x9cproperty\xe2\x80\x9d work on the variety\nof property forms you have encountered so far, or others you might imagine?\nUnder it, is a car property? A dog? A house? Human remains? A medical record?\nProper alignment of one\xe2\x80\x99s psychic aura?\n\n\x0c80\n\nProperty\n3. There are thriving markets for domain names. People buy and sell them all the\ntime, companies use them as collateral for loans, and Stephen Cohen considered\nsex.com valuable enough to steal. But do these economic considerations make\nthem \xe2\x80\x9cproperty?\xe2\x80\x9d Recall Felix Cohen\xe2\x80\x99s argument against basing property rights\non economic value. Does Kremen commit precisely the fallacy the other Cohen\nwarned about?\n4. Is tangibility the key to the case or a giant red herring? Does the court\xe2\x80\x99s\nargument in footnote 11 that under the Restatement an intangible must be\nmerged in a document but the document need not itself be tangible suggest that\nthere is something wrong with the Restatement\xe2\x80\x99s test or with the court\xe2\x80\x99s reading\nof the Restatement?\n5. The Internet Corporation for Assigned Names and Numbers (ICANN) has\npromulgated a system of mandatory arbitration for domain-name registrants,\nthe Uniform Domain Name Dispute Resolution Policy (UDRP). Under the\nUDRP, a trademark owner can bring an expedited proceeding against anyone\nwho has registered a domain name that is \xe2\x80\x9cidentical or confusingly similar\xe2\x80\x9d to\ntheir trademark if the domain name \xe2\x80\x9chas been registered and is being used in\nbad faith.\xe2\x80\x9d If the arbitrator finds a violation, the remedy is transfer of the\ndomain name to the trademark owner. What does this system of protection for\ntrademark owners\xe2\x80\x99 property in their trademarks do to the security of domainname registrants\xe2\x80\x99 property in their domain names? Both are systems of property\nin names, but can they coexist?\n\nD. Intellectual Property\nIntellectual property laws purport to confer ownership rights in information. There is\nno one distinctive set of doctrines governing all intellectual property. Instead, the name\n\xe2\x80\x9cintellectual property\xe2\x80\x9d is a catch-all used to group several related sets of legal rights,\neach of which gives the rightsholder an exclusive right to use certain information in\ncertain ways, or to prevent others from using certain information in certain ways. A\ndefendant who uses that information in that way without the rightsholder permission\nis said to be an infringer.\n\n\x0cSubject Matter of Property\n\n81\n\nIt is common, and in some respects accurate, to describe the rightsholder as the \xe2\x80\x9cowner\xe2\x80\x9d\nof the information, but keep in mind that only certain specified uses count as\ninfringement. There is no body of intellectual property law that prohibits possessing or\nthinking about information, for example. Instead, different bodies of intellectual\nproperty law restrict different kinds of uses. In each case, the scope of the owner\xe2\x80\x99s\nrights is closely tied to what kinds of information that body of law protects and to the\nrules governing when someone becomes a rightsholder. We have taken it largely for\ngranted that land is a proper subject matter for real property and other tangible things\nare proper subject matter for personal property. Intellectual property is different,\nbecause not every kind of information qualifies. In copyright, for example, processes\nare not proper subject matter: as a consequence, the list of ingredients in a recipe and\nthe steps for combining them are not copyrightable\xe2\x80\x94even if they meet all of copyright\nlaw\xe2\x80\x99s other requirements.\nLearning a body of intellectual property law, therefore, requires learning its subject\nmatter, its rules of initial ownership, and its rules of infringement. At the federal level,\nthis traditionally includes the distinct bodies of law corresponding to copyrights,\npatents, and trademarks.\n\xe2\x80\xa2 Federal copyright law protects \xe2\x80\x9coriginal works of authorship,\xe2\x80\x9d like novels,\nbiographies, songs, screenplays, paintings, blueprints, and sculptures. Copyright law\nhas a very low threshold for protection: a work must merely display a \xe2\x80\x9cmodicum of\ncreativity\xe2\x80\x9d and have been written down (\xe2\x80\x9cfixed in a tangible medium of\nexpression\xe2\x80\x9d). The copyright so obtained is valid during its author\xe2\x80\x99s lifetime, and\nfor the next seventy years after that. It gives copyright owners the exclusive right\nto reproduce their works, to make adaptations of them, to distribute them to the\npublic, and to perform or display them publicly\xe2\x80\x94but this right only applies against\npeople who copy from the owner. Someone who independently and coincidentally\ncomes up with similar expression is an author in her own right, not an infringer.\nBelow, for example, are two photographs of the same icerberg, taken by different\nphotographers from nearby locations at almost exactly the same time. Neither\ninfringes on the other.\n\n\x0c82\n\nProperty\n\nLeft: Sarah Scurr. Right: Marisol Ortiz Elfeldt\n\n\xe2\x80\xa2 Federal patent law protects \xe2\x80\x9cany new and useful process, machine, manufacture,\nor composition of matter.\xe2\x80\x9d Examples include mechanical devices like tractor plows\nand can openers, chemical processes used to refine oil, pharmaceutical products\nlike anti-HIV drugs, and, a little infamously, a \xe2\x80\x9cMethod and apparatus for\nautomatically exercising a curious animal\xe2\x80\x9d by encouraging it to chase a laser pointer.\nSee U.S. Pat. No. 6,701,872. To obtain a patent, an inventor must go through a\ndetailed and expensive application process, which involves convincing the U.S.\nPatent and Trademark Office (USPTO) that her invention is genuinely new\n(\xe2\x80\x9cnovel\xe2\x80\x9d), that it represents a sufficient advance on previous inventions (that it be\n\xe2\x80\x9cnonobvious\xe2\x80\x9d), and that it has some practical use in the world, however slight\n(\xe2\x80\x9cutility\xe2\x80\x9d). She must also disclose to the public, in detail, how her invention works\nand how best to use it. Once the USPTO issues a patent, it gives the owner the\nexclusive right for twenty years (from the date she filed her application with the\nUSPTO) to make, use, offer to sell, or sell the invention. (This means that anyone\nis free to copy or to study the patent on a new kind of steering wheel, but they cannot\nmake, use, or sell steering wheels as described in the patent.)\n\xe2\x80\xa2 Trade secret law was once almost entirely a matter of state common law (i.e.,\njudge-made law), but now almost all states have adopted a version of the Uniform\nTrade Secrets Act (UTSA), and the federal Defend Trade Secrets Act of 2016\nsubstantially incorporates the UTSA\xe2\x80\x99s definitions. To be protected as a trade secret,\ninformation must be valuable because it is secret. Canonical examples of trade\nsecrets include chain restaurants\xe2\x80\x99 secret sauces, customer lists, business plans,\nmanufacturing designs, information on the location of valuable resources like\nshipwrecks and oil fields, and inventions in the development stage before they are\nready to be patented. (Because obtaining a patent involves extensive disclosure, it\n\n\x0cSubject Matter of Property\n\n83\n\nis impossible to have a patent and a trade secret on exactly the same information;\none of the major strategic decisions inventors must make when they apply for a\npatent is how much to include in the application to obtain a stronger or broader\npatent, and how much to try to hold back as a trade secret.) In general, a defendant\nis liable only for obtaining a trade secret through \xe2\x80\x9cimproper means.\xe2\x80\x9d Breach of a\nduty of confidentiality is far and away the most common such means \xe2\x80\x93 such as\nwhen employees take company documents stamped \xe2\x80\x9cCONFIDENTIAL\xe2\x80\x9d with\nthem to their new jobs at a competitor. More colorfully, industrial espionage, such\nas breaking into labs or hacking into computers, is also improper means. Note that\ntrade secret law, like copyright law, protects only against infringers who obtain the\nsecret information, directly or indirectly, from the owner: independent rediscovery\nof the same information is a complete defense. So is reverse engineering, in which\na defendant takes publicly available information (including legally obtained copies\nof the owner\xe2\x80\x99s goods containing or made using with the trade secret) and studies it\nto understand how the secret works.\n\xe2\x80\xa2 Trademark law is a hybrid of state and federal\nrights. Its basis for protection is a little different.\nA trademark is a word or symbol, like NIKE or\nthe \xe2\x80\x9cswoosh\xe2\x80\x9d logo that distinguishes goods or\nservices in the marketplace. One gains trademark rights by using a mark on goods\nso that consumers associate the mark with a particular source\xe2\x80\x94i.e., they know that\nNIKE shoes come from one company (Nike) and not another (Adidas or Reebok).\nThese associations are called \xe2\x80\x9cgoodwill\xe2\x80\x9d and it is common to say that what a\ntrademark owner owns is the goodwill (even though it exists only in consumers\xe2\x80\x99\nminds). These rights exist under state common law as soon as the goodwill exists;\ntrademark owners can also register their marks with the USPTO, which gives\nnationwide and not just local rights. Trademark law gives a trademark owner the\nright to prevent uses of the mark that cause \xe2\x80\x9cconsumer confusion\xe2\x80\x9d about the source\nof goods: a consumer who sees non-Nike shoes falsely labeled NIKE and who\nmistakenly believes they come from Nike has been confused about the origin of\nthe goods, and Nike can sue the company slapping its trademark on ersatz shoes.\nDespite the name, it is highly controversial whether intellectual property should be\nconsidered a species of \xe2\x80\x9cproperty\xe2\x80\x9d at all. Consider why advocates might want to\nembrace or deny that label, and what if anything is at stake. Does the relevance, or the\n\n\x0c84\n\nProperty\n\nmeaning, of the label \xe2\x80\x9cproperty\xe2\x80\x9d change depending on whether it is used to refer to\nthe intangible ideas embodied in an object or to the object itself? (In copyright terms,\nthis is the distinction between a \xe2\x80\x9cwork\xe2\x80\x9d and a \xe2\x80\x9ccopy\xe2\x80\x9d of the work.) These types of\n\xe2\x80\x9cproperty\xe2\x80\x9d rights can overlap or conflict, and some of the most important doctrines of\nintellectual property law are devoted to sorting out these issues. Finally, consider the\nextent to which the fact that intellectual property rights deal with information raises\ndistinctive free expression concerns. Are they different in kinds from the concerns in\na case like State v. Shack?\n\n\x0cAllocation\nWe may well conclude that certain types of resources should be subject to private\nownership, and we may further conclude that such ownership ought to entail particular\nrights of owners. But this would not be sufficient to establish a system of property\nrights. We would still need to decide which things are owned by whom. Certainly, if\none of the rights of owners is the power to alienate, then once something is legitimately\nowned by someone, that person can transfer rightful ownership to someone else. (We\nwill study how such transfers can come about later in this book\xe2\x80\x94indeed we will find\nthat some transfers can confer the rights of ownership on a transferee even where the\ntransferor\xe2\x80\x99s rights are not so clear-cut. We will also see that there are ways for things\nowned by one person to become owned by another person other than by voluntary\ntransfer.)\nBut even assuming a current owner could trace their rights of ownership back through\na series of successive voluntary transfers from rightful owners\xe2\x80\x94a chain of title, as we\nwill come to call it\xe2\x80\x94the first link in that chain must be something other than a transfer\nfrom a prior rightful owner. What could this something be? How do things go from\nbeing unowned to being owned? Why might we recognize some rules for such initial\nallocations of resources over the available alternatives?\nIn this chapter, we will examine the most common justification for protecting\nsomeone\xe2\x80\x99s rights of ownership: possession. The common law holds that initial ownership\nof a heretofore unowned thing goes to the first to possess that thing\xe2\x80\x94that first in time is\nfirst in right. But as we will see, this rule is not as straightforward as it may seem. To\nbegin with, reasonable people may differ as to what constitutes \xe2\x80\x9cpossession,\xe2\x80\x9d or what\nit means to be \xe2\x80\x9cfirst.\xe2\x80\x9d Our first few cases illustrating this problem deal with first\npossession of chattels (sometimes called \xe2\x80\x9cpersonal property\xe2\x80\x9d or \xe2\x80\x9cpersonalty\xe2\x80\x9d\xe2\x80\x94basically\nany ownable thing that isn\xe2\x80\x99t land or attached to land).\n\n85\n\n\x0c86\n\nProperty\n\nA. Initial Allocation of Chattels\n\nSource: R.S. SURTEES, HAWBUCK GRANGE 197 (1885), British Library, https://flic.kr/p/i38jT2\n\nPierson v. Post\n3 Cai. R. 175 (N.Y. Sup. Ct. 1805)\nTHIS was an action of trespass on the case commenced in a justice\xe2\x80\x99s court, by the\npresent defendant against the now plaintiff.\nThe declaration stated that Post, being in possession of certain dogs and hounds under\nhis command, did, \xe2\x80\x9cupon a certain wild and uninhabited, unpossessed and waste land,\ncalled the beach, find and start one of those noxious beasts called a fox,\xe2\x80\x9d and whilst\nthere hunting, chasing and pursuing the same with his dogs and hounds, and when in\nview thereof, Pierson, well knowing the fox was so hunted and pursued, did, in the sight\nof Post, to prevent his catching the same, kill and carry it off. A verdict having been\nrendered for the plaintiff below, the defendant there sued out a certiorari, and now\nassigned for error, that the declaration and the matters therein contained were not\nsufficient in law to maintain an action\xe2\x80\xa6.\nTOMPKINS, J. delivered the opinion of the court.\n\n\x0cAllocation\n\n87\n\nThis cause comes before us on a return to a certiorari directed to one of the justices of\nQueens county.\nThe question submitted by the counsel in this cause for our determination is, whether\nLodowick Post, by the pursuit with his hounds in the manner alleged in his declaration,\nacquired such a right to, or property in, the fox, as will sustain an action against Pierson\nfor killing and taking him away?\nThe cause was argued with much ability by the counsel on both sides, and presents for\nour decision a novel and nice question. It is admitted that a fox is an animal fer\xc3\xa6 natur\xc3\xa6,\nand that property in such animals is acquired by occupancy only. These admissions\nnarrow the discussion to the simple question of what acts amount to occupancy,\napplied to acquiring right to wild animals?\nIf we have recourse to the ancient writers upon general principles of law, the judgment\nbelow is obviously erroneous. Justinian\xe2\x80\x99s Institutes, lib. 2. tit. 1. s. 13. and Fleta, lib. 3. c.\n2. p. 175. adopt the principle, that pursuit alone vests no property or right in the\nhuntsman; and that even pursuit, accompanied with wounding, is equally ineffectual\nfor that purpose, unless the animal be actually taken. The same principle is recognised\nby Bracton, lib. 2. c. 1. p. 8.\nPuffendorf, lib. 4. c. 6. s. 2. and 10. defines occupancy of beasts fer\xc3\xa6 natur\xc3\xa6, to be the\nactual corporal possession of them, and Bynkershoek is cited as coinciding in this\ndefinition. It is indeed with hesitation that Puffendorf affirms that a wild beast mortally\nwounded, or greatly maimed, cannot be fairly intercepted by another, whilst the pursuit\nof the person inflicting the wound continues. The foregoing authorities are decisive to\nshow that mere pursuit gave Post no legal right to the fox, but that he became the\nproperty of Pierson, who intercepted and killed him.\nIt therefore only remains to inquire whether there are any contrary principles, or\nauthorities, to be found in other books, which ought to induce a different decision.\nMost of the cases which have occurred in England, relating to property in wild animals,\nhave either been discussed and decided upon the principles of their positive statute\nregulations, or have arisen between the huntsman and the owner of the land upon\nwhich beasts fer\xc3\xa6 natur\xc3\xa6 have been apprehended; the former claiming them by title of\n\n\x0c88\n\nProperty\n\noccupancy, and the latter ratione soli. Little satisfactory aid can, therefore, be derived\nfrom the English reporters.\nBarbeyrac, in his notes on Puffendorf, does not accede to the definition of occupancy by\nthe latter, but, on the contrary, affirms, that actual bodily seizure is not, in all cases,\nnecessary to constitute possession of wild animals. He does not, however, describe the\nacts which, according to his ideas, will amount to an appropriation of such animals to\nprivate use, so as to exclude the claims of all other persons, by title of occupancy, to\nthe same animals; and he is far from averring that pursuit alone is sufficient for that\npurpose. To a certain extent, and as far as Barbeyrac appears to me to go, his objections\nto Puffendorf\xe2\x80\x99s definition of occupancy are reasonable and correct. That is to say, that\nactual bodily seizure is not indispensable to acquire right to, or possession of, wild\nbeasts; but that, on the contrary, the mortal wounding of such beasts, by one not\nabandoning his pursuit, may, with the utmost propriety, be deemed possession of him;\nsince, thereby, the pursuer manifests an unequivocal intention of appropriating the\nanimal to his individual use, has deprived him of his natural liberty, and brought him\nwithin his certain control. So also, encompassing and securing such animals with nets\nand toils, or otherwise intercepting them in such a manner as to deprive them of their\nnatural liberty, and render escape impossible, may justly be deemed to give possession\nof them to those persons who, by their industry and labour, have used such means of\napprehending them. Barbeyrac seems to have adopted, and had in view in his notes, the\nmore accurate opinion of Grotius, with respect to occupancy. That celebrated author,\nlib. 2. c. 8. s. 3. p. 309. speaking of occupancy, proceeds thus: \xe2\x80\x9cRequiritur autem corporalis\nqu\xc3\xa6dam possessio ad dominium adipiscendum; atque ideo, vulnerasse non sufficit.\xe2\x80\x9d * But in the\nfollowing section he explains and qualifies this definition of occupancy: \xe2\x80\x9cSed possessio\nilla potest non solis manibus, sed instrumentis, ut decipulis, retibus, laqueis dum duo adsint: primum\nut ipsa instrumenta sint in nostra potestate, deinde ut fera, ita inclusa sit, ut exire inde nequeat.\xe2\x80\x9d\xe2\x80\xa0\nThis qualification embraces the full extent of Barbeyrac\xe2\x80\x99s objection to Puffendorf\xe2\x80\x99s\ndefinition, and allows as great a latitude to acquiring property by occupancy, as can\n[Translation: \xe2\x80\x9cSome bodily possession is required for acquiring ownership; for that reason, wounding is not\nenough.\xe2\x80\x9d \xe2\x80\x94 eds.]\n*\n\n[Translation: \xe2\x80\x9cBut that possession can be not only by hand, but by instruments, such as traps, nets, and snares,\nwhere two things are present: first that this instrument itself be in our control, and then that the wild thing, being\nenclosed, cannot exit therefrom.\xe2\x80\x9d\xe2\x80\x94eds.]\n\n\xe2\x80\xa0\n\n\x0cAllocation\n\n89\n\nreasonably be inferred from the words or ideas expressed by Barbeyrac in his notes. The\ncase now under consideration is one of mere pursuit, and presents no circumstances\nor acts which can bring it within the definition of occupancy by Puffendorf, or Grotius,\nor the ideas of Barbeyrac upon that subject.\nThe case cited from 11 Mod. 74--130. * I think clearly distinguishable from the present;\ninasmuch as there the action was for maliciously hindering and disturbing the plaintiff\nin the exercise and enjoyment of a private franchise; and in the report of the same case,\n3 Salk. 9. Holt, Ch. J. states, that the ducks were in the plaintiff\xe2\x80\x99s decoy pond, and so in\nhis possession, from which it is obvious the court laid much stress in their opinion upon\nthe plaintiff\xe2\x80\x99s possession of the ducks, ratione soli. \xe2\x80\xa0\nWe are the more readily inclined to confine possession or occupancy of beasts fer\xc3\xa6\nnatur\xc3\xa6, within the limits prescribed by the learned authors above cited, for the sake of\ncertainty, and preserving peace and order in society. If the first seeing, starting, or\npursuing such animals, without having so wounded, circumvented or ensnared them,\nso as to deprive them of their natural liberty, and subject them to the control of their\npursuer, should afford the basis of actions against others for intercepting and killing\nthem, it would prove a fertile source of quarrels and litigation.\nHowever uncourteous or unkind the conduct of Pierson towards Post, in this instance,\nmay have been, yet his act was productive of no injury or damage for which a legal\nremedy can be applied. We are of opinion the judgment below was erroneous, and\nought to be reversed.\nLIVINGSTON, J.\nMy opinion differs from that of the court.\nOf six exceptions, taken to the proceedings below, all are abandoned except the third,\nwhich reduces the controversy to a single question.\n\n[This citation, and the following citation to Salk., both refer to the case of Keeble v. Hickeringill, which we will\ncome to later in this Chapter.\xe2\x80\x94eds.]\n*\n\n\xe2\x80\xa0\n\n[Translation: \xe2\x80\x9cby reason of the soil\xe2\x80\x9d\xe2\x80\x94eds.]\n\n\x0c90\n\nProperty\n\nWhether a person who, with his own hounds, starts and hunts a fox on waste and\nuninhabited ground, and is on the point of seizing his prey, acquires such an interest in\nthe animal, as to have a right of action against another, who in view of the huntsman\nand his dogs in full pursuit, and with knowledge of the chase, shall kill and carry him\naway?\nThis is a knotty point, and should have been submitted to the arbitration of sportsmen,\nwithout poring over Justinian, Fleta, Bracton, Puffendorf, Locke, Barbeyrac, or Blackstone, all\nof whom have been cited; they would have had no difficulty in coming to a prompt\nand correct conclusion. In a court thus constituted, the skin and carcass of poor reynard *\nwould have been properly disposed of, and a precedent set, interfering with no usage\nor custom which the experience of ages has sanctioned, and which must be so well\nknown to every votary of Diana. But the parties have referred the question to our\njudgment, and we must dispose of it as well as we can, from the partial lights we possess,\nleaving to a higher tribunal, the correction of any mistake which we may be so\nunfortunate as to make. By the pleadings it is admitted that a fox is a \xe2\x80\x9cwild and noxious\nbeast.\xe2\x80\x9d Both parties have regarded him, as the law of nations does a pirate, \xe2\x80\x9chostem\nhumani generis,\xe2\x80\x9d \xe2\x80\xa0 and although \xe2\x80\x9cde mortuis nil nisi bonum,\xe2\x80\x9d \xe2\x80\xa1 be a maxim of our profession,\nthe memory of the deceased has not been spared. His depredations on farmers and on\nbarn yards, have not been forgotten; and to put him to death wherever found, is\nallowed to be meritorious, and of public benefit. Hence it follows, that our decision\nshould have in view the greatest possible encouragement to the destruction of an\nanimal, so cunning and ruthless in his career. But who would keep a pack of hounds;\nor what gentleman, at the sound of the horn, and at peep of day, would mount his\nsteed, and for hours together, \xe2\x80\x9csub jove frigido,\xe2\x80\x9d \xc2\xa7 or a vertical sun, pursue the windings\nof this wily quadruped, if, just as night came on, and his stratagems and strength were\nnearly exhausted, a saucy intruder, who had not shared in the honours or labours of\n\n[Reynard was a clever (and often duplicitous) fox character who featured in several well-known medieval\nEuropean folk tales and literary works. The character\xe2\x80\x99s popularity gave rise to the modern French word for \xe2\x80\x9cfox\xe2\x80\x9d:\nrenard. \xe2\x80\x94 eds.]\n*\n\n\xe2\x80\xa0\n\n[Translation: \xe2\x80\x9cenemy of the human race.\xe2\x80\x9d \xe2\x80\x94 eds.]\n\n\xe2\x80\xa1\n\n[Translation: \xe2\x80\x9cOf the dead say nothing but good.\xe2\x80\x9d \xe2\x80\x94 eds.]\n\n\xc2\xa7\n\n[Translation: \xe2\x80\x9cUnder frigid Jove\xe2\x80\x9d (i.e., under a cold sky). \xe2\x80\x94 eds.]\n\n\x0cAllocation\n\n91\n\nthe chase, were permitted to come in at the death, and bear away in triumph the object\nof pursuit? Whatever Justinian may have thought of the matter, it must be recollected\nthat his code was compiled many hundred years ago, and it would be very hard indeed,\nat the distance of so many centuries, not to have a right to establish a rule for ourselves.\nIn his day, we read of no order of men who made it a business, in the language of the\ndeclaration in this cause, \xe2\x80\x9cwith hounds and dogs to find, start, pursue, hunt, and chase,\xe2\x80\x9d\nthese animals, and that, too, without any other motive than the preservation of Roman\npoultry; if this diversion had been then in fashion, the lawyers who composed his\ninstitutes, would have taken care not to pass it by, without suitable encouragement. If\nany thing, therefore, in the digests or pandects shall appear to militate against the\ndefendant in error, who, on this occasion, was the foxhunter, we have only to say\ntempora mutantur; * and if men themselves change with the times, why should not laws\nalso undergo an alteration?\nIt may be expected, however, by the learned counsel, that more particular notice be\ntaken of their authorities. I have examined them all, and feel great difficulty in\ndetermining, whether to acquire dominion over a thing, before in common, it be\nsufficient that we barely see it, or know where it is, or wish for it, or make a declaration\nof our will respecting it; or whether, in the case of wild beasts, setting a trap, or lying\nin wait, or starting, or pursuing, be enough; or if an actual wounding, or killing, or\nbodily tact and occupation be necessary. Writers on general law, who have favoured us\nwith their speculations on these points, differ on them all; but, great as is the diversity\nof sentiment among them, some conclusion must be adopted on the question\nimmediately before us. After mature deliberation, I embrace that of Barbeyrac, as the\nmost rational, and least liable to objection. If at liberty, we might imitate the courtesy\nof a certain emperor, who, to avoid giving offence to the advocates of any of these\ndifferent doctrines, adopted a middle course, and by ingenious distinctions, rendered it\ndifficult to say (as often happens after a fierce and angry contest) to whom the palm of\nvictory belonged. He ordained, that if a beast be followed with large dogs and hounds, he\nshall belong to the hunter, not to the chance occupant; and in like manner, if he be\nkilled or wounded with a lance or sword; but if chased with beagles only, then he passed\n\n[Translation: \xe2\x80\x9ctimes change.\xe2\x80\x9d Part of a well-known Latin aphorism, tempora mutantur, nos et mutamur in illis: \xe2\x80\x9ctimes\nchange, and we change with them.\xe2\x80\x9d \xe2\x80\x94 eds.]\n*\n\n\x0c92\n\nProperty\n\nto the captor, not to the first pursuer. If slain with a dart, a sling, or a bow, he fell to\nthe hunter, if still in chase, and not to him who might afterwards find and seize him.\nNow, as we are without any municipal regulations of our own, and the pursuit here,\nfor aught that appears on the case, being with dogs and hounds of imperial stature, we\nare at liberty to adopt one of the provisions just cited, which comports also with the\nlearned conclusion of Barbeyrac, that property in animals fer\xc3\xa6 natur\xc3\xa6 may be acquired\nwithout bodily touch or manucaption, provided the pursuer be within reach, or have a\nreasonable prospect (which certainly existed here) of taking, what he has thus discovered\nan intention of converting to his own use.\nWhen we reflect also that the interest of our husbandmen, the most useful of men in\nany community, will be advanced by the destruction of a beast so pernicious and\nincorrigible, we cannot greatly err, in saying, that a pursuit like the present, through\nwaste and unoccupied lands, and which must inevitably and speedily have terminated\nin corporal possession, or bodily seisin, confers such a right to the object of it, as to\nmake any one a wrongdoer, who shall interfere and shoulder the spoil. The justice\xe2\x80\x99s\njudgment ought, therefore, in my opinion, to be affirmed.\nJudgment of reversal.\nNotes and Questions\n1. Justifying Allocations. Does awarding ownership of a previously unowned\nchattel to the first possessor of that chattel strike you as a good rule? Consider\nsome arguments that might be raised for or against it:\n\xe2\x80\xa2 Administrability: Is the rule easy to apply? Does it give clear and ready\nanswers? Does it make judges\xe2\x80\x99 and litigants\xe2\x80\x99 jobs easier or harder? Does it\nminimize the cost and time involved in resolving disputes? Can it be applied\nwithout resort to ambiguous or hard-to-obtain evidence?\n\xe2\x80\xa2 Fairness: Does the rule comport with well-considered notions of fairness?\nDoes it treat similarly situated people similarly? Does it favor some claimants\nover others based on criteria that seem irrelevant, arbitrary, or beyond the\nclaimants\xe2\x80\x99 control?\n\n\x0cAllocation\n\n93\n\n\xe2\x80\xa2 Morality: Does the rule reward moral behavior and punish\xe2\x80\x94or at least\nrefrain from rewarding\xe2\x80\x94immoral behavior? Does it give people what they\ndeserve?\n\xe2\x80\xa2 Reliance: Does the rule respect the reasonable expectations of those with an\ninterest in contested resources? Does it result in a forfeiture of their\ninvestment of time, money, or effort premised on such expectations? Does\nit comport with tradition?\n\xe2\x80\xa2 Pragmatism: Does the rule roughly comport with the moral intuitions of\nthose who are subject to it? Do we expect the rule to be obeyed?\n\xe2\x80\xa2 Ecology: Is the rule consistent with responsible stewardship of resources?\nDoes it ensure that an exhaustible resource will remain available for the\nbenefit of future generations?\n\xe2\x80\xa2 Incentives: Does the rule encourage or discourage the conversion of idle\nresources to productive use? Does it encourage excessive, duplicative, or\nwasteful efforts to exploit resources? Does it encourage or discourage\ndisputes or violence among rival claimants? Does it encourage would-be\nclaimants to expend resources on protecting themselves against other wouldbe claimants, instead of on more productive pursuits? When weighing these\nincentives in the aggregate, is the rule efficient? That is, does it extract the\ngreatest possible value from available resources at the lowest possible cost?\nWhich of these arguments strikes you as more or less important to the\njustification of a legal rule\xe2\x80\x94particularly a rule of property law? Which of them\nwere invoked by Justices Tompkins and Livingston in Pierson?\nEven if we agree as to which of these arguments matter in disposing of a\nparticular dispute, are we sure to agree whether a particular type of argument\nfavors a particular party? For example, is Justice Livingston correct in claiming\nthat the decision in Pierson\xe2\x80\x99s favor will provide insufficient incentive for\nhunters to capture foxes? Is Justice Tompkins correct in claiming that a decision\nin Post\xe2\x80\x99s favor would lead to increased disputes over the trophies of the chase?\n\n\x0c94\n\nProperty\nDoes either opinion clearly establish which outcome would be the most fair?\nHow could we know the answer to these questions?\n2. Alternatives to First Possession. Is the rule of first possession the best\navailable rule for allocating unowned resources? Consider some possible\nalternative allocation principles:\n\xe2\x80\xa2 Perhaps initial allocation should go to the first claimant\xe2\x80\x94the first to explicitly\nassert a right of ownership (or manifest the intent to assert such a right, as\nby pursuit).\n\xe2\x80\xa2 Perhaps initial allocation should go to the last possessor\xe2\x80\x94the person who\ngains and maintains possession against the efforts of all competitors.\n\xe2\x80\xa2 Perhaps possession is irrelevant: perhaps initial allocation should go to all\ninterested claimants in equal shares.\n\xe2\x80\xa2 Perhaps the resource should be owned as a commons: it belongs to everybody\njointly; everybody has an equal right to it and nobody has a superior right to\nanyone else.\n\xe2\x80\xa2 Perhaps the government ought to own everything and simply provide rights\nof possession and use by means of bureaucratic and political mechanisms.\n(Then again, perhaps this is exactly what the common law of real property\ndoes. See Section B, infra.)\n\xe2\x80\xa2 Perhaps ownership should be determined by lot, at random.\nHow would each of these rules compare to the rule of first possession in terms\nof each of the justifications we have just reviewed for and against that rule?\nWhat do you think would be the practical result of choosing one of these\nalternative allocation regimes\xe2\x80\x94i.e., how would people likely shape their\nbehavior in response to these allocation rules?\n3. Recall the first type of justification we discussed in Note 1 above:\nadministrability. Do you think it will always be obvious that one claimant of a\n\n\x0cAllocation\n\n95\n\nchattel has achieved possession and another has not? Consider the following\ncase.\n\nSource: \xe2\x80\x9cFast to a whale, shooting the bomb lance.\xe2\x80\x9d New Bedford Free Public Library. Digital Commonwealth,\nhttp://ark.digitalcommonwealth.org/ark:/50959/sb398z14j\n\nGhen v. Rich\n8 F. 159 (D. Mass. 1881)\nNELSON, D.J.\nThis is a libel to recover the value of a fin-back whale. The libellant lives in\nProvincetown and the respondent in Wellfleet. The facts, as they appeared at the\nhearing, are as follows:\nIn the early spring months the easterly part of Massachusetts Bay is frequented by the\nspecies of whale known as the fin-back whale. Fishermen from Provincetown pursue\nthem in open boats from the shore, and shoot them with bomb-lances fired from guns\nmade expressly for the purpose. When killed they sink at once to the bottom, but in\nthe course of from one to three days they rise and float on the surface. Some of them\nare picked up by vessels and towed into Provincetown. Some float ashore at high water\nand are left stranded on the beach as the tide recedes. Others float out to sea and are\n\n\x0c96\n\nProperty\n\nnever recovered. The person who happens to find them on the beach usually sends\nword to Provincetown, and the owner comes to the spot and removes the blubber.\nThe finder usually receives a small salvage for his services. Try-works are established\nin Provincetown for trying out the oil. The business is of considerable extent, but, since\nit requires skill and experience, as well as some outlay of capital, and is attended with\ngreat exposure and hardship, few persons engage in it. The average yield of oil is about\n20 barrels to a whale. It swims with great swiftness, and for that reason cannot be taken\nby the harpoon and line. Each boat\xe2\x80\x99s crew engaged in the business has its peculiar mark\nor device on its lances, and in this way it is known by whom a whale is killed.\nThe usage on Cape Cod, for many years, has been that the person who kills a whale in\nthe manner and under the circumstances described, owns it, and this right has never\nbeen disputed until this case. The libellant has been engaged in this business for ten\nyears past. On the morning of April 9, 1880, in Massachusetts Bay, near the end of\nCape Cod, he shot and instantly killed with a bomb-lance the whale in question. It sunk\nimmediately, and on the morning of the 12th was found stranded on the beach in\nBrewster, within the ebb and flow of the tide, by one Ellis, 17 miles from the spot\nwhere it was killed. Instead of sending word to Provincetown, as is customary, Ellis\nadvertised the whale for sale at auction, and sold it to the respondent, who shipped off\nthe blubber and tried out the oil. The libellant heard of the finding of the whale on the\nmorning of the 15th, and immediately sent one of his boat\xe2\x80\x99s crew to the place and\nclaimed it. Neither the respondent nor Ellis knew the whale had been killed by the\nlibellant, but they knew or might have known, if they had wished, that it had been shot\nand killed with a bomb-lance, by some person engaged in this species of business.\nThe libellant claims title to the whale under this usage. The respondent insists that this\nusage is invalid. It was decided by Judge Sprague, in Taber v. Jenny, 1 Sprague, 315,\nthat when a whale has been killed, and is anchored and left with marks of appropriation,\nit is the property of the captors; and if it is afterwards found, still anchored, by another\nship, there is no usage or principle of law by which the property of the original captors\nis diverted, even though the whale may have dragged from its anchorage. The learned\njudge says:\n\xe2\x80\x98When the whale had been killed and taken possession of by the boat of\nthe Hillman, (the first taker,) it became the property of the owners of\n\n\x0cAllocation\n\n97\n\nthat ship, and all was done which was then practicable in order to secure\nit. They left it anchored, with unequivocal marks of appropriation.\xe2\x80\x99\nIn Bartlett v. Budd, 1 Low. 223, the facts were these: The first officer of the libellant\xe2\x80\x99s\nship killed a whale in the Okhotsk sea, anchored it, attached a waif* to the body, and\nthen left it and went ashore at some distance for the night. The next morning the boats\nof the respondent\xe2\x80\x99s ship found the whale adrift, the anchor not holding, the cable coiled\nround the body, and no waif or irons attached to it. Judge Lowell held that, as the\nlibellants had killed and taken actual possession of the whale, the ownership vested in\nthem. In his opinion the learned judge says:\n\xe2\x80\x98A whale, being ferae naturae, does not become property until a firm\npossession has been established by the taker. But when such possession\nhas become firm and complete, the right of property is clear, and has all\nthe characteristics of property.\xe2\x80\x99\nHe doubted whether a usage set up but not proved by the respondents, that a whale\nfound adrift in the ocean is the property of the finder, unless the first taker should\nappear and claim it before it is cut in, would be valid, and remarked that \xe2\x80\x98there would\nbe great difficulty in upholding a custom that should take the property of A. and give\nit to B., under so very short and uncertain a substitute for the statute of limitations, and\none so open to fraud and deceit.\xe2\x80\x99 Both the cases cited were decided without reference\nto usage, upon the ground that the property had been acquired by the first taker by\nactual possession and appropriation.\nIn Swift v. Gifford, 2 Low, 110, Judge Lowell decided that a custom among whalemen\nin the Arctic seas, that the iron holds the whale was reasonable and valid. In that case\na boat\xe2\x80\x99s crew from the respondent\xe2\x80\x99s ship pursued and struck a whale in the Arctic\nOcean, and the harpoon and the line attached to it remained in the whale, but did not\nremain fast to the boat. A boat\xe2\x80\x99s crew from the libellant\xe2\x80\x99s ship continued the pursuit\nand captured the whale, and the master of the respondent\xe2\x80\x99s ship claimed it on the spot.\n\n[Eds.\xe2\x80\x94\xe2\x80\x9cThe waif is a pennoned pole, two or three of which are carried by every boat; and which, when\nadditional game is at hand, are inserted upright into the floating body of a dead whale, both to mark its place on\nthe sea, and also as token of prior possession, should the boats of any other ship draw near.\xe2\x80\x9d HERMAN MELVILLE,\nMOBY-DICK 368 (1922) [1892].]\n*\n\n\x0c98\n\nProperty\n\nIt was held by the learned judge that the whale belonged to the respondents. It was said\nby Judge Sprague, in Bourne v. Ashley, an unprinted case referred to by Judge Lowell\nin Swift v. Gifford, that the usage for the first iron, whether attached to the boat or\nnot, to hold the whale was fully established; and he added that, although local usages\nof a particular port ought not to be allowed to set aside the general maritime law, this\nobjection did not apply to a custom which embraced an entire business, and had been\nconcurred in for a long time by every one engaged in the trade.\nIn Swift v. Gifford, Judge Lowell also said:\n\xe2\x80\x98The rule of law invoked in this case is one of very limited application.\nThe whale fishery is the only branch of industry of any importance in\nwhich it is likely to be much used, and if a usage is found to prevail\ngenerally in that business, it will not be open to the objection that it is\nlikely to disturb the general understanding of mankind by the\ninterposition of an arbitrary exception.\xe2\x80\x99\nI see no reason why the usage proved in this case is not as reasonable as that sustained\nin the cases cited. Its application must necessarily be extremely limited, and can affect\nbut a few persons. It has been recognized and acquiesced in for many years. It requires\nin the first taker the only act of appropriation that is possible in the nature of the case.\nUnless it is sustained, this branch of industry must necessarily cease, for no person\nwould engage in it if the fruits of his labor could be appropriated by any chance finder.\nIt gives reasonable salvage for securing or reporting the property. That the rule works\nwell in practice is shown by the extent of the industry which has grown up under it,\nand the general acquiescence of a whole community interested to dispute it. It is by no\nmeans clear that without regard to usage the common law would not reach the same\nresult. That seems to be the effect of the decisions in Taber v. Jenny and Bartlett v.\nBudd. If the fisherman does all that is possible to do to make the animal his own, that\nwould seem to be sufficient. Such a rule might well be applied in the interest of trade,\nthere being no usage or custom to the contrary. Holmes, Com. Law, 217. But be that\nas it may, I hold the usage to be valid, and that the property in the whale was in the\nlibelant.\nThe rule of damages is the market value of the oil obtained from the whale, less the\ncost of trying it out and preparing it for the market, with interest on the amount so\n\n\x0cAllocation\n\n99\n\nascertained from the date of conversion. As the question is new and important, and\nthe suit is contested on both sides, more for the purpose of having it settled than for\nthe amount involved, I shall give no costs.\nDecree for libellant for $71.05, without costs.\nNotes and Questions\n1. Primary and Secondary Rules. Is the rule of Ghen v. Rich different from the\nrule of Pierson v. Post? If so, how? Are the justifications for the rule, or for the\noutcome, the same in each case? If not, how do they differ?\nTo answer this question, it may be helpful to distinguish between what leading\nlegal philosopher H.L.A. Hart called primary rules and secondary rules. In Hart\xe2\x80\x99s\naccount, primary rules are those that prescribe standards of conduct, and set forth\nconsequences for failure to act accordingly. Statutes defining and setting forth\npunishments for crimes provide a straightforward example. Secondary rules are\nbasically everything else, but in particular they include rules that give actors\nwithin the legal system the power to create, alter, or abolish their own primary\nrules. For example, contract law is largely a body of secondary rules: parties to\na contract acting within those rules have the power to create legal rights and\nobligations that will bind them; the contract itself embodies the applicable\nprimary rules. (For more on this distinction\xe2\x80\x94and more of Hart\xe2\x80\x99s monumental\ncontributions to jurisprudence\xe2\x80\x94see H.L.A. HART, THE CONCEPT OF LAW.)\nBased on this admittedly limited introduction to the concept, was the\ndeterminative legal rule in Ghen v. Rich a primary or a secondary rule? What\nabout in Pierson v. Post?\n2. Whose Custom? In Aberdeen Arctic Co. v. Sutter, 4 McQ. H.L. 355 (1862), the\nHouse of Lords heard the appeal of a case involving a hired Eskimo harpooner\naboard an English whaling vessel in Cumberland Inlet, a traditional native\nfishing ground in what is now Canada. The harpooner, one Bullygar, struck a\nwhale with a harpoon and line, at the end of which was attached an inflated\nsealskin, or \xe2\x80\x9cdrog,\xe2\x80\x9d which the native fishermen had a custom of using to tire\nthe harpooned animal and to make it easier to track while it swims below the\nsurface. The whale dove immediately, so deep that Bullygar was forced to\n\n\x0c100\n\nProperty\nrelease his line, and it did not surface again until it had traveled several miles.\nBefore Bullygar and his ship could retrieve it, another ship\xe2\x80\x94the Alibi\xe2\x80\x94came\nupon the wounded whale, killed it, and took it. Bullygar\xe2\x80\x99s captain (Sutter) sued\nthe owners of the Alibi for \xe2\x80\x9ccompensation and damages\xe2\x80\x9d in the amount of\n\xc2\xa31,200.\nThe Law Lords found for the owners of the Alibi, recognizing a custom of\nEnglish whalers in the shallower waters around Greenland. This custom was\nknown as \xe2\x80\x9cfast and loose\xe2\x80\x9d (which does not\xe2\x80\x94or did not\xe2\x80\x94mean what you think\nit means). According to the \xe2\x80\x9cfast and loose\xe2\x80\x9d rule, the first ship to harpoon a\nwhale has a right to the animal so long as the ship holds \xe2\x80\x9cfast\xe2\x80\x9d to its line, even\nif other ships participate in the ultimate killing and capture of the whale. But if\nthe whale should break free\xe2\x80\x94even if mortally wounded\xe2\x80\x94or if the line should\nbe intentionally cut or released\xe2\x80\x94even for reasons of safety or necessity\xe2\x80\x94the\nwhale becomes \xe2\x80\x9cloose\xe2\x80\x9d and will become the property of the first ship to actually\nsecure it. (See HERMAN MELVILLE, MOBY-DICK 372-75 (1922) [1892] (\xe2\x80\x9cFastFish and Loose-Fish\xe2\x80\x9d).)\nSutter argued that Cumberland Inlet had long been governed by the custom of\nthe Eskimo\xe2\x80\x94which conferred ownership on the first person whose harpoon\nstruck and remained in the animal with the drog attached\xe2\x80\x94and that the English\n\xe2\x80\x9cfast and loose\xe2\x80\x9d rule should not apply. Lord Chancellor Westbury rejected the\nargument. He opined that Sutter had the burden of proving that English\nwhaling ships entering this new fishing ground had agreed not to bring the \xe2\x80\x9cfast\nand loose\xe2\x80\x9d custom with them. Indeed, he openly doubted whether the drog\nfishing methods of the Eskimo\xe2\x80\x94which they used primarily in seal hunting\xe2\x80\x94\nwere even capable of capturing a whale. Moreover, he suggested that even if the\ncase were to be decided by the law of \xe2\x80\x9coccupancy\xe2\x80\x9d rather than the custom of\nEnglish whalers, the result would be the same.\nIs the rule of Ghen v. Rich the same as the rule of Aberdeen Arctic Co. v. Sutter? If\ndifferent, which rule is better and why?\n3. Imagine you are counsel to either Pierson or Rich, and your adversary makes\nyou an offer of settlement: to sell the contested chattel and split the proceeds\nevenly. What would you advise your client to do? Consider the following case.\n\n\x0cAllocation\n\n101\n\nSource: Up For Grabs (Crooked Hook Productions 2004)\n\nPopov v. Hayashi\n2002 WL 31833731 (Cal. Sup. Ct. San Francisco Cty. Dec. 18, 2002)\nMCCARTHY, J.\nFACTS\nIn 1927, Babe Ruth hit sixty home runs. That record stood for thirty four years until\nRoger Maris broke it in 1961 with sixty one home runs. Mark McGwire hit seventy in\n1998. On October 7, 2001, at PacBell Park in San Francisco, Barry Bonds hit number\nseventy three. That accomplishment set a record which, in all probability, will remain\nunbroken for years into the future.\nThe event was widely anticipated and received a great deal of attention.\nThe ball that found itself at the receiving end of Mr. Bond\xe2\x80\x99s bat garnered some of that\nattention. Baseball fans in general, and especially people at the game, understood the\nimportance of the ball. It was worth a great deal of money * and whoever caught it\nwould bask, for a brief period of time, in the reflected fame of Mr. Bonds.\n\n*\n\nIt has been suggested that the ball might sell for something in excess of $1,000,000.\n\n\x0c102\n\nProperty\n\nWith that in mind, many people who attended the game came prepared for the\npossibility that a record setting ball would be hit in their direction. Among this group\nwere plaintiff Alex Popov and defendant Patrick Hayashi. They were unacquainted at\nthe time. Both men brought baseball gloves, which they anticipated using if the ball\ncame within their reach.\n\xe2\x80\xa6 When the seventy-third home run ball went into the arcade, it landed in the upper\nportion of the webbing of a softball glove worn by Alex Popov. While the glove\nstopped the trajectory of the ball, it is not at all clear that the ball was secure. Popov\nhad to reach for the ball and in doing so, may have lost his balance.\nEven as the ball was going into his glove, a crowd of people began to engulf Mr. Popov.\nHe was tackled and thrown to the ground while still in the process of attempting to\ncomplete the catch. Some people intentionally descended on him for the purpose of\ntaking the ball away, while others were involuntarily forced to the ground by the\nmomentum of the crowd.\nEventually, Mr. Popov was buried face down on the ground under several layers of\npeople. At one point he had trouble breathing. Mr. Popov was grabbed, hit and kicked.\nPeople reached underneath him in the area of his glove. [The evidence is insufficient]\nto establish which individual members of the crowd were responsible for the assaults\non Mr. Popov.\nMr. Popov intended at all times to establish and maintain possession of the ball. At\nsome point the ball left his glove and ended up on the ground. It is impossible to\nestablish the exact point in time that this occurred or what caused it to occur.\nMr. Hayashi was standing near Mr. Popov when the ball came into the stands. He, like\nMr. Popov, was involuntarily forced to the ground. He committed no wrongful act.\nWhile on the ground he saw the loose ball. He picked it up, rose to his feet and put it\nin his pocket.\n... It is important to point out what the evidence did not and could not show. Neither\nthe camera [of a local news team fortuitously recording the incident] nor the percipient\nwitnesses were able to establish whether Mr. Popov retained control of the ball as he\ndescended into the crowd. Mr. Popov\xe2\x80\x99s testimony on this question is inconsistent on\n\n\x0cAllocation\n\n103\n\nseveral important points, ambiguous on others and, on the whole, unconvincing. We\ndo not know when or how Mr. Popov lost the ball.\nPerhaps the most critical factual finding of all is one that cannot be made. We will never\nknow if Mr. Popov would have been able to retain control of the ball had the crowd\nnot interfered with his efforts to do so. Resolution of that question is the work of a\npsychic, not a judge.\nLEGAL ANALYSIS\nPlaintiff has pled causes of actions for conversion, trespass to chattel, injunctive relief\nand constructive trust.\nConversion is the wrongful exercise of dominion over the personal property of another.\n\xe2\x80\xa6 If a person entitled to possession of personal property demands its return, the\nunjustified refusal to give the property back is conversion.\n\xe2\x80\xa6 Conversion does not exist, however, unless the baseball rightfully belongs to Mr.\nPopov. One who has neither title nor possession, nor any right to possession, cannot\nsue for conversion. The deciding question in this case then, is whether Mr. Popov\nachieved possession or the right to possession as he attempted to catch and hold on to\nthe ball.\nThe parties have agreed to a starting point for the legal analysis. Prior to the time the\nball was hit, it was possessed and owned by Major League Baseball. At the time it was\nhit it became intentionally abandoned property. The first person who came in\npossession of the ball became its new owner.\n\xe2\x80\xa6 Although the term possession appears repeatedly throughout the law, its definition\nvaries depending on the context in which it is used. Various courts have condemned\nthe term as vague and meaningless.\nThis level of criticism is probably unwarranted.\nWhile there is a degree of ambiguity built into the term possession, that ambiguity exists\nfor a purpose. Courts are often called upon to resolve conflicting claims of possession\nin the context of commercial disputes. A stable economic environment requires rules\n\n\x0c104\n\nProperty\n\nof conduct which are understandable and consistent with the fundamental customs and\npractices of the industry they regulate. Without that, rules will be difficult to enforce\nand economic instability will result. Because each industry has different customs and\npractices, a single definition of possession cannot be applied to different industries\nwithout creating havoc.\nThis does not mean that there are no central principles governing the law of possession.\nIt is possible to identify certain fundamental concepts that are common to every\ndefinition of possession.\n\xe2\x80\xa6We start with the observation that possession is a process which culminates in an\nevent. The event is the moment in time that possession is achieved. The process\nincludes the acts and thoughts of the would be possessor which lead up to the moment\nof possession.\nThe focus of the analysis in this case is not on the thoughts or intent of the actor. Mr.\nPopov has clearly evidenced an intent to possess the baseball and has communicated\nthat intent to the world. 23 The question is whether he did enough to reduce the the\nball to his exclusive dominion and control. Were his acts sufficient to create a legally\ncognizable interest in the ball?\nMr. Hayashi argues that possession does not occur until the fan has complete control\nof the ball. Professor Brian Gray, suggests the following definition[:] \xe2\x80\x9cA person who\ncatches a baseball that enters the stands is its owner. A ball is caught if the person has\nachieved complete control of the ball at the point in time that the momentum of the\nball and the momentum of the fan while attempting to catch the ball ceases. A baseball,\nwhich is dislodged by incidental contact with an inanimate object or another person,\nbefore momentum has ceased, is not possessed. Incidental contact with another person\nis contact that is not intended by the other person. The first person to pick up a loose\nball and secure it becomes its possessor.\xe2\x80\x9d 24\n\n23\n\nLiterally.\n\n24\n\nThis definition is hereinafter referred to as Gray\xe2\x80\x99s Rule.\n\n\x0cAllocation\n\n105\n\nMr. Popov argues that this definition requires that a person seeking to establish\npossession must show unequivocal dominion and control, a standard rejected by\nseveral leading cases. 25 Instead, he offers the perspectives of Professor Bernhardt and\nProfessor Paul Finkelman who suggest that possession occurs when an individual\nintends to take control of a ball and manifests that intent by stopping the forward\nmomentum of the ball whether or not complete control is achieved.\nProfessors Finkelman and Bernhardt have correctly pointed out that some cases\nrecognize possession even before absolute dominion and control is achieved. Those\ncases require the actor to be actively and ably engaged in efforts to establish complete\ncontrol. 27 Moreover, such efforts must be significant and they must be reasonably\ncalculated to result in unequivocal dominion and control at some point in the near\nfuture.\nThis rule is applied in cases involving the hunting or fishing of wild animals 29 or the\nsalvage of sunken vessels. The hunting and fishing cases recognize that a mortally\nwounded animal may run for a distance before falling. The hunter acquires possession\nupon the act of wounding the animal not the eventual capture. Similarly, whalers\nacquire possession by landing a harpoon, not by subduing the animal.\nIn the salvage cases, an individual may take possession of a wreck by exerting as much\ncontrol \xe2\x80\x9cas its nature and situation permit\xe2\x80\x9d. Inadequate efforts, however, will not\nsupport a claim of possession. Thus, a \xe2\x80\x9csailor cannot assert a claim merely by boarding\na vessel and publishing a notice, unless such acts are coupled with a then present\n\n25\n\nPierson v. Post, 3 Caines R. (N.Y.1805).\n\nThe degree of control necessary to establish possession varies from circumstance to circumstance. \xe2\x80\x9cThe law ...\ndoes not always require that one who discovers lost or abandoned property must actually have it in hand before\nhe is vested with a legally protected interest. The law protects not only the title acquired by one who finds lost\nor abandoned property but also the right of the person who discovers such property, and is actively and ably\nengaged in reducing it to possession, to complete this process without interference from another. The courts\nhave recognized that in order to acquire a legally cognizable interest in lost or abandoned property a finder need\nnot always have manual possession of the thing. Rather, a finder may be protected by taking such constructive\npossession of the property as its nature and situation permit.\xe2\x80\x9d Treasure Salvors Inc. v. The Unidentified Wrecked and\nAbandoned Sailing Vessel 640 F.2d 560, 571 (1981).\n27\n\n29\n\n\xe2\x80\xa6Ghen v. Rich 8 F. 159 (D.Mass.1881); Pierson v. Post 3 Caines R. (N.Y.1805)\xe2\x80\xa6.\n\n\x0c106\n\nProperty\n\nintention of conducting salvage operations, and he immediately thereafter proceeds\nwith activity in the form of constructive steps to aid the distressed party.\xe2\x80\x9d\nThese rules are contextual in nature. They are crafted in response to the unique nature\nof the conduct they seek to regulate. Moreover, they are influenced by the custom and\npractice of each industry. The reason that absolute dominion and control is not\nrequired to establish possession in the cases cited by Mr. Popov is that such a rule\nwould be unworkable and unreasonable. The \xe2\x80\x9cnature and situation\xe2\x80\x9d of the property at\nissue does not immediately lend itself to unequivocal dominion and control. It is\nimpossible to wrap one\xe2\x80\x99s arms around a whale, a fleeing fox or a sunken ship.\nThe opposite is true of a baseball hit into the stands of a stadium. Not only is it\nphysically possible for a person to acquire unequivocal dominion and control of an\nabandoned baseball, but fans generally expect a claimant to have accomplished as much.\nThe custom and practice of the stands creates a reasonable expectation that a person\nwill achieve full control of a ball before claiming possession. There is no reason for the\nlegal rule to be inconsistent with that expectation. Therefore Gray\xe2\x80\x99s Rule is adopted as\nthe definition of possession in this case.\nThe central [tenet] of Gray\xe2\x80\x99s Rule is that the actor must retain control of the ball after\nincidental contact with people and things. Mr. Popov has not established by a\npreponderance of the evidence that he would have retained control of the ball after all\nmomentum ceased and after any incidental contact with people or objects.\nConsequently, he did not achieve full possession.\nThat finding, however, does not resolve the case. The reason we do not know whether\nMr. Popov would have retained control of the ball is not because of incidental contact.\n\n\x0cAllocation\n\n107\n\nIt is because he was attacked. His efforts to establish possession were interrupted by\nthe collective assault of a band of wrongdoers. 34\nA decision which ignored that fact would endorse the actions of the crowd by not\nrepudiating them. Judicial rulings, particularly in cases that receive media attention,\naffect the way people conduct themselves. This case demands vindication of an\nimportant principle. We are a nation governed by law, not by brute force.\nAs a matter of fundamental fairness, Mr. Popov should have had the opportunity to\ntry to complete his catch unimpeded by unlawful activity. To hold otherwise would be\nto allow the result in this case to be dictated by violence. That will not happen.\n\xe2\x80\xa6The legal question presented at this point is whether an action for conversion can\nproceed where the plaintiff has failed to establish possession or title. It can[.] An action\nfor conversion may be brought where the plaintiff has title, possession or the right to\npossession.\n\xe2\x80\xa6 Consistent with this principle, the court adopts the following rule. Where an actor\nundertakes significant but incomplete steps to achieve possession of a piece of\nabandoned personal property and the effort is interrupted by the unlawful acts of\nothers, the actor has a legally cognizable pre-possessory interest in the property. That\npre-possessory interest constitutes a qualified right to possession which can support a\ncause of action for conversion.\n\xe2\x80\xa6 Recognition of a legally protected pre-possessory interest, vests Mr. Popov with a\nqualified right to possession and enables him to advance a legitimate claim to the\nbaseball based on a conversion theory. Moreover it addresses the harm done by the\nunlawful actions of the crowd.\n\nProfessor Gray has suggested that the way to deal with this problem is to demand that Mr. Popov sue the\npeople who assaulted him. This suggestion is unworkable for a number of reasons. First, it was an attack by a\nlarge group of people. It is impossible to separate out the people who were acting unlawfully from the people\nwho were involuntarily pulled into the mix. Second, in order to prove damages related to the loss of the ball, Mr.\nPopov would have to prove that but for the actions of the crowd he would have achieved possession of the ball.\nAs noted earlier, this is impossible.\n34\n\n\x0c108\n\nProperty\n\nIt does not, however, address the interests of Mr. Hayashi. The court is required to\nbalance the interests of all parties.\nMr. Hayashi was not a wrongdoer. He was a victim of the same bandits that attacked\nMr. Popov. \xe2\x80\xa6 Mr. Hayashi appears on the surface to have done everything necessary\nto claim full possession of the ball, [but] the ball itself is encumbered by the qualified\npre-possessory interest of Mr. Popov. At the time Mr. Hayashi came into possession\nof the ball, it had, in effect, a cloud on its title.\nAn award of the ball to Mr. Popov would be unfair to Mr. Hayashi. It would be\npremised on the assumption that Mr. Popov would have caught the ball. That\nassumption is not supported by the facts. An award of the ball to Mr. Hayashi would\nunfairly penalize Mr. Popov. It would be based on the assumption that Mr. Popov\nwould have dropped the ball. That conclusion is also unsupported by the facts.\nBoth men have a superior claim to the ball as against all the world. Each man has a\nclaim of equal dignity as to the other. We are, therefore, left with something of a\ndilemma.\nThankfully, there is a middle ground.\n\xe2\x80\xa6The concept of equitable division has its roots in ancient Roman law. As Helmholz\npoints out, it is useful in that it \xe2\x80\x9cprovides an equitable way to resolve competing claims\nwhich are equally strong.\xe2\x80\x9d Moreover, \xe2\x80\x9c[i]t comports with what one instinctively feels\nto be fair\xe2\x80\x9d.\n\xe2\x80\xa6The principle at work here is that where more than one party has a valid claim to a\nsingle piece of property, the court will recognize an undivided interest in the property\nin proportion to the strength of the claim.\n\xe2\x80\xa6Mr. Hayashi\xe2\x80\x99s claim is compromised by Mr. Popov\xe2\x80\x99s pre-possessory interest. Mr.\nPopov cannot demonstrate full control. \xe2\x80\xa6 Their legal claims are of equal quality and\nthey are equally entitled to the ball.\n\xe2\x80\xa6The court therefore declares that both plaintiff and defendant have an equal and\nundivided interest in the ball. Plaintiff\xe2\x80\x99s cause of action for conversion is sustained only\n\n\x0cAllocation\n\n109\n\nas to his equal and undivided interest. In order to effectuate this ruling, the ball must\nbe sold and the proceeds divided equally between the parties\xe2\x80\xa6.\nNotes and Questions\n\nSource: Raphael, Judgment of Solomon. Vatican Museums.\n\n1. Splitting the Baby. The cynical lawyer would call Judge McCarthy\xe2\x80\x99s ruling in\nPopov v. Hayashi a classic example of \xe2\x80\x9csplitting the baby.\xe2\x80\x9d The implication is that\nordering the division of the disputed chattel is wishy-washy, or a cop-out. This\nassumes that there is a \xe2\x80\x9cright\xe2\x80\x9d answer that will make one party perfectly happy\nand utterly disappoint the other, but for whatever reason the judge has decided\nto ignore that answer and instead issue a ruling that tries to give something to\neverybody and therefore satisfies nobody. *\nIs that a fair critique? Come to think of it, why don\xe2\x80\x99t we resolve all disputes over\ninitial ownership of chattels this way? Should Pierson and Post have split the\nvalue of the fox pelt? Should Ghen and Rich (or perhaps Ellis) have shared the\nvalue of the whale oil? (Wouldn\xe2\x80\x99t they have done so under the custom\nsupposedly enforced by the court in that case?) Are there good reasons not to\nIn the Old Testament parable from which the idiom is derived, King Solomon supposedly used this device to\nsuss out the true facts of the case he was called on to decide\xe2\x80\x94that is, to identify the true mother of a disputed\nchild. (He did not, in the event, actually split the baby.) (1 KINGS 3:16-28.) Why might a judge in a modern court\nof law issue a ruling that makes nobody happy? Why do you think Judge McCarthy did so in Popov?\n\n*\n\n\x0c110\n\nProperty\ncompel competing claimants of a resource to share? What would your\nkindergarten teacher say?\nYour casebook authors would never dare contradict your kindergarten teacher,\nbut we might venture a few questions: How would you expect competing\nclaimants to a single, indivisible resource to behave under a rule that requires\nthem to share that resource? How do adults who share a household usually\nshare the resources of that household? Does it matter if the people sharing like\nor respect each other? How would you expect courts to resolve their disputes\nunder a rule requiring sharing? What do you expect the reactions to such\nresolutions would be? What would be the effect on the value and productive\nuse of such resources?\nFinally, which of the justifications for allocation rules discussed in Note 1 on\npage 92 are implicated by these questions?\n2. Precedent. In common-law systems, courts rely on precedent\xe2\x80\x94earlier decided\ncases presenting similar facts and legal issues\xe2\x80\x94to guide their decisions.\nPrecedent may be either binding authority\xe2\x80\x94if it issues from a court with direct\nappellate jurisdiction over the court deciding an identical issue\xe2\x80\x94or persuasive\nauthority\xe2\x80\x94if it issues from a different court in an opinion the deciding court\nfinds well-reasoned and analogous.\nIn Popov Judge McCarthy cited and relied on our two earlier chattels cases, Pierson\nv. Post and Ghen v. Rich, to justify his ruling. Do you agree with Judge McCarthy\xe2\x80\x99s\ninterpretation of these precedents? Do you think he applied them correctly to\nthe facts of the case before him? Do you think he should have relied on these\ntwo decisions as persuasive authority in the Popov case?\n3. Escape and Return. The common law developed particular rules to deal with\na captured wild animal that later escaped. In general, once such an animal is free\nof the control of its captor, that captor loses their property right in the animal\xe2\x80\x94\nin becomes once again ferae naturae, and a new captor can become its owner by\nkilling or capturing it, free of any claim by the original captor. If, however, the\nanimal in question has animus revertendi\xe2\x80\x94a natural tendency to return to its place\nof captivity (like, say, homing pigeons, hived bees, or trained hawks)\xe2\x80\x94its\n\n\x0cAllocation\n\n111\n\ntemporary departure from the possession of the original owner does not\ndiminish that owner\xe2\x80\x99s property right. See 2 WILLIAM BLACKSTONE,\nCOMMENTARIES *392-93.\nMight the rule of escape have any application to Popov v. Hayashi? Or are there\nother factors at work in the case that make the rule unhelpful?\n4. Postscript. Recall Question 3 on page 100, above. Patrick Hayashi claims that\nbefore this case went to trial, he made a settlement offer to Alex Popov whereby\nthe two men would essentially do what the court ended up ordering them to\ndo\xe2\x80\x94selling the ball and dividing the proceeds. Popov, confident in his right to\nsole ownership, allegedly countered with a lowball offer of $5,000 in exchange\nfor return of the ball. * This turned out to be\xe2\x80\xa6ill advised.\nDespite speculation that Barry Bonds\xe2\x80\x99s record-setting home-run ball might sell\nfor a million dollars or more, the controversy over its ownership appears to\nhave negatively affected its market value. At auction, the ball sold for $450,000.\xe2\x80\xa0\nSplit according to the court\xe2\x80\x99s order, that came out to $225,000 for each party\xe2\x80\x94\nnot a bad haul. But don\xe2\x80\x99t forget: this case was bitterly litigated for over a year\xe2\x80\x94\nincluding a trial that proceeded over several weeks\xe2\x80\x94and that ain\xe2\x80\x99t cheap.\nPatrick Hayashi\xe2\x80\x99s attorneys ultimately agreed to waive most of their fee\nfollowing the resolution of the case, leaving him enough from the proceeds of\nthe sale to cover the cost of his graduate education. He left San Francisco and\nbegan a happy new life and career in San Diego. \xe2\x80\xa1\nAlex Popov was not so lucky. The day after the ball went under the auction\nhammer, Popov\xe2\x80\x99s attorney, Martin Triano, obtained a temporary restraining\n\nJay Posner, Possessing 73rd HR ball first made his life a hassle, then movie, SAN DIEGO UNION-TRIBUNE (June 14,\n2005), available at http://www.utsandiego.com/uniontrib/20050614/news_1s14bondball.html.\n\n*\n\nIra Berkow, 73rd Home Run Ball Sells for $450,000, N.Y. TIMES (June 26, 2003), available at\nhttp://www.nytimes.com/2003/06/26/sports/baseball-73rd-home-run-ball-sells-for-450000.html\n\xe2\x80\xa0\n\nGwen Knapp, Finally, in Bonds ball case, someone shows some class, S.F. CHRON. (Dec. 30, 2003) at A1, available at\nhttp://www.sfgate.com/sports/article/Finally-in-Bonds-ball-case-someone-shows-some-2507738.php.\n\xe2\x80\xa1\n\n\x0c112\n\nProperty\norder freezing Popov\xe2\x80\x99s share of the proceeds. * Mr. Triano claimed that Popov\nstill owed him attorney\xe2\x80\x99s fees in the amount of $473,500. \xe2\x80\xa0 Alex Popov\neventually filed for bankruptcy, \xe2\x80\xa1 but not before suing his attorney for\nmalpractice and fraud. \xc2\xa7 The litigation between Messrs. Popov and Triano was\nlast before a judge in September 2011, nearly 10 years after Popov had his fateful\nbrush with a piece of sports (and legal) history. At that appearance, Mr. Popov\nwas ordered to pay Mr. Triano an additional $22,241 in legal fees arising from\ntheir decade of litigation against one another ** \xe2\x80\x94though one suspects Mr.\nTriano may have some difficulty collecting the award. (There is a lesson here\nfor lawyers, not just litigants.)\nTo learn more about the saga of Popov v. Hayashi, and to see video of the\ninfamous home run itself, we highly recommend the 2004 feature-length\ndocumentary Up for Grabs.\n5. Review and Application. On September 21, 2008, Jos\xc3\xa9 Molina hit what would\nbe the last home run at the old Yankee Stadium (which was demolished\nfollowing the end of the season to make way for a new, glitzier facility). The ball\nsailed into the left-field stands, and was stopped by a net hung over the seating\narea specifically for the purpose of protecting fans from incoming fly balls.\nSeveral fans attempted to reach through the net to grab the ball, and one\xe2\x80\x94Steve\nHarshman\xe2\x80\x94managed to get his hand around it. But the net was still between\nhim and the ball. Harshman told reporters he had intended to rip the ball\nthrough the net, but was interrupted by staff at the stadium, who instructed him\nto release it while giving assurances that they would return it to him. Harshman\n\nIn re Martin Triano, Case No. CPF 03 503194, Temporary Restraining Order, June 26, 2003 (Cal. Super. Ct.\nSan. Francisco Cty.).\n\n*\n\nId., Petition filed by Martin F. Triano (June 20, 2003); see also David Kravets, Attorney sues fan over Bonds ball\ncase, USA Today (July 8, 2003), available at http://usatoday30.usatoday.com/sports/baseball/nl/giants/2003-0708-bonds-ball-legal-fees_x.htm.\n\n\xe2\x80\xa0\n\n\xe2\x80\xa1\n\nBankruptcy Petition #: 05-32929 (N.D. Cal. Sept. 6, 2005).\n\n\xc2\xa7\n\nPopov v. Triano, Case No. CGC 04 427956, Complaint, Jan. 12, 2004 (Cal. Super. Ct. San. Francisco Cty.).\n\nIn re Martin Triano, Case No. CPF 03 503194, Minute Entry, Sept. 16, 2011 (Cal. Super. Ct. San. Francisco\nCty.) (granting in part Triano\xe2\x80\x99s motion for attorney\xe2\x80\x99s fees, in the amount of $22,241).\n\n**\n\n\x0cAllocation\n\n113\n\nfollowed the staff\xe2\x80\x99s instructions, and the ball rolled down the net and into an\nadjacent seating area, where Bronx schoolteacher Paul Russo caught it. Yankee\nStadium staff immediately confronted Russo and instructed him to turn over\nthe ball. Russo complied, he claimed, because he thought the staff was offering\nto secure the ball on his behalf. Instead, to Mr. Russo\xe2\x80\x99s surprise and chagrin,\nthey delivered the ball to Mr. Harshman. *\nImagine Mr. Russo sues Mr. Harshman for return of the last home-run ball hit\nat the House that Ruth Built. What result? Would it matter if Yankee Stadium\nhad a long-established policy of having its staff deliver game-play balls to fans\nwho grasp them through protective netting on condition that the fan release the\nball when instructed? Would it matter why the organization implemented such a\npolicy?\n6. First Possession? Really? We have now examined three different cases that\npurport to resolve a property dispute between an earlier pursuer and a later\ncaptor by reference to the rule of first possession. But each of them appears to\ncome out a different way. Pierson awards the chattel (or its value) to the captor;\nGhen to the pursuer; Popov to both in equal shares. Are these three cases really\napplying the same rule? If so, what nuances should we add to the maxims \xe2\x80\x9cfirst\nin time is first in right\xe2\x80\x9d or \xe2\x80\x9ctitle goes to the first possessor\xe2\x80\x9d in order to explain\nthe outcomes of these three cases and help us to resolve factually similar cases\nwe may encounter in the future? And if not, what are the multiple rules or\nconsiderations that govern the initial allocation of rights in chattels? Either way,\nhow should we justify our rule(s)?\n\nJames Barron, At the Stadium, Possession Is Some Tenths of the Law, N.Y. TIMES (Sept. 24, 2008) at B3, available at\nhttp://www.nytimes.com/2008/09/24/nyregion/24ball.html.\n*\n\n\x0c114\n\nB.\n\nProperty\n\nAllocation of Land\nWilliam Blackstone, Commentaries on the Laws of England\nVol. 2, p. 59 (1765).\n\n[A]ll the land in the kingdom is supposed to be holden, mediately or immediately, of\nthe king; who is stiled the lord paramount, or above all.\n\nSource: Bayeux Tapestry. Left: Harold the King Is Slain. Right: William the Conqueror seated, center.\n\nUnlike foxes, whales, and baseballs, real property\xe2\x80\x94that is, land and structures and other\nimprovements attached to land\xe2\x80\x94isn\xe2\x80\x99t subject to the physical control of an individual\nin the same way chattels are. So what might be the legal basis for allocating private\nrights in real property?\nClaims to ownership of land in England trace back as much as a thousand years. In\n1066, William the Bastard, Duke of Normandy, invaded England and defeated the\nAnglo-Saxon King Harold at the battle of Hastings\xe2\x80\x94as immortalized in the Bayeux\nTapestry. William\xe2\x80\x94now William the Conqueror\xe2\x80\x94promptly set about parceling out\nrights to possess land in his new kingdom. William allocated these rights according to\nhis political and military needs: affirming the rights of Anglo-Saxon landholders who\nsupported him, while expropriating the land of his opponents and reallocating it to his\nloyal Norman nobles. These nobles received their rights of tenure (from the Latin word\ntenere and Norman French word tenir, \xe2\x80\x9cto hold\xe2\x80\x9d) under obligations of fealty (from the\nNorman French fedelit\xc3\xa9 or fealt\xc3\xa9, meaning fidelity or loyalty); the land each nobleman\nheld was referred to as his f\xc3\xa9, (variations: fief, fee, feud). Hence the name historians have\napplied to the resulting social system: feudalism. Feudal obligations typically included\npayment of taxes in cash or kind and rendering of services (primarily military services)\n\n\x0cAllocation\n\n115\n\nto the tenant\xe2\x80\x99s (holder\xe2\x80\x99s) lord and king. This system of feudal grants of possessory and\nusufructary rights from the crown evolved over the centuries into the modern system\nof land ownership\xe2\x80\x94a historical process we will revisit later in our chapter on Estates\nin Land.\nCan there be any justification for the allocation of rights in land beyond the whims of\na long-dead warlord and his cronies? In early modern England this was not merely an\nacademic question. Huge changes in the legal regime governing rights to land were\nunderway: lands in England long held as \xe2\x80\x9ccommons\xe2\x80\x9d were being progressively\n\xe2\x80\x9cenclosed\xe2\x80\x9d (i.e., appropriated) by noble families for their private use, the personal\nloyalty relationships underlying feudal land tenure were being supplanted by a more\nself-consciously economic approach to land rights, and the colonization of the\nAmericas brought European settlers into contact\xe2\x80\x94and often conflict\xe2\x80\x94with native\nAmericans. In this period of rapid change, Britain\xe2\x80\x99s leading thinkers turned to the\nproblem of justifying private property rights in land.\nThomas Hobbes, Leviathan\npp. 188-190 (Oxford 1909) [1651]\nThe NUTRITION of a Common-wealth consisteth, in the Plenty, and Distribution of\nMaterials conducing to Life: In Concoction, or Preparation; and (when concocted) in the\nConveyance of it, by convenient conduits, to the Publique use.\n\xe2\x80\xa6The Distribution of the Materials of this Nourishment, is the constitution of Mine,\nand Thine, and His, that is to say, in one word Propriety; and belongeth in all kinds of\nCommon-wealth to the Soveraign Power. For where there is no Common-wealth, there\nis, (as hath been already shewn) a perpetuall warre of every man against his neighbour;\nAnd therefore every thing is his that getteth it, and keepeth it by force; which is neither\nPropriety nor Community; but Uncertainty. \xe2\x80\xa6 Seeing therefore the Introduction of Propriety\nis an effect of Common-wealth; which can do nothing but by the Person that\nRepresents it, it is the act onely of the Soveraign; and consisteth in the Lawes, which\nnone can make that have not the Soveraign Power. And this they well knew of old,\nwho called that \xce\x9d\xc3\xb3\xce\xbco\xcf\x82, (that is to say, Distribution,) which we call Law; and defined\nJustice, by distributing to every man his own.\n\n\x0c116\n\nProperty\n\n\xe2\x80\xa6 In this Distribution, the First Law, is for Division of the Land it selfe: wherein the\nSoveraign assigneth to every man a portion, according as he, and not according as any\nSubject, or any number of them, shall judge agreeable to Equity, and the Common\nGood. \xe2\x80\xa6 And though a People comming into possession of a land by warre, do not\nalwaies exterminate the antient Inhabitants \xe2\x80\xa6 but leave to many, or most, or all of\nthem their Estates; yet it is manifest they hold them afterwards, as of the Victors\ndistribution; as the people of England held all theirs of William the Conquerour.\nWilliam Blackstone, Commentaries on the Laws of England\nvol. 2, p. 2 (1765)\nThere is nothing which so generally strikes the imagination, and engages the affections\nof mankind, as the right of property; or that sole and despotic dominion which one\nman claims and exercises over the external things of the world, in total exclusion of the\nright of any other individual in the universe. And yet there are very few, that will give\nthemselves the trouble to consider the original and foundation of this right. Pleased as\nwe are with the possession, we seem afraid to look back to the means by which it was\nacquired, as if fearful of some defect in our title; or at best we rest satisfied with the\ndecision of the laws in our favour, without examining the reason or authority upon\nwhich those laws have been built. We think it enough that our title is derived by the\ngrant of the former proprietor, by descent from our ancestors, or by the last will and\ntestament of the dying owner; not caring to reflect that (accurately and strictly speaking)\nthere is no foundation in nature or in natural law, why a set of words upon parchment\nshould convey the dominion of land; why the son should have a right to exclude his\nfellow creatures from a determinate spot of ground, because his father had done so\nbefore him; or why the occupier of a particular field or of a jewel, when lying on his\ndeath-bed and no longer able to maintain possession, should be entitled to tell the rest\nof the world which of them should enjoy it after him. These enquiries, it must be owned,\nwould be useless and even troublesome in common life. It is well if the mass of\nmankind will obey the laws when made, without scrutinizing too nicely into the reasons\nof making them.\n\n\x0cAllocation\n\n117\nJohn Locke, Second Treatise of Civil Government\nCh. 5 (1690)\n\nThough the earth, and all inferior creatures, be common to all men, yet every man has\na property in his own person: this no body has any right to but himself. The labour of\nhis body, and the work of his hands, we may say, are properly his. Whatsoever then he\nremoves out of the state that nature hath provided, and left it in, he hath mixed his\nlabour with, and joined to it something that is his own, and thereby makes it his\nproperty. It being by him removed from the common state nature hath placed it in, it\nhath by this labour something annexed to it, that excludes the common right of other\nmen: for this labour being the unquestionable property of the labourer, no man but he\ncan have a right to what that is once joined to, at least where there is enough, and as\ngood, left in common for others.\nHe that is nourished by the acorns he picked up under an oak, or the apples he gathered\nfrom the trees in the wood, has certainly appropriated them to himself. No body can\ndeny but the nourishment is his. I ask then, when did they begin to be his? when he\ndigested? or when he eat? or when he boiled? or when he brought them home? or when\nhe picked them up? and it is plain, if the first gathering made them not his, nothing else\ncould. That labour put a distinction between them and common: that added something\nto them more than nature, the common mother of all, had done; and so they became\nhis private right. And will any one say, he had no right to those acorns or apples, he\nthus appropriated, because he had not the consent of all mankind to make them his?\nWas it a robbery thus to assume to himself what belonged to all in common? If such a\nconsent as that was necessary, man had starved, notwithstanding the plenty God had\ngiven him\xe2\x80\xa6.\nBut the chief matter of property being now not the fruits of the earth, and the beasts\nthat subsist on it, but the earth itself; as that which takes in and carries with it all the\nrest; I think it is plain, that property in that too is acquired as the former. As much land\nas a man tills, plants, improves, cultivates, and can use the product of, so much is his\nproperty. He by his labour does, as it were, inclose it from the common. Nor will it\ninvalidate his right, to say every body else has an equal title to it; and therefore he\ncannot appropriate, he cannot inclose, without the consent of all his fellow-commoners,\nall mankind. God, when he gave the world in common to all mankind, commanded\nman also to labour, and the penury of his condition required it of him. God and his\n\n\x0c118\n\nProperty\n\nreason commanded him to subdue the earth, i.e. improve it for the benefit of life, and\ntherein lay out something upon it that was his own, his labour. He that in obedience to\nthis command of God, subdued, tilled and sowed any part of it, thereby annexed to it\nsomething that was his property, which another had no title to, nor could without injury\ntake from him.\nNor was this appropriation of any parcel of land, by improving it, any prejudice to any\nother man, since there was still enough, and as good left; and more than the yet\nunprovided could use\xe2\x80\xa6.\nGod gave the world to men in common; but since he gave it them for their benefit,\nand the greatest conveniencies of life they were capable to draw from it, it cannot be\nsupposed he meant it should always remain common and uncultivated. He gave it to\nthe use of the industrious and rational, (and labour was to be his title to it;) not to the\nfancy or covetousness of the quarrelsome and contentious. He that had as good left\nfor his improvement, as was already taken up, needed not complain, ought not to\nmeddle with what was already improved by another\xe2\x80\x99s labour: if he did, it is plain he\ndesired the benefit of another\xe2\x80\x99s pains, which he had no right to, and not the ground\nwhich God had given him in common with others to labour on, and whereof there was\nas good left, as that already possessed, and more than he knew what to do with, or his\nindustry could reach to.\n\xe2\x80\xa6 To which let me add, that he who appropriates land to himself by his labour, does\nnot lessen, but increase the common stock of mankind: for the provisions serving to\nthe support of human life, produced by one acre of inclosed and cultivated land, are\n(to speak much within compass) ten times more than those which are yielded by an\nacre of land of an equal richness lying waste in common. And therefore he that incloses\nland, and has a greater plenty of the conveniencies of life from ten acres, than he could\nhave from an hundred left to nature, may truly be said to give ninety acres to mankind:\nfor his labour now supplies him with provisions out of ten acres, which were but the\nproduct of an hundred lying in common. I have here rated the improved land very low,\nin making its product but as ten to one, when it is much nearer an hundred to one: for\nI ask, whether in the wild woods and uncultivated waste of America, left to nature,\nwithout any improvement, tillage or husbandry, a thousand acres yield the needy and\n\n\x0cAllocation\n\n119\n\nwretched inhabitants as many conveniencies of life, as ten acres of equally fertile land\ndo in Devonshire, where they are well cultivated?\n\xe2\x80\xa6Thus labour, in the beginning, gave a right of property, wherever any one was\npleased to employ it upon what was common, which remained a long while the far\ngreater part, and is yet more than mankind makes use of. Men, at first, for the most\npart, contented themselves with what unassisted nature offered to their necessities: and\nthough afterwards, in some parts of the world, (where the increase of people and stock,\nwith the use of money, had made land scarce, and so of some value) the several\ncommunities settled the bounds of their distinct territories, and by laws within\nthemselves regulated the properties of the private men of their society, and so, by\ncompact and agreement, settled the property which labour and industry began; and the\nleagues that have been made between several states and kingdoms, either expresly or\ntacitly disowning all claim and right to the land in the others possession, have, by\ncommon consent, given up their pretences to their natural common right, which\noriginally they had to those countries, and so have, by positive agreement, settled a\nproperty amongst themselves, in distinct parts and parcels of the earth\xe2\x80\xa6\n\xe2\x80\xa6 Thus in the beginning all the world was America\xe2\x80\xa6.\nHerman Melville, Moby-Dick\np. 375 (1922) [1892]\nWhat was America in 1492 but a Loose-Fish, in which Columbus struck the Spanish\nstandard by way of waifing it for his royal master and mistress? What was Poland to\nthe Czar? What Greece to the Turk? What India to England? What at last will Mexico\nbe to the United States? All Loose-Fish.\n\n\x0c120\n\nProperty\n\nFederal Land Patent to William McIntosh\n\nJohnson v. M\xe2\x80\x99Intosh\n21 U.S. 543 (1823)\nERROR to the District Court of Illinois. This was an action of ejectment for lands in\nthe State and District of Illinois, claimed by the plaintiffs under a purchase and\nconveyance from the Piankeshaw Indians, and by the defendant, under a grant from\nthe United States [dated July 20, 1818]. It came up on a case stated, upon which there\nwas a judgment below for the defendant. \xe2\x80\xa6\nMr. Chief Justice MARSHALL delivered the opinion of the Court.\nThe plaintiffs in this cause claim the land, in their declaration mentioned, under two\ngrants, purporting to be made, the first in 1773, and the last in 1775, by the chiefs of\n\n\x0cAllocation\n\n121\n\ncertain Indian tribes, constituting the Illinois and the Piankeshaw nations; and the\nquestion is, whether this title can be recognised in the Courts of the United States?\nThe facts, as stated in the case agreed, show the authority of the chiefs who executed\nthis conveyance, so far as it could be given by their own people; and likewise show,\nthat the particular tribes for whom these chiefs acted were in rightful possession of the\nland they sold. The inquiry, therefore, is, in a great measure, confined to the power of\nIndians to give, and of private individuals to receive, a title which can be sustained in\nthe Courts of this country.\nAs the right of society, to prescribe those rules by which property may be acquired and\npreserved is not, and cannot be drawn into question; as the title to lands, especially, is\nand must be admitted to depend entirely on the law of the nation in which they lie; it\nwill be necessary, in pursuing this inquiry, to examine, not singly those principles of\nabstract justice, which the Creator of all things has impressed on the mind of his\ncreature man, and which are admitted to regulate, in a great degree, the rights of\ncivilized nations, whose perfect independence is acknowledged; but those principles\nalso which our own government has adopted in the particular case, and given us as the\nrule for our decision.\nOn the discovery of this immense continent, the great nations of Europe were eager\nto appropriate to themselves so much of it as they could respectively acquire. Its vast\nextent offered an ample field to the ambition and enterprise of all; and the character\nand religion of its inhabitants afforded an apology for considering them as a people\nover whom the superior genius of Europe might claim an ascendency. The potentates\nof the old world found no difficulty in convincing themselves that they made ample\ncompensation to the inhabitants of the new, by bestowing on them civilization and\nChristianity, in exchange for unlimited independence. But, as they were all in pursuit\nof nearly the same object, it was necessary, in order to avoid conflicting settlements,\nand consequent war with each other, to establish a principle, which all should\nacknowledge as the law by which the right of acquisition, which they all asserted, should\nbe regulated as between themselves. This principle was, that discovery gave title to the\ngovernment by whose subjects, or by whose authority, it was made, against all other\nEuropean governments, which title might be consummated by possession.\n\n\x0c122\n\nProperty\n\nThe exclusion of all other Europeans, necessarily gave to the nation making the\ndiscovery the sole right of acquiring the soil from the natives, and establishing\nsettlements upon it. It was a right with which no Europeans could interfere. It was a\nright which all asserted for themselves, and to the assertion of which, by others, all\nassented.\nThose relations which were to exist between the discoverer and the natives, were to be\nregulated by themselves. The rights thus acquired being exclusive, no other power\ncould interpose between them.\nIn the establishment of these relations, the rights of the original inhabitants were, in no\ninstance, entirely disregarded; but were necessarily, to a considerable extent, impaired.\nThey were admitted to be the rightful occupants of the soil, with a legal as well as just\nclaim to retain possession of it, and to use it according to their own discretion; but their\nrights to complete sovereignty, as independent nations, were necessarily diminished,\nand their power to dispose of the soil at their own will, to whomsoever they pleased,\nwas denied by the original fundamental principle, that discovery gave exclusive title to\nthose who made it.\nWhile the different nations of Europe respected the right of the natives, as occupants,\nthey asserted the ultimate dominion to be in themselves; and claimed and exercised, as\na consequence of this ultimate dominion, a power to grant the soil, while yet in\npossession of the natives. These grants have been understood by all, to convey a title\nto the grantees, subject only to the Indian right of occupancy.\n\xe2\x80\xa6 No one of the powers of Europe gave its full assent to this principle, more\nunequivocally than England. The documents upon this subject are ample and complete.\n\xe2\x80\xa6 Thus has our whole country been granted by the crown while in the occupation of\nthe Indians. These [royal] grants purport to convey the soil as well as the right of\ndominion to the grantees. \xe2\x80\xa6 In all of them, the soil, at the time the grants were made,\nwas occupied by the Indians. Yet almost every title within those governments is\ndependent on these grants. \xe2\x80\xa6 It has never been objected to this, or to any other similar\ngrant, that the title as well as possession was in the Indians when it was made, and that\nit passed nothing on that account.\n\n\x0cAllocation\n\n123\n\nThese various patents cannot be considered as nullities; nor can they be limited to a\nmere grant of the powers of government. A charter intended to convey political power\nonly, would never contain words expressly granting the land, the soil, and the waters.\nSome of them purport to convey the soil alone; and in those cases in which the powers\nof government, as well as the soil, are conveyed to individuals, the crown has always\nacknowledged itself to be bound by the grant. Though the power to dismember regal\ngovernments was asserted and exercised, the power to dismember proprietary\ngovernments was not claimed; and, in some instances, even after the powers of\ngovernment were revested in the crown, the title of the proprietors to the soil was\nrespected.\n\xe2\x80\xa6Thus, all the nations of Europe, who have acquired territory on this continent, have\nasserted in themselves, and have recognised in others, the exclusive right of the\ndiscoverer to appropriate the lands occupied by the Indians. Have the American States\nrejected or adopted this principle?\nBy the treaty which concluded the war of our revolution, Great Britain relinquished all\nclaim, not only to the government, but to the \xe2\x80\x98propriety and territorial rights of the\nUnited States,\xe2\x80\x99 whose boundaries were fixed in the second article. By this treaty, the\npowers of government, and the right to soil, which had previously been in Great Britain,\npassed definitively to these States. We had before taken possession of them, by\ndeclaring independence; but neither the declaration of independence, nor the treaty\nconfirming it, could give us more than that which we before possessed, or to which\nGreat Britain was before entitled. It has never been doubted, that either the United\nStates, or the several States, had a clear title to all the lands within the boundary lines\ndescribed in the treaty, subject only to the Indian right of occupancy, and that the\nexclusive power to extinguish that right, was vested in that government which might\nconstitutionally exercise it.\nVirginia, particularly, within whose chartered limits the land in controversy lay, passed\nan act, in the year 1779, declaring her \xe2\x80\x98exclusive right of pre-emption from the Indians,\nof all the lands within the limits of her own chartered territory, and that no person or\npersons whatsoever, have, or ever had, a right to purchase any lands within the same,\nfrom any Indian nation, except only persons duly authorized to make such purchase;\nformerly for the use and benefit of the colony, and lately for the Commonwealth.\xe2\x80\x99 The\n\n\x0c124\n\nProperty\n\nact then proceeds to annul all deeds made by Indians to individuals, for the private use\nof the purchasers.\n\xe2\x80\xa6In pursuance of the same idea, Virginia proceeded, at the same session, to open her\nland office, for the sale of that country which now constitutes Kentucky, a country,\nevery acre of which was then claimed and possessed by Indians, who maintained their\ntitle with as much persevering courage as was ever manifested by any people.\nThe States, having within their chartered limits different portions of territory covered\nby Indians, ceded that territory, generally, to the United States, on conditions expressed\nin their deeds of cession, which demonstrate the opinion, that they ceded the soil as\nwell as jurisdiction, and that in doing so, they granted a productive fund to the\ngovernment of the Union. The lands in controversy lay within the chartered limits of\nVirginia, and were ceded with the whole country northwest of the river Ohio. This\ngrant contained reservations and stipulations, which could only be made by the owners\nof the soil; and concluded with a stipulation, that \xe2\x80\x98all the lands in the ceded territory,\nnot reserved, should be considered as a common fund, for the use and benefit of such\nof the United States as have become, or shall become, members of the confederation,\xe2\x80\x99\n&c. \xe2\x80\x98according to their usual respective proportions in the general charge and\nexpenditure, and shall be faithfully and bona fide disposed of for that purpose, and for\nno other use or purpose whatsoever.\xe2\x80\x99\nThe ceded territory was occupied by numerous and warlike tribes of Indians; but the\nexclusive right of the United States to extinguish their title, and to grant the soil, has\nnever, we believe, been doubted.\n\xe2\x80\xa6The United States, then, have unequivocally acceded to that great and broad rule by\nwhich its civilized inhabitants now hold this country. They hold, and assert in\nthemselves, the title by which it was acquired. They maintain, as all others have\nmaintained, that discovery gave an exclusive right to extinguish the Indian title of\noccupancy, either by purchase or by conquest; and gave also a right to such a degree of\nsovereignty, as the circumstances of the people would allow them to exercise.\nThe power now possessed by the government of the United States to grant lands,\nresided, while we were colonies, in the crown, or its grantees. The validity of the titles\ngiven by either has never been questioned in our Courts. It has been exercised\n\n\x0cAllocation\n\n125\n\nuniformly over territory in possession of the Indians. The existence of this power must\nnegative the existence of any right which may conflict with, and control it. An absolute\ntitle to lands cannot exist, at the same time, in different persons, or in different\ngovernments. An absolute, must be an exclusive title, or at least a title which excludes\nall others not compatible with it. All our institutions recognise the absolute title of the\ncrown, subject only to the Indian right of occupancy, and recognise the absolute title\nof the crown to extinguish that right. This is incompatible with an absolute and\ncomplete title in the Indians.\n\xe2\x80\xa6 Conquest gives a title which the Courts of the conqueror cannot deny, whatever the\nprivate and speculative opinions of individuals may be, respecting the original justice\nof the claim which has been successfully asserted. The British government, which was\nthen our government, and whose rights have passed to the United States, asserted a\ntitle to all the lands occupied by Indians, within the chartered limits of the British\ncolonies. It asserted also a limited sovereignty over them, and the exclusive right of\nextinguishing the title which occupancy gave to them. These claims have been\nmaintained and established as far west as the river Mississippi, by the sword. The title\nto a vast portion of the lands we now hold, originates in them. It is not for the Courts\nof this country to question the validity of this title, or to sustain one which is\nincompatible with it.\n\xe2\x80\xa6Although we do not mean to engage in the defence of those principles which\nEuropeans have applied to Indian title, they may, we think, find some excuse, if not\njustification, in the character and habits of the people whose rights have been wrested\nfrom them.\nThe title by conquest is acquired and maintained by force. The conqueror prescribes\nits limits. Humanity, however, acting on public opinion, has established, as a general\nrule, that the conquered shall not be wantonly oppressed, and that their condition shall\nremain as eligible as is compatible with the objects of the conquest. Most usually, they\nare incorporated with the victorious nation, and become subjects or citizens of the\ngovernment with which they are connected. The new and old members of the society\nmingle with each other; the distinction between them is gradually lost, and they make\none people. Where this incorporation is practicable, humanity demands, and a wise\npolicy requires, that the rights of the conquered to property should remain unimpaired;\n\n\x0c126\n\nProperty\n\nthat the new subjects should be governed as equitably as the old, and that confidence\nin their security should gradually banish the painful sense of being separated from their\nancient connexions, and united by force to strangers.\nWhen the conquest is complete, and the conquered inhabitants can be blended with\nthe conquerors, or safely governed as a distinct people, public opinion, which not even\nthe conqueror can disregard, imposes these restraints upon him; and he cannot neglect\nthem without injury to his fame, and hazard to his power.\nBut the tribes of Indians inhabiting this country were fierce savages, whose occupation\nwas war, and whose subsistence was drawn chiefly from the forest. To leave them in\npossession of their country, was to leave the country a wilderness; to govern them as a\ndistinct people, was impossible, because they were as brave and as high spirited as they\nwere fierce, and were ready to repel by arms every attempt on their independence.\nWhat was the inevitable consequence of this state of things? The Europeans were under\nthe necessity either of abandoning the country, and relinquishing their pompous claims\nto it, or of enforcing those claims by the sword, and by the adoption of principles\nadapted to the condition of a people with whom it was impossible to mix, and who\ncould not be governed as a distinct society, or of remaining in their neighbourhood,\nand exposing themselves and their families to the perpetual hazard of being massacred.\nFrequent and bloody wars, in which the whites were not always the aggressors,\nunavoidably ensued. European policy, numbers, and skill, prevailed. As the white\npopulation advanced, that of the Indians necessarily receded. The country in the\nimmediate neighbourhood of agriculturists became unfit for them. The game fled into\nthicker and more unbroken forests, and the Indians followed. The soil, to which the\ncrown originally claimed title, being no longer occupied by its ancient inhabitants, was\nparcelled out according to the will of the sovereign power, and taken possession of by\npersons who claimed immediately from the crown, or mediately, through its grantees\nor deputies.\nThat law which regulates, and ought to regulate in general, the relations between the\nconqueror and conquered, was incapable of application to a people under such\ncircumstances. The resort to some new and different rule, better adapted to the actual\n\n\x0cAllocation\n\n127\n\nstate of things, was unavoidable. Every rule which can be suggested will be found to\nbe attended with great difficulty.\nHowever extravagant the pretension of converting the discovery of an inhabited\ncountry into conquest may appear; if the principle has been asserted in the first instance,\nand afterwards sustained; if a country has been acquired and held under it; if the\nproperty of the great mass of the community originates in it, it becomes the law of the\nland, and cannot be questioned. So, too, with respect to the concomitant principle, that\nthe Indian inhabitants are to be considered merely as occupants, to be protected, indeed,\nwhile in peace, in the possession of their lands, but to be deemed incapable of\ntransferring the absolute title to others. However this restriction may be opposed to\nnatural right, and to the usages of civilized nations, yet, if it be indispensable to that\nsystem under which the country has been settled, and be adapted to the actual condition\nof the two people, it may, perhaps, be supported by reason, and certainly cannot be\nrejected by Courts of justice.\n... After bestowing on this subject a degree of attention which was more required by\nthe magnitude of the interest in litigation, and the able and elaborate arguments of the\nbar, than by its intrinsic difficulty, the Court is decidedly of opinion, that the plaintiffs\ndo not exhibit a title which can be sustained in the Courts of the United States; and\nthat there is no error in the judgment which was rendered against them in the District\nCourt of Illinois.\nJudgment affirmed, with costs.\nMabo v. Queensland (No. 2) [\xe2\x80\x9cMabo\xe2\x80\x99s Case\xe2\x80\x9d]\nHigh Court of Australia, (1992) 175 C.L.R. 1\nBRENNAN J.\nThe Murray Islands lie in the Torres Strait, at about 10 degrees S. Latitude and 144\ndegrees E. Longitude. They are the easternmost of the Eastern Islands of the Strait.\nTheir total land area is of the order of 9 square kilometres. The biggest is Mer (known\nalso as Murray Island), oval in shape about 2.79 kms long and about 1.65 kms across.\n\xe2\x80\xa6 The people who were in occupation of these Islands before first European contact\nand who have continued to occupy those Islands to the present day are known as the\nMeriam people. \xe2\x80\xa6 The Meriam people of today retain a strong sense of affiliation with\n\n\x0c128\n\nProperty\n\ntheir forbears and with the society and culture of earlier times. They have a strong sense\nof identity with their Islands. The plaintiffs are members of the Meriam people. In this\ncase, the legal rights of the members of the Meriam people to the land of the Murray\nIslands are in question.\n\xe2\x80\xa6 It may be assumed that on 1 August 1879 the Meriam people knew nothing of the\nevents in Westminster and in Brisbane that effected the annexation of the Murray\nIslands and their incorporation into Queensland and that, had the Meriam people been\ntold of the Proclamation [of annexation] made in Brisbane on 21 July 1879, they would\nnot have appreciated its significance. The legal consequences of these events are in\nissue in this case. Oversimplified, the chief question in this case is whether these\ntransactions had the effect on 1 August 1879 of vesting in the Crown absolute\nownership of, legal possession of and exclusive power to confer title to, all land in the\nMurray Islands. The defendant submits that that was the legal consequence of the\nLetters Patent and of the events which brought them into effect. If that submission be\nright, the Queen took the land occupied by Meriam people on 1 August 1879 without\ntheir knowing of the expropriation; they were no longer entitled without the consent\nof the Crown to continue to occupy the land they had occupied for centuries past.\n\xe2\x80\xa6In discharging its duty to declare the common law of Australia, this Court is not free\nto adopt rules that accord with contemporary notions of justice and human rights if\ntheir adoption would fracture the skeleton of principle which gives the body of our law\nits shape and internal consistency. Australian law is not only the historical successor of,\nbut is an organic development from, the law of England. Although our law is the\nprisoner of its history, it is not now bound by decisions of courts in the hierarchy of\nan Empire then concerned with the development of its colonies\xe2\x80\xa6. It is not possible,\na priori, to distinguish between cases that express a skeletal principle and those which\ndo not, but no case can command unquestioning adherence if the rule it expresses\nseriously offends the values of justice and human rights (especially equality before the\nlaw) which are aspirations of the contemporary Australian legal system. If a postulated\nrule of the common law expressed in earlier cases seriously offends those\ncontemporary values, the question arises whether the rule should be maintained and\napplied. Whenever such a question arises, it is necessary to assess whether the particular\nrule is an essential doctrine of our legal system and whether, if the rule were to be\n\n\x0cAllocation\n\n129\n\noverturned, the disturbance to be apprehended would be disproportionate to the\nbenefit flowing from the overturning.\n\xe2\x80\xa6 International law [at the time of colonization of Australia by Britain] recognized\nconquest, cession, and occupation of territory that was terra nullius as three of the\neffective ways of acquiring sovereignty\xe2\x80\xa6. Various justifications for the acquisition of\nsovereignty over the territory of \xe2\x80\x9cbackward peoples\xe2\x80\x9d were advanced. The benefits of\nChristianity and European civilization had been seen as a sufficient justification from\nmediaeval times. Another justification for the application of the theory of terra nullius\nto inhabited territory\xe2\x80\x94a justification first advanced by Vattel at the end of the 18th\ncentury\xe2\x80\x94was that new territories could be claimed by occupation if the land were\nuncultivated, for Europeans had a right to bring lands into production if they were left\nuncultivated by the indigenous inhabitants.\n\xe2\x80\xa6 The fiction by which the rights and interests of indigenous inhabitants in land were\ntreated as non-existent was justified by a policy which has no place in the contemporary\nlaw of this country\xe2\x80\xa6. Whatever the justification advanced in earlier days for refusing\nto recognize the rights and interests in land of the indigenous inhabitants of settled\ncolonies, an unjust and discriminatory doctrine of that kind can no longer be\naccepted.\xe2\x80\xa6 It is contrary both to international standards and to the fundamental values\nof our common law to entrench a discriminatory rule which, because of the supposed\nposition on the scale of social organization of the indigenous inhabitants of a settled\ncolony, denies them a right to occupy their traditional lands. It was such a rule which\nevoked from Deane J.[, in] Gerhardy v. Brown (1985) 159 CLR 70, at p. 149[,] the\ncriticism that\xe2\x80\x94\n\xe2\x80\x9cthe common law of this land has still not reached the stage of retreat from\ninjustice which the law of Illinois and Virginia had reached in 1823 when\nMarshall C.J., in Johnson v. McIntosh, accepted that, subject to the assertion of\nultimate dominion (including the power to convey title by grant) by the State,\nthe \xe2\x80\x98original inhabitants\xe2\x80\x99 should be recognized as having \xe2\x80\x98a legal as well as just\nclaim\xe2\x80\x99 to retain the occupancy of their traditional lands\xe2\x80\x9d.\nHowever, recognition by our common law of the rights and interests in land of the\nindigenous inhabitants of a settled colony would be precluded if the recognition were\nto fracture a skeletal principle of our legal system.\xe2\x80\xa6\n\n\x0c130\n\nProperty\n\nThe land law of England is based on the doctrine of tenure. In English legal theory,\nevery parcel of land in England is held either mediately or immediately of the King who\nis the Lord Paramount; the term \xe2\x80\x9ctenure\xe2\x80\x9d is used to signify the relationship between\ntenant and lord, not the relationship between tenant and land\xe2\x80\xa6. When the Crown\nacquired territory outside England which was to be subject to the common law, there\nwas a natural assumption that the doctrine of tenure should be the basis of the land\nlaw. Perhaps the assumption did not have to be made\xe2\x80\xa6.\nBy attributing to the Crown a radical title * to all land within a territory over which the\nCrown has assumed sovereignty, the common law enabled the Crown, in exercise of\nits sovereign power, to grant an interest in land to be held of the Crown or to acquire\nland for the Crown\xe2\x80\x99s demesne. \xe2\x80\xa6 But it is not a corollary of the Crown\xe2\x80\x99s acquisition\nof a radical title to land in an occupied territory that the Crown acquired absolute\nbeneficial ownership of that land to the exclusion of the indigenous inhabitants.\xe2\x80\xa6 Nor\nis it necessary to the structure of our legal system to refuse recognition to the rights\nand interests in land of the indigenous inhabitants\xe2\x80\xa6.\nRecognition of the radical title of the Crown is quite consistent with recognition of\nnative title to land, for the radical title, without more, is merely a logical postulate\nrequired to support the doctrine of tenure (when the Crown has exercised its sovereign\npower to grant an interest in land) and to support the plenary title of the Crown (when\nthe Crown has exercised its sovereign power to appropriate to itself ownership of\nparcels of land within the Crown\xe2\x80\x99s territory). Unless the sovereign power is exercised\nin one or other of those ways, there is no reason why land within the Crown\xe2\x80\x99s territory\nshould not continue to be subject to native title. It is only the fallacy of equating\nsovereignty and beneficial ownership of land that gives rise to the notion that native\ntitle is extinguished by the acquisition of sovereignty.\n\xe2\x80\xa6. The ownership of land within a territory in the exclusive occupation of a people\nmust be vested in that people: land is susceptible of ownership, and there are no other\nowners.\xe2\x80\xa6 Of course, since European settlement of Australia, many clans or groups of\n\n[Eds.\xe2\x80\x94\xe2\x80\x9cRadical title\xe2\x80\x9d is a subtle and unsettled concept; it may refer here to the common-law principle that the\ngovernment\xe2\x80\x94i.e., the crown\xe2\x80\x94is the ultimate source of property rights in land within the territory subject to its\njurisdiction.]\n*\n\n\x0cAllocation\n\n131\n\nindigenous people have been physically separated from their traditional land and have\nlost their connexion with it. But that is not the universal position. It is clearly not the\nposition of the Meriam people. Where a clan or group has continued to acknowledge\nthe laws and (so far as practicable) to observe the customs based on the traditions of\nthat clan or group, whereby their traditional connexion with the land has been\nsubstantially maintained, the traditional community title of that clan or group can be\nsaid to remain in existence. The common law can, by reference to the traditional laws\nand customs of an indigenous people, identify and protect the native rights and\ninterests to which they give rise. However, when the tide of history has washed away\nany real acknowledgment of traditional law and any real observance of traditional\ncustoms, the foundation of native title has disappeared. A native title which has ceased\nwith the abandoning of laws and customs based on tradition cannot be revived for\ncontemporary recognition. \xe2\x80\xa6 Once traditional native title expires, the Crown\xe2\x80\x99s radical\ntitle expands to a full beneficial title, for then there is no other proprietor than the\nCrown.\nIt follows that a right or interest possessed as a native title cannot be acquired from an\nindigenous people by one who, not being a member of the indigenous people, does\nnot acknowledge their laws and observe their customs; nor can such a right or interest\nbe acquired by a clan, group or member of the indigenous people unless the acquisition\nis consistent with the laws and customs of that people. Such a right or interest can be\nacquired outside those laws and customs only by the Crown.\n\xe2\x80\xa6 Sovereignty carries the power to create and to extinguish private rights and interests\nin land within the Sovereign\xe2\x80\x99s territory. It follows that, on a change of sovereignty,\nrights and interests in land that may have been indefeasible under the old regime\nbecome liable to extinction by exercise of the new sovereign power. The sovereign\npower may or may not be exercised with solicitude for the welfare of indigenous\ninhabitants but, in the case of common law countries, the courts cannot review the\nmerits, as distinct from the legality, of the exercise of sovereign power. \xe2\x80\xa6 However,\nthe exercise of a power to extinguish native title must reveal a clear and plain intention\nto do so, whether the action be taken by the Legislature or by the Executive\xe2\x80\xa6. A\nCrown grant which vests in the grantee an interest in land which is inconsistent with\nthe continued right to enjoy a native title in respect of the same land necessarily\nextinguishes the native title\xe2\x80\xa6. Where the Crown grants land in trust or reserves and\n\n\x0c132\n\nProperty\n\ndedicates land for a public purpose, the question whether the Crown has revealed a\nclear and plain intention to extinguish native title will sometimes be a question of fact,\nsometimes a question of law and sometimes a mixed question of fact and law. Thus, if\na reservation is made for a public purpose other than for the benefit of the indigenous\ninhabitants, a right to continued enjoyment of native title may be consistent with the\nspecified purpose - at least for a time - and native title will not be extinguished. But if\nthe land is used and occupied for the public purpose and the manner of occupation is\ninconsistent with the continued enjoyment of native title, native title will be\nextinguished. \xe2\x80\xa6 [W]here the Crown has not granted interests in land or reserved and\ndedicated land inconsistently with the right to continued enjoyment of native title by\nthe indigenous inhabitants, native title survives and is legally enforceable.\n[The Court declared that the Murray Islands are not crown lands, that the Meriam\npeople were entitled to \xe2\x80\x9cpossession, occupation, use and enjoyment\xe2\x80\x9d of the island of\nMer (excluding certain parcels leased or physically used by the Australian, provincial,\nor local governments), and that the Meriam people\xe2\x80\x99s right to Mer is subject to the\npower of the Queensland government to extinguish it by law.]\nMASON C.J. and McHUGH J.\nWe agree with the reasons for judgment of Brennan J. and with the declaration which\nhe proposes.\nIn the result, six [out of seven] members of the Court (Dawson J. dissenting) are in\nagreement that the common law of this country recognizes a form of native title which,\nin the cases where it has not been extinguished, reflects the entitlement of the\nindigenous inhabitants, in accordance with their laws or customs, to their traditional\nlands and that, subject to the effect of some particular Crown leases, the land\nentitlement of the Murray Islanders in accordance with their laws or customs is\npreserved, as native title, under the law of Queensland. The main difference between\nthose members of the Court who constitute the majority is that, \xe2\x80\xa6 neither of us nor\nBrennan J. agrees with the conclusion to be drawn from the judgments of Deane,\nToohey and Gaudron JJ. that, at least in the absence of clear and unambiguous statutory\nprovision to the contrary, extinguishment of native title by the Crown by inconsistent\ngrant is wrongful and gives rise to a claim for compensatory damages. We note that the\njudgment of Dawson J. supports the conclusion of Brennan J. and ourselves on that\n\n\x0cAllocation\n\n133\n\naspect of the case since his Honour considers that native title, where it exists, is a form\nof permissive occupancy at the will of the Crown.\nWe are authorized to say that the other members of the Court agree with what is said\nin the preceding paragraph about the outcome of the case.\n[Opinions of Toohey and Gaudron JJ. and Dawson J. omitted.]\nNotes and Questions\n1. A system of land ownership founded on violent conquest strikes us as arbitrary\nand unjustifiable today. Both cases you read seem to reflect this view in their\nrhetoric. But do they implement such a view in their dispositions of the claims\nbefore them? Or do they follow Blackstone\xe2\x80\x99s advice to \xe2\x80\x9cobey the laws when\nmade, without scrutinizing too nicely into the reasons of making them\xe2\x80\x9d?\nChief Justice Marshall seems almost embarrassed to confirm the\n\xe2\x80\x9cextravagant\xe2\x80\xa6pretension\xe2\x80\x9d that European discovery and conquest is not only a\nlegitimate source of land titles in the United States, but the only legitimate source\nof such titles. But he does so anyway. Why?\nJustice Brennan is even more forceful, finding the European rule of discovery\nto be \xe2\x80\x9can unjust and discriminatory doctrine of that kind can no longer be\naccepted.\xe2\x80\x9d But is the rule he announces any different than the rule of Johnson v.\nM\xe2\x80\x99Intosh? If so, how?\nCan we think of a better justification for allocating ownership of land? What\nallocation rule would result from such a better justification? If we could come\nup with a better justified principle for allocating initial ownership of land than\nviolent conquest, could we simply implement a system based on that principle\ntomorrow? If not, what has become of Judge McCarthy\xe2\x80\x99s defiant assertion in\nPopov v. Hayashi that \xe2\x80\x9c[w]e are a nation governed by law, not by brute force\xe2\x80\x9d? Is\nthere something different about land that makes allocation by \xe2\x80\x9cbrute force\xe2\x80\x9d\nmore acceptable?\n2. Wrong + Time = Right? Perhaps the distinction between Popov v. Hayashi and\nJohnson v. M\xe2\x80\x99Intosh has to do with how much time has passed since the violent\n\n\x0c134\n\nProperty\ndispossession of the aggrieved plaintiff. Does the fact that a thousand years have\npassed since William the Conqueror make his expropriation of land from the\nAnglo-Saxons any less unjust? What about the five hundred years since\nEuropean discovery of the Americas? The two hundred years since the British\ncolonization of Australia? If the United States invaded a foreign country\xe2\x80\x94say,\nsomewhere in the Middle East\xe2\x80\x94tomorrow, and purported to sell to an\nAmerican corporation legal title to land in that country that was in possession\nof natives claiming ownership under the laws of the conquered nation, would\nyou expect the dispossessed natives to have a legal remedy? In what court?\n3. Note that the major split between the Justices in Mabo was not over the existence\nof native title, but on its scope. Three (of seven) Justices would have held that\n\xe2\x80\x9cIf common law native title is wrongfully extinguished by the Crown, \xe2\x80\xa6\ncompensatory damages can be recovered provided the proceedings for recovery\nare instituted within the period allowed by applicable limitations provisions,\xe2\x80\x9d\nand that extinguishment by inconsistent grant in the absence of an Act of\nParliament is wrongful. Opinion of Toohey and Gaudron JJ., \xc2\xb6 64-65. We will\nconsider how the passage of time can affect an owner\xe2\x80\x99s ability to assert their\nrights in our units on Found and Stolen Property and on Adverse Possession.\n4. Historical Injustices and Reparations. Should injuries to persons long dead,\ninflicted by persons long dead, be remediable? Are the descendants of the\nwronged individuals the proper recipients of such a remedy? Should the\ndescendants of the inflicters of the injury be held liable?\nIn the United States, these are recurring issues that arise in discussions of the\ndispossession and genocide of Native Americans and the enslavement of\nkidnapped Africans and their descendants. See, e.g., Ta-Nehisi Coates, The Case\nATLANTIC\n(June\n2014),\navailable\nat\nfor\nReparations,\nTHE\nhttp://www.theatlantic.com/features/archive/2014/05/the-case-forreparations/361631/ (citing early American examples of reparations of former\nslaves, cataloguing the continued injuries inflicted on African-Americans by the\ndiscrimination they face in American society, and laying out the case for a more\ncomprehensive reparations program). Reparations are also the subject of serious\nphilosophical, political, and legal discussion. Consider the following excerpt\n\n\x0cAllocation\n\n135\n\nfrom Carol Rose, The Moral Subject of Property, 48 WM. & MARY L. REV. 1897,\n1906-07 (2006) (footnotes omitted):\nProperty, as an institution, requires stability in people\xe2\x80\x99s\nexpectations about their own and other people\xe2\x80\x99s claims. This is\nwhy property law has several claims-clearing devices that\nsubstitute Owner #2 for Owner #1 when the claims of Owner\n#1 have not been sufficiently publicized, and when most people\nthink that Owner #2 is the true owner even though she is not.\nAdverse possession is a classic example of this sort of claimsclearing device.* Unfortunately, Owner #2\xe2\x80\x99s claims may have\narisen in dubious circumstances or even through force or fraud,\nand that fact can undermine confidence in the entire institution.\nContemporary Russia is a case in point, where major capitalist\nfigures are widely regarded as the beneficiaries of insider\nfavoritism and horrifically shady practices. Should their great\nwealth be recognized, simply for the sake of getting on with\nthings and letting a modern economy unroll? Or would some\nkind of redistribution actually lead to greater stability?\nHistoric injustices create another source of unease: Palestinians\nvis-\xc3\xa0-vis Israelis, former East European landowners vis-\xc3\xa0-vis the\nnewcomers under Soviet rule, numerous indigenous groups vis\xc3\xa0-vis the settler societies that displaced them, descendants of\nslaves vis-\xc3\xa0-vis the descendants of slave-owners. Settling all those\nscores could be hugely disruptive, and the passage of time itself\nmakes proposed settlements morally ambiguous, because the\noriginal victims and perpetrators often are no longer on the scene.\nWhy charge A in favor of B, when neither A nor B were\npersonally involved in the past injustice? Moreover, settlements\ncould leave open the origins of the displaced persons\xe2\x80\x99 own prior\nclaims, as in the case of former aristocrats\xe2\x80\x99 plantations in East\n\n*\n\n[Eds.\xe2\x80\x94We will discuss adverse possession in a subsequent chapter.]\n\n\x0c136\n\nProperty\nGermany. Just whom did their ancestors displace, far back in the\nMiddle Ages? And so on back in time.\nThe age-old acquisition problem is not very salient to most\nproperty regimes, however, even though it bubbles hotly at the\ncenter in some locales. Issues of this kind usually become\nperipheral because we basically follow Blackstone\xe2\x80\x99s advice: we\nforget about the questionable origins of title. \xe2\x80\xa6 By forgetting\nabout origins we can keep on acquiring, investing, trading, and\ngenerally making ourselves wealthier. The larger public good of\nstable claims normally outweighs the private lapses that were\nentailed in some of those claims. But not surprisingly, on\noccasion the situation is reversed: unjust acquisitions may seem\nso gross as to eat away even the middle ground morality that\nmakes property regimes possible. If you think that all those who\nsucceed are thieves, why not be a thief yourself? That rhetorical\nquestion turns tit-for-tat practitioners into larcenists. Under such\ncircumstances, public morality\xe2\x80\x94even in quest of stability for\nproperty\xe2\x80\x94could require some kind of restitutionary gesture, or\nat least some acknowledgment of past injustice.\nFor further philosophical treatments of reparations and responsibility for\nancient wrongs, see George Sher, Transgenerational Compensation, 33 PHILOS. &\nPUB. AFF. 181 (2005) (attempting to justify reparations); Christopher W. Morris,\nExistential Limits to the Rectification of Past Wrongs, 21 AM. PHILOS. Q. 175 (1984)\n(casting doubt on the moral argument for reparations); Eric A. Posner & Adrian\nVermeule, Reparations for Slavery and Other Historical Injustices, 103 COLUM. L. REV.\n689 (2003) (addressing both philosophical and legal issues in reparations\nprograms).\n5. Is the United States\xe2\x80\x99 dispossession of Native Americans really a \xe2\x80\x9chistorical\xe2\x80\x9d\ninjustice? Professor Joseph Singer has long faulted the American legal system\nfor its continued mistreatment of Native Americans:\n[T]itle to land in the United States rests on the forced taking of\nland from first possessors\xe2\x80\x94the very opposite of respect for first\n\n\x0cAllocation\n\n137\npossession. Conquest is a mode of original acquisition that we\ncannot sweep under the rug by pretending that it accords with\nany recognizable principle of justice. And conquest,\nunfortunately, is where American history starts\xe2\x80\x94as does the title\nto almost every parcel of land in the United States. This is a highly\ninconvenient (not to say stunningly demoralizing) fact, not least\nof all to the Indian nations that continue to inhabit the North\nAmerican continent\xe2\x80\xa6.\nMany of us protect ourselves from having to think too deeply\nabout conquest by distancing ourselves from it. \xe2\x80\xa6 If we can\nrelegate conquest to the distant past, we can concentrate instead\non the fact that the United States was founded on respect for\nproperty rights. We do not acquire property by conquest today.\nThis comforting story is misleading at best and false at worst. We\ncannot comfort ourselves with the idea that conquest became a\nthing of the past with the American Revolution, independence\nfrom Great Britain, and the adoption of the U.S. Constitution.\n\nJoseph William Singer, Original Acquisition of Property: From Conquest & Possession\nto Democracy & Equal Opportunity, 86 IND. L.J. 763, 766-67 (2011). As Professor\nSinger explains, id. at 767-68, most of the federal government\xe2\x80\x99s dispossession\nof Native American land occurred during the 19th century. During the early 20th\ncentury\xe2\x80\x94while the Supreme Court was gaining a reputation for striking down\nstate economic legislation in the name of protecting freedom of contract and\nprivate property (the so-called \xe2\x80\x9cLochner era\xe2\x80\x9d *)\xe2\x80\x94the United States forcibly took\ntwo-thirds of the remaining lands of the Indian nations. The Supreme Court\nheld in 1955 that Alaska natives possessed merely a license to live on the land\xe2\x80\x94\nrevocable permission from whites to occupy Alaskan territory. As recently as\n2009, the Supreme Court held that the Navajo Nation had no right to sue the\nfederal government for damages where the Secretary of the Interior was alleged\nto have colluded with a mining company to undercompensate the tribe for\n*\n\nLochner v. New York, 198 U.S. 45 (1905).\n\n\x0c138\n\nProperty\nmining rights on lands held under \xe2\x80\x9cjoint title\xe2\x80\x9d between the Navajo and the\nUnited States (by law, the Secretary must approve any leases of tribal land for\nmining purposes). United States v. Navajo Nation, 556 U.S. 287 (2009). As\nProfessor Singer reminds us, the conquest is not over.\n\n\x0cAllocation\n\n139\n\nC. Ratione Soli and Fugitive Resources: Chattels Meet Land\n1. Wild Animals on Owned Land\n\nSource: RALPH PAYNE-GALLWEY, THE BOOK OF DUCK DECOYS 34, 36, 166 (1886), available at\nhttps://archive.org/details/bookofduckdecoysx00payn\n\nKeeble v. Hickeringill\n(1707) 103 Eng. Rep. 1127, 11 East 574 (Q.B.)\nAction upon the case. Plaintiff declares that he was, 8th November in the second year\nof the Queen, lawfully possessed of a close of land called Minott\xe2\x80\x99s Meadow, [where he\nmaintained] a decoy pond, to which divers wildfowl used to resort and come: and the\nplaintiff had at his own costs and charges prepared and procured divers decoy ducks,\nnets, machines and other engines for the decoying and taking of the wildfowl, and\nenjoyed the benefit in taking them: the defendant, knowing which, and intending to\ndamnify the plaintiff in his vivary, and to fright and drive away the wildfowl used to\nresort thither, and deprive him of his profit, did, on the 8th of November, resort to the\nhead of the said pond and vivary, and did discharge six guns laden with gunpowder,\nand with the noise and stink of the gunpowder did drive away the wildfowl then being\nin the pond: and on the 11th and 12th days of November the defendant, with design\nto damnify the plaintiff, and fright away the wildfowl, did place himself with a gun near\nthe vivary, and there did discharge the said gun several times that was then charged\nwith the gunpowder against the said decoy pond, whereby the wildfowl were frighted\naway, and did forsake the said pond. Upon not guilty pleaded, a verdict was found for\nthe plaintiff and 20l. damages.\n\n\x0c140\n\nProperty\n\nHOLT C.J.\nI am of opinion that this action doth lie. It seems to be new in its instance, but is not\nnew in the reason or principle of it. For, 1st, this using or making a decoy is lawful.\n2dly, this employment of his ground to that use is profitable to the plaintiff, as is the\nskill and management of that employment. As to the first, every man that hath a\nproperty may employ it for his pleasure and profit, as for alluring and procuring decoy\nducks to come to his pond. \xe2\x80\xa6 Then when a man useth his art or his skill to take them,\nto sell and dispose of for his profit; this is his trade; and he that hinders another in his\ntrade or livelihood is liable to an action for so hindering him.\xe2\x80\xa6\n[W]here a violent or malicious act is done to a man\xe2\x80\x99s occupation, profession, or way of\ngetting a livelihood; there an action lies in all cases. But if a man doth him damage by\nusing the same employment; as if Mr. Hickeringill had set up another decoy on his own\nground near the plaintiff\xe2\x80\x99s, and that had spoiled the custom of the plaintiff, no action\nwould lie, because he had as much liberty to make and use a decoy as the plaintiff. This\nis like the case of 11 H. 4, 47. One schoolmaster sets up a new school to the damage\nof an antient school, and thereby the scholars are allured from the old school to come\nto his new. (The action was held there not to lie.) But suppose Mr. Hickeringill should\nlie in the way with his guns, and fright the boys from going to school, and their parents\nwould not let them go thither; sure that schoolmaster might have an action for the loss\nof his scholars. ...\nThere was an objection that did occur to me, though I do not remember it to be made\nat the Bar; which is, that it is not mentioned in the declaration what number or nature\nof wildfowl were frighted away by the defendant\xe2\x80\x99s shooting. \xe2\x80\xa6 Where a man brings\ntrespass for taking his goods, he must declare of the quantity, because he, by having\nhad the possession, may know what he had, and therefore must know what he lost. \xe2\x80\xa6\nThe plaintiff in this case brings his action for the apparent injury done him in the use\nof that employment of his freehold, his art, and skill, that he uses thereby. \xe2\x80\xa6 And when\nwe do know that of long time in the kingdom these artificial contrivances of decoy\nponds and decoy ducks have been used for enticing into those ponds wildfowl, in order\nto be taken for the profit of the owner of the pond, who is at the expence of servants,\nengines, and other management, whereby the markets of the nation may be furnished;\nthere is great reason to give encouragement thereunto; that the people who are so\ninstrumental by their skill and industry so to furnish the markets should reap the benefit\n\n\x0cAllocation\n\n141\n\nand have their action. But, in short, that which is the true reason is that this action is\nnot brought to recover damage for the loss of the fowl, but for the disturbance.\nNotes and Questions\n1. What was Keeble suing Hickeringill for, and why did he prevail? Was his\nclaim a property claim? (A related question: what is an \xe2\x80\x9c[a]ction on the\ncase\xe2\x80\x9d? Have we seen it before? Did you look it up?) If a property claim,\nwhat was the res\xe2\x80\x94the thing that Keeble claimed as his property? If not\na property claim, what might this case be doing in your Property\ncasebook?\n2. Whether Keeble is a property case or not, where did the 20\xc2\xa3 damages\nmeasure come from?\n3. You may recall that Keeble was discussed by Justice Tompkins in Pierson\nv. Post, though not by name. (See page 89 note ***, supra.) Justice\nTompkins referred to different reports of the case than the one you\nread. The existence of multiple, sometimes conflicting, reports is fairly\ncommon for earlier English cases and even for some early American\ncases. In earlier days, judges would announce their opinions from the\nbench, and reporters\xe2\x80\x94usually entrepreneurial lawyers\xe2\x80\x94would take\nnotes of these opinions (often along with the arguments of counsel),\ncollect them, and publish them as a reference for the bar. These days\njudges issue written opinions, which are collected and published in\n\xe2\x80\x9cofficial\xe2\x80\x9d reporters as written. But for earlier cases, the content of a\nprecedential authority depended on the transcription of the reporter, and\nreporters could be unreliable. The Modern King\xe2\x80\x99s Bench (\xe2\x80\x9cMod.\xe2\x80\x9d) and\nSalkeld (\xe2\x80\x9cSalk.\xe2\x80\x9d) reports cited by Justice Tompkins are today believed to\nbe less reliable than the East report you just read, which the reporter\nclaimed to have based on a copy of Lord Chief Justice Holt\xe2\x80\x99s own\nmanuscript. Unfortunately for Justice Tompkins, the East report of\nKeeble was not published until 1815 (ten years after Pierson). Had this\nreport been available to the New York Supreme Court in 1805, do you\nthink Pierson would have come out differently?\nA Note on Ratione Soli\nLord Holt, who decided Keeble, is also a key\xe2\x80\x94if perhaps slightly confusing\xe2\x80\x94expositor\nof the related and peculiarly English doctrine of ratione soli (Latin for \xe2\x80\x9cby reason of the\n\n\x0c142\n\nProperty\n\nsoil\xe2\x80\x9d), also referred to in Pierson. Ratione soli is the principle that the right to take\npossession of wild animals belongs to the owner of the land where the animal may be\nfound; thus title to any animals captured or killed on owned land automatically vests in\nthe landowner. The English rule is in stark opposition to the civil (i.e., Roman) law rule,\nreflected in the Institutes of Justinian, * which is that the captor of a wild animal acquires\nproperty rights in the animal wherever captured, though he may be liable in trespass to\nthe owner of the real property on which the animal was pursued or taken. This\ndistinction affects not only the right to possession of the animal itself, but also the\nmeasure of damages, because the damages from the trespass may be less than the value\nof the animal.\nA strong principle of ratione soli was consolidated in mid-19th century England as part\nof the class wars between the landed gentry\xe2\x80\x94who passionately defended game hunting\nas an exclusive sport for the aristocracy\xe2\x80\x94and the upwardly-mobile merchant classes\nand more desperate farmers and poachers\xe2\x80\x94who saw game as a token of luxury and a\nmeans of sustenance, respectively. See generally Chester Kirby, The English Game Law\nSystem, 38 AM. HIST. REV. 240 (1933). The aristocrats won a decisive victory in a suit\nby a game merchant against certain servants of the Marquis of Exeter, who had forcibly\nseized several dozen rabbits purchased by the merchant for resale, on grounds that they\nhad been poached from the Marquis\xe2\x80\x99s lands. Blades v. Higgs, (1865) 11 Eng. Rep. 1474,\n11 H.L.Cas. 621. The Law Lords ruled that wild animals are the property of the owner\nof the land on which they are taken, and that the Marquis\xe2\x80\x99s servants were therefore\nwithin their rights in repossessing the rabbits.\nRatione soli was initially rejected by the newly independent American states, in favor of\na rule of \xe2\x80\x9cfree taking.\xe2\x80\x9d This made some sense in the America of John Locke\xe2\x80\x99s\nimagination: a vast, naturally bountiful, largely undeveloped, and sparsely populated\ncontinent. Moreover, \xe2\x80\x9c[i]n the New World, game was no sporting matter, but rather a\n\nJ. INST. 2.1.12. The Institutes are a portion of the massive codification of Roman law under Byzantine (Roman)\nEmperor Justinian I: the Corpus Iuris Civilis. The Corpus, in turn, is an important predecessor of most modern civil\nlaw systems, which prevail in Continental European nations and many of their former colonies. Unlike commonlaw systems, which prevail in England and most of its former colonies (including the United States, with the\nexception of Louisiana), legal authority in civil law systems derives not from caselaw, but from comprehensive\nstatutory codes. A primary distinction between common law and civil law systems is the sharply diminished role\nof precedent in civil law adjudication. (Recall note 2 on page 108, supra.)\n*\n\n\x0cAllocation\n\n143\n\nsource of food and clothing.\xe2\x80\x9d Thomas A. Lund, Early American Wildlife Law, 51 N.Y.U.\nL. REV. 703 (1976). Thus, for the first century of the new Republic\xe2\x80\x99s life, landowners\nfor the most part enjoyed no special privileges to wild animals on their otherwise idle\nland; hunters were presumed to be free to enter or cross unenclosed and undeveloped\nland in pursuit of game, even where that land was privately owned. Landowners could\ndefeat this presumption by posting notices of their intent to exclude hunters at the\nboundaries of their property, but in practice posting was uncommon and generally\nineffective for large holdings in the wilds of the frontier. Id. at 712-14.\nOver time, even the vast North American continent saw its natural resources\nthreatened with depletion by overexploitation, and its lands subject to increased\ndevelopment that conflicted with the free taking regime. Nevertheless, while a small\nnumber of American cases adopted ratione soli (see, e.g., Rexroth v. Coon, 23 A. 37 (R.I.\n1885) (bees); Schulte v. Warren, 75 N.E. 783 (Ill. 1905) (fish)), the rule never took hold\nhere as it did in England. Today, wild animals are subject to a variety of state and federal\nregulations that fairly comprehensively govern whether, when, and under what\ncircumstances they may be hunted or captured, on the theory that wildlife is a common\nresource to be managed by the government for the benefit of the people. See generally\nMichael C. Blumm & Lucus Ritchie, The Pioneer Spirit and the Public Trust: The American\nRule of Capture and State Ownership of Wildlife, 35 ENVIRON. L. 673 (2005). But a majority\nof states still allow licensed hunters to take or pursue game on unenclosed private land\nunless the landowner has posted against hunting or trespassing. Mark R. Sigman, Note,\nHunting and Posting on Private Land in America, 54 DUKE L. J. 549, 558-68 (2004).\nOne possible virtue of the doctrine of ratione soli is the same as the virtue of the punitive\ndamages award in Jacque v. Steenberg Homes: it may marginally discourage trespasses on\nland by those who would trespass for the purpose of capturing wild animals. But at\nwhat cost? And do we really need ratione soli when, as Jacque makes clear, punitive\ndamages are already available against trespassers? Or when, as Keeble makes clear, there\nare other legal remedies available against those who interfere with landowners\xe2\x80\x99 efforts\nto exploit wild animals on their land? Is there any other principled justification for\neither ratione soli or free taking, or are the rules merely sops to particular political\ninterests? In light of all this history, what do you think ought to be the legal rights of\nlandowners with respect to wild animals that happen to be on their land? Why? Is there\nany reason landowners should have a superior claim to anyone else?\n\n\x0c144\n\nProperty\n\n2. Other Fugitive Resources: Water, Oil, and Gas\nWe have studied a fair number of cases about property rights in wild animals. By now\nyou may be asking yourself: who cares? This is, after all, an area of legal doctrine that\nyou will almost certainly never encounter in your future career as a lawyer. Are we\nwasting your time?\nObviously we don\xe2\x80\x99t think so. We would offer two related reasons for studying this area\nof law:\nFirst: The study of these cases has introduced you to some accessible illustrations of\nhow we might justify rules for allocating control over scarce resources among competing\nclaimants. We have already seen several justifications for the rules we have studied\xe2\x80\x94\nmoral reasons, economic reasons, reasons grounded in administrability and in other\npragmatic concerns. (See note 1 on page 92, supra.) These are the types of justifications\nthat move courts and policymakers, and they are the kinds of justifications that lawyers\nmust invoke in crafting legal arguments and explaining legal rules to their clients.\nSecond: It is sometimes said that \xe2\x80\x9cthe law is a seamless web.\xe2\x80\x9d One influential\ninterpretation of this principle, offered by legal philosopher Ronald Dworkin, is that\ncommon-law judges must attempt to decide cases by reference to \xe2\x80\x9ca scheme of abstract\nand concrete principles that provides a coherent justification for all common law\nprecedent.\xe2\x80\x9d Ronald Dworkin, Hard Cases, 88 HARV. L. REV. 1057, 1094 (1975). That is\nto say that a legal system\xe2\x80\x99s rules should not only be justified according to discernable\nprinciples, they should be coherent: the principles that justify an outcome in one area of\nlaw should apply consistently to other areas of law to the extent possible. Thus, when\ndeciding novel cases, common-law judges will have to infer what principles are\nconsistent with\xe2\x80\x94or fit\xe2\x80\x94the entire corpus of cases that have been decided before,\ndecide which among those principles best justifies the cases, and use that principle as a\nguide in deciding the novel case.\nAt a more practical level, lawyers typically reason about novel cases by analogy to past\ncases in the same general doctrinal field. The common-law treatment of precedent,\ndiscussed above on page 110, note 2, is a special case of this more general principle.\nThus, even though we don\xe2\x80\x99t see many cases involving disputes over wild animals\nanymore, past judicial resolutions of those disputes will inform how we decide disputes\n\n\x0cAllocation\n\n145\n\nover other resources that are similar in some way. We have seen this type of reasoning\nby analogy already, in Popov v. Hayashi: a baseball is not a wild animal, but Judge\nMcCarthy thought cases about wild animals provided instruction for the dispute before\nhim. (Query: Why might he have thought so?) With respect to the intersection of land\nand chattels, we can similarly see Keeble and the doctrines of ratione soli and free taking\nas reflecting principles applicable to fugitive resources: chattels that can move of their own\naccord from place to place, sometimes taking them onto owned land. There are plenty\nof valuable resources that share this quality, and many of them are the subject of heated\nlegal disputes even today. We will focus here on two: water and oil.\nWater is essential to life, but it can also be put to a variety of other practical uses:\nirrigating farmland, extracting minerals from mines and oil or gas from wells, powering\ndams and mills, cooling industrial equipment, and as an input to manufacturing, for\nexample. Fresh water from rainfall and snowmelt may flow over the surface of land,\neither free-flowing (particularly during heavy rains or spring thaws) or in defined\nchannels as streams and lakes. Rain and snowmelt can also seep down and be absorbed\nby the earth as subsurface groundwater or deep aquifers. In either case, water has a\nfundamental physical connection to land, but it also moves freely over, under, and\nacross land. (Sound familiar?)\nBoth surface and subsurface waters are renewable; they are replenished by precipitation.\nBut they\xe2\x80\x99re still scarce. This scarcity comes in two basic forms, which map to the\neconomic categories of stocks and flows. Depletion of a groundwater source at a rate\nexceeding its natural replenishment will eventually exhaust the stock\xe2\x80\x94or finite total\namount\xe2\x80\x94of water at that source. A stream flows at a particular (though perhaps\nvariable) rate, but that rate is primarily determined by ecological rather than human\nprocesses, so adding more users or more intense uses may not threaten future flows but\ndoes reduce the share of the flow available to each at any given time. Given these forms\nof scarcity, competition over water resources is inevitable, and property law may be\ncalled on to regulate that competition.\nComplicating the matter, the rate of renewal of water stocks and the magnitude of\nwater flows vary from time to time and place to place: Hawaii gets a lot more rain than\nNevada, and California got a lot more rain in 1983 than it did in 2013. Reflecting this\nnatural diversity, the American states have devised two broad categories of common-\n\n\x0c146\n\nProperty\n\nlaw responses to the challenge of managing conflicts over access to water, epitomized\nby the two cases below. The first response, riparian rights, dominates in the wetter,\neastern states, and was firmly established by our first case, Tyler v. Wilkinson. The\nsecond response, prior appropriation, prevails in the more arid western states, and is\nsometimes referred to as the \xe2\x80\x9cColorado Rule\xe2\x80\x9d given its historic association with our\nsecond case, Coffin v. Left Hand Ditch Co. Both cases deal with rights to flows, in\nparticular the flow of a river. As you read these cases, try to understand how the two\nsystems differ, and what might explain or justify the difference.\nTyler v. Wilkinson\n24 F.Cas. 472, 4 Mason 397 (D. R.I. 1827)\nSTORY, Circuit Justice\n[The Pawtucket River forms part of the boundary between Rhode Island and\nMassachusetts. Plaintiffs owned several mills on the Massachusetts side of the river.\nFor over a century, mills on both sides of the river had been powered by the flow of\nthe Pawtucket as directed by a dam (the \xe2\x80\x9clower dam\xe2\x80\x9d). Defendants owned several mills\nupstream of the plaintiffs on the Rhode Island side of the river and on a man-made\ncanal called Sergeant\xe2\x80\x99s Trench, which bypassed the lower dam on the western bank.\nDefendants erected a new dam (the \xe2\x80\x9cupper dam\xe2\x80\x9d) to direct the flow of water toward\ntheir mills, interfering with the ability of plaintiffs to rely on the flow of the Pawtucket\nto the lower dam to power the plaintiffs\xe2\x80\x99 mills. Plaintiffs sued for a declaration that by\n\xe2\x80\x9cancient usage\xe2\x80\x9d they had a superior claim to the waters of the Pawtucket over the\ndefendants, whom the plaintiffs alleged were entitled only to \xe2\x80\x9cwastewater,\xe2\x80\x9d or so much\nof the flow as was not needed by the plaintiffs. Supreme Court Justice Joseph Story,\nriding circuit, heard the dispute and rendered the following opinon.]\nBefore proceeding to an examination of these points, it may be proper to ascertain the\nnature and extent of the right, which riparian proprietors generally possess, to the\nwaters of rivers flowing through their lands\xe2\x80\xa6.\nPrima facie every proprietor upon each bank of a river is entitled to the land, covered\nwith water, in front of his bank, to the middle thread of the stream, or, as it is commonly\nexpressed, usque ad filum acquae. In virtue of this ownership he has a right to the use of\nthe water flowing over it in its natural current, without diminution or obstruction. But,\n\n\x0cAllocation\n\n147\n\nstrictly speaking, he has no property in the water itself; but a simple use of it, while it\npasses along. The consequence of this principle is, that no proprietor has a right to use\nthe water to the prejudice of another. It is wholly immaterial, whether the party be a\nproprietor above or below, in the course of the river; the right being common to all\nthe proprietors on the river, no one has a right to diminish the quantity which will,\naccording to the natural current, flow to a proprietor below, or to throw it back upon\na proprietor above. This is the necessary result of the perfect equality of right among\nall the proprietors of that, which is common to all. The natural stream, existing by the\nbounty of Providence for the benefit of the land through which it flows, is an incident\nannexed, by operation of law, to the land itself. When I speak of this common right, I\ndo not mean to be understood, as holding the doctrine, that there can be no diminution\nwhatsoever, and no obstruction or impediment whatsoever, by a riparian proprietor, in\nthe use of the water as it flows; for that would be to deny any valuable use of it. There\nmay be, and there must be allowed of that, which is common to all, a reasonable use.\nThe true test of the principle and extent of the use is, whether it is to the injury of the\nother proprietors or not.\xe2\x80\xa6 The maxim is applied, \xe2\x80\x98Sic utere tuo, ut non alienum laedas.\xe2\x80\x99\nBut of a thing, common by nature, there may be an appropriation by general consent\nor grant. Mere priority of appropriation of running water, without such consent or\ngrant, confers no exclusive right. It is not like the case of mere occupancy, where the\nfirst occupant takes by force of his priority of occupancy. That supposes no ownership\nalready existing, and no right to the use already acquired. But our law annexes to the\nriparian proprietors the right to the use in common, as an incident to the land; and\nwhoever seeks to found an exclusive use, must establish a rightful appropriation in\nsome manner known and admitted by the law. Now, this may be, either by a grant from\nall the proprietors, whose interest is affected by the particular appropriation, or by a\nlong exclusive enjoyment, without interruption, which affords a just presumption of\nright. By our law, upon principles of public convenience, the term of twenty years of\nexclusive uninterrupted enjoyment has been held a conclusive presumption of a grant\nor right\xe2\x80\xa6.\nWith these principles in view, the general rights of the plaintiffs cannot admit of much\ncontroversy. They are riparian proprietors, and, as such, are entitled to the natural flow\nof the river without diminution to their injury. As owners of the lower dam, and the\nmills connected therewith, they have no rights beyond those of any other persons, who\n\n\x0c148\n\nProperty\n\nmight have appropriated that portion of the stream to the use of their mills. That is,\ntheir rights are to be measured by the extent of their actual appropriation and use of\nthe water for a period, which the law deems a conclusive presumption in favor of rights\nof this nature. In their character as mill-owners, they have no title to the flow of the\nstream beyond the water actually and legally appropriated to the mills; but in their\ncharacter as riparian proprietors, they have annexed to their lands the general flow of\nthe river, so far as it has not been already acquired by some prior and legally operative\nappropriation. No doubt, then, can exist as to the right of the plaintiffs to the surplus\nof the natural flow of the stream not yet appropriated. Their rights, as riparian\nproprietors, are general; and it is incumbent on the parties, who seek to narrow these\nrights, to establish by competent proofs their own title to divert and use the stream.\nAnd this leads me to the consideration of the nature and extent of the rights of the\ntrench owners. There is no doubt, that in point of law or fact, there may be a right to\nwater of a very limited nature, and subservient to the more general right of the riparian\nproprietors.\xe2\x80\xa6 But the presumption of an absolute and controlling power over the\nwhole flow, a continuing power of exclusive appropriation from time to time, in the\nriparian proprietor, as his wants or will may influence his choice, would require the\nmost irresistible facts to support it. Men who build mills, and invest valuable capital in\nthem, cannot be presumed, without the most conclusive evidence, to give their\ndeliberate assent to the acceptance of such ruinous conditions. The general\npresumption appears to me to be that which is laid down by Mr. Justice Abbott in\nSaunders v. Newman, 1 Barn. & Ald. 258: \xe2\x80\x98When a mill has been erected upon a stream\nfor a long period of time, it gives to the owner a right, that the water shall continue to\nflow to and from the mill in the manner in which it has been accustomed to flow during\nall that time. The owner is not bound to use the water in the same precise manner, or\nto apply it to the same mill; if he were, that would stop all improvements in machinery.\nIf, indeed, the alterations made from time to time prejudice the right of the lower mill\n(i.e. by requiring more water), the case would be different.\xe2\x80\x99\nIn this view of the matter, the proprietors of Sergeant\xe2\x80\x99s trench are entitled to the use\nof so much of the water of the river as has been accustomed to flow through that\ntrench to and from their mills (whether actually used or necessary for the same mills or\nnot), during the twenty years last before the institution of this suit, subject only to such\nqualifications and limitations, as have been acknowledged or rightfully exercised by the\n\n\x0cAllocation\n\n149\n\nplaintiffs as riparian proprietors, or as owners of the lower mill-dam, during that period.\nBut here their right stops; they have no right farther to appropriate any surplus water\nnot already used by the riparian proprietors, upon the notion, that such water is open\nto the first occupiers. That surplus is the inheritance of the riparian proprietors, and\nnot open to occupancy.\n\xe2\x80\xa6My opinion accordingly is, that the trench owners have an absolute right to the\nquantity of water which has usually flowed therein, without any adverse right on the\nplaintiffs to interrupt that flow in dry seasons, when there is a deficiency of water. But\nthe trench owners have no right to increase that flow; and whatever may be the mills\nor uses, to which they may apply it, they are limited to the accustomed quantity, and\nmay not exceed it\xe2\x80\xa6. [I]f there be a deficiency, it must be borne by all parties, as a\ncommon loss, wherever it may fall, according to existing rights \xe2\x80\xa6 and that the plaintiffs\nto this extent are entitled to have their general right established, and an injunction\ngranted.\nIt is impracticable for the court to do more, in this posture of the case, than to refer it\nto a master to ascertain, as near as may be, and in conformity with the suggestions in\nthe opinion of the court, the quantity to which the trench owners are entitled, and to\nreport a suitable mode and arrangement permanently to regulate and adjust the flow of\nthe water, so as to preserve the rights of all parties.\n\xe2\x80\xa6 The decree of the court is to be drawn up accordingly; and all further directions are\nreserved to the further hearing upon the master\xe2\x80\x99s report, &c. Decree accordingly.\nCoffin v. Left Hand Ditch Co.\n6 Colo. 443 (1882)\nHELM, J.\nAppellee, who was plaintiff below, claimed to be the owner of certain water by virtue\nof an appropriation thereof from the south fork of the St. Vrain creek. It appears that\nsuch water, after its diversion, is carried by means of a ditch to the James creek, and\nthence along the bed of the same to Left Hand creek, where it is again diverted by\nlateral ditches and used to irrigate lands adjacent to the last named stream. Appellants\nare the owners of lands lying on the margin and in the neighborhood of the St. Vrain\nbelow the mouth of said south fork thereof, and naturally irrigated therefrom.\n\n\x0c150\n\nProperty\n\nIn 1879 there was not a sufficient quantity of water in the St. Vrain to supply the ditch\nof appellee and also irrigate the said lands of appellant. A portion of appellee\xe2\x80\x99s dam\nwas torn out, and its diversion of water thereby seriously interfered with by appellants.\nThe action is brought for damages arising from the trespass, and for injunctive relief\nto prevent repetitions thereof in the future. \xe2\x80\xa6 [T]rial was had before a jury\xe2\x80\xa6, and\nverdict and judgment given for appellee. Such recovery was confined, however, to\ndamages for injury to the dam alone, and did not extend to those, if any there were,\nresulting from the loss of water.\n... It is contended by counsel for appellants that the common law principles of riparian\nproprietorship prevailed in Colorado until 1876, and that the doctrine of priority of\nright to water by priority of appropriation thereof was first recognized and adopted in\nthe constitution. But we think the latter doctrine has existed from the date of the\nearliest appropriations of water within the boundaries of the state. The climate is dry,\nand the soil, when moistened only by the usual rainfall, is arid and unproductive; except\nin a few favored sections, artificial irrigation for agriculture is an absolute necessity.\nWater in the various streams thus acquires a value unknown in moister climates. Instead\nof being a mere incident to the soil, it rises, when appropriated, to the dignity of a\ndistinct usufructuary estate, or right of property. It has always been the policy of the\nnational, as well as the territorial and state governments, to encourage the diversion\nand use of water in this country for agriculture; and vast expenditures of time and\nmoney have been made in reclaiming and fertilizing by irrigation portions of our\nunproductive territory. Houses have been built, and permanent improvements made;\nthe soil has been cultivated, and thousands of acres have been rendered immensely\nvaluable, with the understanding that appropriations of water would be protected.\nDeny the doctrine of priority or superiority of right by priority of appropriation, and a\ngreat part of the value of all this property is at once destroyed.\n\xe2\x80\xa6 We conclude, then, that the common law doctrine giving the riparian owner a right\nto the flow of water in its natural channel upon and over his lands, even though he\nmakes no beneficial use thereof, is inapplicable to Colorado. Imperative necessity,\nunknown to the countries which gave it birth, compels the recognition of another\ndoctrine in conflict therewith. And we hold that, in the absence of express statutes to\nthe contrary, the first appropriator of water from a natural stream for a beneficial\n\n\x0cAllocation\n\n151\n\npurpose has, with the qualifications contained in the constitution, a prior right thereto,\nto the extent of such appropriation.\n\xe2\x80\xa6 It is urged, however, that even if the doctrine of priority or superiority of right by\npriority of appropriation be conceded, appellee in this case is not benefited thereby.\nAppellants claim that they have a better right to the water because their lands lie along\nthe margin and in the neighborhood of the St. Vrain. They assert that, as against them,\nappellee\xe2\x80\x99s diversion of said water to irrigate lands adjacent to Left Hand creek, though\nprior in time, is unlawful.\nIn the absence of legislation to the contrary, we think that the right to water acquired\nby priority of appropriation thereof is not in any way dependent upon the locus of its\napplication to the beneficial use designed. And the disastrous consequences of our\nadoption of the rule contended for, forbid our giving such a construction to the statutes\nas will concede the same, if they will properly bear a more reasonable and equitable\none.\nThe doctrine of priority of right by priority of appropriation for agriculture is evoked,\nas we have seen, by the imperative necessity for artificial irrigation of the soil. And it\nwould be an ungenerous and inequitable rule that would deprive one of its benefit\nsimply because he has, by large expenditure of time and money, carried the water from\none stream over an intervening watershed and cultivated land in the valley of another.\nIt might be utterly impossible, owing to the topography of the country, to get water\nupon his farm from the adjacent stream; or if possible, it might be impracticable on\naccount of the distance from the point where the diversion must take place and the\nattendant expense; or the quantity of water in such stream might be entirely insufficient\nto supply his wants. It sometimes happens that the most fertile soil is found along the\nmargin or in the neighborhood of the small rivulet, and sandy and barren land beside\nthe larger stream. To apply the rule contended for would prevent the useful and\nprofitable cultivation of the productive soil, and sanction the waste of water upon the\nmore sterile lands. It would have enabled a party to locate upon a stream in 1875, and\ndestroy the value of thousands of acres, and the improvements thereon, in adjoining\nvalleys, possessed and cultivated for the preceding decade. Under the principle\ncontended for, a party owning land ten miles from the stream, but in the valley thereof,\n\n\x0c152\n\nProperty\n\nmight deprive a prior appropriator of the water diverted therefrom whose lands are\nwithin a thousand yards, but just beyond an intervening divide.\n\xe2\x80\xa6The judgment of the court below will be affirmed.\nNotes and Questions\n1. Different Strokes for Different Folks. Why is the rule for control and use of\nsurface waters different in the Eastern United States than it is in the West? Why\nis it different for water in New England than it is for wild animals in (old)\nEngland? Is the \xe2\x80\x9cpriority of appropriation\xe2\x80\x9d rule in Colorado the same as the\n\xe2\x80\x9cfree taking\xe2\x80\x9d rule for game in the early American frontier? If not, how and why\ndoes it differ?\nOne of the important skills of lawyers (and legal scholars) is to identify distinctions\namong seemingly analogous fact patterns that could account for courts\xe2\x80\x99\nselection of the rules they apply to those facts. So: can we identify some\ndistinctions in the facts of these two cases that might account for the difference\nbetween, say, the eastern (riparian) rule and the western (priority of\nappropriation) rule for water? (Did Justice Helm identify any such distinctions\nin Coffin?)\nWe might examine at least three different grounds for distinguishing these types\nof cases from one another. First, the characteristics of the resource itself may be\ndifferent. That may be a relevant basis for distinguishing wild animals from\nwater; as we will see it may also be a basis for distinguishing both of those\nresources from oil and gas. Second, the characteristics of the society in which the\nresource is being exploited may be different. As we have already noted, the\ninterior of the American continent in the 18th century was a very different place\nthan the English countryside\xe2\x80\x94in terms of its population density and in terms\nof the level of development and exploitation of existing natural resources. And\nas the Coffin court noted, the quality and distribution of arable soil in the\nmountain west makes irrigation an \xe2\x80\x9cimperative necessity\xe2\x80\x9d to agriculture in a way\n\xe2\x80\x9cunknown to\xe2\x80\x9d the riparian east. Third, the particular uses of the resource may\ndiffer from one social context to another. For example, in New England, where\nsurface water is plentiful, streams were mainly used non-consumptively to power\n\n\x0cAllocation\n\n153\n\nindustrial plants in the 19th century; in Colorado, where water is scarce, streams\nwere used primarily for consumptive purposes\xe2\x80\x94mining, farming, and drinking.\nSee Carol M. Rose, Energy And Efficiency in the Realignment of Common-Law Water\nRights, 19 J. LEG. STUD. 261, 290-93 (1990). Any of these types of distinctions\ncould justify a change in legal rules from one case to another. Which\xe2\x80\x94if any\xe2\x80\x94\ndo you think best explain the difference between Tyler and Coffin?\n2. Stock Resources. Tyler and Coffin deal with allocation of the right to a share of\nthe flow of a natural watercourse. But much water use depends not on surface\nwaters, but on groundwater, extracted by means of wells and pumps. Such\ngroundwater can behave more like a stock resource than a flow resource;\nexcessive extraction by any one claimant today threatens the availability of the\nresource for all claimants in the future. Indeed, extraction of groundwater\xe2\x80\x94and\neven collection of precipitation\xe2\x80\x94can alter the flows of surface channels,\nthreatening the rights of remote riparians or prior appropriators. For this reason,\nsome states\xe2\x80\x94particularly in the more arid Western United States\xe2\x80\x94have\nenacted comprehensive statutory codes and administrative regulations\nallocating water rights. California\xe2\x80\x99s system is among the most complex, layering\nearly common-law riparian rights with later common-law prior appropriation\nrights and a subsequent statutory code administered by a powerful\nadministrative agency with significant discretion to alter and limit water uses to\nrespond to changing conditions. The state\xe2\x80\x99s regulatory reach is profound; in\nMay of 2015 the Water Board responded to serious drought conditions by\nadopting emergency regulations requiring residents to refrain from most\noutdoor uses of water and requiring businesses to reduce their potable water\nusage by 25%, all on pain of a fine of $500 per day. State Water Resources\nControl Bd. Res. No. 2015-0032: To Adopt an Emergency Regulation for\nStatewide Water Conservation (May 5, 2015), available at\nhttp://www.waterboards.ca.gov/waterrights/water_issues/programs/drought\n/docs/emergency_regulations/rs2015_0032_with_adopted_regs.pdf.\n3. Non-Renewable Fugitive Resources. For our next category of fugitive\nresource\xe2\x80\x94oil and gas\xe2\x80\x94stock depletion is the standard state of affairs,\nexacerbated by the fact that oil stocks do not replenish themselves the way water\n\n\x0c154\n\nProperty\nstocks do. Should the legal rules we\xe2\x80\x99ve developed in the contexts of wild animals\nand water apply to such non-renewable resources?\nBriggs v. Southwestern Energy Production Company\n224 A.3d 334 (Pa. 2020)\n\nCHIEF JUSTICE SAYLOR\nIn this appeal by allowance, we consider whether the rule of capture immunizes an\nenergy developer from liability in trespass, where the developer uses hydraulic\nfracturing on the property it owns or leases, and such activities allow it to obtain oil or\ngas that migrates from beneath the surface of another person\xe2\x80\x99s land.\nI. BACKGROUND\nA. The rule of capture\nOil and gas are minerals, and while in place they are considered part of the land. They\ndiffer from coal and other substances with a fixed situs in that they are fugacious in\nnature \xe2\x80\x93 meaning they tend to seep or flow across property lines beneath the surface\nof the earth. Such underground movement is known as \xe2\x80\x9cdrainage.\xe2\x80\x9d Drainage stems\nfrom a physical property of fluids in that they naturally move across a pressure gradient\nfrom high to low pressure. Indeed, the extraction of oil or gas by drilling is based, at\nleast in part, on creating a low-pressure pathway from the mineral\xe2\x80\x99s subterranean\nlocation to the earth\xe2\x80\x99s surface.\nOil and gas have thus been described as having a \xe2\x80\x9cfugitive and wandering existence,\xe2\x80\x9d\nBrown v. Vandergrift, 80 Pa. 142, 147 (Pa. 1875), and have been compared to wild animals\nwhich move about from one property to another. See Westmoreland & Cambria Nat. Gas\nCo. v. DeWitt, 130 Pa. 235, 249, 18 A. 724, 725 (1889) (\xe2\x80\x9cIn common with animals, and\nunlike other minerals, [oil, gas, and water] have the power and the tendency to escape\nwithout the volition of the owner.\xe2\x80\x9d). Accordingly, such minerals are subject to the rule\nof capture, which is\n[a] fundamental principle of oil-and-gas law holding that there is no\nliability for drainage of oil and gas from under the lands of another so\nlong as there has been no trespass ....\n\n\x0cAllocation\n\n155\n\nBLACK\xe2\x80\x99S LAW DICTIONARY 1358 (8th ed. 2004)); accord Brown v. Spilman, 155 U.S. 665,\n669-70, 15 S. Ct. 245, 247, 39 L.Ed. 304 (1895). 1 A corollary to this rule is that an\naggrieved property owner\xe2\x80\x99s remedy for the loss, through drainage, of subsurface oil or\ngas has traditionally been to offset the effects of the developer\xe2\x80\x99s well by drilling his or\nher own well, often termed an \xe2\x80\x9coffset well.\xe2\x80\x9d See Barnard v. Monongahela Gas Co., 216 Pa.\n362, 365, 65 A. 801, 803 (1907) (\xe2\x80\x9cWhat then can the neighbor do? Nothing; only go\nand do likewise.\xe2\x80\x9d).\nThe reference to \xe2\x80\x9cthe lands of another\xe2\x80\x9d in the above quote does not suggest a\ndeveloper may invade the subsurface area of a neighboring property by drilling at an\nangle rather than vertically (referred to as slant drilling or slant wells), or by drilling\nhorizontally beneath the surface. This is because the title holder of a parcel of land\ngenerally owns everything directly beneath the surface. Rather, and as suggested by the\n\xe2\x80\x9cno trespass\xe2\x80\x9d predicate, it refers to the potential for oil and gas to migrate from the\nplaintiff\xe2\x80\x99s property to the developer\xe2\x80\x99s land when extracted from a common pool or\nreservoir spanning both parcels.\nB. Hydraulic fracturing\nOne of the central questions in this matter involves how these principles apply where\nhydraulic fracturing is used to extract oil or gas from subsurface geological formations.\nAccording to the federal government, hydraulic fracturing is used in \xe2\x80\x9cunconventional\xe2\x80\x9d\ngas production. \xe2\x80\x9cUnconventional\xe2\x80\x9d reservoirs can cost-effectively produce gas only by\nusing a special stimulation technique, like hydraulic fracturing .... This is often because\nthe gas is highly dispersed in the rock, rather than occurring in a concentrated\nunderground location. United States Environmental Protection Agency (the \xe2\x80\x9cEPA\xe2\x80\x9d),\nThe Process of Unconventional Natural Gas Production, https://www.epa.gov/uog/processunconventional-natural-gas-production (viewed Oct. 22, 2019). In terms of how the\ntechnique works, the EPA continues:\nFractures are created by pumping large quantities of fluids at high\npressure down a wellbore and into the target rock formation. Hydraulic\n\nThe term \xe2\x80\x9ccapture\xe2\x80\x9d is also drawn from an analogy to wild animals. At common law, a person could acquire title\nto such an animal by reducing it to possession.\n\n1\n\n\x0c156\n\nProperty\nfracturing fluid commonly consists of water, proppant and chemical\nadditives that open and enlarge fractures within the rock formation.\nThese fractures can extend several hundred feet away from the wellbore.\nThe proppants \xe2\x80\x93 sand, ceramic pellets or other small incompressible\nparticles \xe2\x80\x93 hold open the newly created fractures.\n\nId.\nAfter injection, fluid is withdrawn from the well while leaving the proppants in place\nto hold the fissures open. This enhances the drainage of oil or gas into the wellbore\nwhere it can be captured.\nC. Factual and procedural history of this case\n(i) Introduction\nThe parties presently favor essentially the same rule of law: they both, in substance,\nargue that the traditional rule of capture should apply, subject to the common-law\nstandard for trespass of real property based on physical intrusion onto another\xe2\x80\x99s land.\nEach party, moreover, depicts the other as erroneously suggesting that an exception to\nthis framework should pertain where hydraulic fracturing is used to obtain oil or natural\ngas. In particular, the plaintiffs suggest that Southwestern wishes to convert the rule of\ncapture into a precept whereby energy developers may physically invade the property\nof others to capture natural gas so long as they are using hydraulic fracturing. For its\npart, Southwestern portrays the plaintiffs and the Superior Court decision from which\nit appeals as positing that the rule of capture simply does not apply when hydraulic\nfracturing is used for energy development on one\xe2\x80\x99s own land.\n(ii) Undisputed facts\nAdam, Paula, Joshua, and Sarah Briggs (\xe2\x80\x9cPlaintiffs\xe2\x80\x9d) own a parcel of real estate\nconsisting of approximately eleven acres in Harford Township, Susquehanna County.\nDuring all relevant times, Plaintiffs have not leased their property to any entity for\nnatural gas production. Plaintiffs\xe2\x80\x99 property is adjacent to a tract of land leased by\nAppellant Southwestern Energy Production Company for natural gas extraction (the\n\xe2\x80\x9cProduction Parcel\xe2\x80\x9d). Southwestern maintains wellbores on the Production Parcel and\n\n\x0cAllocation\n\n157\n\nhas used hydraulic fracturing to boost natural gas extraction from the Marcellus Shale\nformation through those wellbores.\n(iii) Proceedings before the Court of Common Pleas\nIn November 2015, Plaintiffs commenced an action against Southwestern in which\nthey stated two causes of action, trespass and conversion. In Count I (the trespass\nclaim), Plaintiffs averred that Southwestern\xe2\x80\x99s actions constituted a trespass which\ndeprived Plaintiffs of the value of the \xe2\x80\x9cnatural gas extracted from under their land[.]\xe2\x80\x9dIn\nCount II (the conversion claim), Plaintiffs alleged that, through its drilling activities,\nSouthwestern had deprived Plaintiffs of their possession and use of the natural gas and\nconverted it to Southwestern\xe2\x80\x99s use. Notably, Plaintiffs did not expressly allege that\nSouthwestern\xe2\x80\x99s activities had caused a physical intrusion into Plaintiffs\xe2\x80\x99 property.\nSouthwestern filed a responsive pleading denying it had extracted gas from Plaintiffs\xe2\x80\x99\nland and denying it had trespassed upon Plaintiffs\xe2\x80\x99 property or converted their natural\ngas. Southwestern specifically denied it had drilled underneath Plaintiffs\xe2\x80\x99 property and\nstated, further, that it had \xe2\x80\x9conly drilled for oil, gas or minerals from under properties\nfor which [Southwestern] has leases.\xe2\x80\x9d\nAfter the parties engaged in discovery, Southwestern filed a motion for summary\njudgment and a supporting brief in which it argued that it did not physically invade\nPlaintiffs\xe2\x80\x99 property and, to the extent that it had recovered any gas through drainage\nfrom that property to the Production Parcel, again, it was entitled to judgment as a\nmatter of law under the rule of capture. Plaintiffs \xe2\x80\xa6 filed their own motion for partial\nsummary judgment as to liability, asserting that courts should not apply the rule of\ncapture in circumstances where gas has been captured through the use of hydraulic\nfracturing.\nBy order and opinion, the common pleas court granted Southwestern\xe2\x80\x99s motion for\nsummary judgment, and denied Plaintiffs\xe2\x80\x99 motion for partial summary judgment\xe2\x80\xa6.\nPlaintiffs filed a notice of appeal, \xe2\x80\xa6 in which they raised a single issue: whether the\ntrial court erred in determining that the rule of capture precluded liability under theories\nof trespass and conversion, where Southwestern had used hydraulic fracturing to\nobtain natural gas which originated under Plaintiffs\xe2\x80\x99 land.\n\n\x0c158\n\nProperty\n(iv) Proceedings before the Superior Court\n\nA two-judge panel of the Superior Court reversed in a published decision.\xe2\x80\xa6The court\nnoted, however, that the record did not indicate whether Southwestern\xe2\x80\x99s operations\nhad resulted in a subsurface intrusion into Plaintiffs\xe2\x80\x99 property, going so far as to express\nthat \xe2\x80\x9c[t]here does not appear to be any evidence, or even an estimate, as to how far the\nsubsurface fractures extend from each of the wellbore [sic] on Southwestern\xe2\x80\x99s lease.\xe2\x80\x9d ...\nAccordingly, the panel reversed the trial court\xe2\x80\x99s order and remanded for additional\nfactual development.\n\xe2\x80\xa6[T]he Superior Court panel\xe2\x80\x99s analysis can reasonably be viewed as embodying two\ndistinct, but interrelated, holdings: first, that whenever \xe2\x80\x9cartificial means,\xe2\x80\x9d such as\nhydraulic fracturing, are used to stimulate the flow of underground resources, the rule\nof capture does not apply because drainage does not occur through the operation of\n\xe2\x80\x9cnatural agencies,\xe2\x80\x9d and second, that in this particular case summary judgment was\npremature in light of certain unspecified allegations relating to cross-boundary\nintrusions into Plaintiffs\xe2\x80\x99 land.\nII. PRELIMINARY DISCUSSION\nA. Trespass\nIn Pennsylvania, a trespass occurs when a person who is not privileged to do so\nintrudes upon land in possession of another, whether willfully or by mistake. This\nconception of trespass is not disputed by the parties. Nevertheless, meaningful\nappellate review at this stage is not straightforward for multiple reasons.\nB. Pleading deficiencies, decisional irregularities, and issue limitation\n\xe2\x80\xa6 Plaintiffs did not assert \xe2\x80\xa6 in their pleadings \xe2\x80\xa6 that Southwestern had effectuated\na physical intrusion onto (or into) their property. The Superior Court panel recognized\nthis aspect of Plaintiffs\xe2\x80\x99 litigation position, but raised and resolved, sua sponte, an issue\nbased on the opposite premise, that Plaintiffs had alleged a physical intrusion. Then,\nstating that there was no record evidence that such an intrusion had taken place, and\nwithout referencing any specific aspect of the pleadings, the panel indicated that the\nComplaint\xe2\x80\x99s allegations were alone sufficient to raise a genuine issue of fact so as to\npreclude summary judgment.\n\n\x0cAllocation\n\n159\n\nThis is in some tension with the governing summary-judgment standard which\ngenerally centers on whether the adverse party has produced enough evidence to raise\na question of material fact as to each element of the claim.\n\xe2\x80\xa6 [M]oreover, Southwestern articulated the issue for this Court\xe2\x80\x99s consideration in\nterms of whether the rule of capture should be applied in the same manner it has always\nbeen applied: to allow for the capture of oil and gas which merely drains from an\nadjacent property after the completion of a well using hydraulic fracturing solely within\nthe developer\xe2\x80\x99s property. This is an issue, again, on which the parties do not presently\ndiverge: they both answer in the affirmative. Their disagreement is limited to whether\nany physical intrusion has taken place \xe2\x80\x93 a question that is not fairly subsumed within\nthe issue framed for our review.\nIII. ANALYSIS\nThe issue as stated by Southwestern should nonetheless be resolved for purposes of\nthis dispute \xe2\x80\x93 and to provide guidance to the bench and bar \xe2\x80\x93 because at least part of\nthe Superior Court\xe2\x80\x99s opinion can reasonably be construed as setting forth a per se rule\nforeclosing application of the rule of capture in hydraulic fracturing scenarios, and that\nrule rests on faulty assumptions. In particular, and most saliently, the panel appears to\nhave indicated that one litmus for whether the rule of capture applies is whether the\ndefendant\xe2\x80\x99s gas extraction methodology relies only on the natural drainage of oil or gas\nwithin a conventional pool or reservoir, or whether instead those methods utilize some\nmeans of artificial stimulation to induce drainage.\nThe Superior Court\xe2\x80\x99s position in this respect logically rests on one of two grounds: (a)\nthe act of artificially stimulating the cross-boundary flow through the use of hydraulic\nfracturing solely on the developer\xe2\x80\x99s property in and of itself renders the rule of capture\ninapplicable; or (b) as Plaintiffs argue, any time natural gas migrates across property\nlines resulting, directly or indirectly, from hydraulic fracturing, a physical intrusion into\nthe plaintiff\xe2\x80\x99s property must necessarily have taken place.\nAs to the first proposition, all drilling for subsurface fugacious minerals involves the\nartificial stimulation of the flow of that substance. The mere act of drilling interferes\nwith nature and stimulates the flow of the minerals toward artificially-created low\npressure areas, most notably, the wellbore. This Court has held that the rule of capture\n\n\x0c160\n\nProperty\n\napplies although the driller uses further artificial means, such as a pump, to enhance\nproduction from a source common to it and the plaintiff \xe2\x80\x93 so long as no physical\ninvasion of the plaintiff\xe2\x80\x99s land occurs. See Jones, 194 Pa. at 384, 44 A. at 1075 (indicating\nthat, absent physical intrusion, a developer may use \xe2\x80\x9call the skill and invention of which\na man is capable\xe2\x80\x9d to appropriate resources from under his own property). There is no\nreason why this precept should apply any differently to hydraulic fracturing conducted\nsolely within the driller\xe2\x80\x99s property.\n\xe2\x80\xa6 Accordingly, we reject as a matter of law the concept that the rule of capture is\ninapplicable to drilling and hydraulic fracturing that occurs entirely within the\ndeveloper\xe2\x80\x99s property solely because drainage of natural resources takes place as the\ndirect or indirect result of hydraulic fracturing, or that such drainage stems from less\n\xe2\x80\x9cnatural\xe2\x80\x9d means than conventional drainage.\nThe second predicate \xe2\x80\x93 that drainage from under a plaintiff\xe2\x80\x99s parcel can only occur if\nthe driller first physically invades that property \xe2\x80\x93 does not lend itself to a purely legal\nresolution.\xe2\x80\xa6 By design, hydraulic fracturing creates fissures in rock strata which store\nhydrocarbons within their porous structure. On the state of the present record, this\nalone does not establish that a physical intrusion into a neighboring property is\nnecessary for such action to result in drainage from that property. We cannot rule out,\nfor example, that a fissure created through the injection of hydraulic fluid entirely\nwithin the developer\xe2\x80\x99s property may create a sufficient pressure gradient to induce the\ndrainage of hydrocarbons from the relevant stratum of rock underneath an adjacent\nparcel even absent physical intrusion. Nor can we discount the possibility that a fissure\ncreated within the developer\xe2\x80\x99s property may communicate with other, pre-existing\nfissures that reach across property lines. Whether these, or any other non-invasive\nmeans of drainage occasioned by hydraulic fracturing, are physically possible in a given\ncase is a factual question to be established through expert evidence.\nThe Superior Court panel appears to have assumed, if implicitly, that such occurrences\nwere impossible \xe2\x80\x93 but, again, there is no basis in the record for such an assumption. In\nall events, a plaintiff asserting a cause of action \xe2\x80\x9cmust be able to prove all the elements\nof his case by proper evidentiary standards.\xe2\x80\x9d Papieves v. Lawrence, 437 Pa. 373, 379, 263\nA.2d 118, 121 (1970). Thus, to the extent this lawsuit goes forward on Plaintiffs\xe2\x80\x99 new,\n\n\x0cAllocation\n\n161\n\nphysical-intrusion theory, Plaintiffs will bear the burden of demonstrating that such an\nintrusion took place.\nWe have not overlooked Southwestern\xe2\x80\x99s argument that trespass should not be viewed\nas occurring miles beneath the surface of the earth. As Southwestern observes, in some\njurisdictions traditional concepts of physical trespass have been relaxed where activities\ntake place miles below the surface and the plaintiff is not deprived of the use and\nenjoyment of the land. Southwestern posits that this is analogous to the principle that\ntrespass does not arise high above the surface. See Causby, 328 U.S. at 260-61, 66 S. Ct.\nat 1065. It emphasizes that other socially useful endeavors \xe2\x80\x93 such as carbon\nsequestration projects, energy storage wells, and waste disposal sites \xe2\x80\x93 could be\njeopardized if the rule against trespass were to be enforced in an unduly stringent\nmanner where deep subsurface activities are concerned.\nWithout speaking to the merit of such a claim, we note that this Court is limited to the\nissue as it was framed in the petition for allowance of appeal, and Southwestern has\nnot articulated any reason an exception should be made in the present dispute. Thus,\nto the extent Southwestern argues it should be permitted to escape liability even if it is\nultimately found to have effectuated a physical intrusion into Plaintiff\xe2\x80\x99s subsurface\nproperty, its claim in this regard has not been preserved for review by this Court.\nThis brings us to the question of whether the lawsuit can, indeed, progress on a theory\nof trespass by physical intrusion, and by extension, to the question of the appropriate\nmandate from this Court. Ordinarily, and for the reasons explained, we would deem\nany such contention to be absent from the litigation, as it does not appear to have been\nmentioned in Plaintiffs\xe2\x80\x99 pleadings or argued as a basis to deny Southwestern\xe2\x80\x99s motion\nfor summary judgment. The Superior Court, however, evidently believed there was\nsome legitimate basis to dispose of the appeal on the presupposition that Southwestern\nwas alleged to have physically invaded Plaintiffs\xe2\x80\x99 subsurface property with hydraulic\nfracturing liquid and proppants; and, as noted, Southwestern has not challenged the\nintermediate court\xe2\x80\x99s action in this respect.\nThat being the case, \xe2\x80\xa6 we find that the appropriate action at this juncture is to vacate\nthe Superior Court\xe2\x80\x99s order and remand for reconsideration in light of the guidance\nprovided in this opinion, and the certified record on appeal\xe2\x80\xa6.\n\n\x0c162\n\nProperty\n\nJUSTICE DOUGHERTY[, concurring in part and dissenting in part:]\nI join the majority\xe2\x80\x99s holding that the rule of capture remains effective in Pennsylvania\nto protect a developer from trespass liability where there has been no physical invasion\nof another\xe2\x80\x99s property. In so holding, the majority correctly recognizes that if there is\nsuch a physical invasion the rule of capture will not insulate a developer engaged in\nhydraulic fracturing from trespass liability. As I agree with both propositions, I also\nagree the matter should be remanded for further proceedings involving a specific\ninquiry into a physical invasion. I respectfully dissent, however, from the notion that\nthis question must be determined by the Superior Court on the present record\xe2\x80\xa6.\nGiven the state of the record, which was apparently not complete at the time the trial\ncourt erroneously entered summary judgment, I would remand the matter to that court\nfor further proceedings, including the completion of discovery on the factual question\nof physical invasion, and trial thereon as necessary.\nNotes and Questions\n1. Questions of Fact; Questions of Law. Do Chief Justice Saylor and Justice\nDougherty disagree on the content of the legal rules in Pennsylvania regarding\nthe ownership of oil and gas? Do they disagree on the law of trespass as it\napplies to mineral extraction? If the answer to both these questions is no, what\nis their disagreement about?\nIn considering these questions, ask yourself what actually happened to the Briggses\nand their land in this case. Are you confident you can answer that question? If\nnot, it may be difficult to say whether they should prevail on their trespass or\nconversion claims. This is not because the legal rule is unclear; rather it is\nbecause it may be unclear whether the rule is satisfied given the facts in the record.\nThis distinction between legal issues and factual issues is central to the practice\nof law, and you will surely learn more about it in your civil procedure class. How\ndoes the court\xe2\x80\x99s resolution of the legal issues in the case affect the factual questions\nthat the parties must answer in litigation? How should they go about answering\nthose questions? What is likely to happen to the Briggses\xe2\x80\x99 claim on remand, and\nwhat would have happened if Justice Dougherty\xe2\x80\x99s opinion had instead carried a\nmajority of the court? (Hint: The answer to this last question has less to do with\nthe law of property and more to do with the law of civil procedure.)\n\n\x0cAllocation\n\n163\n\n2. I Drink Your Milkshake. * Briggs reaffirms a principle of long standing in oil\nand gas law. Imagine Alice and Bob are neighboring landowners in an oil-rich\nregion. Alice drills an oil well at an angle, such that the wellhead is on Alice\xe2\x80\x99s\nland, but the bottom of the wellbore, from which the pipe draws oil, is under\nBob\xe2\x80\x99s land. Bob sues Alice to enjoin the continued operation of the well and to\nrecover the value of the oil already extracted. Under the rule of capture and the\ndefinition of trespass as discussed in Briggs, what result and why? See 1 SUMMERS\nOIL AND GAS \xc2\xa7 2:3 (3d ed.) (\xe2\x80\x9c[I]f a well deviates from the vertical and produces\noil or gas from under the surface of another landowner, that is a trespass for\nwhich the adjacent owner is entitled to damages, an accounting and\ninjunction.\xe2\x80\x9d). Why might it be acceptable to use a well on your land to draw the\noil from under your neighbor\xe2\x80\x99s land, but not to drill the bottom of your well\nunder the surface owned by your neighbor to extract the very same oil? Does\nthe distinction have any practical effect? Does the advent of fracking technology\nchange your answer?\n3. Incentives Again. Given that any landowner can lawfully extract all the oil and\ngas under not only her land, but potentially under the land of any neighboring\nlandowners who occupy the surface over the same geologic formation, what\nincentive does each landowner over a large formation have with respect to that\nunderlying oil and gas? In early-20th-century California, we found out:\n\n*\n\nTHERE WILL BE BLOOD (Paramount Vantage/Miramax Films 2007).\n\n\x0c164\n\nProperty\n\nSignal Hill, California, c. 1923. Source: U.S. Library of Congress PPOC,\nhttp://www.loc.gov/pictures/resource/pan.6a17401/\n\nThis is an image of Signal Hill, California, one of the richest oil fields ever\ndiscovered, around the peak of its productivity in 1923. Why do you think there\nare so many oil derricks in such close proximity to each other? Do you think\nthis quantity and density of wells are necessary to extract the oil underground?\nIf not, isn\xe2\x80\x99t this duplication of investment and effort wasteful? Couldn\xe2\x80\x99t the oil\nbe just as easily extracted with one (or at least far fewer) wells? If so, why did\nthe people of Signal Hill build so many? Could property law be playing a role?\n4. The Tragedy of the Commons. The race to drill in Signal Hill evokes one of\nthe key set-pieces invoked by economists to justify private property rights: the\ntragedy of the commons, famously described in an essay of the same name:\n\xe2\x80\x9cPicture a pasture open to all. It is to be expected that each\nherdsman will try to keep as many cattle as possible on the\ncommons. \xe2\x80\xa6 As a rational being, each herdsman seeks to\nmaximize his gain. Explicitly or implicitly, more or less\nconsciously, he asks, "What is the utility to me of adding one\nmore animal to my herd?" \xe2\x80\xa6[T]he herdsman receives all the\nproceeds from the sale of the additional animal\xe2\x80\xa6. Since,\nhowever, the effects of overgrazing are shared by all the\nherdsmen, \xe2\x80\xa6 any particular decision-making herdsman [bears]\nonly a fraction of [the negative effects of his additional animal].\xe2\x80\xa6\n[T]he rational herdsman concludes that the only sensible course\n\n\x0cAllocation\n\n165\nfor him to pursue is to add another animal to his herd. And\nanother; and another.... But this is the conclusion reached by each\nand every rational herdsman sharing a commons. Therein is the\ntragedy. Each man is locked into a system that compels him to\nincrease his herd without limit\xe2\x80\x94in a world that is limited.\xe2\x80\x9d\n\nGarrett Hardin, The Tragedy of the Commons, 162 SCIENCE 1243 (1968).\nThe negative effects of each additional animal, which are suffered by all the\ncommon owners collectively, are what economists refer to as an externality.\nSome of the things we do with the resources we control can make others better\nor worse off. If I divert a stream to my mine, your crops may wither; if I plant\na rosebush in my garden, you may enjoy the smell of my flowers on your way\nto work each day. The key point to keep in mind about these externalities caused\nby my conduct is that I care about them less than you do. I am better off if the stream\nI diverted makes my mine more productive; the fact that the diversion causes\nyour crops to die doesn\xe2\x80\x99t affect me directly, or perhaps at all.\nExternalities can lead to the kind of misallocation of investment and effort we\nsee in Signal Hill or the overcrowded pasture: in deciding whether to engage in\nan activity, I am unlikely to take sufficient account of the effects of my activity\non others. This, in turn, can lead to bad aggregate outcomes: I may impose large\ncosts on all my neighbors by engaging in an activity that is of only moderate\nbenefit to me, or I may refrain from an activity that would confer large benefits\non many people at only moderate cost to myself. The trouble is that I have no\nincentive to weigh the cost of your dying crops, your starving animals, or your\ndried-up well.\nThe economist\xe2\x80\x99s solution to this problem is to internalize the externalities that result\nfrom resource use. That is, to find some way to make the effects of a person\xe2\x80\x99s\nactions hit that person in the pocketbook, for good or for ill. One way to\ninternalize the externalities that generate the tragedy of the commons is to\nconvert the commons to private ownership. Knowing that pasturing too many\nanimals today would leave nothing for his animals to eat tomorrow, a rational\nowner of the pasture would calibrate the number of animals he keeps to maximize\ntheir number today while ensuring a stable supply of fodder into the future.\n\n\x0c166\n\nProperty\nIndeed, Professor Harold Demsetz famously argued that property rights arise\nprecisely when the benefits of exploiting a scarce resource have increased in\nvalue (due to increasing demand or decreasing supply) to the point where the\nright to control that value would be a sufficient incentive to undertake the costs\nof responsibly managing the resource (i.e., where an owner would be willing to\ninternalize the externalities of using the resource). See Harold Demsetz, Toward\na Theory of Property Rights, 57 AM. ECON. REV. 347 (1967).\nSo goes the theory, at any rate. But this theory leaves open a host of practical\nquestions, primarily about allocation of these theoretically attractive private\nproperty rights. Does it make the most sense to have one owner of the whole\npasture? Should the pasture be divided into parcels, and if so, how many and\nhow should they be assigned? What if dividing the pasture into smaller parcels\nleaves each owner with insufficient space to pasture animals? If there is just\none owner, how are we supposed to choose the lucky winner? And once the\nwinner is chosen, what is everyone else supposed to do? Finally, who has the\nauthority to decide all these questions?\nWe can apply these questions to our oil and gas example. If you were trying to\navoid overexploitation of the oil field at Signal Hill in 1923, would you assign\nprivate property rights over the entire oil field? How? To whom? Is there an\nalternative to private property rights that can avoid inefficient overexploitation?\nMight the experience of other societies whose territory includes valuable fossil\nfuel reserves be instructive? See Helge Ryggvik, A Short History of the Norwegian\nOil Industry: From Protected National Champions to Internationally Competitive\nMultinationals, 89 BUSINESS HISTORY REVIEW 3 (2015).\n5. Hardin\xe2\x80\x99s Problematic Legacy. Garrett Hardin\xe2\x80\x99s metaphor of the\noverburdened pasture was one piece of a broader worldview expressed in his\nwritings that strikes many today as deeply problematic. Like many mid-20thcentury residents of rich countries, Hardin was concerned about a supposed\n\xe2\x80\x9cpopulation bomb\xe2\x80\x9d: a postwar trend of higher population growth in poorer\ncountries relative to richer countries. Some predicted that this population\ngrowth would generate levels of consumption that would overburden the\n\n\x0cAllocation\n\n167\n\nearth\xe2\x80\x99s resources (particularly its capacity to produce food), leading to\nexhaustion of those resources and widespread pollution, famine, and poverty.\nHardin\xe2\x80\x99s reaction to those predictions was to see developing nations as\nadversaries in a global competition for resources, and to urge national and even\nethnic solidarity within rich countries to resist the developing world\xe2\x80\x99s demands\nfor access to those resources. Though few read the full essay today, The Tragedy\nof the Commons is ultimately an argument in favor of compulsory restraints on\nprocreation. Its final sections equate \xe2\x80\x9cbreeding\xe2\x80\x9d with bank robbery, and\nconclude: \xe2\x80\x9cThe only way we can preserve and nurture other and more precious\nfreedoms is by relinquishing the freedom to breed, and that very soon.\xe2\x80\x9d Hardin,\nsupra, at 1248. Hardin thought rich countries should refuse to grant foreign aid,\nlimit immigration from poor countries, impose compulsory measures to reduce\nfertility rates, and harden their hearts against any moral pangs arising from the\nresulting suffering of the world\xe2\x80\x99s poor\xe2\x80\x94policies that went hand-in-hand with\nhis view of resource competition as the struggle of rich societies against poor\nsocieties for survival. In his own words:\n\xe2\x80\x9cMetaphorically each rich nation can be seen as a lifeboat full of\ncomparatively rich people. In the ocean outside each lifeboat\nswim the poor of the world, who would like to get in, or at least\nto share some of the wealth. What should the lifeboat passengers\ndo?... Suppose we decide to preserve our small safety factor and\nadmit no more to the lifeboat. Our survival is then possible\nalthough we shall have to be constantly on guard against boarding\nparties.\xe2\x80\x9d\nGarrett Hardin, Lifeboat Ethics, PSYCHOLOGY TODAY (Sept. 1974).\nToday, many critics note that Hardin\xe2\x80\x99s arguments smack of eugenics and\nimperialism. In his non-academic writings, Hardin was outspoken in his\nopposition to ethnic diversity and his support of restricting non-European\nimmigration to the United States, and the Southern Poverty Law Center\nidentifies him as a white nationalist extremist. Southern Poverty Law Center,\nExtremist Files: Garrett Hardin, https://www.splcenter.org/fightinghate/extremist-files/individual/garrett-hardin. One critic rejects Hardin\xe2\x80\x99s\n\n\x0c168\n\nProperty\nargument about the tragedy of the commons as a product of his chauvinist\npolitics: \xe2\x80\x9c[R]acist, eugenicist, nativist and Islamophobe... [h]is writings and\npolitical activism helped inspire the anti-immigrant hatred spilling across\nAmerica today\xe2\x80\xa6. Hardin wasn\xe2\x80\x99t making an informed scientific case. Instead, he\nwas using concerns about environmental scarcity to justify racial discrimination.\xe2\x80\x9d\nMatto Mildenberger, The Tragedy of The Tragedy of the Commons, SCIENTIFIC\nAMERICAN: VOICES (April 23, 2019).\nDoes the fact that Hardin held deplorable social and political views detract from\nthe force of his arguments about resource management? Your answer may\ndepend on whether you believe the two are related\xe2\x80\x94whether his solutions to\nthe problem of stewarding the Earth\xe2\x80\x99s scarce resources were really just a means\nto the particular (and contestable) ends contemplated by his political views.\nThere is a plausible argument that they were: that his theoretical model of\noverconsumption in a commons is an abstraction of his concern that growing\nresource consumption by developing Latin American, Asian, and African\nsocieties posed a threat to the ability of rich European and North American\nsocieties to maintain the far higher per capita levels of consumption they enjoy.\nIn this view, Hardin\xe2\x80\x99s proposed solution\xe2\x80\x94giving some privileged consumers\nthe power to exclude others\xe2\x80\x94seems conveniently designed to justify rich\ncountries\xe2\x80\x99 privileged consumption levels. The very term \xe2\x80\x9cpopulation bomb,\xe2\x80\x9d\npopularized in a bestselling book published in the same year as The Tragedy of the\nCommons (PAUL R. EHRLICH, THE POPULATION BOMB (1968)), reflects a view\nof the developing world as a deadly threat, and implies that the solution lies, not\nin reduced consumption by rich countries, or in reallocation of resources more\ngenerally, but in limiting the number of competitors for scarce resources.\nThis view has had serious world-historical consequences. Over the second half\nof the 20th century, population control was enthusiastically promoted by\nWestern countries, by philanthropic organizations such as the Rockefeller\nFoundation and the Ford Foundation, and by the United Nations. The\ngovernments of developing countries such as India and China\xe2\x80\x94often with the\nsupport and financial encouragement of Western-led institutions such as the\nWorld Bank\xe2\x80\x94implemented decades-long programs of incentivized or\ncompulsory sterilization and abortion\xe2\x80\x94with mixed results, and at great cost. See\n\n\x0cAllocation\n\n169\n\ngenerally MATTHEW CONNELLY, FATAL MISCONCEPTION: THE STRUGGLE TO\nCONTROL WORLD POPULATION (2008).\nBut as it turned out, Hardin and the other doomsayers were wrong in their\npredictions of global famine and resource collapse. Technological advances in\nfood production and pollution control, as well as social and political changes\nsuch as conservation programs, democratization, and reductions in armed\nconflict, ultimately put the lie to many of their direst predictions. Food\ninsecurity and extreme poverty have steadily declined worldwide since the 1960s.\nPopulation growth rates have also steadily declined worldwide, notably in\ninverse correlation with increases in income and in women\xe2\x80\x99s educational\nattainment. But even today, similar fears and analogous political concerns\npervade debates over problems of great importance\xe2\x80\x94particularly climate\nchange\xe2\x80\x94in which resource allocation and stewardship play a crucial role.\n6. The Comedy of the Commons. Whether or not one finds Hardin\xe2\x80\x99s arguments\nmorally repugnant, his analyses have also been criticized as bad social science.\nIt turns out that the free-for-all common pasture of Hardin\xe2\x80\x99s essay lacks a\nhistorical antecedent: medieval English commons were actually a form of\ncommunity resource management based on ancient rules and customs that\nserved to preserve the commons for future generations. See Susan Jane Buck\nCox, No Tragedy on the Commons, 7 ENVIRONMENTAL ETHICS 49 (1985). And\nsuch community management arrangements are not unusual.\nSome of the most groundbreaking work in economics in the past half-century\xe2\x80\x94\nsuch as the Nobel Prize-winning work of Dr. Elinor Ostrom\xe2\x80\x94has\ndemonstrated how community resource management actually works\nsurprisingly well in contexts as diverse as Swiss mountain farms, Filipino\nirrigation canals, and Turkish fisheries. See generally ELINOR OSTROM,\nGOVERNING THE COMMONS (1990). Indeed, some resources\xe2\x80\x94infrastructure\nsuch as roads and waterways, recreational facilities such as parks and beaches,\nand social spaces such as public squares\xe2\x80\x94may have characteristics of a \xe2\x80\x9ccomic\xe2\x80\x9d\ncommons in that the more people use them, the more valuable they become (at\nleast within a finite community). See generally, e.g., Carol Rose, The Comedy of the\nCommons: Commerce, Custom, and Inherently Public Property, 53 U. CHI. L. REV. 711\n\n\x0c170\n\nProperty\n(1986). We will revisit these ideas when we encounter the public trust doctrine\nin our unit on Easements.\nGiven the practical problems of allocation raised by efforts to privatize\nresources, and the availability of alternative management schemes for at least\nsome such resources, we might well question whether the absence of property\nrights over scarce resources necessarily results in tragedy. In any case, we ought\nto be skeptical of the argument that the tragedy of the commons must affect all\nresources, in all societies, at all times.\n7. Are the doctrines we have studied regarding allocation of fugitive resources\nproperty-based or commons-based? Take, for example, the riparian doctrine of\nreasonable use: can riparian owners take as much of the waters flowing past\ntheir land as they want, whenever they wish? Is there any middle ground\nbetween the \xe2\x80\x9csole and despotic dominion\xe2\x80\x9d of Blackstone\xe2\x80\x99s private property and\nthe tragic spiraling waste of Hardin\xe2\x80\x99s unregulated pasture? If so, how does the\nlaw decide who gets what?\nWhat about the prior appropriation rule governing water rights in western\nstates? Is it an instance of law stepping in to prevent a tragedy of the commons?\nThat is certainly one conventional interpretation of the rule. But Professor\nDavid Schorr recently argued that early settlers in Colorado had informally\nworked out relatively egalitarian water allocation arrangements, which the Coffin\ncourt was merely protecting against destabilizing intrusions by new arrivals and\npowerful corporate interests. See generally DAVID SCHORR, THE COLORADO\nDOCTRINE (2012). Which makes more sense to you: that the Coffin court was\nsetting economic policy to avoid overuse of scarce water, or that it was\nprotecting the past investments and future expectations of the state\xe2\x80\x99s most\nestablished citizens? If you were a newly arrived farmer in Colorado when Coffin\nwas announced, how would you react to the opinion?\n\n\x0cAllocation\n\n171\n\nD. Allocation of Intangibles\nTribune Co. v. Oak Leaves Broadcasting Station\n68 Cong. Rec. 216 (Ill. Cir. Ct. Cook Cty. Nov. 17, 1926)\nDECISION OF JUDGE WILSON ON DEFENDANTS\xe2\x80\x99 MOTION TO\nDISSOLVE TEMPORARY INJUNCTION\n\xe2\x80\xa6 The bill very briefly charges that the complainant is and has been for some time a\ncorporation organized under the laws of the State of Illinois. with its principal place of\nbusiness in the city of Chicago, and is engaged in the publication of a newspaper known\nas the Chicago Daily Tribune. and that it has an average daily paid circulation of several\nhundred thousand subscribers.\nIt further charges that since March 29, 1924, it has been engaged in broadcasting by\nradio of daily programs of information, amusement, and entertainment to the general\npublic, and particularly to that part of the general public residing in and in the vicinity\nof the city of Chicago, and for that purpose the complainant, operates an apparatus\ngenerally known as a broadcasting station located on the Drake Hotel and another such\nbroadcasting station operated near the city of Elgin.\nThe bill further charges that it has been the custom for several years for persons\nengaged in broadcasting to designate their certain stations by certain combinations of\nletters known as call letters, and that these call letters serve to enable persons using\nradio receiving sets to identify the particular station. and in this instance the\ncomplainant has been using the letters WGN, which stand for the abbreviation of the\nWorld\xe2\x80\x99s Greatest Newspaper which appears to have been adopted by the complainant\nas a sort of trade name indicating the Chicago Daily Tribune.\n\xe2\x80\xa6 Further charges, on information and belief, that the number of persons who listen\nto the said broadcasting of the complainant is in excess of 500,000 and that these\npersons are educated to listen in or tune in on the wave length of the complainant for\nthe purpose of hearing and enjoying the programs so broadcasted.\nThe bill further charges that, when two stations are broadcasting on the same or nearly\nthe same wave length, the result will be that the users of the radio will either hear one\nof the stations to the exclusion of the other or hear both of the stations at the same\n\n\x0c172\n\nProperty\n\ntime, which will cause confusion to the listener, or will hear one to the exclusion of the\nother but accompanied by a series of noises, such as whistles and roars, which render\nthe program practically useless.\n\xe2\x80\xa6The bill further charges that the sending waves used by broadcasting stations are\nalso classified by the number of kilocycles denoting the frequency of vibration per\nsecond characteristic of each wave. The higher the wave length the less is the number\nof kilocycles, and a definite number of kilocycles is characteristic of each wave. *\n\xe2\x80\xa6 The complainant further charges that on the 14th of December, 1925, it did, and\never since then has, broadcast on a sending wave length of 302.8 meters (the kilocycles\ncharacteristic of such wave length being 990) and that it broadcasts from both the\nDrake Hotel and from its Elgin broadcasting station and that, at that time, no other\nbroadcasting station in the city of Chicago or in the entire State of Illinois was using\nsaid wave length or any wave length sufficiently near to interfere with complainant\xe2\x80\x99s\nbroadcasting and that this fact was generally known to the public and that the public\nhad access by reason thereof to the programs of the complainant as broadcast over the\nsame wave length from the two broadcasting stations and which programs were\nannounced at different periods of time by arrangement of the complainant.\n\xe2\x80\xa6That the defendants, the Oak Leaves Broadcasting Station (Inc.), and the Coyne\nElectrical School (Inc.) are corporations existing under and by virtue of the laws of\nIllinois, and that the defendant, Guyon, is a resident of Chicago, Ill., engaged in\nbusiness in said city under the name of Guyon\xe2\x80\x99s Paradise Ball Room, and operates a\ndance hall in the city of Chicago.\nThe bill further charges that the broadcasting station, heretofore used and operated by\nthe defendants, Oak Leaves Broadcasting Station (Inc.), and Coyne Electrical School\n(Inc.), which had been operated from Oak Park, a suburb of the city of Chicago, was\nmoved to 124 North Crawford Avenue, where Guyon\xe2\x80\x99s Paradise Ball Room is located,\nand is being now operated from that point, and charges that the said defendant, Guyon,\n\n[Eds.\xe2\x80\x94The formula is f = c/\xce\xbb, where f is the frequency in cycles per second, \xce\xbb is the wavelength in meters, and\nc is the speed of light (approximately 299,792,458 meters per second). So, for example, to use WGN\xe2\x80\x99s numbers,\n299,792,458 / 302.8 = 990,067.56 cycles per second, or approximately 990 kilocycles per second.]\n\n*\n\n\x0cAllocation\n\n173\n\nbecame the owner and operator of said broadcasting station and that the other\ndefendants have some interest in said station which is unknown to the complainant,\nbut which is charged to be true on information and belief.\nThe bill further charges that said station of the defendants had originally used a wave\nlength of 220 meters (1,350 kilocycles) \xe2\x80\xa6 and that, later, it changed its wave length to\n249.9 meters (1,200 kilocycles), which it continued to use until on or about September\n7, 1926, and further charges that the defendants had never enjoyed any considerable\ndegree of the good will of the public, nor was it popular with the users of radio receiving\nsets, but was comparatively unknown in Chicago or its vicinity.\nThat on or about September 7, 1926, the said Guyon\xe2\x80\x99s Paradise Broadcasting Station,\nused and operated by the defendants, changed its sending wave length to a wave length\neither the same as that of the complainant (i.e. 302.8) or one having a frequency of\nconsiderably less than 50 kilocycles different than that of the complainant, and that it\nis now using said wave length and has from that time until the date of the filing of the\nbill herein \xe2\x80\xa6 .\nThe bill further charges that the defendants have, since September 7, 1926, used the\nsaid new wave length during the hours of the day when complainant is broadcasting,\nand that by reason thereof said broadcasting by the said defendants has interfered with\nand destroyed complainant\xe2\x80\x99s broadcasting to the public in the city of Chicago and\nthroughout the region where complainant\xe2\x80\x99s newspaper circulates, and that by reason\nthereof radio receivers have been unable to hear the programs of the complainant, and\nthat if it is allowed to continue it will work incalculable damage and injury to the good\nwill of the complainant\xe2\x80\x99s broadcasting, and consequently will injure the circulation of\nthe complainant so far as its newspaper is concerned and deprive it of great profits.\nFurther charges that there are other wave lengths which are usable by the defendants\nand that this wave length can be changed with practically no expense and within a short\nperiod of time.\nThe bill prays for an order restraining the defendants from broadcasting from said\nstation in such a manner as to interfere with the broadcasting of the complainant, and\nmore particularly from using any wave length within 100 miles of the city of Chicago\nhaving a frequency of less than 1,040 kilocycles per second, or more than 940 kilocycles\n\n\x0c174\n\nProperty\n\nper second, charging, in effect, that any wave length within that designated number of\nkilocycles would necessarily cause an interference with the broadcasting of the\ncomplainant.\nThe answer \xe2\x80\xa6 admits that where a broadcasting station is operating on a wave length\nthe frequency of which is within 50 kilocycles per second of the number of kilocycles\nper second characteristic of the wave length of the first station, that some interference\nwill result but that such interference is natural where stations are operating in close\nproximity one to the other, but that where two broadcasting stations in the same\nlocality are properly constructed and operated and the wave length employed sharply\ndefined and the power of said stations substantially equal there will be no appreciable\ninterference by the stations if they are separated by 40 kilocycles. \xe2\x80\xa6\nThe answer admits that on September 7, 1926, the said defendants\xe2\x80\x99 station changed its\nwave length, but denies that they are broadcasting over the same wave length as that\nof the complainant, but state that they are sending over a wave length which is removed\n40 kilocycles from the wave length used by the complainant, and that said wave being\nused is 315.6 meters with a frequency of 950 kilocycles.\n\xe2\x80\xa6 The answer further admits that on or about September 7, 1926, there was available\nto them a wave length of 249.9 metres with a frequency of 1,200 kilocycles, but state\nthat said wave length is not desirable for the purpose of broadcasting and that its use\nwould render WGES of little or no value as a broadcasting station.\nAnd further sets forth that there are other wave lengths which would be usable by the\ndefendants, but states that their use would cause greater interference to other\nbroadcasters than the interference now caused to WGN by the use of the present wave\nlength now employed by them.\n\xe2\x80\xa6 It is a matter of general knowledge that in the last few years there has grown up in\nthe United States, as well as abroad, a well recognized calling or business known as\nbroadcasting which consists in sending from a central station, electrically equipped,\nprograms of music and amusement, speeches by men of prominence, news of the day\nand items of interest taking place in the world, and that these various programs are\nreceived by the public over radio receiving sets.\xe2\x80\xa6 Wave lengths have been bought and\nsold and broadcasting stations have changed hands for a consideration. Broadcasting\n\n\x0cAllocation\n\n175\n\nstations have contracted with each other so as to broadcast without conflicting and in\nthis manner be able to present their different programs to the waiting public. The\npublic itself has become educated to the use or its receiving sets so as to be able to\nobtain certain particular items of news, speeches, or programs over its own particular\nsets.\nThe theory of the bill in this case is based upon the proposition that by usage of a\nparticular wave length for a considerable length of time and by reason of the\nexpenditure of a considerable amount of money in developing its broadcasting station\nand by usage of a particular wave length educating the public to know that that\nparticular wave length is the wave length of the complainant: and by furnishing\nprograms which have been attractive and thereby cause a great number of people to\nlisten in to their particular programs that the said complainant has created and carved\nout for itself a particular right or easement in and to the use of said wave length which\nshould be recognized in a court of equity and that outsiders should not be allowed\nthereafter, except for good cause shown, to deprive them of that right and to make use\nof a field which had been built up by the complainant at a considerable cost in money\nand a considerable time in pioneering. \xe2\x80\xa6\nThe defendants further insist that a wave length can not be made the subject of private\ncontrol and, further and lastly, that as a matter of fact they are not interfering with the\ncomplainant by the use of the present wave length employed by them from their\nbroadcasting station. \xe2\x80\xa6\n[The court discussed the 1912 federal statute which required a license to broadcast by\nradio and restricted the wavelengths available, as discussed above. It concluded that\nthe statute did not displace state law.]\nIn the first place, it is argued that there are no rights in the air and that the law has no\nright or authority to restrict the using of wave lengths or to exclude others from their\nuse. In answer to this it might be said that Congress has already attempted to regulate\nthe use of the air in its enactment of August 13, 1912, by providing that only certain\nstrata of the air or ether may be used for broadcasting purposes and, further, requiring\npersons to take out a license before they are permitted to exercise the use of the air or\nether. Moreover, it appears to this court that the situation is such from the past\ndevelopment of the industry of broadcasting and radio receiving and from the apparent\n\n\x0c176\n\nProperty\n\nfuture, as indicated by the past, that, unless some regulatory measures are provided for\nby Congress or rights recognized by State courts, the situation will result in chaos and\na great detriment to the advancement of an industry which is only in its infancy.\nWhile it is true that the case in question is novel in its newness, the situation is not\ndevoid, however, of legal equitable support. The same answer might be made, as was\nmade in the beginning; that there was no property right, or could be, in a name or sign,\nbut there has developed a long line of cases, both in the Federal and State courts, which\nhas recognized, under the law known as the law of unfair competition, the right to\nobtain a property right in a name or word or collection of names or words [Ed: i.e., a\ntrademark] which gives the person who first made use of the same a property right\ntherein, provided that by reason of their use, he has succeeded in building up a business\nand created a good will which has become known to the public and to the trade and\nwhich has served as a designation of some particular output so that it has become\ngenerally recognized as the property of such person. The courts have held that persons\nwho attempt to imitate or to make use of such trade name or names or words evidently\ndo so for the purpose of enriching themselves through the efforts of some other person\nwho by the investment of money and time has created something of value. Equity has\ninvariably protected the rights of such persons in the use of said names.\nIt is also true that the courts have recognized, particularly in the west, the right to the\nuse of running water for the purposes of mining and other uses. (Atchison v. Peterson, 20\nWall. 507; Cache La Poudre Reservoir v. Water Supply & Storage Co., 25 Colo. 161.)\n\xe2\x80\xa6 In regard to the water cases, counsel for the defendants call our attention to the rule\nin this State, as set forth in the case of Druley v. Adam (102 Ill. 177), where the court\nsays in its opinion, page 193, \xe2\x80\x9cThe law has been long settled in this State that there can\nbe no property merely in the water of a running stream. The owner of land over which\na stream of water flows has, as incident to his ownership of the land, a property right\nin the flow of the water at that place for all the beneficial uses that may result from it,\nwhether for motive power in propelling machinery or in imparting fertility to the adjacent soil, etc.; in other words, he has a usufruct in the water while it passes; but all other\nriparian proprietors have precisely the same rights in regard to it and, apart from the\nright of consumption for supplying natural wants, neither can, to the injury of the other,\nabstract the water or divert or arrest its flow.\xe2\x80\x9d\n\n\x0cAllocation\n\n177\n\nThe same court, however, in its opinion, on page 201, while holding that the western\nwater cases are not applicable, recognized the law as laid down in those cases and\ndistinguished them on the ground that it is apparent that the law necessarily arose in\nthose cases by reason of the peculiar circumstances and necessities existing in those\ncountries at the time.\nIt is the opinion of the court that, under the circumstances as now exist, there is a\npeculiar necessity existing and that there are such unusual and peculiar circumstances\nsurrounding the question at issue that a court of equity is compelled to recognize rights\nwhich have been acquired by reason of the outlay and expenditure of money and the\ninvestment of time and that the circumstances and necessities are such, under the\ncircumstances of this case, as will justify a court of equity in taking jurisdiction of the\ncause. Such being the case, it becomes the duty of the court to consider the last question,\nnamely, whether or not there is such an interference by the defendants with the broadcasting station of complainant that the temporary injunction heretofore granted should\nbe kept in force until a final hearing of the cause.\n[W]e believe that the equities of the situation are in favor of the complainant on the\nfacts as heretofore shown, particularly in that the complainant has been using said wave\nlength for a considerable length of time and has built up a large clientage, whereas the\ndefendants are but newly in the field and will not suffer as a result of an injunction in\nproportion to the damage that would be sustained by the complainant after having\nspent a much greater length of time in the education of the general radio-receiving\npublic to the wave length in question.\nWe are of the opinion further that, under the circumstances in this case, priority of\ntime creates a superiority in right, and the fact of priority having been conceded by the\nanswer it would seem to this court that it would lie only just that the situation should\nbe preserved in the status in which it was prior to the time that the defendants\nundertook to operate over or near the wave length of the complainant. \xe2\x80\xa6\n\xe2\x80\xa6 [T]he order heretofore entered will be modified so that it will read that the\ndefendants are restrained and enjoined from broadcasting over a wave length\nsufficiently near to the one used by the complainant so as to cause any material\ninterference with the programs or announcements of the complainant over and from\nits broadcasting station to the radio public within a radius of 100 miles, and in order\n\n\x0c178\n\nProperty\n\nthat the defendants may be apprised of the feeling of the court in this regard, while the\norder is not expressly one of exact limitation, nevertheless the court feels that a distance\nremoved 50 kilocycles front the wave length of the complainant would be a safe\ndistance and that if the defendants use a wave length in closer proximity than the one\nstated it must be at the risk of the defendants in this cause.\nNotes and Questions\n1. Oak Leaves is a road not taken. This report of the case comes from the\nCongressional Record. Senator Clarence Dill (D-WA) had it read into the record on\nDecember 10, 1926 (i.e. the month after it was decided) because of its bearing\non a radio regulation bill he co-sponsored. * That bill became the Radio Act of\n1927, which established the licensing system whose essentials are still in force\ntoday. Broadcasters require a license from the Federal Communications\nCommission; those licenses specify, in some detail, the frequency on which they\ncan broadcast, the locations of their transmitters, and the power they can use.\nThe licenses started out being heavily regulated to ensure that each broadcaster\xe2\x80\x99s\nprograms served the public interest, but over time the licensing process has\nbecome far more ministerial. Subject to some concentrated-ownership\nrestrictions and a few miscellaneous content rules (e.g. compliance with the\nEmergency Broadcasting System and some rules on children\xe2\x80\x99s programming), a\nbroadcaster is free to transmit whatever programming it wants as long as it\ncomplies with the FCC\xe2\x80\x99s technical requirements. The result is a system that\ndivides the airwaves into geographic and frequency blocks, and gives each of\nthese blocks an exclusive licensee. Anyone else broadcasting on these\nfrequencies in these places is violating the law. Similar systems hand out the\nright to use other frequencies for other purposes (e.g. mobile phone towers,\npolice radios, satellite communications, etc.). In effect, any unauthorized use of\nsomeone else\xe2\x80\x99s assigned spectrum is illegal.\nCompare this system with the common-law process illustrated by Oak Leaves.\nOne obvious difference is how one acquires rights in a frequency: prior use\n\nBeing read into the record is not necessarily a sign of importance. Five pages later, Senator Byron Harrison (DMS) had one of Aesop\xe2\x80\x99s fables read into the record to make a point about Republican political maneuvering.\n\n*\n\n\x0cAllocation\n\n179\n\nversus governmental assignment. Which of the two seems more likely to lead\nto an efficient allocation of resources to those best able to make good use of\nthem? Which is fairer to participants? Which is more likely to serve the interests\nof the listening public? Another evident difference is the different tests for\nviolation of another\xe2\x80\x99s rights. Is it fair to say that the FCC\xe2\x80\x99s exclusive licenses are\nprotected by a kind of right against trespass, while Oak Leaves more closely\nresembles the sic utere tuo maxim? Are there any other relevant differences?\nHere\xe2\x80\x99s another alternative: no licenses at all, and let anyone use the spectrum\nhowever they see fit. Before you scoff at this \xe2\x80\x9ccommons\xe2\x80\x9d approach to spectrum\nallocation, consider that this is how WiFi works. You don\xe2\x80\x99t need an FCC license\nto plug in a home wireless router. The frequency range from 2.4 gigahertz (i.e.\n2.4 billion cycles per second) to 2.5 gigahertz is \xe2\x80\x9cunlicensed\xe2\x80\x9d; the FCC regulates\nthe maximum power that a device can emit, but otherwise, anyone is basically\nfree to use any device they want however they want. How well does your WiFi\nconnection typically work? What about the chaos of interference Oak Leaves\nfeared? Would this approach work on a wider scale?\n2. Oak Leaves presents its holding as an almost inevitable consequence of the\nnature of spectrum. But what is spectrum? Radio broadcasting works by\nrunning an electric current through the right kind of circuit, which results in\nelectromagnetic radiation spreading in certain ways that people with the right\nkinds of devices can detect. Why isn\xe2\x80\x99t the relevant \xe2\x80\x9cproperty\xe2\x80\x9d here the\ntransmitter and the receiver (both tangible personal property), or the land over\nwhich the radiation passes (real property)? So why not handle broadcasting\ncases using personal property torts (\xe2\x80\x9cYou damaged my radio tower by\ninterfering with its transmissions\xe2\x80\x9d) or real property torts (\xe2\x80\x9cYou trespassed by\nsending electromagnetic radiation over my land\xe2\x80\x9d)? Consider this passage from\nRonald Coase, The Federal Communications Commission, 2 J. L. ECON. 1 (1959):\nWhat does not seem to have been understood is that what is\nbeing allocated by the Federal Communications Commission, or,\nif there were a market, what would be sold, is the right to use a\npiece of equipment to transmit signals in a particular way. Once\nthe question is looked at in this way, it is unnecessary to think in\n\n\x0c180\n\nProperty\nterms of ownership of frequencies or the ether. Earlier we\ndiscussed a case in which it had to be decided whether a\nconfectioner had the right to use machinery which caused noise\nand vibrations in a neighboring house. It would not have\nfacilitated our analysis of the case if it had been discussed in terms\nof who owned sound waves or vibrations or the medium\n(whatever it is) through which sound waves or vibrations travel.\nYet this is essentially what is done in the radio industry. The\nreason why this way of thinking has become so dominant in\ndiscussions of radio law is that it seemed to have developed by\nusing the analogy of the law of airspace. In fact, the law of radio\nand television has been commonly treated as part of the law of\nthe air. It is not suggested that this approach need lead to the\nwrong answers, but it tends to obscure the question that is being\ndecided. Thus, whether we have the right to shoot over another\nman\xe2\x80\x99s land has been thought of as depending on who owns the\nairspace over the land. It would be simpler to discuss what we\nshould be allowed to do with a gun. \xe2\x80\xa6 The problem confronting\nthe radio industry is that signals transmitted by one person may\ninterfere with those transmitted by another. It can be solved by\ndelimiting the rights which various persons possess.\nIs this any more helpful than Oak Leaves\xe2\x80\x99s analogies to trademarks and water\nrights? How does the fact that intangibles are so susceptible to conceptual\nredefinition affect the justification for allocating them in particular ways?\n3. Subject Matter Redux. Does Oak Leaves give legal recognition to property that\nalready exists, or create property where none existed before? Or is \xe2\x80\x9cproperty\xe2\x80\x9d\nthe wrong way to refer to WGN\xe2\x80\x99s rights here?\n\n\x0cPart II: Possession\nWe now embark on our investigation of the ways in which the law protects owners in\ntheir possession of property. We begin with an overview of the historical system of\nclaims and remedies that common-law courts have devised to enforce this protection:\nthe property torts (and analogous crimes). We then turn to the most basic factual\nscenario in which such claims are brought: where the property of one person finds\nitself in the possession of another either by being lost and found, or by being stolen (or\nboth). We will next see how even wrongful possession can become lawful ownership\n(or \xe2\x80\x9ctitle\xe2\x80\x9d) through the doctrine of adverse possession. Finally, we will note two types\nof factual scenarios that complicate the rules governing the possessory right: first,\nwhere owners intentionally part with either possession or the right to possession (as in\nbailments and liens); and second, where a third party comes into possession by\npurchasing property from a seller who, unbeknownst to the buyer, lacked legal\nauthority to sell it (the good-faith purchaser).\n\n181\n\n\x0cProperty Torts and Crimes\nA. Real Property\nThe name of the most familiar tort protecting real property, trespass, was originally\nthe name of an entire family of actions that first emerged in the 12th and 13th centuries.\nA plaintiff would commence his case by going to the royal Chancery and purchasing a\nwrit commanding the defendant to come before the courts and explain why he had\ndone such-and-such a thing against the plaintiff\xe2\x80\x99s rights. The Latin phrases used by the\nChancery clerks who filled out the writs\xe2\x80\x94and which the royal courts insisted on when\nhearing a case\xe2\x80\x94came to define individual forms of action.\nOne of the earliest such formulaic phrases, and one with one of the longest careers in\nthe common law, was trespass quare clausum fregit (literally, \xe2\x80\x9cwhy he broke the close,\xe2\x80\x9d\nand often abbreviated to \xe2\x80\x9ctrespass q.c.f.\xe2\x80\x9d). The gist of the action was that the defendant,\nwrongfully, with force and arms (in Latin, vi et armis) and against the King\xe2\x80\x99s peace, had\nbroken into the plaintiff\xe2\x80\x99s enclosed lands and caused injury. As in a trespass action for\nintentional battery, a plaintiff bringing an action for trespass q.c.f. could obtain money\ndamages to the extent of his injuries. Trespass q.c.f. was the natural cause of action for\ndamaging the plaintiff\xe2\x80\x99s crops or destroying his buildings.\nAnother early formula, trespass de ejectione firmae (literally, \xe2\x80\x9cof ejection from his term,\xe2\x80\x9d\nand often simply \xe2\x80\x9cejectment\xe2\x80\x9d), protected a lessee against being wrongfully evicted\nfrom his lands by an intruder. To the extent that the medieval legal mind made such a\ndistinction, ejectment protected not against injury as such but against disposession; by\nthe sixteenth century, the common-law courts would put a victorious plaintiff back in\npossession. This development made ejectment a potentially attractive way to litigate\ncompeting claims to land\xe2\x80\x94in modern terms, to \xe2\x80\x9ctry title.\xe2\x80\x9d Among other things,\nejectment (like the other trespass writs) led to a trial before a jury; a defendant sued\nunder an older \xe2\x80\x9cwrit of right\xe2\x80\x9d could elect trial by battle. There was only one problem:\nejectment was only available to lessees. The result was one of the great legal fictions of\nthe common law: the fictitious lessee.\n182\n\n\x0cProperty Torts and Crimes\n\n183\n\nWhen two parties wished to try the title to a piece of land, one of them\nleased it to an imaginary person (John Doe) and the other similarly leased\nto another (William Styles). One lessee ejects the other (this will be all\nfiction), and in order to try the rights of the lessees the court has to enter\ninto the question of the rights of the lessors.\nTHEODORE F.T. PLUCKNETT, A CONCISE HISTORY OF THE COMMON LAW 374 (5th\ned. 1956). This fictional use of ejectment crossed the Atlantic and survived in the\ncaptions of famous cases like Johnson & Graham\xe2\x80\x99s Lessee v. M\xe2\x80\x99Intosh, 21 U.S. 543 (1823)\nand Martin v. Hunter\xe2\x80\x99s Lessee, 14 U.S. 304 (1816). There were no actual lessees in these\ncases; they were simply fictitious parties required by the formula of ejectment.\nToday, the distinctions between trespass (q.c.f.) and ejectment are far less significant\nbut not gone entirely. Courts can generally reach any legal issues necessary to resolve a\ncase, regardless of the plaintiff\xe2\x80\x99s initial choice of cause of action, and they have far more\nfreedom to select appropriate legal and equitable remedies, such as money damages for\ninjuries to land or lost income from being out of possession, injunctions to order a\ndefendant to cease trespassing or execute a conveyance to the plaintiff, or declaratory\njudgments about the state of title.\nOne remaining hole in the common-law system was that both trespass and\nejectment required some interference with possession, but there are many cases of\ndisputed title in which the parties are civilized enough not to be constantly elbowing\neach other off the land. The action to quiet title provides a remedy here; it is brought\nby a plaintiff objecting that another\xe2\x80\x99s claims amount to a \xe2\x80\x9ccloud\xe2\x80\x9d on her title. Other\nclaimants must either defend and prove their competing title or be estopped from\nasserting them. Quiet title, for example, is typically the appropriate cause of action to\nestablish that one has acquired title to land through adverse possession, or that an\neasement has been abandoned through non-use, or that a deed sitting in the land\nrecords is void as a forgery. Although frequently quiet title actions are brought in\npersonam against specific claimants, state statutes can authorize in rem quiet title actions\nthat extinguish the rights of all parties, known and unknown, unless they appear to\ndefend their claims. See Arndt v. Griggs, 134 U.S. 316, 327 (1890) (\xe2\x80\x9c[A] State has power\nby statute to provide for the adjudication of titles to real estate within its limits as\nagainst non-residents who are brought into court only by publication \xe2\x80\xa6 .\xe2\x80\x9d). Particularly\nin view of the long-standing \xe2\x80\x9csitus rule\xe2\x80\x9d giving state courts\xe2\x80\x99 exclusive jurisdiction over\n\n\x0c184\n\nProperty\n\nland located within their states, the in rem quiet title action probably survives the\nSupreme Court\xe2\x80\x99s 20th-century Due Process revolution.\nOriginally, the assize of nuisance protected plaintiffs\xe2\x80\x99 rights to use land they did not\nthemselves own (such as a right to pasture cows on another\xe2\x80\x99s land, much like a modern\neasement) or to be free from some specific harms caused by a neighbor (such as\nstraying cows). In the fourteenth century, plaintiffs began to be able to use writs of\ntrespass to allege a nuisance without needing to plead that the defendant had acted vi\net armis, and this new formula developed into a general action for what we would today\nrecognize as nuisances: unreasonable interferences with the use and enjoyment of land.\n(Nuisance was thus an \xe2\x80\x9caction on the case\xe2\x80\x9d; it belonged to the same branch of nonforcible trespasses as the one from which the modern tort of negligence developed.)\nIn keeping with its origins in actions \xe2\x80\x9con the case,\xe2\x80\x9d nuisance has become an extremely\nversatile cause of action, encompassing a variety of injuries to interests in real property\nand a variety of potential remedies for those injuries.\nTrespass is also a crime, but it is a surprisingly mild one. Vermont\xe2\x80\x99s basic trespass\noffense is typical:\nA person shall be imprisoned for not more than three months or fined\nnot more than $500.00, or both, if, without legal authority or the consent\nof the person in lawful possession, he or she enters or remains on any\nland or in any place as to which notice against trespass is given by:\n(A) actual communication by the person in lawful possession or\nhis or her agent or by a law enforcement officer acting on behalf\nof such person or his or her agent;\n(B) signs or placards so designed and situated as to give\nreasonable notice \xe2\x80\xa6\nVT. STAT. tit. 13, \xc2\xa7 3705. Many states\xe2\x80\x99 laws contain exceptions relaxing the notice\nrequirement in specified cases where the lack of permission ought to be obvious in\ncontext. See, e.g., MD. CODE ANN., CRIM. LAW \xc2\xa7 6-408 (making trespass a crime even\nwithout specific notice not to enter if the trespass is committed \xe2\x80\x9cfor the purpose of\ninvading the privacy of an occupant of a building or enclosure located on the property\nby looking into a window, door, or other opening.\xe2\x80\x9d).\n\n\x0cProperty Torts and Crimes\n\n185\n\nGiven the harshness of civil trespass remedies, as in Jacque, what explains the leniency\nof criminal trespass law? In many states, this mild baseline is supplemented with more\nsevere penalties for certain sorts of trespasses. New York, for example, treats criminal\ntrespass (ordinarily a violation) as a class B misdemeanor when it involves entry onto\nfenced land, a school or children\xe2\x80\x99s overnight camp, a public housing project, or a\nrailroad yard. N.Y. PENAL L. \xc2\xa7 140.10. Are these principled attempts to distinguish\namong trespasses, or special favors for particular landowners?\n\nB. Personal Property\nOne of the early variants of writs for forcible trespasses, trespass de bonis asportatis\n(literally, \xe2\x80\x9cof taking away goods,\xe2\x80\x9d and often abbreviated to \xe2\x80\x9ctrespass d.b.a\xe2\x80\x9d) was\navailable when the defendant carried away the plaintiff\xe2\x80\x99s property, and its remedy was\ndamages. But beyond this simple core, the personal property actions were a confused\nmess that defies easy description and took many centuries to clean up. The hard part\nwas to determine just what kinds of facts ought to entitle a plaintiff to recover when\nhe could not allege a taking from his possession, perhaps because he had voluntarily\nparted with possession (e.g. in a bailment, which is a temporary, voluntary transfer of\npossession of personal property) or perhaps because the defendant had not taken them\n(e.g. for found property).\nOne approach was the older writ of detinue, which was available against a bailee (the\nparty who receives possession in a bailment) who \xe2\x80\x9cdetained\xe2\x80\x9d the goods from the\nplaintiff bailor. The courts extended detinue so that it ran against other parties (at first\nthe executor of the estate of a deceased bailee, and then anyone) as long as there had\nbeen an initial bailment. But since a defendant could defeat detinue by disproving the\nallegations in the writ, detinue was really only safe when the plaintiff could trace with\nconfidence the chain from his hands to the defendant\xe2\x80\x99s. As a result, detinue \xe2\x80\x9con a\nbailment\xe2\x80\x9d was gradually supplanted by detinue \xe2\x80\x9csur trover\xe2\x80\x9d (literally, \xe2\x80\x9cupon finding\xe2\x80\x9d):\nthe plaintiff alleged that he had lost the property and the defendant had found it but\nrefused to return it. The defendant could show that he had the property rightfully (e.g.\nthrough a sale tracing back to the plaintiff), but otherwise \xe2\x80\x9clost and found\xe2\x80\x9d was a\nconveniently broad formula that could cover actual cases of missing property,\nbailments gone wrong, and even cases of suspected theft. All the plaintiff needed to\n\n\x0c186\n\nProperty\n\nshow was that the property was his and that the defendant now had it. Even so, detinue\nin its trover variation still was frequently unsatisfactory:\nA praecipe action [the general name of a category of writs including\ndetinue] was barred by performance, even imperfect performance, and\nso in detinue damages could not be awarded if the goods were restored.\nThe bailee who starved a horse to death, or who rode it further than\nagreed, or who returned other goods in a damaged state, was not liable\nin detinue. The plaintiff in detinue could not count on a bailment or loss\nof the thing demanded if it was no longer the same thing as he had bailed\nor lost, as where it had been made part of something else or fashioned\ninto something new. And on the same principle, it was arguable that he\ncould not allege a detaining of something which no longer existed at all.\nJ.H. BAKER, AN INTRODUCTION TO ENGLISH LEGAL HISTORY 394 (4th ed. 2007).\nThe solution lay, yet again, in trespass. The road to reform is paved with legal fictions.\nThe royal courts had no difficulty treating outright theft as satisfying the requirement\nof trespass d.b.a that the taking be forcible. But plaintiffs soon started pleading claims\nof trespass d.b.a for injuries to horses against defendants named Smith, and claims for\nthe forcible chopping up of lumber against defendants described as carpenters. These\nwere garden-variety contract actions (for defectively shoeing a horse or for botching a\nconstruction job)\xe2\x80\x94or would have been, if the common law had had an effective form\nof action for breach of contract. It didn\xe2\x80\x99t, and so plaintiffs who could stretched the\nfacts to fit within trespass d.b.a. The royal courts solved this particular problem around\n1350 by abandoning the need to plead vi et armis in trespass, as long as the plaintiff\ncould set forth in more detail the special facts entitling him to recover. This was the\norigin of actions on the case, mentioned above; it had the effect of kickstarting a burst\nof creative experimentation with new variation of trespass.\nOne approach, reflecting bailments\xe2\x80\x99 place on the border between property and contract,\nwas to plead that the defendant had negligently or deceitfully violated a promise to\nkeep the goods safe. Another was to plead that a bailee had intentionally converted\ngoods to his own use\xe2\x80\x94as with a bailee who drinks a bottle of wine or spends the silver\ncoins in a strongbox. This latter idea had staying power; by the 16th century, trespass\non the case for conversion was regularly used against bailees. Then history repeated\n\n\x0cProperty Torts and Crimes\n\n187\n\nitself: just as detinue was extended from bailees to third parties by alleging the fictitious\nfinding called trover, so was conversion. A plaintiff could even plead that he had \xe2\x80\x9clost\xe2\x80\x9d\nhis ship and that the defendant had \xe2\x80\x9cfound\xe2\x80\x9d it in London. The final stage in\nconversion\xe2\x80\x99s triumph was to treat a wrongful withholding itself\xe2\x80\x94the old \xe2\x80\x9cdetinue\xe2\x80\x9d\xe2\x80\x94\nas a form of conversion to the defendant\xe2\x80\x99s own use. And with that, the modern tort of\nconversion or trover took shape: the plaintiff claimed that the property was his and\nthat the defendant had treated it as his own. The defendant might still have the property,\nor might not; the property might still exist, or it might have been destroyed; what\nmattered was the defendant\xe2\x80\x99s use in a manner inconsistent with the plaintiff\xe2\x80\x99s\nownership resulting in the plaintiff\xe2\x80\x99s dispossession. As the Restatement puts it,\n\xe2\x80\x9cConversion is an intentional exercise of dominion or control over a chattel which so\nseriously interferes with the right of another to control it that the actor may justly be\nrequired to pay the other the full value of the chattel.\xe2\x80\x9d RESTATEMENT (SECOND) OF\nTORTS \xc2\xa7 222A (1965).\nWhat if the defendant merely damages the plaintiff\xe2\x80\x99s property, or interferes with its use,\nbut stops short of converting it\xe2\x80\x94as by breaking the headlights on the plaintiff\xe2\x80\x99s car, or\ntaking it for a forty-eight-hour joyride? Conversion traditionally did not quite work\nhere; instead the plaintiff\xe2\x80\x99s remedy lay in trespass to chattels, which evolved from the\noriginal action for trespass d.b.a. Its use in a case of forcible misuse (like smashing\nheadlights or temporary taking) was straightforward enough. Over time, courts\nextended its use to other cases involving indirect or non-forcible harms. But unlike\nwith trespass to land\xe2\x80\x94which as Jacque shows is actionable even without harm to the\nproperty\xe2\x80\x94the Restatement says that trespass to chattels requires that the defendant\ndeprive the plaintiff of possession, impair the value of the property, or deprive the\nplaintiff of its use. RESTATEMENT (SECOND) OF TORTS \xc2\xa7 218. See also Intel v. Hamidi,\n71 P.3d 296 (Cal. 2003) (no trespass to chattels for sending emails addressed to Intel\nemployees to Intel computers over Intel\xe2\x80\x99s objections).\nA final member of the property torts family is replevin. Initially, it was a purely feudal\nform of action. If a tenant failed to perform the feudal services due to his lord, the lord\ncould \xe2\x80\x9cdistrain\xe2\x80\x9d the tenant\xe2\x80\x99s personal property by taking possession of it. The tenant\xe2\x80\x99s\nremedy for a wrongful distraint was replevin: by posting a bond of twice the value of\nthe property, the tenant was entitled to possession immediately while the suit over the\nunderlying dispute proceeded. As the feudal character dropped out of the landlord-\n\n\x0c188\n\nProperty\n\ntenant relationship, replevin became a general-purpose action to recover possession of\nproperty wrongfully withheld. Its immediate-recovery remedy made it attractive to\nplaintiffs who just wanted their stuff back, particularly in the United States. (\xe2\x80\x9cMattie\nRoss: The saddle is not for sale. I will keep it. Lawyer Dagget will prove ownership of\nthe gray horse. He will come after you with a writ of replevin.\xe2\x80\x9d TRUE GRIT (Paramount\nPictures 2010)). Today in some states it remains at least the name of the action to\nrecover possession, although it has often been superseded by procedures to recover\npossession in state civil procedure codes.\nThe Major Common-Law Property Torts: A Summary\n\nPreferred Remedy\n\nType\n\nDamages\n\nPossession\n\nReal Property\n\nTrespass\n\nEjectment\n\nChattels\n\nConversion\n(or Trover);\nTrespass to\nChattels\n\nof\nProperty\n\nReplevin\n\nDeclaration of\nRights\n\nQuiet Title\n\nCriminal law also protects personal property ownership and possession. The menu of\ncommon-law personal property crimes bore the same confused stamp of history as the\nmenu of personal property torts. Larceny required a felonious carrying away from\npossession; over time, both the carrying away and the possession became thin shadows\nof their former selves, but not quite fictional. Larceny by trick, at least in theory,\nplugged the gap for owners who parted with possession voluntarily under the influence\nof fraudsters\xe2\x80\x99 lies; embezzlement covered faithless bailees and employees who abused\ntheir positions of trust to steal from the cash register, literally or metaphorically.\nRobbery was theft achieved by a threat of violence. Looking back on the fine\n\n\x0cProperty Torts and Crimes\n\n189\n\ndistinctions courts contrived to distinguish these various crimes (e.g., in Bazely\xe2\x80\x99s Case,\n(1799) 168 Eng. Rep. 517 (Cent. Cr. Ct.), the court held it was embezzlement for a\nteller to put money in a bank drawer and then put it in his pocket, but not\nembezzlement for the teller to put the money in his pocket directly), it is hard not to\nconcur with historian S.F.C. Milsom\xe2\x80\x99s assessment: \xe2\x80\x9cThe miserable history of crime in\nEngland can shortly be told. Nothing worth-while was created.\xe2\x80\x9d S.F.C. MILSOM,\nHISTORICAL FOUNDATIONS OF THE COMMON LAW 353 (1969). Many states,\ninfluenced by the Model Penal Code, have tried to reform their theft statutes to create\na single, integrated law of theft. See generally STUART P. GREEN, 13 WAYS TO STEAL A\nBICYCLE: THEFT LAW IN THE INFORMATION AGE 4 (2012) (arguing that \xe2\x80\x9ctheft law\nreformers threw out the baby with the bathwater\xe2\x80\x9d). But hard problems remain, such as\ndefining the kinds of property that can be \xe2\x80\x9cstolen\xe2\x80\x9d at all\xe2\x80\x94e.g., is it theft to sneak into\na movie without paying or to download that movie on BitTorrent, or is \xe2\x80\x9ctheft\xe2\x80\x9d simply\nthe wrong word to describe conduct that deprives no one else of their possession and\nenjoyment?\n\n\x0cFound and Stolen Property\nFinders keepers, losers weepers?\nArmory v. Delamirie\n(1722) 1 Strange 505, 93 Eng. Rep. 664 (K.B.)\nThe plaintiff being a chimney sweeper\xe2\x80\x99s boy found a jewel and carried it to the\ndefendant\xe2\x80\x99s shop (who was a goldsmith) to know what it was, and delivered it into the\nhands of the apprentice, who under pretence of weighing it, took out the stones, and\ncalling to the master to let him know it came to three halfpence, the master offered the\nboy the money, who refused to take it, and insisted to have the thing again; whereupon\nthe apprentice delivered him back the socket without the stones. And now in trover\nagainst the master these points were ruled:\n1. That the finder of a jewel, though he does not by such finding acquire an absolute\nproperty or ownership, yet he has such a property as will enable him to keep it against\nall but the rightful owner, and consequently may maintain trover.\n2. That the action well lay against the master, who gives a credit to his apprentice, and\nis answerable for his neglect.\n3. As to the value of the jewel several of the trade were examined to prove what a jewel\nof the finest water that would fit the socket would be worth; and the Chief Justice\ndirected the jury, that unless the defendant did produce the jewel, and shew it not to\nbe of the finest water, they should presume the strongest against him, and make the\nvalue of the best jewels the measure of their damages: which they accordingly did.\nNotes and Questions\n1. One way of describing the holding of Armory is that it sets out the rights of\nfinders. Suppose that the \xe2\x80\x9crightful owner\xe2\x80\x9d of the jewel, Lord Hobnob, had\nshown up in the shop while the chimney-sweep and the apprentice were arguing\n190\n\n\x0cFound and Stolen Property\n\n191\n\nover the jewel. Who would have been entitled to the jewel? If the chimneysweep is not the \xe2\x80\x9crightful owner,\xe2\x80\x9d why does he still win the case? What kind of\ninterest does he have in the jewel?\n2. A second way of describing of describing the holding of Armory is that it\nillustrates \xe2\x80\x9crelativity of title.\xe2\x80\x9d As between the plaintiff and the defendant, the\nparty with the relatively better claim to title wins, even if their title is in some\nsense defective in an absolute sense. Relativity of title is intimately connected to\nthe idea of \xe2\x80\x9cchains of title\xe2\x80\x9d: competing claimants to a piece of property each do\ntheir best to trace their claims back to a rightful source. What is the source of\nthe chimney-sweep\xe2\x80\x99s claim to the jewel? And the jeweler\xe2\x80\x99s? Does this explain\nthe outcome of the case? What result if the jeweler had proven that he had\nsigned a contract to purchase the jewel from Lord Hobnob but that Lord\nHobnob had lost the jewel before delivering it?\n3. A third way of describing the holding of Armory is that it rejects the jeweler\xe2\x80\x99s\nattempt to assert a jus tertii (Latin for \xe2\x80\x9cright of a third party\xe2\x80\x9d) defense. The\ndefendant cannot defeat the plaintiff\xe2\x80\x99s otherwise-valid claim to the jewel by\narguing that a third party\xe2\x80\x94Lord Hobnob\xe2\x80\x94has an even better claim. Put\ndifferently, we might say that \xe2\x80\x9cas against a wrongdoer, possession is title.\xe2\x80\x9d\nJeffries v. Great W. Ry. Co., (1856) 119 Eng. Rep. 680, 681 (Q.B.). Does this\nnarrowing of focus to the parties before the court make sense?\nHere is one way to think about it. Suppose that Lord Hobnob shows up in court\nwhile Armory is being argued and explains that the jewel slipped from his finger\nwhile he was strolling in Lincoln\xe2\x80\x99s Inn Fields. Who is entitled to the jewel? What\nif Lord Hobnob shows up and explains that he tossed the jewel aside in the\nmud, saying \xe2\x80\x9cI have become tired of this bauble; it bores me and I no longer\nwish to have it.\xe2\x80\x9d What if he explains that he handed it to the chimney-sweep,\nsaying \xe2\x80\x9cI wish you to have this jewel; may it serve you better than it has me.\xe2\x80\x9d\nBut recall that in the actual case, Lord Hobnob was nowhere to be found; no\none even knew his identity. Does it matter to the outcome of Armory v. Delamirie\nhow the jewel passed from Lord Hobnob\xe2\x80\x99s hands to the chimney-sweep\xe2\x80\x99s?\nIf you are still not convinced, consider this. If the jeweler could set up Lord\nHobnob\xe2\x80\x99s title to show that the chimney-sweep\xe2\x80\x99s title was defective, would the\n\n\x0c192\n\nProperty\nchimney-sweep be entitled to present evidence that Lord Hobnob\xe2\x80\x99s title was\ndefective, say because Lord Hobnob stole the jewel from a visiting Frenchman\nin 1693? Cutting off inquiry into third parties\xe2\x80\x99 claims also helps cut off inquiry\ninto old claims. Can you see why this might be an appealing choice for a system\nof property law?\n4. We are not quite done with Lord Hobnob. Consider the remedy the plaintiff\nobtains: an award of the value of the jewel, rather than the jewel itself. This is\nin effect a forced sale of the jewel, which the defendant can keep after paying\nthe plaintiff\xe2\x80\x99s damage award. Now who owns the jewel? What if Lord Hobnob\nshows up now? Can he also bring trover, and if so, will the jeweler be forced to\npay out a second time? In fact, why is Paul de Lamerie, the goldsmith whose\nname the court mangles, on the hook for his apprentice\xe2\x80\x99s wrongdoing? What if\nthe apprentice pocketed the jewel and never turned it over to the master?\n5. About that damage award. Why is the jury instructed to presume that the jewel\nwas \xe2\x80\x9cof the finest water?\xe2\x80\x9d (i.e. highest quality)?\nOther Variations on Armory\n\nJust how far does the holding of Armory v. Delamirie (\xe2\x80\x9cThat the finder of [property],\nthough he does not by such finding acquire an absolute property or ownership, yet he\nhas such a property as will enable him to keep it against all but the rightful owner\xe2\x80\x9d) go?\nConsider three nineteenth-century cases about lost lumber. Are they required by\nArmory? Consistent with Armory? Consistent with each other? Which is most\npersuasive?\nIn Clark v. Maloney, 3 Del. 68 (1840), the plaintiff found ten logs floating in a bay after\na storm. He tied them up in the mouth of a creek, but they (apparently) got free again\nand the defendants (apparently) found them floating up the creek. Held, the plaintiff\nwas entitled to the logs:\nPossession is certainly prima facie evidence of property. It is called prima facie\nevidence because it may be rebutted by evidence of better title, but in the\nabsence of better title it is as effective a support of title as the most conclusive\nevidence could be. It is for this reason, that the finder of a chattel, though he does not\nacquire an absolute property in it, yet has such a property, as will enable him to keep it against\n\n\x0cFound and Stolen Property\n\n193\n\nall but the rightful owner. The defence consists, not in showing that the defendants\nare the rightful owners, or claim under the rightful owner; but that the logs were\nfound by them adrift in Mispillion creek, having been loosened from their\nfastening either by accident or design, and they insist that their title is as good\nas that of the plaintiff. But it is a well settled rule of law that the loss of a chattel\ndoes not change the right of property; and for the same reason that the original\nloss of these logs by the rightful owner, did not change his absolute property in\nthem, but he might have maintained trover against the plaintiff upon refusal to\ndeliver them, so the subsequent loss did not divest the special property of the\nplaintiff. It follows, therefore, that as the plaintiff has shown a special property\nin these logs, which he never abandoned, and which enabled him to keep them\nagainst all the world but the rightful owner, he is entitled to a verdict.\nIn Anderson v. Gouldberg, 53 N.W. 636 (Minn. 1892), the defendants took ninety-three\nlogs from the plaintiff\xe2\x80\x99s mill. The defendants claimed that the plaintiff had cut the logs\non their land, but the plaintiff replied (and a jury agreed) that he had actually cut the\nlogs by trespassing on the land of a third party. Held: the plaintiff was entitled to the\nlogs:\nTherefore the only question is whether bare possession of property, though\nwrongfully obtained, is sufficient title to enable the party enjoying it to maintain\nreplevin against a mere stranger, who takes it from him. We had supposed that\nthis was settled in the affirmative as long ago, at least, as the early case of Armory\nv. Delamirie, so often cited on that point. When it is said that to maintain replevin\nthe plaintiff\xe2\x80\x99s possession must have been lawful, it means merely that it must\nhave been lawful as against the person who deprived him of it; and possession\nis good title against all the world except those having a better title. Counsel says\nthat possession only raises a presumption of title, which, however, may be\nrebutted. Rightly understood, this is correct; but counsel misapplies it. One who\ntakes property from the possession of another can only rebut this presumption\nby showing a superior title in himself, or in some way connecting himself with\none who has. One who has acquired the possession of property, whether by\nfinding, bailment, or by mere tort, has a right to retain that possession as against\na mere wrongdoer who is a stranger to the property. Any other rule would lead\n\n\x0c194\n\nProperty\nto an endless series of unlawful seizures and reprisals in every case where\nproperty had once passed out of the possession of the rightful owner.\n\nAnderson states what is overwhelmingly the majority rule. Seven years after Anderson,\nNorth Carolina took the opposite course. In Russell v. Hill, 34 S.E. 640 (N.C. 1899),\ntwo different people held what appeared to be state grants to the same tract of land,\nand the plaintiff cut timber on the land with the wrong one\xe2\x80\x99s permission. While the\nlogs were floating in a river, the defendants\xe2\x80\x94unconnected with either of the purported\nlandowners\xe2\x80\x94took them away and sold them. Held: the defendants were entitled to the\nlogs (internal quotation marks omitted):\nIn some of the English books, and in some of the Reports of our sister states,\ncases might be found to the contrary, but that those cases were all founded upon\na misapprehension of the principle laid down in the case of Armory v. Delamirie.\nThere a chimney sweep found a lost jewel. He took it into his possession, as he\nhad a right to do, and was the owner, because of having it in possession, unless\nthe true owner should become known. That owner was not known, and it was\nproperly decided that trover would lie in favor of the finder against the\ndefendant, to whom he had handed it for inspection, and who refused to restore\nit. But the court said the case would have been very different if the owner had\nbeen known.\nIs this an accurate reading of Armory? The court also expressed concern about the\ndefendant\xe2\x80\x99s potential liability to the true owner:\nIt is true that, as possession is the strongest evidence of the ownership, property\nmay be presumed from possession. \xe2\x80\xa6 But if it appears on the trial that the\nplaintiff, although in possession, is not in fact the owner, the presumption of\ntitle inferred from the possession is rebutted, and it would be manifestly wrong\nto allow the plaintiff to recover the value of the property; for the real owner\nmay forthwith bring trover against the defendant, and force him to pay the value\nthe second time, and the fact that he paid it in a former suit would be no defense.\nConsequently trover can never be maintained unless a satisfaction of the\njudgment will have the effect of vesting a good title in the defendant.\n\n\x0cFound and Stolen Property\n\n195\n\nIs the fear of double liability sufficient reason to allow the defendant to escape liability\nentirely? Based on a review of the court records in the case, John V. Orth writes that\nthe true owner in Russell v. Hill was \xe2\x80\x9cno bodiless abstraction but had in fact a name and\nidentity: [Fabius Haywood] Busbee, one of the state\xe2\x80\x99s leading lawyers, a man well\nknown to every member of the supreme court that decided the case.\xe2\x80\x9d John V. Orth,\nRussell v. Hill (N.C. 1899): Misunderstood Lessons, 73 N.C. L. REV. 2031, 2034 (1995).\nDoes this help explain Russell?\nProfessor Orth, arguing for a middle ground between Anderson and Russell, argues that\nArmory should protect only prior possessors who took the property in good faith: \xe2\x80\x9cA\ntechnical wrongdoing, such as an innocent trespass, as the source of possession should\nnot disable the possessor from securing judicial protection against an unauthorized\ntaking, but a willful trespass at the root of title should. Plaintiff in Russell, in other words,\ndeserved a new trial at which to show, not his title, but his bona fides.\xe2\x80\x9d Id. at 2060. Is this\na better rule?\nMcAvoy v. Medina\n93 Mass. (11 Allen) 548 (1866)\nTORT to recover a sum of money found by the plaintiff in the shop of the defendant.\n[I]t appeared that the defendant was a barber, and the plaintiff, being a customer in the\ndefendant\xe2\x80\x99s shop, saw and took up a pocket-book which was lying upon a table there,\nand said, \xe2\x80\x9cSee what I have found.\xe2\x80\x9d The defendant came to the table and asked where\nhe found it. The plaintiff laid it back in the same place and said, \xe2\x80\x9cI found it right there.\xe2\x80\x9d\nThe defendant then took it and counted the money, and the plaintiff told him to keep\nit, and if the owner should come to give it to him; and otherwise to advertise it; which\nthe defendant promised to do. Subsequently the plaintiff made three demands for the\nmoney, and the defendant never claimed to hold the same till the last demand. It was\nagreed that the pocket-book was placed upon the table by a transient customer of the\ndefendant and accidentally left there, and was first seen and taken up by the plaintiff,\nand that the owner had not been found. \xe2\x80\xa6\n\n\x0c196\n\nProperty\n\nDEWEY, J.\nIt seems to be the settled law that the finder of lost property has a valid claim to the\nsame against all the world except the true owner, and generally that the place in which\nit is found creates no exception to this rule.\nBut this property is not, under the circumstances, to be treated as lost property in that\nsense in which a finder has a valid claim to hold the same until called for by the true\nowner. This property was voluntarily placed upon a table in the defendant\xe2\x80\x99s shop by a\ncustomer of his who accidentally left the same there and has never called for it. The\nplaintiff also came there as a customer, and first saw the same and took it up from the\ntable. The plaintiff did not by this acquire the right to take the property from the shop,\nbut it was rather the duty of the defendant, when the fact became thus known to him,\nto use reasonable care for the safe keeping of the same until the owner should call for\nit. In the case of Bridges v. Hawkesworth, 7 Eng. Law & Eq. R. 424, the property, although\nfound in a shop, was found on the floor of the same, and had not been placed there\nvoluntarily by the owner, and the court held that the finder was entitled to the\npossession of the same, except as to the owner. But the present case more resembles\nthat of Lawrence v. The State, 1 Humph. (Tenn.) 228, and is indeed very similar in its\nfacts. The court there take a distinction between the case of property thus placed by\nthe owner and neglected to be removed, and property lost. It was there held that \xe2\x80\x9cto\nplace a pocket-book upon a table and to forget to take it away is not to lose it, in the\nsense in which the authorities referred to speak of lost property.\xe2\x80\x9d\nWe accept this as the better rule, and especially as one better adapted to secure the\nrights of the true owner.\nIn view of the facts of this case, the plaintiff acquired no original right to the property,\nand the defendant\xe2\x80\x99s subsequent acts in receiving and holding the property in the\nmanner he did does not create any.\nNotes and Questions\n1. In Lawrence v. State, on which McAvoy relies, the customer did come back for his\nlost pocketbook containing $480 in bank notes, which he had left on a table\nwhile the barber went out to make change. To quote the court: \xe2\x80\x9cThe barber left\nthe shop to get the bill changed, and, a fight occurring in the streets, the\n\n\x0cFound and Stolen Property\n\n197\n\n[customer\xe2\x80\x99s] attention was arrested thereat and he left the shop, his pocket-book\nlying on the table.\xe2\x80\x9d When he returned, the barber \xe2\x80\x9cdenied all knowledge of the\npocket-book\xe2\x80\x9d but then \xe2\x80\x9cexpended [the bank notes] in the purchase of\nconfections, etc.\xe2\x80\x9d A criminal prosecution for grand larceny followed, and the\nbarber argued that the pocketbook had been lost because larceny only applies\nwhen the defendant takes property from the possession of the victim. The court\nheld that because the pocketbook on a table was merely mislaid, rather than\n\xe2\x80\x9clost,\xe2\x80\x9d it was still within the customer\xe2\x80\x99s \xe2\x80\x9cconstructive possession.\xe2\x80\x9d First of all,\nis this plausible? And second, is this a good fit for the facts of McAvoy?\nBy way of contrast, in Bridges v. Hawkesworth, which McAvoy distinguishes, the\nplaintiff found a small parcel on the floor of the defendant\xe2\x80\x99s shop and\nimmediately showed it to the defendant\xe2\x80\x99s employee. The parcel contained bank\nnotes; the plaintiff \xe2\x80\x9crequested the defendant to deliver them to the owner.\xe2\x80\x9d\nThree years later, with no owner having returned, the court held the plaintiff as\nfinder was entitled to the notes. \xe2\x80\x9cIf the notes had been accidentally kicked into\nthe street, and then found by someone passing by, could it be contended that\nthe defendant was entitled to them, from the mere fact of their having been\ndropped in his shop? \xe2\x80\xa6 Certainly not. The notes were never in the custody of\nthe defendant, nor within the protection of his house before they were found,\nas they would have had they been intentionally deposited there, and the\ndefendant has come under no responsibility.\xe2\x80\x9d First, what do you make of the\nBridges court\xe2\x80\x99s argument that the shopkeeper\xe2\x80\x99s entitlement to the notes should\nturn on whether he would have been held responsible to the true owner for\nlosing them? And second, is this any better a fit for the facts of McAvoy?\nWhat do you make of the argument that awarding the pocket-book to the\nshopkeeper is \xe2\x80\x9cone better adapted to secure the rights of the true owner?\xe2\x80\x9d\n2. In addition to lost and mislaid property, there is also abandoned property:\nproperty which the owner has voluntarily relinquished with no intent to reclaim.\nSince abandoned property is again unowned, the usual rules of first possession\napply. (As you have seen, these rules themselves are not as simple as \xe2\x80\x9cfirst\npossessor wins.\xe2\x80\x9d). How easy is it to tell the three apart? Why?\n\n\x0c198\n\nProperty\n3. In Benjamin v. Lindner Aviation, 534 N.W.2d 400 (Iowa 1995) in which an airplane\ninspector found $18,000 in cash inside the wing of an airplane in 1992 while the\nplane was parked in his employer\xe2\x80\x99s hangar for maintenance. The money, which\nconsisted primarily of $20 bills dating to the 1950s and 1960s, was in two fourinch packets wrapped in handkerchiefs and tied with string and then wrapped\nagain in aluminum foil. The packets were inserted behind a panel on the\nunderside of the plane\xe2\x80\x99s wing; the panel was secured with rusty screws that had\nnot been removed in several years. The inspector, the employer, and the bank\nthat owned the plane (after repossessing it from a prior owner who had\ndefaulted on a loan) all made claims to the money. Was it lost, mislaid, or\nabandoned, and who was entitled to it?\n4. Another category sometimes mentioned in the found-property caselaw is\ntreasure trove: money, gold, or silver intentionally placed underground, which\nis found long enough later that it is likely the owner is dead or will never return\nfor it. At common law in England, treasure trove belonged to the King. Most\nAmerican states now treat treasure trove like any other found property. Is this\na sensible rejection of an archaic and pointless quirk of the common-law, or was\nthere something to the doctrine?\n5. In Hannah v. Peel, [1945] K.B. 509, the British government requisitioned\nGwernhaylod House in 1940 for use during World War II and paid the owner,\nMajor Hugh Edward Ethelston Peel \xc2\xa3250 per year. The house had been\nconveyed to Major Peel in 1938 but it was unoccupied from then until when it\nwas requisitioned. Duncan Hannah, a lance-corporal with the Royal Artillery,\nwas stationed in the house and was adjusting a blackout curtain in August 1940\nwhen he found something loose in a crevice on top of the window-frame. It\nturned out to be a brooch covered in cobwebs and dirt; he informed his\ncommanding officer and then turned it over to the police. Two years later, the\npolice gave it to Major Peel, who sold it for \xc2\xa366. Lance-Corporal Hannah sued\nand was awarded the value of the brooch. The court discussed numerous cases,\nincluding Bridges v. Hawkesworth and South Staffordshire Water Co. v. Sharman, [1896]\n2 Q.B. 44, which awarded two rings found by a workman embedded in the mud\nat the bottom of a pool to the company that owned the land. From them, it\nextracted a rule that \xe2\x80\x9ca man possesses everything which is attached to or under\n\n\x0cFound and Stolen Property\n\n199\n\nhis land.\xe2\x80\x9d Since Major Peel \xe2\x80\x9cwas never physically in possession of these\npremises\xe2\x80\x9d and hence had no \xe2\x80\x9cprior possession\xe2\x80\x9d of the brooch, Lance-Corporal\nHannah was entitled to it as a finder. Is this possession-based approach a better\nway of analyzing found-property cases than the categorical lost-vs-mislaid\nAmerican approach exemplified by McAvoy? Or is Hannah an oddball outlier\ndriven by the court\xe2\x80\x99s desire to do right by a wartime serviceman \xe2\x80\x9cwhose conduct\nwas commendable and meritorious,\xe2\x80\x9d especially as against an absentee landlord\nfrom the local gentry?\n\n\x0cAdverse Possession\nFew doctrines taught in the first year of law school make a worse first impression than\nadverse possession. Adverse possession enables a non-owner to gain title to land (or\npersonal property, but we will focus here on land) after the expiration of the statute of\nlimitations for the owner to recover possession. That sounds bad, and the thought of\n\xe2\x80\x9csquatters\xe2\x80\x9d becoming owners gets its share of bad press. But historically the doctrine\nhas performed, and continues to serve, important functions.\nThe basic requirements, if not their wording and application, are common from state\nto state. As one treatise summarizes, an adverse possessor must prove possession that\nis:\n(1) hostile (perhaps under a claim of right);\n(2) exclusive;\n(3) open and notorious;\n(4) actual; and\n(5) continuous for the requisite statutory period.\n16 POWELL ON REAL PROPERTY \xc2\xa7 91.01. States routinely add to the list. California law,\nfor example, requires that\nthe claimant must prove: (1) possession under claim of right or color of\ntitle; (2) actual, open, and notorious occupation of the premises\nconstituting reasonable notice to the true owner; (3) possession which is\nadverse and hostile to the true owner; (4) continuous possession for at\nleast five years; and (5) payment of all taxes assessed against the property\nduring the five-year period.\nMain St. Plaza v. Cartwright & Main, LLC, 124 Cal. Rptr. 3d 170, 178 (Cal. App. 2011)\n(citations and quotations omitted).\n200\n\n\x0cAdverse Possession\n\n201\n\nA. Adverse Possession Rationales\nBut why allow adverse possession? One court summarized the doctrine\xe2\x80\x99s history and\npurposes as follows:\n\xe2\x80\xa6 a brief history of adverse possession may be of assistance. After first\nusing an amalgamation of Roman and Germanic doctrine, our English\npredecessors in common law later settled upon statutes of limitation to\neffect adverse possession. See Axel Teisen, Contributions of the Comparative\nLaw Bureau, 3 A.B.A. J. 97, 126, 127, 134 (1917). In practice, the statutes\neliminated a rightful owner\xe2\x80\x99s ability to regain possession after the passing\nof a certain number of years, thereby vesting de facto title in the adverse\npossessor. For example, a 1623 statute of King James I restricted the\nright of entry to recover possession of land to a period of twenty years.\nEssentially, in England, the \xe2\x80\x9c[o]riginal policy supporting the\ndevelopment of adverse possession reflected society\xe2\x80\x99s unwillingness to\ntake away a \xe2\x80\x98right\xe2\x80\x99 which an adverse possessor thought he had. Similarly,\nsociety felt the loss of an unknown right by the title owner was minimal.\xe2\x80\x9d\nWilliam G. Ackerman & Shane T. Johnson, Comment, Outlaws of the Past:\nA Western Perspective on Prescription and Adverse Possession, 31 Land & Water\nL. Rev. 79, 83 (1996).\xe2\x80\xa6\nIn the United States, although the 1623 statute of King James I \xe2\x80\x9ccame\nsome years after the settling of Jamestown (the usual date fixed as the\ncrystalizing of the common law in America), its fiat is generally accepted\nas [our] common law. Hence \xe2\x80\x98adverse possession\xe2\x80\x99 for 20 years under the\ncommon law in this country passes title to the adverse possessor with\ncertain stated qualifications.\xe2\x80\x9d 10 Thompson on Real Property \xc2\xa7 87.01 at 75.\nToday, all fifty states have some statutory form of adverse possession\n.\xe2\x80\xa6\n\xe2\x80\xa6.Courts and commentators generally ascribe to \xe2\x80\x9cfour traditional\njustifications or clusters of justifications which support transferring the\nentitlement to the [adverse possessor] after the statute of limitations\nruns: the problem of lost evidence, the desirability of quieting titles, the\ninterest in discouraging sleeping owners, and the reliance interests of\n\n\x0c202\n\nProperty\n[adverse possessors] and interested third persons.\xe2\x80\x9d Thomas W. Merrill,\nProperty Rules, Liability Rules, and Adverse Possession, 79 Nw. U. L. Rev.\n1122, 1133 (1984). Effectively, our society has made a policy\ndetermination that \xe2\x80\x9call things should be used according to their nature\nand purpose\xe2\x80\x9d and when an individual uses and preserves property \xe2\x80\x9cfor\na certain length of time, [he] has done a work beneficial to the\ncommunity.\xe2\x80\x9d Teisen, 3 A.B.A. J. at 127. For his efforts, \xe2\x80\x9chis reward is\nthe conferring upon him of the title to the thing used.\xe2\x80\x9d Id. Esteemed\njurist Oliver Wendell Holmes, Jr. went a step further than Teisen, basing\nour society\xe2\x80\x99s tolerance of adverse possession on the ideal that \xe2\x80\x9c[a] thing\nwhich you have enjoyed and used as your own for a long time, whether\nproperty or an opinion, takes root in your being and cannot be torn away\nwithout your resenting the act and trying to defend yourself, however\nyou came by it.\xe2\x80\x9d O Centro Espirita Beneficente Uniao Do Vegetal v.\nAshcroft, 389 F.3d 973, 1016 (10th Cir. 2004) (quoting Oliver Wendell\nHolmes, Jr., The Path of the Law, 10 Harv. L. Rev. 457, 477 (1897)).\nRegardless of how deeply the doctrine is engrained in our history,\nhowever, courts have questioned \xe2\x80\x9cwhether the concept of adverse\npossession is as viable as it once was, or whether the concept always\nsquares with modern ideals in a sophisticated, congested, peaceful\nsociety.\xe2\x80\x9d Finley, 160 Cal. Rptr. at 427. Commentators have also opined\nthat, along with the articulated benefits of adverse possession, numerous\ndisadvantages exist including the \xe2\x80\x9cinfringement of a landowner\xe2\x80\x99s rights,\na decrease in value of the servient estate, and the encouraged\n[over]exploitation and [over]development of land. In addition, they \xe2\x80\xa6\n[include] the generation of animosity between neighbors, a source of\ndamages to land or loss of land ownership, and the creation of\nuncertainty for the landowner.\xe2\x80\x9d * Ackerman, 31 Land & Water L. Rev. at\n92. In reality, \xe2\x80\x9c[a]dverse possession \xe2\x80\x98[i]s nothing more than a person\ntaking someone else\xe2\x80\x99s private property for his own private use.\xe2\x80\x99 It is hard\nto imagine a notion more in contravention of the ideals set forth in the\n\n*\n\n[Eds.\xe2\x80\x94The modifications to the quotation from Ackerman are ours, not the court\xe2\x80\x99s.]\n\n\x0cAdverse Possession\n\n203\n\nU.S. Constitution protecting life, liberty and property.\xe2\x80\x9d Ackerman, 31\nLand & Water L. Rev. at 94-95 (quoting 2 C.J.S. Adverse Possession \xc2\xa7 2\n(1972)).\nAlthough this Court duly recognizes its role as the judicial arm of\ngovernment tasked with applying the law, rather than making law, it is\nnot without an eyebrow raised at the ancient roots and arcane rationale\nof adverse possession that we apply the doctrine to this modern property\ndispute.\nCahill v. Morrow, 11 A.3d 82, 86-88 (R.I. 2011). Do you share the court\xe2\x80\x99s skepticism?\nConsider the rationales discussed above against the following case.\nTieu v. Morgan\n265 P.3d 98 (Ore. App. 2011)\nHADLOCK, J.\nThe parties dispute ownership of a strip of land that runs parallel to defendants\xe2\x80\x99\ndriveway. Plaintiff, who owns residential property adjoining that strip of land, filed suit\nseeking (1) a declaration that he owns the disputed strip and (2) an injunction\nprohibiting defendants from trespassing on that property. Defendants counterclaimed,\nasserting that they acquired the disputed strip through adverse possession, and\nsubsequently moved for summary judgment on that counterclaim. The trial court\ngranted defendants\xe2\x80\x99 motion and entered a judgment declaring that defendants had\nacquired the strip through adverse possession. Plaintiff appeals, and we affirm.\xe2\x80\xa6\n\n\x0c204\n\nProperty\n\nThe two parcels subject to this appeal are adjoining residential tax lots in a Portland\nsubdivision. Tax lot 3100 is rectangular, with its north side fronting Southeast Boise\nStreet. Tax lot 3200 is a flag lot that is situated largely south of lot 3100; its driveway\n(the \xe2\x80\x9cflagpole\xe2\x80\x9d) runs north from the main portion of the lot (the \xe2\x80\x9cflag\xe2\x80\x9d) to Southeast\nBoise Street, parallel to the eastern edge of lot 3100. The disputed three-foot-wide strip\nlies between lot 3200\xe2\x80\x99s driveway and lot 3100. Defendants own lot 3200. Plaintiff owns\nlot 3100 and also is the record owner of the disputed strip.\nA north-south stretch of fence on plaintiff\xe2\x80\x99s property runs along the western boundary\nof the disputed strip, parallel to defendants\xe2\x80\x99 driveway. The fence starts roughly halfway\ndown the driveway from Southeast Boise Street, running south, then turns 45 degrees\nto the southwest, cutting off the southeast corner of lot 3100, then makes another 45degree turn before continuing west, roughly following the east-west boundary between\nlots 3100 and 3200. The diagonal portion of the fence that cuts the corner of lot 3100\nincludes a gate wide enough to accommodate a boat trailer. As noted, the disputed\nthree-foot-wide strip lies between defendants\xe2\x80\x99 driveway and the north-south fence on\nlot 3100; its practical effect is to widen the \xe2\x80\x9cflagpole\xe2\x80\x9d portion of lot 3200.\nThe fencing that separates the two properties has existed for decades. As of 1984, the\ntwo lots were owned by Robert Stevens, who installed most of the fencing that year,\nincluding about half of the north-south stretch located west of lot 3200\xe2\x80\x99s driveway. In\n1994, Robert Stevens sold lot 3200 to his son, James Stevens, believing that the deed\nhe conveyed to James included all property on the east side of a north-south line\n\n\x0cAdverse Possession\n\n205\n\ndefined by that portion of the fence, i.e., the disputed strip. Although he never\nspecifically discussed the issue with his father, James also believed that his purchase of\nthe flag lot included the disputed strip along his driveway. James explained that he had\n\xe2\x80\x9cno reason to know\xe2\x80\x94to think [that the fence] would be in the wrong location.\xe2\x80\x9d\nDuring the four years that James owned the flag lot, he granted Robert permission to\noccasionally use James\xe2\x80\x99s driveway and the disputed strip, so that Robert could drive a\nlarge vehicle and boat trailer through the diagonal gate into Robert\xe2\x80\x99s back yard. In 1996,\nJames installed a sewer line in the center of the disputed strip, running all the way from\nSoutheast Boise Street to the house on lot 3200. When James later put lot 3200 on the\nmarket, he advertised it as having a \xe2\x80\x9cfully fenced yard,\xe2\x80\x9d based on his belief that his\nownership included the disputed strip.\nJames sold lot 3200 to defendants in 1998. The lot was not surveyed in conjunction\nwith that sale; nor did the parties to the sale discuss the lot\xe2\x80\x99s recorded boundaries,\nreview paperwork or maps, or perform any investigation specifically related to that\nsubject.\nDefendants have made use of the disputed strip since they purchased lot 3200.\nDefendant Francine Morgan runs a daycare business from her home, and parents\nregularly use the disputed strip when dropping off and picking up their children. In\n1999, defendants extended the fence paralleling the strip north by roughly 40 feet,\nchoosing not to extend the fence all the way to Southeast Boise Street after Robert\nsuggested that they leave that area unfenced to accommodate maneuvering large\nvehicles in and out of their driveways. Defendants have laid gravel and bark dust on\nthe disputed strip a number of times and have maintained the fence by replacing posts\nand fence boards. While Robert still owned lot 3100, he specifically asked defendants\xe2\x80\x99\npermission each time he wanted to use the disputed strip to access or move his boat,\nand defendants granted that permission.\nPlaintiff bought lot 3100 from Robert in early 2006. Before purchasing the property,\nplaintiff had it surveyed and learned that the north-south fence was not located on the\ndeeded boundary between lots 3100 and 3200. A survey pin marking the recorded\nboundary was placed at that time. Plaintiff claims that he told defendant Francine\nMorgan soon after the survey was completed that he planned to move the fence to the\ndeeded property line within two years. According to plaintiff, Francine neither disputed\n\n\x0c206\n\nProperty\n\nplaintiff\xe2\x80\x99s right to move the fence nor claimed ownership of land between the survey\nmarker and the fence. Defendants deny that such a conversation occurred.\nIn 2008, plaintiff attempted to remove the north-south portion of the fence. After\ndefendants protested, plaintiff initiated this action, seeking a declaration that he owned\nthe disputed strip. As noted, defendants asserted in a counterclaim that they had\nacquired the strip through adverse possession. The trial court ultimately granted\nsummary judgment to defendants, ruling that the undisputed facts established that\ndefendants had acquired the disputed strip through adverse possession.\xe2\x80\xa6\nORS 105.620 codifies the common-law elements of adverse possession, requiring a\nclaimant to prove by clear and convincing evidence that the claimant or the claimant\xe2\x80\x99s\npredecessors in interest maintained actual, open, notorious, exclusive, hostile, and\ncontinuous possession of the property for ten years. In addition to those common-law\nelements, the statute also requires the claimant to have had an honest belief of actual\nownership when he or she entered into possession of the property.\nPlaintiff makes arguments related to each of the statutory elements, first claiming that\ndefendants did not establish actual, open, notorious, exclusive, or continuous\npossession of the entire disputed strip. We recently summarized what proof is required\nto satisfy those elements of an adverse-possession claim:\n\xe2\x80\x9cThe element of actual use is satisfied if a claimant established a use of\nthe land that would be made by an owner of the same type of land, taking\ninto account the uses for which the land is suited. To establish a use that\nis open and notorious, plaintiffs must prove that their possession is of\nsuch a character as to afford the owner the means of knowing it, and of\nthe claim. The exclusivity of the use also depends on how a reasonable\nowner would or would not share the property with others in like\ncircumstances. A use is continuous if it is constant and not intermittent.\nThe required constancy of use, again, is determined by the kind of use\nthat would be expected of such land.\xe2\x80\x9d\nStiles v. Godsey, 233 Or. App. 119, 126, 225 P.3d 81 (2009) (internal quotations and\ncitations omitted).\n\n\x0cAdverse Possession\n\n207\n\nHere, the land in question is a three-foot-wide strip, covered mostly with gravel or bark\ndust, adjacent to a narrow driveway. Defendants and their predecessor have used the\nstrip as an extension of that driveway since 1994, both to accommodate wide vehicles\nand to provide additional loading room for defendant Francine Morgan\xe2\x80\x99s daycare\nclients. That use is consistent with ownership and with the land\xe2\x80\x99s character. Moreover,\nthat use was \xe2\x80\x9copen\xe2\x80\x9d and \xe2\x80\x9cnotorious,\xe2\x80\x9d particularly when considered together with\nJames\xe2\x80\x99s act of locating his sewer line on the strip and, later, defendants\xe2\x80\x99 maintenance\nof and improvements to the fence. Finally, defendants and their predecessor used the\nstrip continuously from 1994 (when James bought the lot) to at least 2006 (when\nplaintiff bought lot 3100 from Robert), i.e., for longer than the statutory 10-year\nadverse-possession period. Thus, the undisputed facts establish defendants\xe2\x80\x99 actual,\nopen, notorious, exclusive, and continuous use of the property.\nPlaintiff\xe2\x80\x99s contrary argument rests on the fact that the disputed strip is not completely\nseparated from his residential lot by a fence; he emphasizes that the fence at issue does\nnot extend all the way to Southeast Boise Street, but starts partway down the\ndriveway.\xe2\x80\xa6 Here, even though the fence does not extend to the street, it adequately\ndefines the entire disputed strip, indicating that it is separate from the land that abuts\nit to the west.\nPlaintiff also contends that defendants\xe2\x80\x99 use of the disputed strip was not \xe2\x80\x9cexclusive\xe2\x80\x9d\nbecause Robert sometimes used the property even after the fence was built. But\nadverse-possession claimants are allowed the freedom to allow others to occasionally\nuse their property, in the manner that neighbors are wont to do, without thereby\nabandoning their claim. In this case, Robert asked permission of defendants and their\npredecessors each time that he used the disputed strip; that permissive use was\nconsistent with defendants\xe2\x80\x99 ownership of the land and does not defeat their claim to it.\nWe also reject plaintiff\xe2\x80\x99s argument that defendants\xe2\x80\x99 use of the disputed strip was not\n\xe2\x80\x9chostile\xe2\x80\x9d because, he claims, defendants had a conscious doubt regarding the property\nline. Under ORS 105.620(2)(a), a claimant \xe2\x80\x9cmaintains \xe2\x80\x98hostile possession\xe2\x80\x99 of property\nif the possession is under claim of right or with color of title.\xe2\x80\x9d A \xe2\x80\x9cclaim of right\xe2\x80\x9d may\nbe established through proof of an honest but mistaken belief of ownership, resulting,\nfor example, from a mistake as to the correct location of a boundary. The mistaken\nbelief must be a \xe2\x80\x9cpure\xe2\x80\x9d mistake, however, and not one based upon \xe2\x80\x9cconscious doubt\xe2\x80\x9d\n\n\x0c208\n\nProperty\n\nabout the true boundary. Furthermore, ORS 105.620(1)(b) requires that the claimants\n(or their predecessors) have had an \xe2\x80\x9chonest belief\xe2\x80\x9d of actual ownership that (1)\ncontinued through the vesting period, (2) had an objective basis, and (3) was reasonable\nunder the circumstances.\nIn Mid-Valley Resources, Inc. v. Engelson, 170 Ore App 255 (2000), we concluded that the\ndefendants had failed to establish pure mistake about the location of a boundary line\nbecause one of the defendants had a conscious doubt on that subject. That Mid-Valley\ndefendant had testified that she had not known where the property line was when she\nwas a child, and she still did not know at the time of trial whether a particular fence\nwas located on that boundary. That defendant\xe2\x80\x99s uncertainty about the property line\xe2\x80\x99s\nlocation defeated the defendants\xe2\x80\x99 adverse-possession claim.\nHere, by contrast, the undisputed evidence clearly establishes that defendants and their\npredecessor, James, always believed that the fence marked the north-south line between\nlots 3200 and 3100. James assumed when he bought lot 3200 in 1994 that the fence\nwas on the property line, and he perpetuated that belief in defendants by telling them,\nwhen they bought the property, that it was \xe2\x80\x9cfully fenced.\xe2\x80\x9d Robert, then the record\nowner of the disputed strip, confirmed those mistaken beliefs when he did not object\nto installation of the sewer line, to defendants\xe2\x80\x99 use of the strip, or to defendants\xe2\x80\x99\nextension of the fence. No evidence in the record supports plaintiff\xe2\x80\x99s assertion that\ndefendants had a \xe2\x80\x9cconscious doubt\xe2\x80\x9d about whether the fence was actually located on\nthe line separating their property from plaintiff\xe2\x80\x99s. Defendants did suggest in their\ndepositions that they had not given much thought to the property line\xe2\x80\x99s location until\nthe dispute arose with plaintiff. Read in context, however, those statements simply\nconfirm defendants\xe2\x80\x99 certainty that the property line was the same as the fence line; the\nstatements do not indicate that defendants had any conscious doubt as to the\nboundary\xe2\x80\x99s location.\nMoreover, no evidence calls into question the reasonableness of defendants\xe2\x80\x99 belief that\nthey owned the disputed strip. That strip of land is small in relation to the size of lots\n3200 and 3100, it regularly has been used as an extension to the width of an existing\ndriveway, it is well suited to that purpose, and it is partly fenced off from plaintiff\xe2\x80\x99s\nproperty. Under the circumstances, defendants\xe2\x80\x99 belief that they owned the disputed\nstrip was reasonable.\n\n\x0cAdverse Possession\n\n209\n\nIn sum, the undisputed evidence establishes clearly and convincingly that defendants\nand their predecessor, James, had an \xe2\x80\x9chonest belief\xe2\x80\x9d that the disputed strip was part of\nlot 3200 and that they continuously maintained actual, open, notorious, exclusive, and\nhostile possession of that strip for well over 10 years, from 1994 at least until plaintiff\nbought lot 3100 in 2006. 6 We conclude that defendants\xe2\x80\x99 adverse-possession claim to\nthe disputed strip vested in 2004, giving them title and extinguishing any claim that\nplaintiff might otherwise have had to that land.\nNotes and Questions\n1. Does the result in Tieu jibe with the rationales for adverse possession recited in\nthe note preceding it? Which ones? Cahill suggests that these rationales are less\nrelevant today than in the past. Do you agree? Should the defendants in Tieu\nhave been without recourse?\n2. Tieu involves an error in a conveyance. The parties\xe2\x80\x99 predecessors in interest\nthought they had bargained to transfer land that they didn\xe2\x80\x99t. This is a common\nsource of adverse possession litigation. Other recurring fact patterns include\nmistaken deed descriptions, surveying errors, and accidental encroachments by\nneighbors. Adverse possession claims may also follow the souring of\nrelationships, perhaps between cotenants or one involving permissive land use.\nNone of these cases necessarily involve bad faith actors; although the doctrine\nmay indeed be applied in favor of the mere trespasser, depending on the\njurisdiction\xe2\x80\x99s interpretation of the state of mind required to satisfy the \xe2\x80\x9chostility\xe2\x80\x9d\nelement. We will discuss this issue further below.\n3. Title based on adverse possession is as good as any. To think through the\nimplications of that observation, imagine the following facts. Neighbor A\nmistakenly builds a fence on her neighbor\xe2\x80\x99s land and gains title to the enclosed\n\n6\n\nWe reject plaintiff\xe2\x80\x99s argument that defendants cannot satisfy the 10-year adverse-possession period by tacking\ntheir possession to that of James. An adverse-possession claimant may tack his possessory interests to those of a\npredecessor \xe2\x80\x9cif there is evidence that the predecessor intended to transfer whatever adverse possessory rights he\nor she may have acquired.\xe2\x80\x9d Fitts v. Case, 243 Ore App 543, 549, 267 P3d 160 (2011). Here, James clearly intended\nhis transfer of lot 3200 to defendants to include the disputed strip, given his belief that the fence marked the\nboundary line and his advertisement of lot 3200 as \xe2\x80\x9cfully fenced.\xe2\x80\x9d\n\n\x0c210\n\nProperty\nland by adverse possession. Neighbor B then notices the encroachment and\ndemands that A move the fence. She agrees, but changes her mind two years\nlater and rebuilds it. B sues for trespass. Who wins?\n4. Open and notorious possession. Whatever its merits, adverse possession is\nstrong medicine. The doctrine therefore provides safeguards to prevent a title\nowner from losing her property without adequate notice by, for example,\nrequiring that the possession be open and notorious\xe2\x80\x94it has to be the kind of\nact that an owner would notice.\nBut even overt acts may not be obvious threats to ownership rights. A fence on\nsomeone else\xe2\x80\x99s property certainly seems open and notorious, but what if it is\njust an inch or two over the border? What about the three-foot incursion at\nissue in Tieu? What if it had been built while the plaintiff was in occupation of\nhis lot? Do we expect owners to commission surveys anytime a neighbor builds\nnear the property line?\nFor some courts, the answer is no. Mannillo v. Gorski, 255 A.2d 258, 264 (N.J.\n1969), for example, holds that minor encroachments are not open and\nnotorious without actual knowledge on the part of the title owner. But where\nwould that leave an innocent encroacher, whose trespass may be costly to\nremedy? In Mannillo, the court balked at placing the trespasser, whose steps and\nconcrete walk extended 15 inches into the plaintiffs\xe2\x80\x99 property, at her neighbor\xe2\x80\x99s\nmercy.\nIt is conceivable that the application of the foregoing rule may in\nsome cases result in undue hardship to the adverse possessor who\nunder an innocent and mistaken belief of title has undertaken an\nextensive improvement which to some extent encroaches on an\nadjoining property. In that event \xe2\x80\xa6 equity may furnish relief.\nThen, if the innocent trespasser of a small portion of land\nadjoining a boundary line cannot without great expense remove\nor eliminate the encroachment, or such removal or elimination is\nimpractical or could be accomplished only with great hardship,\nthe true owner may be forced to convey the land so occupied\nupon payment of the fair value thereof without regard to whether\n\n\x0cAdverse Possession\n\n211\n\nthe true owner had notice of the encroachment at its inception.\nOf course, such a result should eventuate only under appropriate\ncircumstances and where no serious damage would be done to\nthe remaining land as, for instance, by rendering the balance of\nthe parcel unusable or no longer capable of being built upon by\nreason of zoning or other restrictions.\nId. * Is this result\xe2\x80\x94a forced transaction in which the innocent trespasser\nbecomes the owner, but must pay\xe2\x80\x94the best accommodation of the relevant\ninterests? If the true owner wasn\xe2\x80\x99t on notice of the incursion, why can she be\nforced to surrender her land, even for payment?\n5. Adverse possession and the property owner. State-to-state variation about\nwhether encroachments need to be obvious may reflect a deeper question about\nthe purpose of adverse possession. Some authorities view the doctrine as having\nan object of punishing inattentive owners who sleep on their rights. If so, then\n\nAs Manillo\xe2\x80\x99s resort to equity shows, adverse possession is not the only way to address boundary disputes. Other\noptions include the equitable doctrine of acquiescence, Hamlin v. Niedner, 955 A.2d 251, 254 (Me. 2008) (\xe2\x80\x9cTo\nprove that title or a boundary line is established by acquiescence, a plaintiff must prove four elements by clear\nand convincing evidence: (1) possession up to a visible line marked clearly by monuments, fences or the like; (2)\nactual or constructive notice of the possession to the adjoining landowner; (3) conduct by the adjoining\nlandowner from which recognition and acquiescence, not induced by fraud or mistake, may be fairly inferred;\nand (4) acquiescence for a long period of years[.]\xe2\x80\x9d); the doctrine of agreed boundaries, Finley v. Yuba Cnty. Water\nDist., 160 Cal. Rptr. 423, 428 (Cal. App. 1979); estoppel, Douglas v. Rowland, 540 S.W.2d 252 (Tenn. App. 1976),\nand laches. See generally L. C. Warden, Mandatory injunction to compel removal of encroachments by adjoining landowner, 28\nA.L.R.2d 679 (Originally published in 1953) (discussing factors influencing issuance of an injunction).\n\n*\n\nLaches raises a conceptual difficulty, as it seems to cover some of the same ground as adverse possession. Laches\nis an equitable defense analogous to the legal defense provided by a statute of limitations: if a plaintiff\nunreasonably delays in bringing suit and the defendant is prejudiced by the delay, laches will bar the suit as a\nmatter of equity. But if an owner tries to recover land within the limitations period, doesn\xe2\x80\x99t that imply that there\nhas been no unreasonable delay? Clanton v. Hathorn, 600 So. 2d 963, 966 (Miss. 1992) (observing that the adverse\npossession statute \xe2\x80\x9cwould seem to occupy the field\xe2\x80\x9d); Kelly v. Valparaiso Realty Co., 197 So. 2d 35, 36 (Fla. Dist.\nCt. App. 1967) (where adverse possession was unavilable due to failure to pay taxes on the land \xe2\x80\x9cwe do not feel\nthat equity can be invoked to circumvent the statutory law of adverse possession\xe2\x80\x9d); see generally 27A Am. Jur. 2d\nEquity \xc2\xa7 163 (\xe2\x80\x9cOnly rarely should laches bar a case before the statute of limitations has run.\xe2\x80\x9d). But see Pufahl v.\nWhite, No. 2050-S, 2002 WL 31357850, at *1 (Del. Ch. Oct. 9, 2002) (although laches claim cannot lead to title,\nthe \xe2\x80\x9claches defense may, however, be applicable to the plaintiffs\xe2\x80\x99 request to enjoin the defendants to remove the\nencroachment\xe2\x80\x9d).\n\n\x0c212\n\nProperty\nperhaps it makes sense to require an incursion to be sufficiently obvious that a\nproperty owner would not need to conduct a survey to determine the existence\nof a violation.\nBut should sleeping owners be the target of the doctrine? Are property owners\nwho fail to assert their rights also less likely to develop their property (or sell it\nto someone who will)? And if that is the underlying end, are there any problems\nwith using adverse possession doctrine as a means to it?\n6. Adverse possession as reward. The reciprocal view\xe2\x80\x94that adverse possession\nexists to reward the possessors\xe2\x80\x94has two flavors. One is externally focused. The\npossessor, by putting the land to productive use, \xe2\x80\x9chas done a work beneficial to\nthe community.\xe2\x80\x9d Axel Teisen, 3 A.B.A. J. 97, 127 (1917). The other is more\ninternal:\nA thing which you have enjoyed and used as your own for a long\ntime, whether property or an opinion, takes root in your being\nand cannot be torn away without your resenting the act and trying\nto defend yourself, however you came by it. The law can ask no\nbetter justification than the deepest instincts of man. It is only by\nway of reply to the suggestion that you are disappointing the\nformer owner, that you refer to his neglect having allowed the\ngradual dissociation between himself and what he claims, and the\ngradual association of it with another.\nOliver Wendell Holmes, The Path of the Law, 10 HARV. L. REV. 457, 477 (1897).\nDo either of these views resonate? What does this rationale tell you about what\nthe state of mind of the adverse possessor should be?\n7. Third-party interests. Consider the following justification for adverse\npossession doctrine:\nThe statute has not for its object to reward the diligent trespasser\nfor his wrong nor yet to penalize the negligent and dormant\nowner for sleeping upon his rights; the great purpose is\nautomatically to quiet all titles which are openly and consistently\n\n\x0cAdverse Possession\n\n213\n\nasserted, to provide proof of meritorious titles, and correct errors\nin conveyancing.\nHenry W. Ballantine, Title by Adverse Possession, 32 HARV. L. REV. 135, 135 (1918)\n(footnotes omitted). By providing stability to existing property arrangements\nafter the passage of time, adverse possession simplifies transactions by relieving\npurchasers and mortgagees of the risk that they are dealing with title founded\non a long-ago mistake or trespass. The doctrine is a healing mechanism that\nrealigns possession and paperwork when they\xe2\x80\x99ve gotten too badly out of sync.\nThe benefit extends to the legal system as well by relieving courts of the need\nto delve into the details of long-forgotten events.\n8. Adverse possession\xe2\x80\x99s information function. Adverse possession also enables\nrights that exist as a matter of custom (e.g., \xe2\x80\x9cthe Smiths always farm that strip\nof land\xe2\x80\x9d) to receive legal status. A banker in a distant city may not understand\n(or trust) allocations based on local understandings, but that doesn\xe2\x80\x99t matter if\nthe claims are translated into recordable title. * The land may now serve as the\nobject of a sale or collateral for a loan for an expanded audience, enhancing its\nvalue. Adverse possession\xe2\x80\x99s role in converting informal understandings into\nformal rights illustrates law\xe2\x80\x99s ability to facilitate the aggregation and\ndissemination of information across society. Can you think of others?\n9. Tacking. What happens if a series of possessors occupy a property, but none\nof them are present long enough for the limitations period to run? Tieu notes in\npassing the concept of tacking, which enables a succession of adverse\npossessors to collectively satisfy the statutory period. The usual approach is to\nallow tacking so long as the successive possessors are in \xe2\x80\x9cprivity\xe2\x80\x9d: a relationship\nin which the prior possessor knowingly and intentionally transfers whatever\ninterest she holds to the subsequent possessor. See, e.g., Stump v. Whibco, 715\nA.2d 1006 (N.J. Super. Ct. App. 1998) (\xe2\x80\x9cTacking is generally permitted \xe2\x80\x9cunless\n\n\xe2\x80\x9cQuiet title\xe2\x80\x9d suits perform this function. They are actions that establish the claimant\xe2\x80\x99s title to land and foreclose\nthe ability of others to contest it. Although quiet title suits are not necessary to gain rights under adverse\npossession doctrine, they are very important to adverse possessors. Do you see why? If you cannot answer the\nquestion, ask yourself whether you would ever buy property from an adverse possessor.\n\n*\n\n\x0c214\n\nProperty\nit is shown that the claimant\xe2\x80\x99s predecessor in title did not intend to convey the\ndisputed parcel.\xe2\x80\x9d) (citations and quotation omitted). So the clock continues to\nrun if one possessor sells or leases the occupied land, but there is no privity if\none trespasser wanders onto the lot after another leaves (or worse, dispossesses\nthe earlier trespasser by force).\nRecall the question of whether adverse possession doctrine is more properly\nfocused on rewarding deserving possessors or punishing inattentive owners.\nDoes the U.S. approach to tacking shed light on our answer? The English view\nis to allow tacking without privity. Cf. JAMES AMES, LECTURES ON LEGAL\nHISTORY 197 (1913) (\xe2\x80\x9cEnglish lawyers regard not the merit of the possessor,\nbut the demerit of the one out of possession. The statutes of limitation\nprovide . . . not that the adverse possessor shall acquire title, but that the one\nwho neglects for a given time to assert his right shall thereafter not enforce it.\xe2\x80\x9d).\n10. Adverse possession and the environment. An underlying premise of the\nrationales discussed above is that land should be used. For an argument that\nthis tilt makes adverse possession doctrine environmentally harmful, see John G.\nSprankling, An Environmental Critique of Adverse Possession, 79 CORNELL L. REV.\n816, 840 (1994) (arguing that \xe2\x80\x9cAmerican adverse possession law is\nfundamentally hostile to the private preservation of wild lands\xe2\x80\x9d and proposing\nexemption to doctrine for privately held wild lands).\n\nB. \xe2\x80\x9cHostility\xe2\x80\x9d and Intent\nAdverse possession requires possession that is \xe2\x80\x9chostile\xe2\x80\x9d and, often, \xe2\x80\x9cunder a claim of\nright.\xe2\x80\x9d Hostility is not animosity. \xe2\x80\x9cHostile possession can be understood as possession\nthat is opposed and antagonistic to all other claims, and that conveys the clear message\nthat the possessor intends to possess the land as his or her own.\xe2\x80\x9d 16 POWELL ON REAL\nPROPERTY \xc2\xa7 91.01[2]. The requirement thus prevents permissive occupancy from\nripening into ownership; a lessor need not worry that the tenant will claim title by\nadverse possession. See, e.g., Rise v. Steckel, 652 P.2d 364, 372 (1982) (\xe2\x80\x9c[T]he ten-year\nstatutory period for adverse possession did not begin to run until defendant asserted\nto plaintiff that he was possessing the property in his own right, rather than as a tenant\n\n\x0cAdverse Possession\n\n215\n\nat sufferance.\xe2\x80\x9d). A \xe2\x80\x9cclaim of right,\xe2\x80\x9d sometimes called claim of title,* means that the\npossessor is holding the property as an owner would. This could be seen as\nsynonymous with the hostility requirement, but not all jurisdictions treat the concept\nthis way. The Powell treatise states that the predominant view in the United States is\nthat good faith is not required for adverse possession, 16 POWELL ON REAL PROPERTY\n\xc2\xa7 91.01[2], but as you may have already noticed in the Tieu case above, intent often\nmatters.\nCahill v. Morrow\n11 A.3d 82 (R.I. 2011)\nINDEGLIA, J.\nThe property in dispute is located on Gooseberry Road in the Snug Harbor section of\nSouth Kingstown, Rhode Island. Identified as lot 19 on assessor\xe2\x80\x99s plat 88-1, the land is\nsandwiched between lot 20, currently owned by Cahill, and lot 18, formerly coowned\nby members of the Morrow family. Morrow is the record owner of the subject property,\nlot 19.\nIn 1969, Morrow\xe2\x80\x99s husband, George Morrow, purchased lot 19, and the same year\nGeorge and his brothers jointly purchased lot 18. At the time of lot 19\xe2\x80\x99s purchase, it\nwas largely undeveloped, marked only by a preexisting clothesline, grass, and trees.\nSince that time, the Morrows have not improved or maintained lot 19, but have paid\nall property taxes assessed to it. As such, instead of vacationing on their lot 19, the\nMorrows annually spent two weeks in the summer at the cottages on the adjacent lot\n18. During these vacations, the Morrow children and their cousins played on lot 19\xe2\x80\x99s\ngrassy area. Around 1985, the Morrows ceased summering on Gooseberry Road, 3 but\ncontinued to return at least once a year to view the lot. Morrow stopped visiting lot 19\nin October 2002, after her husband became ill, and she did not return again until July\n2006.\n\n*\n\nWhich is not the same thing as \xe2\x80\x9ccolor of title,\xe2\x80\x9d as discussed below.\n\n3\n\nIn 1991, George Morrow and his joint-owner brothers sold lot 18.\n\n\x0c216\n\nProperty\n\nIn 1971, two years after George Morrow purchased lot 19, Cahill\xe2\x80\x99s mother bought the\nland and house designated as lot 20 as a summer residence. Between 1971 and 1975,\nCahill and her brother did some work on lot 19. They occasionally cut the grass, placed\nfurniture, and planted trees and flowers on it.\nCahill\xe2\x80\x99s mother passed away in 1975, and in 1977, after purchasing her siblings\xe2\x80\x99 shares,\nCahill became the sole record owner of the lot 20 property. Once she became lot 20\xe2\x80\x99s\nowner, Cahill began living in the house year-round. From that time through 1991, she\nand her boyfriend, James M. Cronin, testified that they continued to mow lot 19\xe2\x80\x99s grass\non occasion. In addition, she hung clothing on the clothesline, attached flags to the\nclothesline pole, used the picnic table, positioned a bird bath and feeder, and planted\nmore flowers and trees. Cahill placed Adirondack chairs on lot 19 and eventually\nreplaced the clothesline and picnic table. In 1987, Cahill held the first annual \xe2\x80\x9ccousins\xe2\x80\x99\nparty\xe2\x80\x9d allowing her relatives free rein with respect to her property and lot 19 for playing,\nsitting, and car parking. She also entertained friends and family on lot 19 during other\nsummer days. Mary Frances McGinn, Cahill\xe2\x80\x99s cousin, likewise recalled that lot 19 was\noccupied by Cahill kindred during various family functions throughout this time period.\nCahill admitted that she never objected to neighborhood children using lot 19,\nhowever.\nDuring the period of 1991 through 1997, Cahill testified that she planted more flowers\nand trees, in addition to cutting the grass occasionally. Cahill also stored her gas grill\nand yard furniture on the lot and had her brother stack lobster pots for decorative\npurposes. In 1991 or 1992, she began hosting the annual \xe2\x80\x9cCane Berry Blossom\nFestival,\xe2\x80\x9d another outdoor event that used both her lot and lot 19 as the party venue.\nLike the other gatherings, the festival always took place on a day during a warm-weather\nmonth. In 1997 or 1998, she installed a wooden border around the flower beds.\nOn July 22, 1997, Cahill wrote to George Morrow expressing an interest in obtaining\ntitle to lot 19. In the 1997 letter, Cahill stated: \xe2\x80\x9cI am interested in learning if your narrow\nstrip of property is available for sale. If so, I would be interested in discussing\npurchasing it from you.\xe2\x80\x9d Cahill continued: \xe2\x80\x9cIf there is a possibility that you would like\nto sell it, could you please either call me or send me a note?\xe2\x80\x9d Cahill did not receive a\nresponse.\n\n\x0cAdverse Possession\n\n217\n\nIn the \xe2\x80\x9clate 1990s,\xe2\x80\x9d though Cahill is unclear whether this occurred before or after the\n1997 letter, a nearby marina sought permission to construct and elevate its property.\nCahill attended the related zoning board hearings and expressed her concerns about\nincreased flooding on lot 19 due to the marina elevation. She succeeded in having the\nmarina developer grade part of lot 19 to alleviate flooding. Additionally, Cahill\ninstituted her own trench and culvert drainage measures to divert water off of lot 19\nand then reseeded the graded area. By Cahill\xe2\x80\x99s own admission, however, her trenching\nand reseeding work occurred in 1999 or 2000.\nSubsequent to 2001, the new owners of lot 18 5 stored their boat on lot 19 and planted\ntheir own flowers and small trees on the property. In 2002, when the town (with\napproval from George Morrow) erected a stone wall and laid a sidewalk on the\nGooseberry Road border of lot 19, Cahill loamed and planted grass on that portion of\nthe lot. Also in 2002, Cahill asked Morrow\xe2\x80\x99s two sisters on separate occasions whether\nGeorge Morrow would be interested in selling lot 19. The Morrows gave no response\nto her 2002 inquiries. In 2003, George Morrow passed away.\nAfter making her third inquiry concerning the purchase of lot 19 in 2002, Cahill\ntestified, she continued using the property in a fashion similar to her prior practice until\nDecember 2005, when she noticed heavy-machinery tire marks and test pits on the\nland. Thereafter, she retained counsel and authorized her attorney to send a letter on\nJanuary 10, 2006 to Morrow indicating her adverse possession claim to a \xe2\x80\x9c20-foot strip\nof land on the northerly boundary\xe2\x80\x9d of lot 19. According to a survey of the disputed\nproperty, however, the width of lot 19 from the northerly boundary (adjacent to Cahill\xe2\x80\x99s\nproperty) to lot 18 is 49.97 feet and therefore, more than double what Cahill originally\nclaimed in this letter. Nonetheless, on April 25, 2006, Cahill instituted a civil action\nrequesting a declaration that based on her \xe2\x80\x9cuninterrupted, quiet, peaceful and actual\nseisin and possession\xe2\x80\x9d \xe2\x80\x9cfor a period greater than 10 years,\xe2\x80\x9d she was the true owner of\nlot 19 in its entirety. On July 25, 2007, the trial justice agreed that Cahill had proved\nadverse possession under G.L. 1956 \xc2\xa7 34-7-1 and vested in her the fee simple title to\nlot 19.\xe2\x80\xa6\n\n5\n\nIn approximately 2001, new owners purchased lot 18 from the Morrow brothers\xe2\x80\x99 successor.\n\n\x0c218\n\nProperty\n\nIn Rhode Island, obtaining title by adverse possession requires actual, open, notorious,\nhostile, continuous, and exclusive use of property under a claim of right for at least a\nperiod of ten years.\nHere, the trial justice recited the proper standard of proof for adverse possession and\nthen found that Cahill had\n\xe2\x80\x9cmet her burden of establishing all of the elements of an adverse\npossession claim to lot 19 by her and her mother\xe2\x80\x99s continuous and\nuninterrupted use of the parcel for well in excess of ten years. She\nmaintained the property, planted and improved the property with shrubs,\ntrees, and other plantings, sought drainage control measures, and used\nthe property as if it were her own since 1971. She established that use\nnot only by her own testimony, but as corroborated by other witnesses,\nphotographs, and expert testimony relative to the interpretation of aerial\nphotographs.\xe2\x80\x9d\nAt trial, as here on appeal, Morrow argued that Cahill\xe2\x80\x99s offers to purchase the property\ninvalidated her claim of right and the element of hostile possession. To dispose of that\nissue, the trial justice determined that \xe2\x80\x9ceven assuming that [Cahill\xe2\x80\x99s] inquiry is\ncircumstantial evidence of her knowledge that George Morrow, and subsequently\nMargaret [Morrow], were the legal title holders of [lot] 19, that does not destroy the\nviability of this adverse possession claim.\xe2\x80\x9d The trial justice relied upon our opinion in\nTavares, 814 A.2d at 350, to support his conclusion. Recalling that this Court stated in\nTavares that \xe2\x80\x9ceven when the claimants know they are nothing more than black-hearted\ntrespassers, they can still adversely possess the property in question under a claim [of]\nright to do so if they use it openly, notoriously, and in a manner that is adverse to the\ntrue owner\xe2\x80\x99s rights for the requisite ten-year period,\xe2\x80\x9d the trial justice found that Cahill\xe2\x80\x99s\noutward acknowledgement of Morrow\xe2\x80\x99s record title did not alone \xe2\x80\x9cnegate her claim of\nright.\xe2\x80\x9d He further found that \xe2\x80\x9ceven if somehow the expression of interest in purchasing\nlot 19, made initially in 1997, stopped the running of the ten[-]year period under * * *\n\xc2\xa7 34-7-1, the evidence was overwhelming that [Cahill] and her predecessor in title had\ncommenced the requisite ten-year period beginning in 1971.\xe2\x80\x9d\n\xe2\x80\xa6On appeal, Morrow challenges the trial justice\xe2\x80\x99s legal conclusion that Cahill\xe2\x80\x99s offers\nto purchase lot 19 did not extinguish her claim of right, hostile possession, and\n\n\x0cAdverse Possession\n\n219\n\nultimately, the vesting of her title by adverse possession. Morrow also contends that\nthe trial justice erred in finding that Cahill\xe2\x80\x99s testimonial and demonstrative evidence\nwas sufficient to prove adverse possession under the clear and convincing burden of\nproof standard. We agree that as a matter of law the trial justice failed to consider the\nimpact of Cahill\xe2\x80\x99s offers to purchase on the prior twenty-six years of her lot 19 use. As\na result, we hold that this failure also affects his factual determinations.\n1. 1997 Offer-to-Purchase Letter\nIn Tavares, this Court explained that \xe2\x80\x9crequir[ing] adverse possession under a claim of\nright is the same as requiring hostility, in that both terms simply indicate that the\nclaimant is holding the property with an intent that is adverse to the interests of the\ntrue owner.\xe2\x80\x9d Tavares, 814 A.2d at 351 (quoting 16 Powell on Real Property, \xc2\xa7 91.05[1]\nat 91-28 (2000)). \xe2\x80\x9cThus, [we said] a claim of right may be proven through evidence of\nopen, visible acts or declarations, accompanied by use of the property in an objectively\nobservable manner that is inconsistent with the rights of the record owner.\xe2\x80\x9d Here, the\nfirst issue on appeal is how an offer to purchase has an impact on these elements.\xe2\x80\xa6\n\xe2\x80\xa6[I]n Tavares, 814 A.2d at 351, with regard to \xe2\x80\x9cestablishing hostility and possession\nunder a claim of right,\xe2\x80\x9d we explained that \xe2\x80\x9cthe pertinent inquiry centers on the\nclaimants\xe2\x80\x99 objective manifestations of adverse use rather than on the claimants\xe2\x80\x99 knowledge\nthat they lacked colorable legal title.\xe2\x80\x9d (Emphases added.) Essentially, Tavares turned on\nthe difference between the adverse possession claimant\xe2\x80\x99s \xe2\x80\x9cknowledge\xe2\x80\x9d regarding the\nowner\xe2\x80\x99s title and his \xe2\x80\x9cobjective manifestations\xe2\x80\x9d thereof. In that case, the adversepossession claimant surveyed his land and discovered \xe2\x80\x9cthat he did not hold title to the\nparcels in question.\xe2\x80\x9d After such enlightenment, however, the claimant objectively\nmanifested his claim of ownership to the parcels by \xe2\x80\x9cposting no-trespass signs,\nconstructing stone walls, improving drainage, and wood cutting.\xe2\x80\x9d This Court explained\nthat simply having knowledge that he was not the title owner of the parcels was not\nenough to destroy his claim of right given his objective, adverse manifestations\notherwise. In fact, we went so far as to state that \xe2\x80\x9ceven when claimants know that they\nare nothing more than black-hearted trespassers, they can still adversely possess the\nproperty in question under a claim of right to do so if they use it openly, notoriously,\nand in a manner that is adverse to the true owner\xe2\x80\x99s rights for the requisite ten-year\nperiod.\xe2\x80\x9d This statement is legally correct considering that adverse possession does not\nrequire the claimant to make \xe2\x80\x9ca good faith mistake that he or she had legal title to the\n\n\x0c220\n\nProperty\n\nland.\xe2\x80\x9d 16 Powell on Real Property \xc2\xa7 91.05[2] at 91-23. However, to the extent that\nTavares\xe2\x80\x99s reference to \xe2\x80\x9cblack-hearted trespassers\xe2\x80\x9d suggests that this Court endorses an\ninvade-and-conquer mentality in modern property law, we dutifully excise that\nsentiment from our jurisprudence.\nIn the case before this Court, Cahill went beyond mere knowledge that she was not the\nrecord owner by sending the offer-to-purchase letter. As distinguished from the Tavares\nclaimant who did not communicate his survey findings with anyone, Cahill\xe2\x80\x99s letter\nobjectively declared the superiority of George Morrow\xe2\x80\x99s title to the record owner\nhimself. See also Shanks v. Collins, 1989 OK 115, 782 P.2d 1352, 1355 (Okla. 1989) (\xe2\x80\x9cA\nrecognition by an adverse possessor that legal title lies in another serves to break the\nessential element of continuity of possession.\xe2\x80\x9d).\nIn the face of this precedent, Cahill contends that the trial justice accurately applied the\nlaw by finding that an offer to purchase does not automatically negate a claim of right\nin the property. While we agree that this proposition is correct with respect to offers\nmade in an effort to make peace in an ongoing dispute, we disagree that this\nproposition applies in situations, as here, where no preexisting ownership dispute is\nevident.\xe2\x80\xa6 Her offer was not an olive branch meant to put an end to pending litigation\nwith the Morrows. Rather, it was a clear declaration that Cahill \xe2\x80\x9cwanted title to the\nproperty\xe2\x80\x9d from the record owner. By doing so, she necessarily acknowledged that her\ninterest in lot 19 was subservient to George Morrow\xe2\x80\x99s.\xe2\x80\xa6\nAccordingly, the trial justice erred by considering any incidents of ownership exhibited\nby Cahill after the 1997 letter to George Morrow interrupted her claim.\xe2\x80\xa6\n2. The Impact of Cahill\xe2\x80\x99s Offer to Purchase on her Pre-1997 Adverse-Possession Claim\nFurthermore, we also conclude that the trial justice should not have assumed that even\nif Cahill\xe2\x80\x99s \xe2\x80\x9cinquiry is circumstantial evidence of her knowledge that George Morrow,\nand subsequently [Morrow], were the legal title holders of [lot] 19, that does not destroy\nthe viability of this adverse possession claim.\xe2\x80\x9d We agree that an offer to purchase does\nnot automatically invalidate a claim already vested by statute, but we nonetheless hold\nthat the objective manifestations that another has superior title, made after the statutory\nperiod and not made to settle an ongoing dispute, are poignantly relevant to the\n\n\x0cAdverse Possession\n\n221\n\nultimate determination of claim of right and hostile possession during the statutory\nperiod.\xe2\x80\xa6\n3. Questions of Fact Remain\nDespite the significant deference afforded to the trial justice\xe2\x80\x99s findings of fact, such\nfindings are not unassailable. Here, we find clear error in the trial justice\xe2\x80\x99s conclusion\nthat \xe2\x80\x9ceven if somehow the expression of interest in purchasing [lot] 19, made initially\nin 1997, stopped the running of the ten[-]year period * * * the evidence was\noverwhelming that [Cahill] and her predecessor in title had commenced the requisite\nten-year period beginning in 1971.\xe2\x80\x9d Given our opinion that some of Cahill\xe2\x80\x99s lot 19\nactivities cannot be considered because of the time frame of their occurrence, we\ndisagree that the trial record can be classified as presenting \xe2\x80\x9coverwhelming\xe2\x80\x9d evidence\nof adverse possession.\n\xe2\x80\xa6. On remand, the trial justice is directed to limit his consideration to pre-1997 events\nand make specific determinations whether Cahill\xe2\x80\x99s intermittent flower and tree\nplanting, flag flying, clothesline replacing, lawn chair and beach-paraphernalia storing,\nand annual party hosting are adequate. Furthermore, given our ruling today, the trial\ncourt must evaluate the nature of Cahill\xe2\x80\x99s and her predecessor\xe2\x80\x99s twenty-six-year acts of\npossession in the harsh light of the fact that Cahill openly manifested the existence of\nGeorge Morrow\xe2\x80\x99s superior title on three occasions.\xe2\x80\xa6\nFLAHERTY, J., dissenting.\n\xe2\x80\xa6. Simply put, I do not agree that the correspondence between plaintiff and defendant\nin which plaintiff offers to purchase defendant\xe2\x80\x99s interest in lot 19 is the smoking gun\nthe majority perceives it to be. As is clear from a fair reading of plaintiff\xe2\x80\x99s testimony,\nshe believed that she owned the property as a result of her longtime use of and\ndominion over it. But her testimony also demonstrates that she drew a crisp distinction\nbetween whatever ownership rights she may have acquired and record title, which she\nrecognized continued to reside in the Morrows\xe2\x80\xa6. Even if that letter were as significant\nas the majority contends, there is no doubt that it was sent after the statutory period\nhad run. It is beyond dispute that plaintiff\xe2\x80\x99s correspondence could not serve to divest\nher of title if she had already acquired it by adverse possession\xe2\x80\xa6. There certainly was\ncredible evidence for the trial justice to find that plaintiff had used the property as her\nown for well over twenty years before she corresponded with Mr. Morrow in 1997.\xe2\x80\xa6\n\n\x0c222\n\nProperty\nDombkowski v. Ferland\n893 A.2d 599 (Me. 2006)\n\nDANA, J.\n.\xe2\x80\xa6Although \xe2\x80\x9csome courts and commentators fail to distinguish between the elements\nof hostility and claim of right, or simply consider hostility to be a subset of the claim of right\nrequirement[,] see, e.g., Johnson v. Stanley, 96 N.C. App. 72, 384 S.E.2d 577, 579 (1989)[,]\n\xe2\x80\xa6 under Maine law, the two elements are distinct.\xe2\x80\x9d Striefel, 1999 ME 111, P13 n.7, 733\nA.2d at 991.\n\xe2\x80\x9c\xe2\x80\x98Hostile\xe2\x80\x99 simply means that the possessor does not have the true owner\xe2\x80\x99s permission\nto be on the land, and has nothing to do with demonstrating a heated controversy or a\nmanifestation of ill will, or that the claimant was in any sense an enemy of the owner\nof the servient estate.\xe2\x80\x9d Id. P13, 733 A.2d at 991 (quotation marks and citation omitted).\n\xe2\x80\x9cPermission negates the element of hostility, and precludes the acquisition of title by\nadverse possession.\xe2\x80\x9d Id. \xe2\x80\x9c\xe2\x80\x98Under a claim of right\xe2\x80\x99 means that the claimant is in\npossession as owner, with intent to claim the land as [its] own, and not in recognition\nof or subordination to [the] record title owner.\xe2\x80\x9d Id. P14, 733 A.2d at 991 (quotation\nmarks omitted).\nUnder Maine\xe2\x80\x99s common law, as part of the claim of right element, we have historically\nexamined the subjective intentions of the person claiming adverse possession. See Preble\nv. Maine C. R. Co., 85 Me. 260, 264, 27 A. 149, 150 (1893). Under this approach, which\nis considered the minority rule in the country, \xe2\x80\x9cone who by mistake occupies \xe2\x80\xa6 land\nnot covered by his deed with no intention to claim title beyond his actual boundary\nwherever that may be, does not thereby acquire title by adverse possession to land\nbeyond the true line.\xe2\x80\x9d Preble, 85 Me. at 264, 27 A. at 150; see also McMullen, 483 A.2d at\n700 (\xe2\x80\x9c[If] the occupier intend[s] to hold the property only if he were in fact legally\nentitled to it[, the] occupation [is] \xe2\x80\x98conditional\xe2\x80\x99 and [cannot] form the basis of an\nadverse possession claim.\xe2\x80\x9d). The majority rule in the country is based on French v. Pearce,\n8 Conn. 439 (1831), and recognizes that the possessor\xe2\x80\x99s mistaken belief does not defeat\na claim of adverse possession. [The court then interpreted legislation to overrule Maine\nprecedents and allow mistaken possession to meet the claim of right requirement.]\n\n\x0cAdverse Possession\n\n223\nNotes and Questions\n\n1. Doctrine v. practice. Richard Helmholz has argued that though adverse\npossession doctrine generally does not require the adverse possessor to plead\ngood faith, judicial practice is to disfavor those who know they are trespassing\ncompared to those acting out of a good faith mistake. Richard H. Helmholz,\nAdverse Possession and Subjective Intent, 61 WASH. U. L. Q. 331, 332 (1983). Is Cahill\nan example of this dynamic?\nIn recent decades, state legislatures have increasingly demanded good faith on\nthe part of the possessor (the Oregon statute in Tieu requiring honest belief in\nownership, for example, was passed in 1989). See 16 POWELL ON REAL\nPROPERTY \xc2\xa7 91.05 (collecting examples).\n2. Should good faith be required? And if so, what is good faith? Is it an honest\nbelief about the facts on the ground (e.g., whether the fence builder is correct\nthat his fence is on the right side of the boundary line)? Or is it an attitude about\none\xe2\x80\x99s potential adversary (a willingness to move the fence if wrong)? Either view\ncreates evidentiary difficulties.\nEven when good faith is not part of the analysis as a formal matter, Helmholz\nargues that judges and juries often cannot help but \xe2\x80\x9cprefer the claims of an\nhonest man over those of a dishonest man.\xe2\x80\x9d Helmholz, supra, at 358. Might this\nbe a satisfactory middle ground? Are there advantages to having courts officially\nignore intent while applying a de facto bar to the bad faith possessor when there\nis evidence of dishonesty? Or is it problematic to have legal practice depart from\nofficial doctrine?\nPerhaps another way to reconcile the benefits of adverse possession with the\ndistaste for bad faith possessors would be to allow dishonest possessors to keep\nthe land, but pay for the privilege. Thomas W. Merrill, Property Rules, Liability\nRules, and Adverse Possession, 79 NW. U. L. REV. 1122, 1126 (1984) (suggesting\n\xe2\x80\x9crequiring indemnification only in those cases where the [true owner] can show\nthat the [adverse possessor] acted in bad faith.\xe2\x80\x9d). As Merrill notes, a California\nappellate court required such payment in a case concerning a prescriptive\neasement (which is similar to adverse possession except that it concerns the right\n\n\x0c224\n\nProperty\nto use someone else\xe2\x80\x99s land rather than its ownership), only to be overturned by\nthe state supreme court. Id. (discussing Warsaw v. Chicago Metallic Ceilings,\nInc., 676 P.2d 584 (Cal. 1984)). The proposal may remind you of the Manillo\ncase discussed above. How does it differ?\n\n3. A minority of states, as Dombkowski indicates, require adverse possessors to\nprove their subjective intent to take the land without regard to the existence of\nother ownership interests. This is sometimes referred to as the \xe2\x80\x9caggressive\ntrespass\xe2\x80\x9d standard: \xe2\x80\x9cI thought I did not own it [and intended to take it].\xe2\x80\x9d\nMargaret Jane Radin, Time, Possession, and Alienation, 64 WASH. U. L.Q. 739, 746\n(1986) (brackets in the original). Is there a reason to prefer it? Lee Anne Fennell\nargues for a knowing trespass requirement that requires the adverse possessor\nto document her knowledge:\n[A] documented knowledge requirement facilitates rather than\npunishes efforts at consensual dealmaking. One of the most\ndefinitive ways of establishing that a possessor knew she was not\nthe owner of the disputed land is to produce evidence of her\npurchase offer to the record owner. Currently, such an offer\noften destroys one\xe2\x80\x99s chance at adverse possession because it\nshows one is acting in bad faith if one later trespasses; one does\nfar better to remain in ignorance (or pretend to) and never broach\nthe matter with the record owner. Under my proposal, such\noffers would go from being fatal in a later adverse possession\naction to being practically a prerequisite. As a result, it would be\nmuch more likely that any resulting adverse possession claim will\noccur only where a market transaction is unavailable. A\ndocumented knowledge requirement would also reduce litigation\ncosts and increase the certainty of land holdings. Actions or\nrecords establishing that the trespass was known at the time of\nentry, necessary if the possessor ever wishes to gain title under\nmy approach, would serve to streamline trespass actions that\noccur before the statute has run. Moreover, an approach that\nrefuses to reward innocent mistakes would be expected to reduce\nmistake-making.\n\n\x0cAdverse Possession\n\n225\n\nLee Anne Fennell, Efficient Trespass: The Case for \xe2\x80\x9cBad Faith\xe2\x80\x9d Adverse Possession,\n100 NW. U. L. REV. 1037, 1041-44 (2006) (footnotes omitted). One\xe2\x80\x99s position\non these matters may depend on which scenarios one believes are most\ncommon in adverse possession cases and adjust the state of mind required to\ninclude or exclude them accordingly. Should the state of mind required depend\non the context? A state might, for example, require good faith for\nencroachments, but bad faith or color of title if the possessor seeks to own the\nparcel as a whole. Is this a good idea?\n\n\x0c226\n\nProperty\n\nC. Finer Points of Adverse Possession Law\n1. Actual and Continuous Possession. Adverse possessors are not required to\nlive on the occupied property, what matters is acting like a true owner would.\nThat use, however, must be continuous, not sporadic. Compare, e.g., Lobdell v.\nSmith, 690 N.Y.S.2d 171, 173 (N.Y. App. Div. 3d Dep\xe2\x80\x99t 1999) (although\nundeveloped land \xe2\x80\x9cdoes not require the same quality of possession as residential\nor arable land,\xe2\x80\x9d no adverse possession where claimant \xe2\x80\x9cseldom visited the\nparcel except to occasionally pick berries or hunt small game\xe2\x80\x9d), with Nome 2000\nv. Fagerstrom, 799 P.2d 304, 310 (Alaska 1990) (claimants of a rural parcel\nsuitable for recreational and subsistence activities \xe2\x80\x9cvisited the property several\ntimes during the warmer season to fish, gather berries, clean the premises, and\nplay.\xe2\x80\xa6 That others were free to pick berries and fish is consistent with the\nconduct of a hospitable landowner, and undermines neither the continuity nor\nexclusivity of their possession.\xe2\x80\x9d). Regular use of a summer home may constitute\ncontinuous use. See, e.g., Nechow v. Brown, 120 N.W.2d 251, 252 (Mich. 1963).\n2. Color of title. Claim of title, an intent to use land as one\xe2\x80\x99s own, is distinct from\ncolor of title, which describes taking possession under a defective instrument\n(like a deed based on a mistaken land survey). States often apply more lenient\nadverse possession standards to claims made under color of title. Compare, e.g.,\nFl. St. \xc2\xa7 95.16, with id. \xc2\xa7 95.18. Why do you think that is?\nEntry under color of title may also affect the scope of the land treated as\noccupied by the adverse possessor. 2 C.J.S. Adverse Possession \xc2\xa7 252 (\xe2\x80\x9cAdverse\npossession under color of title ordinarily extends to the whole tract described\nin the instrument constituting color of title.\xe2\x80\x9d). But see Wentworth v. Forne, 137\nSo. 2d 166, 169 (Miss. 1962) (\xe2\x80\x9cIn brief, when the land involved is, in part,\noccupied by the real owner, the adverse possession, even when this possessor\nhas color of title, is confined to the area actually possessed.\xe2\x80\x9d).\n3. Adverse possession by and against the government. Although government\nagencies may acquire title by adverse possession, the general rule is that public\nproperty held for public use is not subject to the doctrine. Why do you think\nthat is?\n\n\x0cAdverse Possession\n\n227\n\n4. Disabilities. The title owner of land may be subject to a disability (e.g., status\nas a minor, mental incapacity) that may extend the time to bring an ejectment\naction against an unlawful occupant. States generally spell out such exceptions\nby statute.\n5. A Moving Target. States vary their adverse possession rules to take into\naccount a variety of factors (e.g., claim under color of title, payment of property\ntaxes, enclosure or cultivation of land, etc.). These factors may change with the\ntimes. In the aftermath of the financial crisis, for example, reports of trespassers\noccupying foreclosed, vacant properties with the goal of acquiring title via\nadverse possession prompted renewed attention to the doctrine. Florida\nenacted legislation that requires those seeking adverse possession without color\nof title to pay all outstanding taxes on the property within one year of taking\npossession and disclose in writing the possessor\xe2\x80\x99s identity, date of possession,\nand a description of the property sufficient to enable the identification of the\nproperty in the public records. Local officials are then required to make efforts\nto contact the record owner of the property. FLA. STAT. \xc2\xa7 95.18. The form\ncreated under the statute is reprinted below. Are measures like these useful?\nConsider the problem of \xe2\x80\x9czombie foreclosures.\xe2\x80\x9d A property may be vacant\nbecause the owners received a notice of foreclosure and left. Sometimes the\nlenders never complete the foreclosure process, perhaps to avoid the costs that\ncome with ownership of the property. Title therefore remains with the out-ofpossession owners, who remain responsible for taxes, association fees, and the\nlike. What outcome should adverse possession law seek to promote in such\ncases?\n\n\x0c228\n\nProperty\n\n\x0cAdverse Possession\n\n229\n\nD. Adverse Possession of Chattels\nO\xe2\x80\x99Keeffe v. Snyder\n416 A.2d 862 (N.J. 1980)\nThe opinion of the Court was delivered by POLLOCK, J.\nThis is an appeal from an order of the Appellate Division granting summary judgment\nto plaintiff, Georgia O\xe2\x80\x99Keeffe, against defendant, Barry Snyder, d/b/a Princeton\nGallery of Fine Art, for replevin of three small pictures painted by O\xe2\x80\x99Keeffe. In her\ncomplaint, filed in March, 1976, O\xe2\x80\x99Keeffe alleged she was the owner of the paintings\nand that they were stolen from a New York art gallery in 1946. Snyder asserted he was\na purchaser for value of the paintings, he had title by adverse possession, and\nO\xe2\x80\x99Keeffe\xe2\x80\x99s action was barred by the expiration of the six-year period of limitations\nprovided by N.J.S.A. 2A:14-1 pertaining to an action in replevin. Snyder impleaded\nthird party defendant, Ulrich A. Frank, from whom Snyder purchased the paintings in\n1975 for $35,000.\nThe trial court granted summary judgment for Snyder on the ground that O\xe2\x80\x99Keeffe\xe2\x80\x99s\naction was barred because it was not commenced within six years of the alleged theft.\nThe Appellate Division reversed and entered judgment for O\xe2\x80\x99Keeffe. A majority of\nthat court concluded that the paintings were stolen, the defenses of expiration of the\nstatute of limitations and title by adverse possession were identical, and Snyder had not\nproved the elements of adverse possession. Consequently, the majority ruled that\nO\xe2\x80\x99Keeffe could still enforce her right to possession of the paintings.\nThe dissenting judge stated that the appropriate measurement of the period of\nlimitation was not by analogy to adverse possession, but by application of the\n\xe2\x80\x9cdiscovery rule\xe2\x80\x9d pertaining to some statutes of limitation. He concluded that the sixyear period of limitations commenced when O\xe2\x80\x99Keeffe knew or should have known\nwho unlawfully possessed the paintings, and that the matter should be remanded to\ndetermine if and when that event had occurred.\nWe granted certification \xe2\x80\xa6\nI\n\n\x0c230\n\nProperty\nI\n\nThe record, limited to pleadings, affidavits, answers to interrogatories, and depositions,\nis fraught with factual conflict. Apart from the creation of the paintings by O\xe2\x80\x99Keeffe\nand their discovery in Snyder\xe2\x80\x99s gallery in 1976, the parties agree on little else.\nO\xe2\x80\x99Keeffe contended the paintings were stolen in 1946 from a gallery, An American\nPlace. The gallery was operated by her late husband, the famous photographer Alfred\nStieglitz.\nAn American Place was a cooperative undertaking of O\xe2\x80\x99Keeffe and some other\nAmerican artists\xe2\x80\xa6 . In 1946, Stieglitz arranged an exhibit which included an O\xe2\x80\x99Keeffe\npainting, identified as Cliffs. According to O\xe2\x80\x99Keeffe, one day in March, 1946, she and\nStieglitz discovered Cliffs was missing from the wall of the exhibit. O\xe2\x80\x99Keeffe estimates\nthe value of the painting at the time of the alleged theft to have been about $150.\nAbout two weeks later, O\xe2\x80\x99Keeffe noticed that two other paintings, Seaweed and\nFragments, were missing from a storage room at An American Place. She did not tell\nanyone, even Stieglitz, about the missing paintings, since she did not want to upset him.\nBefore the date when O\xe2\x80\x99Keeffe discovered the disappearance of Seaweed, she had\nalready sold it (apparently for a string of amber beads) to a Mrs. Weiner, now deceased.\nFollowing the grant of the motion for summary judgment by the trial court in favor of\nSnyder, O\xe2\x80\x99Keeffe submitted a release from the legatees of Mrs. Weiner purportedly\nassigning to O\xe2\x80\x99Keeffe their interest in the sale.\nO\xe2\x80\x99Keeffe testified on depositions that at about the same time as the disappearance of\nher paintings, 12 or 13 miniature paintings by Marin also were stolen from An\nAmerican Place. According to O\xe2\x80\x99Keeffe, a man named Estrick took the Marin paintings\nand \xe2\x80\x9cmaybe a few other things.\xe2\x80\x9d Estrick distributed the Marin paintings to members\nof the theater world who, when confronted by Stieglitz, returned them. However,\nneither Stieglitz nor O\xe2\x80\x99Keeffe confronted Estrick with the loss of any of the O\xe2\x80\x99Keeffe\npaintings.\nThere was no evidence of a break and entry at An American Place on the dates when\nO\xe2\x80\x99Keeffe discovered the disappearance of her paintings. Neither Stieglitz nor O\xe2\x80\x99Keeffe\nreported them missing to the New York Police Department or any other law\n\n\x0cAdverse Possession\n\n231\n\nenforcement agency. Apparently the paintings were uninsured, and O\xe2\x80\x99Keeffe did not\nseek reimbursement from an insurance company. Similarly, neither O\xe2\x80\x99Keeffe nor\nStieglitz advertised the loss of the paintings in Art News or any other publication.\nNonetheless, they discussed it with associates in the art world and later O\xe2\x80\x99Keeffe\nmentioned the loss to the director of the Art Institute of Chicago, but she did not ask\nhim to do anything because \xe2\x80\x9cit wouldn\xe2\x80\x99t have been my way.\xe2\x80\x9d O\xe2\x80\x99Keeffe does not\ncontend that Frank or Snyder had actual knowledge of the alleged theft.\nStieglitz died in the summer of 1946, and O\xe2\x80\x99Keeffe explains she did not pursue her\nefforts to locate the paintings because she was settling his estate. In 1947, she retained\nthe services of Doris Bry to help settle the estate. Bry urged O\xe2\x80\x99Keeffe to report the loss\nof the paintings, but O\xe2\x80\x99Keeffe declined because \xe2\x80\x9cthey never got anything back by\nreporting it.\xe2\x80\x9d Finally, in 1972, O\xe2\x80\x99Keeffe authorized Bry to report the theft to the Art\nDealers Association of America, Inc., which maintains for its members a registry of\nstolen paintings. The record does not indicate whether such a registry existed at the\ntime the paintings disappeared.\nIn September, 1975, O\xe2\x80\x99Keeffe learned that the paintings were in the Andrew Crispo\nGallery in New York on consignment from Bernard Danenberg Galleries. On February\n11, 1976, O\xe2\x80\x99Keeffe discovered that Ulrich A. Frank had sold the paintings to Barry\nSnyder, d/b/a Princeton Gallery of Fine Art. She demanded their return and, following\nSnyder\xe2\x80\x99s refusal, instituted this action for replevin.\nFrank traces his possession of the paintings to his father, Dr. Frank, who died in 1968.\nHe claims there is a family relationship by marriage between his family and the Stieglitz\nfamily, a contention that O\xe2\x80\x99Keeffe disputes. Frank does not know how his father\nacquired the paintings, but he recalls seeing them in his father\xe2\x80\x99s apartment in New\nHampshire as early as 1941-1943, a period that precedes the alleged theft. Consequently,\nFrank\xe2\x80\x99s factual contentions are inconsistent with O\xe2\x80\x99Keeffe\xe2\x80\x99s allegation of theft. Until\n1965, Dr. Frank occasionally lent the paintings to Ulrich Frank. In 1965, Dr. and Mrs.\nFrank formally gave the paintings to Ulrich Frank, who kept them in his residences in\nYardley, Pennsylvania and Princeton, New Jersey. In 1968, he exhibited anonymously\nCliffs and Fragments in a one day art show in the Jewish Community Center in Trenton.\nAll of these events precede O\xe2\x80\x99Keeffe\xe2\x80\x99s listing of the paintings as stolen with the Art\nDealers Association of America, Inc. in 1972.\n\n\x0c232\n\nProperty\n\nFrank claims continuous possession of the paintings through his father for over thirty\nyears and admits selling the paintings to Snyder. Snyder and Frank do not trace their\nprovenance, or history of possession of the paintings, back to O\xe2\x80\x99Keeffe.\nAs indicated, Snyder moved for summary judgment on the theory that O\xe2\x80\x99Keeffe\xe2\x80\x99s\naction was barred by the statute of limitations and title had vested in Frank by adverse\npossession. For purposes of his motion, Snyder conceded that the paintings had been\nstolen. On her cross motion, O\xe2\x80\x99Keeffe urged that the paintings were stolen, the statute\nof limitations had not run, and title to the paintings remained in her.\nII\n[The court held that there was a genuine factual dispute whether the paintings had been\nstolen.]\nIII\nOn the limited record before us, we cannot determine now who has title to the\npaintings. That determination will depend on the evidence adduced at trial.\nNonetheless, we believe it may aid the trial court and the parties to resolve questions\nof law that may become relevant at trial.\nOur decision begins with the principle that, generally speaking, if the paintings were\nstolen, the thief acquired no title and could not transfer good title to others regardless\nof their good faith and ignorance of the theft. Proof of theft would advance O\xe2\x80\x99Keeffe\xe2\x80\x99s\nright to possession of the paintings absent other considerations such as expiration of\nthe statute of limitations.\nAnother issue that may become relevant at trial is whether Frank or his father acquired\na \xe2\x80\x9cvoidable title\xe2\x80\x9d to the paintings under N.J.S.A. 12A:2-403(1). That section, part of\nthe Uniform Commercial Code (U.C.C.), does not change the basic principle that a\nmere possessor cannot transfer good title. Nonetheless, the U.C.C. permits a person\nwith voidable title to transfer good title to a good faith purchaser for value in certain\ncircumstances. * If the facts developed at trial merit application of that section, then\n\n*\n\n[Eds. \xe2\x80\x94 We will explore this rule thoroughly in our unit on Improvers and Good Faith Purchasers.]\n\n\x0cAdverse Possession\n\n233\n\nFrank may have transferred good title to Snyder, thereby providing a defense to\nO\xe2\x80\x99Keeffe\xe2\x80\x99s action. No party on this appeal has urged factual or legal contentions\nconcerning the applicability of the U.C.C. Consequently, a more complete discussion\nof the U.C.C. would be premature, particularly in light of our decision to remand the\nmatter for trial.\nOn this appeal, the critical legal question is when O\xe2\x80\x99Keeffe\xe2\x80\x99s cause of action accrued.\nThe fulcrum on which the outcome turns is the statute of limitations in N.J.S.A. 2A:141, which provides that an action for replevin of goods or chattels must be commenced\nwithin six years after the accrual of the cause of action. \xe2\x80\xa6\nSince the alleged theft occurred in New York, a preliminary question is whether the\nstatute of limitations of New York or New Jersey applies. The New York statute, N.Y.\nCiv. Prac. Law \xc2\xa7 214 (McKinney), has been interpreted so that the statute of limitations\non a cause of action for replevin does not begin to run until after refusal upon demand\nfor the return of the goods. Here, O\xe2\x80\x99Keeffe demanded return of the paintings in\nFebruary, 1976. If the New York statute applied, her action would have been\ncommenced within the period of limitations.\nThe traditional rule to determine which of two statutes of limitations is applicable is\nthat the statute of the forum governs unless the limitation is a condition of the cause\nof action. However, this Court has discarded the mechanical rule that the statute of\nlimitations of the forum must be employed in every suit on a foreign cause of action.\nHeavner v. Uniroyal, Inc., 63 N.J. 130, 140-141 (1973). Heavner set out five requirements\nfor barring an action by applying a statute of limitations other than the appropriate\nNew Jersey statute: (1) the cause of action arose in the other state; (2) the parties are all\npresent in and amenable to jurisdiction in the other state; (3) New Jersey has no\nsubstantial interest in the matter; (4) the substantive law of the other jurisdiction is\napplicable, and (5) the limitations\xe2\x80\x99 period of the other jurisdiction has expired at the\ntime of the commencement of the suit in New Jersey. The Heavner rule provides a\nlimited and special exception to the general rule that the rule of the forum determines\nthe applicable period of limitations. In the present case, none of the parties resides in\nNew York and the paintings are located in New Jersey. On the facts before us, it would\nappear that the appropriate statute of limitations is the law of the forum, N.J.S.A.\n\n\x0c234\n\nProperty\n\n2A:14-1. On remand, the trial court may reconsider this issue if the parties present\nother relevant facts.\nIV\nOn the assumption that New Jersey law will apply, we shall consider significant\nquestions raised about the interpretation of N.J.S.A. 2A:14-1. The purpose of a statute\nof limitations is to stimulate to activity and punish negligence and promote repose by\ngiving security and stability to human affairs. A statute of limitations achieves those\npurposes by barring a cause of action after the statutory period. In certain instances,\nthis Court has ruled that the literal language of a statute of limitations should yield to\nother considerations.\nTo avoid harsh results from the mechanical application of the statute, the courts have\ndeveloped a concept known as the discovery rule. The discovery rule provides that, in\nan appropriate case, a cause of action will not accrue until the injured party discovers,\nor by exercise of reasonable diligence and intelligence should have discovered, facts\nwhich form the basis of a cause of action. The rule is essentially a principle of equity,\nthe purpose of which is to mitigate unjust results that otherwise might flow from strict\nadherence to a rule of law.\nThis Court first announced the discovery rule in Fernandi, supra, 35 N.J. at 434. In\nFernandi, a wing nut was left in a patient\xe2\x80\x99s abdomen following surgery and was not\ndiscovered for three years. The majority held that fairness and justice mandated that\nthe statute of limitations should not have commenced running until the plaintiff knew\nor had reason to know of the presence of the foreign object in her body. \xe2\x80\xa6\nSimilarly, we conclude that the discovery rule applies to an action for replevin of a\npainting under N.J.S.A. 2A:14-1. O\xe2\x80\x99Keeffe\xe2\x80\x99s cause of action accrued when she first\nknew, or reasonably should have known through the exercise of due diligence, of the\ncause of action, including the identity of the possessor of the paintings. \xe2\x80\xa6\nIn determining whether O\xe2\x80\x99Keeffe is entitled to the benefit of the discovery rule, the\ntrial court should consider, among others, the following issues: (1) whether O\xe2\x80\x99Keeffe\nused due diligence to recover the paintings at the time of the alleged theft and\nthereafter; (2) whether at the time of the alleged theft there was an effective method,\nother than talking to her colleagues, for O\xe2\x80\x99Keeffe to alert the art world; and (3) whether\n\n\x0cAdverse Possession\n\n235\n\nregistering paintings with the Art Dealers Association of America, Inc. or any other\norganization would put a reasonably prudent purchaser of art on constructive notice\nthat someone other than the possessor was the true owner.\nV\nThe acquisition of title to real and personal property by adverse possession is based on\nthe expiration of a statute of limitations. R. Brown, The Law of Personal Property (3d\ned. 1975), \xc2\xa7 4.1 at 33 (Brown). Adverse possession does not create title by prescription\napart from the statute of limitations.\nTo establish title by adverse possession to chattels, the rule of law has been that the\npossession must be hostile, actual, visible, exclusive, and continuous. \xe2\x80\xa6\n[T]here is an inherent problem with many kinds of personal property that will raise\nquestions whether their possession has been open, visible, and notorious. \xe2\x80\xa6 For\nexample, if jewelry is stolen from a municipality in one county in New Jersey, it is\nunlikely that the owner would learn that someone is openly wearing that jewelry in\nanother county or even in the same municipality. Open and visible possession of\npersonal property, such as jewelry, may not be sufficient to put the original owner on\nactual or constructive notice of the identity of the possessor.\nThe problem is even more acute with works of art. Like many kinds of personal\nproperty, works of art are readily moved and easily concealed. O\xe2\x80\x99Keeffe argues that\nnothing short of public display should be sufficient to alert the true owner and start\nthe statute running. Although there is merit in that contention from the perspective of\nthe original owner, the effect is to impose a heavy burden on the purchasers of\npaintings who wish to enjoy the paintings in the privacy of their homes. \xe2\x80\xa6\nThe problem is serious. According to an affidavit submitted in this matter by the\npresident of the International Foundation for Art Research, there has been an\n\xe2\x80\x9cexplosion in art thefts\xe2\x80\x9d and there is a \xe2\x80\x9cworldwide phenomenon of art theft which has\nreached epidemic proportions\xe2\x80\x9d.\nThe limited record before us provides a brief glimpse into the arcane world of sales of\nart, where paintings worth vast sums of money sometimes are bought without inquiry\nabout their provenance. There does not appear to be a reasonably available method for\n\n\x0c236\n\nProperty\n\nan owner of art to record the ownership or theft of paintings. Similarly, there are no\nreasonable means readily available to a purchaser to ascertain the provenance of a\npainting. It may be time for the art world to establish a means by which a good faith\npurchaser may reasonably obtain the provenance of a painting. An efficient registry of\noriginal works of art might better serve the interests of artists, owners of art, and bona\nfide purchasers than the law of adverse possession with all of its uncertainties.\nAlthough we cannot mandate the initiation of a registration system, we can develop a\nrule for the commencement and running of the statute of limitations that is more\nresponsive to the needs of the art world than the doctrine of adverse possession.\nWe are persuaded that the introduction of equitable considerations through the\ndiscovery rule provides a more satisfactory response than the doctrine of adverse\npossession. The discovery rule shifts the emphasis from the conduct of the possessor\nto the conduct of the owner. The focus of the inquiry will no longer be whether the\npossessor has met the tests of adverse possession, but whether the owner has acted\nwith due diligence in pursuing his or her personal property.\nFor example, under the discovery rule, if an artist diligently seeks the recovery of a lost\nor stolen painting, but cannot find it or discover the identity of the possessor, the\nstatute of limitations will not begin to run. The rule permits an artist who uses\nreasonable efforts to report, investigate, and recover a painting to preserve the rights\nof title and possession.\nProperly interpreted, the discovery rule becomes a vehicle for transporting equitable\nconsiderations into the statute of limitations for replevin. In determining whether the\ndiscovery rule should apply, a court should identify, evaluate, and weigh the equitable\nclaims of all parties. If a chattel is concealed from the true owner, fairness compels\ntolling the statute during the period of concealment. That conclusion is consistent with\ntolling the statute of limitations in a medical malpractice action where the physician is\nguilty of fraudulent concealment.\nIt is consistent also with the law of replevin as it has developed apart from the discovery\nrule. In an action for replevin, the period of limitations ordinarily will run against the\nowner of lost or stolen property from the time of the wrongful taking, absent fraud or\nconcealment. Where the chattel is fraudulently concealed, the general rule is that the\nstatute is tolled \xe2\x80\xa6\n\n\x0cAdverse Possession\n\n237\n\nThe discovery rule will fulfill the purposes of a statute of limitations and accord greater\nprotection to the innocent owner of personal property whose goods are lost or stolen.\n\xe2\x80\xa6\nBy diligently pursuing their goods, owners may prevent the statute of limitations from\nrunning. The meaning of due diligence will vary with the facts of each case, including\nthe nature and value of the personal property. For example, with respect to jewelry of\nmoderate value, it may be sufficient if the owner reports the theft to the police. With\nrespect to art work of greater value, it may be reasonable to expect an owner to do\nmore. In practice, our ruling should contribute to more careful practices concerning\nthe purchase of art.\nThe considerations are different with real estate, and there is no reason to disturb the\napplication of the doctrine of adverse possession to real estate. Real estate is fixed and\ncannot be moved or concealed. The owner of real property knows or should know\nwhere his property is located and reasonably can be expected to be aware of open,\nnotorious, visible, hostile, continuous acts of possession on it.\nOur ruling not only changes the requirements for acquiring title to personal property\nafter an alleged unlawful taking, but also shifts the burden of proof at trial. Under the\ndoctrine of adverse possession, the burden is on the possessor to prove the elements\nof adverse possession. Under the discovery rule, the burden is on the owner as the one\nseeking the benefit of the rule to establish facts that would justify deferring the\nbeginning of the period of limitations.\nVI\nRead literally, the effect of the expiration of the statute of limitations under N.J.S.A.\n2A:14-1 is to bar an action such as replevin. The statute does not speak of divesting\nthe original owner of title. By its terms the statute cuts off the remedy, but not the right\nof title. Nonetheless, the effect of the expiration of the statute of limitations, albeit on\nthe theory of adverse possession, has been not only to bar an action for possession,\nbut also to vest title in the possessor. There is no reason to change that result although\nthe discovery rule has replaced adverse possession. History, reason, and common sense\nsupport the conclusion that the expiration of the statute of limitations bars the remedy\nto recover possession and also vests title in the possessor. \xe2\x80\xa6\n\n\x0c238\n\nProperty\n\nBefore the expiration of the statute, the possessor has both the chattel and the right to\nkeep it except as against the true owner. The only imperfection in the possessor\xe2\x80\x99s right\nto retain the chattel is the original owner\xe2\x80\x99s right to repossess it. Once that imperfection\nis removed, the possessor should have good title for all purposes. Ames, The Disseisin\nof Chattels, 3 HARV. L. REV. 313, 321 (1890) (Ames). As Dean Ames wrote: \xe2\x80\x9cAn\nimmortal right to bring an eternally prohibited action is a metaphysical subtlety that the\npresent writer cannot pretend to understand.\xe2\x80\x9d Id. at 319.\nRecognizing a metaphysical notion of title in the owner would be of little benefit to\nhim or her and would create potential problems for the possessor and third parties.\nThe expiration of the six-year period of N.J.S.A. 2A:14-1 should vest title as effectively\nunder the discovery rule as under the doctrine of adverse possession. \xe2\x80\xa6\nVII\nWe next consider the effect of transfers of a chattel from one possessor to another\nduring the period of limitation under the discovery rule. Under the discovery rule, the\nstatute of limitations on an action for replevin begins to run when the owner knows or\nreasonably should know of his cause of action and the identity of the possessor of the\nchattel. Subsequent transfers of the chattel are part of the continuous dispossession of\nthe chattel from the original owner. The important point is not that there has been a\nsubstitution of possessors, but that there has been a continuous dispossession of the\nformer owner.\nProfessor Ballantine explains:\nWhere the same claim of title has been consistently asserted for the\nstatutory period by persons in privity with each other, there is the same\nreason to quiet and establish the title as where one person has held. The\nsame flag has been kept flying for the whole period. It is the same ouster\nand disseisin. If the statute runs, it quiets a title which has been\nconsistently asserted and exercised as against the true owner, and the\npossession of the prior holder justly enures to the benefit of the last. [H.\nBallantine, Title by Adverse Possession, 32 HARV. L. REV. 135, 158 (1919)]\n\xe2\x80\xa6\n\n\x0cAdverse Possession\n\n239\n\nFor the purpose of evaluating the due diligence of an owner, the dispossession of his\nchattel is a continuum not susceptible to separation into distinct acts. Nonetheless,\nsubsequent transfers of the chattel may affect the degree of difficulty encountered by\na diligent owner seeking to recover his goods. To that extent, subsequent transfers and\ntheir potential for frustrating diligence are relevant in applying the discovery rule. An\nowner who diligently seeks his chattel should be entitled to the benefit of the discovery\nrule although it may have passed through many hands. Conversely an owner who sleeps\non his rights may be denied the benefit of the discovery rule although the chattel may\nhave been possessed by only one person.\nWe reject the alternative of treating subsequent transfers of a chattel as separate acts of\nconversion that would start the statute of limitations running anew. \xe2\x80\xa6\nTreating subsequent transfers as separate acts of conversion could lead to absurd\nresults. As explained by Dean Ames: \xe2\x80\x93\n\xe2\x80\xa6 If a converter were to sell the chattel, five years after its conversion,\nto one ignorant of the seller\xe2\x80\x99s tort, the disposed owner\xe2\x80\x99s right to recover\nthe chattel from the purchaser would continue five years longer than his\nright to recover from the converter would have lasted if there had been\nno sale. In other words, an innocent purchaser from a wrong-doer would\nbe in a worse position than the wrong-doer himself,\xe2\x80\x94a conclusion as\nshocking in point of justice as it would be anomalous in law. [Ames, supra\nat 323, footnotes omitted]\nIt is more sensible to recognize that on expiration of the period of limitations, title\npasses from the former owner by operation of the statute. Needless uncertainty would\nresult from starting the statute running anew merely because of a subsequent transfer.\n\xe2\x80\xa6\nWe reverse the judgment of the Appellate Division in favor of O\xe2\x80\x99Keeffe and remand\nthe matter for trial in accordance with this opinion.\nNotes and Questions\n1. What did O\xe2\x80\x99Keeffe do to locate the paintings? At least according to the court,\nwhat more could she have done? What more should she have done? What did\n\n\x0c240\n\nProperty\nthe Franks and Snyder do to make their possession of the paintings clear? What\nmore could they have done? What more should they have done? Did the court\nproperly balance the parties\xe2\x80\x99 interests? Did it give the right incentives to future\nparties in their positions?\n\n2. The court argues that switching from adverse possession to the discovery rule\n\xe2\x80\x9cshifts the emphasis from the conduct of the possessor to the conduct of the\nowner.\xe2\x80\x9d Is this a good description of the difference between the two tests? Is\nthe court\xe2\x80\x99s explanation of its reasons for the change persuasive?\n3. Notice O\xe2\x80\x99Keeffe\xe2\x80\x99s discussion of the choice-of-law problem. O\xe2\x80\x99Keeffe\xe2\x80\x99s suit was\ntimely under the New York statute of limitations but may not have been under\nNew Jersey\xe2\x80\x99s. In theory, choice of law is simple for property: the law of the\nproperty\xe2\x80\x99s \xe2\x80\x9csitus\xe2\x80\x9d (i.e. location) controls. * The rule is easy enough to apply to\nreal property, although even there hard cases are possible. \xe2\x80\xa0 But personal\nproperty can move around, generating contacts with multiple states. Suppose\nthe contacts had been flipped, so that the painting was stolen in New Jersey but\nwas currently in New York. Should New York law have applied? Another\npossible rule is that the law of the place where the property is now applies. What\nincentives would that rule create? How about a rule selecting the law of the\nplace where the property was at the time of the relevant events? (Wait. What are\nthe \xe2\x80\x9crelevant events\xe2\x80\x9d in a replevin case involving the statute of limitations?)\nAnother layer of difficulty in choice of law comes from the characterization\nproblem: is the validity of a mortgage securing a loan with an illegally high rate\nof interest a \xe2\x80\x9cproperty\xe2\x80\x9d issue (governed by the situs rule) or a \xe2\x80\x9ccontract\xe2\x80\x9d issue\n(governed by the place the contract was made or the place of residence of the\n\nRelatedly, courts have in rem jurisdiction over property located within their state\xe2\x80\x99s borders, and the traditional\nrule has been that courts have no jurisdiction at all over real property outside their state\xe2\x80\x99s borders. Why might\nthese rules have developed? Do they seem likely to simplify litigation or complicate it?\n\n*\n\nIn Durfee v. Duke, 375 U.S. 106 (1963), the Missouri River, which forms the boundary between Nebraska and\nMissouri, had shifted its channel from the east of the land in question to the west of it. If the river had shifted\nsuddenly (by \xe2\x80\x9cavulsion\xe2\x80\x9d), the boundary stayed where it was and the land was legally in Nebraska. But if the river\nhad shifted course slowly (by \xe2\x80\x9caccretion\xe2\x80\x9d), the boundary moved with the river and the land was in Missouri. Since\nthe plaintiff claimed title under a Nebraska foreclosure proceeding and the defendant claimed title under a\nMissouri swamp land patent, the case turned on which state the land was in.\n\xe2\x80\xa0\n\n\x0cAdverse Possession\n\n241\n\nparties)? The characterization question puts O\xe2\x80\x99Keeffe\xe2\x80\x99s use of medicalmalpractice tort principles in a replevin case in a new light, doesn\xe2\x80\x99t it?\nThe New York Mess\nAs noted in O\xe2\x80\x99Keeffe, New York has a three-year statute of limitations for personalproperty actions, and traditionally applied a demand-and-refusal rule to start the statute\nrunning. Two further doctrines complicate the picture. One is that the demand-andrefusal rule only applies against good-faith purchasers; the limitations period in a suit\nagainst a thief starts at the time of the theft. (Do you see how this result, illogical as it\nmay sound, follows from the logic that the good-faith purchaser is not considered a\nwrongdoer until she refuses a demand for return of the property?) The other is that an\nowner who unreasonably delays making a demand for the return of property, at least\nwhere she knows the identity of the possessor, may find her suit barred by the equitable\ndoctrine of laches.\nIn DeWeerth v. Baldinger, 836 F.2d 103 (2d Cir. 1987), a landscape by Claude Monet\nowned by Gerda DeWeerth disappeared from a castle in Southern Germany where\nAmerican soldiers were quartered during World War II. It turned up on the art market\nin the mid-1950s and was eventually sold by a New York gallery to Edith Baldinger,\nwho kept it in her apartment in New York. In 1981, DeWeerth\xe2\x80\x99s nephew tracked the\npainting to the gallery\xe2\x80\x99s sale to Baldinger and made a demand for its return which was\nrefused. The Second Circuit, sitting in diversity, held that New York \xe2\x80\x9cwould impose a\nduty of reasonable diligence in attempting to locate stolen property,\xe2\x80\x9d not just a duty to\ndemand its return in a reasonable time after the property is located:\nFor if demand is delayed, then so is accrual of the cause of action, and\nthe good-faith purchaser will remain exposed to suit long after an action\nagainst a thief or even other innocent parties would be time-barred. \xe2\x80\xa6\nIn this case, plaintiff\xe2\x80\x99s proposed exception to the rule would rob it of all\nof its salutary effect: The thief would be immune from suit after three\nyears, while the good-faith purchaser would remain exposed as long as\nhis identity did not fortuitously come to the property owner\xe2\x80\x99s attention.\nA construction of the rule requiring due diligence in making a demand\nto include an obligation to make a reasonable effort to locate the\nproperty will prevent unnecessary hardship to the good-faith purchaser,\n\n\x0c242\n\nProperty\nthe party intended to be protected. \xe2\x80\xa6 A rule requiring reasonable\ndiligence in attempting to locate stolen property is especially appropriate\nwith respect to stolen art. Much art is kept in private collections,\nunadvertised and unavailable to the public. An owner seeking to recover\nsuch property will almost never learn of its whereabouts by chance. Yet\nthe location of stolen art may frequently be discovered through\ninvestigation.\n\nThe court concluded that DeWeerth\xe2\x80\x99s efforts were \xe2\x80\x9cminimal\xe2\x80\x9d before her nephew took\nup the case in 1981, so Baldinger kept the Monet.\nThat was 1987. Shortly thereafter, the same issue came up through the New York state\ncourt system. In Guggenheim Foundation v. Lubell, 569 N.E.2d 426 (N.Y. 1991), a painting\nby Marc Chagall was stolen from the Guggenheim Museum by a mailroom employee\nin the 1960s. The Lubells bought the painting from a reputable dealer in 1967; the\nmuseum demanded it back in 1986. The court rejected O\xe2\x80\x99Keeffe, repudiated DeWeerth\xe2\x80\x99s\ninterpretation of New York law, and reaffirmed the New York demand-and-refusal\nrule. It specifically rejected the discovery rule with its requirement of reasonable\ndiligence by the owner:\nOur case law already recognizes that the true owner, having discovered\nthe location of its lost property, cannot unreasonably delay making\ndemand upon the person in possession of that property. \xe2\x80\xa6 Further, the\nfacts of this case reveal how difficult it would be to specify the type of\nconduct that would be required for a showing of reasonable diligence.\nHere, the parties hotly contest whether publicizing the theft would have\nturned up the gouache. According to the museum, some members of the\nart community believe that publicizing a theft exposes gaps in security\nand can lead to more thefts; the museum also argues that publicity often\npushes a missing painting further underground. In light of the fact that\nmembers of the art community have apparently not reached a consensus\non the best way to retrieve stolen art, it would be particularly\ninappropriate for this Court to spell out arbitrary rules of conduct that\nall true owners of stolen art work would have to follow to the letter if\nthey wanted to preserve their right to pursue a cause of action in replevin.\nAll owners of stolen property should not be expected to behave in the\n\n\x0cAdverse Possession\n\n243\n\nsame way and should not be held to a common standard. The value of\nthe property stolen, the manner in which it was stolen, and the type of\ninstitution from which it was stolen will all necessarily affect the manner\nin which a true owner will search for missing property. We conclude that\nit would be difficult, if not impossible, to craft a reasonable diligence\nrequirement that could take into account all of these variables and that\nwould not unduly burden the true owner.\nFurther, our decision today is in part influenced by our recognition that\nNew York enjoys a worldwide reputation as a preeminent cultural center.\nTo place the burden of locating stolen artwork on the true owner and to\nforeclose the rights of that owner to recover its property if the burden is\nnot met would, we believe, encourage illicit trafficking in stolen art.\nThree years after the theft, any purchaser, good faith or not, would be\nable to hold onto stolen art work unless the true owner was able to\nestablish that it had undertaken a reasonable search for the missing art.\nThis shifting of the burden onto the wronged owner is inappropriate. In\nour opinion, the better rule gives the owner relatively greater protection\nand places the burden of investigating the provenance of a work of art\non the potential purchaser.\nArmed with the New York Court of Appeals\xe2\x80\x99s holding in Guggenheim, Gerda DeWeerth\nfiled a Rule 60(b) motion for relief from judgment, arguing that the decision against\nher rested on a misinterpretation of New York law and that she should not have been\nsubjected to a diligent-search requirement. The District Court agreed with her, but the\nSecond Circuit reversed in DeWeerth v. Baldinger, 38 F.3d 1266 (2d Cir. 1994),\nemphasizing the need for finality in litigation:\nWe conclude that the prior DeWeerth panel conscientiously satisfied its\nduty to predict how New York courts would decide the due diligence\nquestion, and that Erie and its progeny require no more than this. The\nfact that the New York Court of Appeals subsequently reached a\ncontrary conclusion in Guggenheim does not constitute an \xe2\x80\x9cextraordinary\ncircumstance\xe2\x80\x9d that would justify reopening this case in order to achieve\na similar result.\n\n\x0c244\n\nProperty\n\nFinally, consider SongByrd Inc. v. Estate of Grossman, 206 F.3d 172 (2d Cir. 2000), another\ndiversity case under New York law. Henry Byrd, who recorded under the name\n\xe2\x80\x9cProfessor Longhair,\xe2\x80\x9d was a celebrated jazz musician. He went to Woodstock, New\nYork for a studio recording session for Bearsville Records in the 1970s. The session\nwas considered unsatisfactory at the time, so the tapes were never released. Instead,\nArthur Davis, the record-store owner who discovered Byrd, sent the tapes to Bearsville\n\xe2\x80\x9cas demonstration tapes only, without any intent for either Albert Grossman or\nBearsville Records Inc. to possess these aforementioned tapes as owner.\xe2\x80\x9d Byrd\xe2\x80\x99s\nattorney wrote two letters to Bearsville requesting the return of the tapes in 1975, but\nthere was no evidence in the record that the letters were even received. Byrd died in\n1980, and after Bearsville\xe2\x80\x99s founder died in 1985, his estate licensed the recordings to\ntwo record companies. One of the resulting albums won Byrd a (posthumous)\nGrammy for Best Traditional Blues Album of 1987. SongByrd, the successor-ininterest to Byrd\xe2\x80\x99s rights, sued in 1995. The Second Circuit held that the conversion\nclaim was barred, because the defendant \xe2\x80\x9cbegan using the master tapes as its own when\nit licensed portions of them to Rounder in 1986.\xe2\x80\x9d\nThe conversion alleged by SongByrd occurred no later than that date.\nThe demand-and-refusal rule, which functioned to delay accrual of the\nclaim in [Guggenheim] \xe2\x80\xa6 for the benefit of the true owner, normally\nprovides some benefit to the good-faith possessor by precipitating its\nawareness that continued possession will be regarded as wrongful by the\ntrue owner. New York has not required a demand and refusal for the\naccrual of a conversion claim against a possessor who openly deals with\nthe property as its own.\nAs an alternative basis for its holding, the court added that the plaintiff had\nunreasonably delayed making its demand.\nEven if a demand were required for accrual of SongByrd\xe2\x80\x99s claim,\n[Guggenheim] instructs that a plaintiff may not unreasonably delay in\nmaking a demand for property whose location is known. Byrd, either\nindependently or through his agents, had known since the 1970s that the\nmaster tapes were in Grossman\xe2\x80\x99s possession, and the unanswered letters\nto Grossman in 1975 for return of the master tapes probably sufficed to\nalert him to Grossman\xe2\x80\x99s disregard of his ownership claim, thereby\n\n\x0cAdverse Possession\n\n245\n\nrendering any demand thereafter unreasonably delayed. In any event, his\nsuccessors\xe2\x80\x99 delay in not making a demand in 1987, when Bearsville\xe2\x80\x99s\nlicensing of the master tapes became well known in the music world as\na result of the Grammy Award for Byrd\xe2\x80\x99s recordings, was clearly\nunreasonable.\nAfter DeWeerth, Guggenheim, and SongByrd, does New York have a coherent approach to\nthe statute of limitations in personal property cases? Does it depend whether the case\nis brought in state or federal court? Has New York done better or worse than New\nJersey at balancing the competing interests at stake?\n\n\x0cImprovers and Good-Faith Purchasers\nA chimney-sweep finds a jewel. He gives it to his friend, a jeweler, who designs and\ncrafts a gold ring around the jewel\xe2\x80\x99s unique shape. Frederica van Snoot sees the ring,\nbuys it for $10,000, and wears it around town. One day, Jeremiah Hobnob recognizes\nthe jewel he lost last month and demands it back. As against the chimney-sweep, this\nis an easy case; nowhere near enough time has passed to satisfy the statute of limitations,\neven in a jurisdiction that imposes a stringent duty of diligent search on owners. But\nthe jeweler and van Snoot are harder cases, because both of them have made\ninvestments. The jeweler invested gold and labor to turn the jewel into a ring. For her\npart, van Snoot paid out $10,000. If Hobnob is entitled to the jewel, the jeweler or van\nSnoot or both will end up poorer than when they started.\nThe common law mitigated the harshness of this result with two doctrines. One, the\nrule of accession, provided that someone who sufficiently improves another person\xe2\x80\x99s\nproperty is allowed to keep it. Importantly, the hornbook rule is that accession only\noperates in favor of good-faith improvers; someone who knows the property is not hers\nacts at her own peril when she combines it with her own property or labor. The jeweler\nis potentially protected by accession. The other doctrine protected good faith purchasers\nfor value from the unknown claims of third parties. It too only protects only parties who\nact in good faith, i.e., those who do not know or have reason to know they are buying\nproperty with clouded title. Frederica van Snoot may be just such a purchaser.\nThis section presents both doctrines. As you read, pay close attention to the\npreconditions that allow them to be invoked; despite their similarities, they have\nimportant differences. For example, it is hornbook law that \xe2\x80\x9ca thief takes no title and\ncan give none\xe2\x80\x9d: good-faith purchase can never cut off the claims of an owner from\nwhom the property was stolen. But accession can, as you will see. Also, observe that\nwhile ownership of the property may be the primary question in these cases, it is often\nnot the only issue. Once ownership is allocated, courts often require restitutionary\npayments to shift losses from more innocent to more culpable parties.\n246\n\n\x0cImprovers and Good-Faith Purchasers\n\n247\n\nWetherbee v. Green\n22 Mich. 311 (1871)\nThis was an action of replevin, brought by George Green, Charles H. Camp and\nGeorge Brooks, in the circuit court for the county of Bay, against George Wetherbee,\nfor one hundred and fifty-eight thousand black ash barrel-hoops, alleged to be of the\nvalue of eight hundred dollars. \xe2\x80\xa6\nCOOLEY J.:\nThe defendants in error replevied of Wetherbee a quantity of hoops, which he had\nmade from timber cut upon their land. Wetherbee defended the replevin suit on two\ngrounds. First, he claimed to have cut the timber under a license from one Sumner,\nwho was formerly tenant in common of the land with Green, and had been authorized\nby Green to give such license. [This defense failed; Sumner was not authorized to let\nWetherbee cut timber on the land.]\nBut if the court should be against him on this branch of the case, Wetherbee claimed\nfurther that replevin could not be maintained for the hoops, because he had cut the\ntimber in good faith, relying upon a permission which he supposed proceeded from\nthe parties having lawful right to give it, and had, by the expenditure of his labor and\nmoney, converted the trees into chattels immensely more valuable than they were as\nthey stood in the forest, and thereby he had made such chattels his own. And he offered\nto show that the standing timber was worth twenty-five dollars only, while the hoops\nreplevied were shown by the evidence to be worth near seven hundred dollars; also\n[facts tending to show Wetherbee\xe2\x80\x99s lack of knowledge of Sumner\xe2\x80\x99s duplicity]. The\nevidence offered to establish these facts was rejected by the court, and the plaintiffs\nobtained judgment.\nThe principal question which, from this statement, appears to be presented by the\nrecord, may be stated thus: Has a party who has taken the property of another in good\nfaith, and in reliance upon a supposed right, without intention to commit wrong, and\nby the expenditure of his money or labor, worked upon it so great a transformation as\nthat which this timber underwent in being transformed from standing trees into hoops,\nacquired such a property therein that it cannot be followed into his hands and reclaimed\nby the owner of the trees in its improved condition?\n\n\x0c248\n\nProperty\n\nThe objections to allowing the owner of the trees to reclaim the property under such\ncircumstances are, that it visits the involuntary wrong-doer too severely for his\nunintentional trespass, and at the same time compensates the owner beyond all reason\nfor the injury he has sustained. In the redress of private injuries the law aims not so\nmuch to punish the wrongdoer as to compensate the sufferer for his injuries; and the\ncases in which it goes farther and inflicts punitory or vindictive penalties are those in\nwhich the wrong-doer has committed the wrong recklessly, willfully, or maliciously,\nand under circumstances presenting elements of aggravation. Where vicious motive or\nreckless disregard of right are not involved, to inflict upon a person who has taken the\nproperty of another, a penalty equal to twenty or thirty times its value, and to\ncompensate the owner in a proportion equally enormous, is so opposed to all legal idea\nof justice and right and to the rules which regulate the recovery of damages generally,\nthat if permitted by the law at all, it must stand out as an anomaly and must rest upon\npeculiar reasons.\nAs a general rule, one whose property has been appropriated by another without\nauthority has a right to follow it and recover the possession from any one who may\nhave received it; and if, in the mean time, it has been increased in value by the addition\nof labor or money, the owner may, nevertheless, reclaim it, provided there has been no\ndestruction of substantial identity. So far the authorities are agreed. A man cannot\ngenerally be deprived of his property except by his own voluntary act or by operation\nof law; and if unauthorized parties have bestowed expense or labor upon it, that fact\ncannot constitute a bar to his reclaiming it, so long as identification is not impracticable.\nBut there must, nevertheless, in reason be some limit to the right to follow and reclaim\nmaterials which have undergone a process of manufacture. Mr. Justice Blackstone lays\ndown the rule very broadly, that if a thing is changed into a different species, as by\nmaking wine out of another\xe2\x80\x99s grapes, oil from his olives, or bread from his wheat, the\nproduct belongs to the new operator, who is only to make satisfaction to the former\nproprietor for the materials converted: 2 Bl. Com., 404. We do not understand this to\nbe disputed as a general proposition, though there are some authorities which hold that,\nin the case of a willful appropriation, no extent of conversion can give to the willful\ntrespasser a title to the property so long as the original materials can be traced in the\nimproved article. The distinction thus made between the case of an appropriation in\ngood faith and one based on intentional wrong, appears to have come from the civil\nlaw, which would not suffer a party to acquire a title by accession, founded on his own\n\n\x0cImprovers and Good-Faith Purchasers\n\n249\n\nact, unless he had taken the materials in ignorance of the true owner, and given them a\nform which precluded their being restored to their original condition: 2 Kent, 363.\nWhile many cases have followed the rule as broadly stated by Blackstone, others have\nadopted the severe rule of the civil law where the conversion was in willful disregard\nof right. The New York cases of Betts v. Lee, 5 Johns., 348; Curtis v. Groat, 6 Johns., 168,\nand Chandler v. Edson, 9 Johns., 362, were all cases where the willful trespasser was held\nto have acquired no property by a very radical conversion, and in Silsbury v. McCoon, 3\nN. Y., 378, 385, the whole subject is very fully examined \xe2\x80\xa6 . [In Silsbury, a thief who\nturned the plaintiff\xe2\x80\x99s corn into whiskey did not thereby acquire ownership of it.] But\nwe are not called upon in this case to express any opinion regarding the rule applicable\nin the case of a willful trespasser, since the authorities agree in holding that, when the\nwrong had been involuntary, the owner of the original materials is precluded, by the\ncivil law and common law alike, from following and reclaiming the property after it has\nundergone a transformation which converts it into an article substantially different.\nThe cases of confusion of goods are closely analogous. It has always been held that he\nwho, without fraud, intentional wrong, or reckless disregard of the rights of others,\nmingled his goods with those of another person, in such manner that they could not\nbe distinguished, should, nevertheless, be protected in his ownership so far as the\ncircumstances would permit. The question of motive here becomes of the highest\nimportance; for, as Chancellor Kent says, if the commingling of property \xe2\x80\x9cwas willfully\nmade without mutual consent, * * the common law gave the entire property, without\nany account, to him whose property was originally invaded, and its distinct character\ndestroyed: Popham\xe2\x80\x99s Rep. 38, Pl. 2. If A will willfully intermix his corn or hay with that\nof B, or casts his gold into another\xe2\x80\x99s crucible, so that it becomes impossible to\ndistinguish what belonged to A from what belonged to B, the whole belongs to B. But\nthis rule only applies to wrongful or fraudulent intermixtures. There may be an\nintentional intermingling, and yet no wrong intended, as where a man mixes two parcels\ntogether, supposing both to be his own; or, that he was about to mingle his with his\nneighbor\xe2\x80\x99s, by agreement, and mistakes the parcel. In such cases, which may be deemed\naccidental intermixtures, it would be unreasonable and unjust that he should lose his\nown or be obliged to take and pay for his neighbor\xe2\x80\x99s, as he would have been under the\ncivil law: In many cases there will be difficulty in determining precisely how he can be\nprotected with due regard to the rights of the other party; but it is clear that the law\n\n\x0c250\n\nProperty\n\nwill not forfeit his property in consequence of the accident or inadvertence, unless a\njust measure of redress to the other party renders it inevitable.\nThe important question on this branch of the case appears to us to be, whether standing\ntrees, when cut and manufactured into hoops, are to be regarded as so far changed in\ncharacter that their identity can be said to be destroyed within the meaning of the\nauthorities. And as we enter upon a discussion of this question, it is evident at once\nthat it is difficult, if not impossible, to discover any invariable and satisfactory test\nwhich can be applied to all the cases which arise in such infinite variety. \xe2\x80\x9cIf grain be\ntaken and made into malt, or money taken and made into a cup, or timber taken and\nmade into a house, it is held in the old English law that the property is so altered as to\nchange the title:\xe2\x80\x9d 2 Kent, 363. But cloth made into garments, leather into shoes, trees\nhewn or sawed into timber, and iron made into bars, it is said may be reclaimed by the\nowner in their new and original shape: Some of the cases place the right of the former\nowner to take the thing in its altered condition upon the question whether its identity\ncould be made out by the senses. But this is obviously a very unsatisfactory test, and in\nmany cases would wholly defeat the purpose which the law has in view in recognizing\na change of title in any of these cases. That purpose is not to establish any arbitrary\ndistinctions, based upon mere physical reasons, but to adjust the redress afforded to\nthe one party and the penalty inflicted upon the other, as near as circumstances will\npermit, to the rules of substantial justice[.]\nIt may often happen that no difficulty will be experienced in determining the identity\nof a piece of timber which has been taken and built into a house; but no one disputes\nthat the right of the original owner is gone in such a case. A particular piece of wood\nmight, perhaps, be traced without trouble into a church organ, or other equally valuable\narticle; but no one would defend a rule of law which, because the identity could be\ndetermined by the senses, would permit the owner of the wood to appropriate a musical\ninstrument, a hundred or a thousand times the value of his original materials, when the\nparty who, under like circumstances, has doubled the value of another man\xe2\x80\x99s corn by\nconverting it into malt, is permitted to retain it, and held liable for the original value\nonly. Such distinctions in the law would be without reason, and could not be tolerated.\nWhen the right to the improved article is the point in issue, the question, how much\nthe property or labor of each has contributed to make it what it is, must always be one\nof first importance. The owner of a beam built into the house of another loses his\n\n\x0cImprovers and Good-Faith Purchasers\n\n251\n\nproperty in it, because the beam is insignificant in value or importance as compared to\nthat to which it has become attached, and the musical instrument belongs to the maker\nrather than to the man whose timber was used in making it--not because the timber\ncannot be identified, but because, in bringing it to its present condition the value of the\nlabor has swallowed up and rendered insignificant the value of the original materials.\nThe labor, in the case of the musical instrument, is just as much the principal thing as\nthe house is in the other case instanced; the timber appropriated is in each case\ncomparatively unimportant.\nNo test which satisfies the reason of the law can be applied in the adjustment of\nquestions of title to chattels by accession, unless it keeps in view the circumstance of\nrelative values. When we bear in mind the fact that what the law aims at is the\naccomplishment of substantial equity, we shall readily perceive that the fact of the value\nof the materials having been increased a hundred-fold, is of more importance in the\nadjustment than any chemical change or mechanical transformation, which, however\nradical, neither is expensive to the party making it, nor adds materially to the value.\nThere may be complete changes with so little improvement in value, that there could\nbe no hardship in giving the owner of the original materials the improved article; but\nin the present case, where the defendant\xe2\x80\x99s labor--if he shall succeed in sustaining his\noffer of testimony\xe2\x80\x94will appear to have given the timber in its present condition nearly\nall its value, all the grounds of equity exist which influence the courts in recognizing a\nchange of title under any circumstances.\nWe are of opinion that the court erred in rejecting the testimony offered. The defendant,\nwe think, had a right to show that he had manufactured the hoops in good faith, and\nin the belief that he had the proper authority to do so; and if he should succeed in\nmaking that showing, he was entitled to have the jury instructed that the title to the\ntimber was changed by a substantial change of identity, and that the remedy of the\nplaintiff was an action to recover damages for the unintentional trespass. \xe2\x80\xa6\nNotes and Questions\n1. What factors matter most to the court\xe2\x80\x99s holding? Is this a case about the relative\nvalue contributed by the plaintiff and defendant, about the difficulty of\nidentifying the plaintiff\xe2\x80\x99s original property, about the difficulty of separating it,\nor about the degree to which it has been physically altered? Consider Atlas\n\n\x0c252\n\nProperty\nAssurance Co. v. Gibbs, 183 A. 690 (Conn. 1936), which involved the engine from\na damaged car (the Hibben car) that had been properly sold and the body of a\ncar (the Sherline car) that had been stolen. The defendant\xe2\x80\x99s predecessor in title\ncombined the two to make one working car. In an action for replevin by the\nassignee of title to the Sherline car, who should get what?\n\n2. How important is Wetherbee\xe2\x80\x99s good faith? What if he had been told by Green\nthat Sumner lacked authority, but had examined Sumner\xe2\x80\x99s title in some detail\nand concluded that Green was wrong? What if Wetherbee steals a set of paints\nand uses it to create a portrait that sells for $500,000?\n3. Note that Green retains \xe2\x80\x9can action to recover damages for the unintentional\ntrespass.\xe2\x80\x9d What is the measure of those damages? Given that Weatherbee owns\nthe hoops via accession, why does he need to pay? Or, to look at it another way,\nwhy doesn\xe2\x80\x99t an adverse possessor need to pay for the value of the property he\nretains after the statute of limitations has run?\n4. Sometimes property transforms itself. A cow from Farmer Jones\xe2\x80\x99s herd wanders\nonto Farmer Smith\xe2\x80\x99s land, where it is impregnated by Farmer Smith\xe2\x80\x99s bull. Who\nowns the calf? Does it matter where the cow gives birth? Felix Cohen, in\nDialogue on Private Property, 9 RUTGERS L. REV. 357 (1954), claimed that every\nlegal system in human history appears to have resolved these cases in the same\nway. Compare the case in which Farmer Smith\xe2\x80\x99s bull kicks Farmer Jones\xe2\x80\x99s cow\nand badly injures it. What result then?\n5. Another theme in confusion cases involves the distinction between unique and\nfungible property. If I mistakenly pour your 55-gallon drum of water into my\nstorage tank, you are entitled to draw 55 gallons of water from the tank, even\nthough it is astoundingly improbable that you will get back the same water\nmolecules you started with. Water is water. If I mistakenly mix your your bottle\nof 1967 Chateau de Snoot wine with my bottle of 2015 Rotgut Red, I can\xe2\x80\x99t give\nyou a bottle of the resulting mixture and call it even. (What are you entitled to?)\nBut note that uniqueness is something courts create as well as discover. At the\nstart of the 19th century, wheat and other grains were stored and sold as though\nthey were unique goods; each farmer\xe2\x80\x99s and merchant\xe2\x80\x99s sacks of grain were\n\n\x0cImprovers and Good-Faith Purchasers\n\n253\n\ntreated as distinct from each other\xe2\x80\x99s. Today, grain has been standardized and is\nsold as a commodity: a merchant could order 100 bushels of U.S. No. 1 Hard\nRed Spring Wheat without needing to specify or worry about what particular\nfarms it came from. A key to this shift was courts\xe2\x80\x99 willingness to treat grain (and\nmany other agricultural commodities) as fungible. A merchant whose sacks of\nwheat were dumped into a grain elevator without his consent would be entitled\nto the same quantity of wheat of the same standard class, not to his specific\nsacks or even to wheat with the same more specific characteristics. What was\ngained and what was lost in this shift?\nUniform Commercial Code \xc2\xa7\xc2\xa7 2-312, 2-403\n\xc2\xa7 2-312. Warranty of title \xe2\x80\xa6\n(1) Subject to subsection (2) there is in a contract for sale a warranty by the seller that\n(a) The title conveyed shall be good, and its transfer rightful; and\n(b) The goods shall be delivered free from any security interest or other lien or\nencumbrance of which the buyer at the time of contracting has no knowledge.\n(2) A warranty under subsection (1) will be excluded or modified only by specific\nlanguage or by circumstances which give the buyer reason to know that the person\nselling does not claim title in himself or that he is purporting to sell only such right or\ntitle as he or a third person may have. \xe2\x80\xa6\n\xc2\xa7 2-403. Power to transfer; good faith purchase of goods; \xe2\x80\x9centrusting\xe2\x80\x9d\n(1) A purchaser of goods acquires all title which his transferor had or had power to\ntransfer except that a purchaser of a limited interest acquires rights only to the extent\nof the interest purchased. A person with voidable title has power to transfer a good\ntitle to a good faith purchaser for value. When goods have been delivered under a\ntransaction of purchase the purchaser has such power even though\n(a) The transferor was deceived as to the identity of the purchaser, or\n(b) The delivery was in exchange for a check which is later dishonored, or\n\n\x0c254\n\nProperty\n(c) It was agreed that the transaction was to be a \xe2\x80\x9ccash sale,\xe2\x80\x9d or\n(d) The delivery was procured through fraud punishable as larcenous under the\ncriminal law.\n\n(2) Any entrusting of possession of goods to a merchant who deals in goods of that\nkind gives him power to transfer all rights of the entruster to a buyer in ordinary course\nof business.\n(3) \xe2\x80\x9cEntrusting\xe2\x80\x9d includes any delivery and any acquiescence in retention of possession\nregardless of any condition expressed between the parties to the delivery or\nacquiescence and regardless of whether the procurement of the entrusting or the\npossessor\xe2\x80\x99s disposition of the goods have been such as to be larcenous under the\ncriminal law.\nNotes and Questions\n1. What do these two provisions have to do with each other? Hint: think about\ncircumstances in which the warranty of \xc2\xa7 2-312 would be violated and consider\nwhether \xc2\xa7 2-403 comes into play, and vice-versa.\nKotis v. Nowlin Jewelry, Inc.\n844 S.W.2d 920 (1992)\nDRAUGHN, Justice.\nEddie Kotis appeals from a judgment declaring appellee, Nowlin Jewelry, Inc., the sole\nowner of a Rolex watch, and awarding appellee attorney\xe2\x80\x99s fees. Kotis raises fourteen\npoints of error. We affirm.\nOn June 11, 1990, Steve Sitton acquired a gold ladies Rolex watch, President model,\nwith a diamond bezel from Nowlin Jewelry by forging a check belonging to his brother\nand misrepresenting to Nowlin that he had his brother\xe2\x80\x99s authorization for the purchase.\nThe purchase price of the watch, and the amount of the forged check, was $9,438.50.\nThe next day, Sitton telephoned Eddie Kotis, the owner of a used car dealership, and\nasked Kotis if he was interested in buying a Rolex watch. Kotis indicated interest and\nSitton came to the car lot[.] Kotis purchased the watch for $3,550.00. Kotis also called\nNowlin\xe2\x80\x99s Jewelry that same day and spoke with Cherie Nowlin.\n\n\x0cImprovers and Good-Faith Purchasers\n\n255\n\nMs. Nowlin told Kotis that Sitton had purchased the watch the day before. Ms. Nowlin\ntestified that Kotis would not immediately identify himself. Because she did not have\nthe payment information available, Ms. Nowlin asked if she could call him back. Kotis\nthen gave his name and number. Ms. Nowlin testified that she called Kotis and told\nhim the amount of the check and that it had not yet cleared. Kotis told Ms. Nowlin\nthat he did not have the watch and that he did not want the watch. Ms. Nowlin also\ntestified that Kotis would not tell her how much Sitton was asking for the watch.\nJohn Nowlin, the president of Nowlin\xe2\x80\x99s Jewelry, testified that, after this call from Kotis,\nNowlin\xe2\x80\x99s bookkeeper began attempting to confirm whether the check had cleared.\nWhen they learned the check would not be honored by the bank, Nowlin called Kotis,\nbut Kotis refused to talk to Nowlin. Kotis referred Nowlin to his attorney. On June 25,\n1990, Kotis\xe2\x80\x99 attorney called Nowlin and suggested that Nowlin hire an attorney and\nallegedly indicated that Nowlin could buy the watch back from Kotis. Nowlin refused\nto repurchase the watch.\nAfter Sitton was indicted for forgery and theft, the district court ordered Nowlin\xe2\x80\x99s\nJewelry to hold the watch until there was an adjudication of the ownership of the watch.\nNowlin then filed suit seeking a declaratory judgment that Nowlin was the sole owner\nof the watch. Kotis filed a counterclaim for a declaration that Kotis was a good faith\npurchaser of the watch and was entitled to possession and title of the watch. After a\nbench trial, the trial court rendered judgment declaring Nowlin the sole owner of the\nwatch. The trial court also filed Findings of Fact and Conclusions of Law.\nIn point of error one, Kotis claims the trial court erred in concluding that Sitton did\nnot receive the watch through a transaction of purchase with Nowlin, within the\nmeaning of Tex.Bus. & Com.Code Ann. \xc2\xa7 2.403(a). Where a party challenges a trial\ncourt\xe2\x80\x99s conclusions of law, we may sustain the judgment on any legal theory supported\nby the evidence. Incorrect conclusions of law will not require reversal if the controlling\nfindings of facts will support a correct legal theory.\nKotis contends there is evidence that the watch is a \xe2\x80\x9cgood\xe2\x80\x9d under the UCC, there was\na voluntary transfer of the watch, and there was physical delivery of the watch. Thus,\nKotis maintains that the transaction between Sitton and Nowlin was a transaction of\npurchase such that Sitton acquired the ability to transfer good title to a good faith\n\n\x0c256\n\nProperty\n\npurchaser under \xc2\xa7 2.403 [which was identical in relevant part to the UCC excerpt\nquoted above]. \xe2\x80\xa6\nNeither the code nor case law defines the phrase \xe2\x80\x9ctransaction of purchase.\xe2\x80\x9d \xe2\x80\x9cPurchase\xe2\x80\x9d\nis defined by the code as a \xe2\x80\x9ctaking by sale, discount, negotiation, mortgage, pledge, lien,\nissue or reissue, gift or any other voluntary transaction creating an interest in property.\xe2\x80\x9d\nTex. Bus. & Com. Code Ann. \xc2\xa7 1.201(32) (Vernon 1968). Thus, only voluntary\ntransactions can constitute transactions of purchase.\nHaving found no Texas case law concerning what constitutes a transaction of purchase\nunder \xc2\xa7 2.403(a), we have looked to case law from other states. Based on the code\ndefinition of a purchase as a voluntary transaction, these cases reason that a thief who\nwrongfully takes the goods against the will of the owner is not a purchaser. See Suburban\nMotors, Inc. v. State Farm Mut. Automobile Ins. Co., 268 Cal. Rptr. 16, 18 (Cal. Ct. App.\n1990); Charles Evans BMW, Inc. v. Williams 395 S.E.2d 650, 651-52 (Ga. Ct. App. 1990);\nInmi-Etti v. Aluisi, 492 A.2d 917 (Md. Ct. App. 1985). On the other hand, a swindler\nwho fraudulently induces the victim to deliver the goods voluntarily is a purchaser\nunder the code.\nIn this case, Nowlin\xe2\x80\x99s Jewelry voluntarily delivered the watch to Sitton in return for\npayment by check that was later discovered to be forged. Sitton did not obtain the\nwatch against the will of the owner. Rather, Sitton fraudulently induced Nowlin\xe2\x80\x99s\nJewelry to deliver the watch voluntarily. Thus, we agree with appellant that the trial\ncourt erred in concluding that Sitton did not receive the watch through a transaction\nof purchase under \xc2\xa7 2.403(a). We sustain point of error one.\nIn point of error two, Kotis contends the trial court erred in concluding that, at the\ntime Sitton sold the watch to Kotis, Sitton did not have at least voidable title to the\nwatch. In point of error nine, Kotis challenges the trial court\xe2\x80\x99s conclusion that Nowlin\xe2\x80\x99s\nJewelry had legal and equitable title at all times relevant to the lawsuit. The lack of Texas\ncase law addressing such issues under the code again requires us to look to case law\nfrom other states to assist in our analysis.\nIn Suburban Motors, Inc. v. State Farm Mut. Automobile Ins. Co., the California court noted\nthat \xc2\xa7 2.403 provides for the creation of voidable title where there is a voluntary transfer\nof goods. Section 2.403(a)(1)-(4) set forth the types of voluntary transactions that can\n\n\x0cImprovers and Good-Faith Purchasers\n\n257\n\ngive the purchaser voidable title. Where goods are stolen such that there is no voluntary\ntransfer, only void title results. Subsection (4) provides that a purchaser can obtain\nvoidable title to the goods even if \xe2\x80\x9cdelivery was procured through fraud punishable as\nlarcenous under the criminal law.\xe2\x80\x9d This subsection applies to cases involving acts\nfraudulent to the seller such as where the seller delivers the goods in return for a forged\ncheck. Although Sitton paid Nowlin\xe2\x80\x99s Jewelry with a forged check, he obtained\npossession of the watch through a voluntary transaction of purchase and received\nvoidable, rather than void, title to the watch. Thus, the trial court erred in concluding\nthat Sitton received no title to the watch and in concluding that Nowlin\xe2\x80\x99s retained title\nat all relevant times. We sustain points of error two and nine.\nIn point of error three, Kotis claims the trial court erred in concluding that Kotis did\nnot give sufficient value for the watch to receive protection under \xc2\xa7 2.403, that Kotis\ndid not take good title to the watch as a good faith purchaser, that Kotis did not receive\ngood title to the watch, and that Kotis is not entitled to the watch under \xc2\xa7 2.403. In\npoints of error four through eight, Kotis challenges the trial court\xe2\x80\x99s findings regarding\nhis good faith, his honesty in fact, and his actual belief, and the reasonableness of the\nbelief, that the watch had been received unlawfully.\nUnder \xc2\xa7 2.403(a), a transferor with voidable title can transfer good title to a good faith\npurchaser. Good faith means \xe2\x80\x9chonesty in fact in the conduct or transaction concerned.\xe2\x80\x9d\nTex.Bus. & Com. Code Ann. \xc2\xa7 1.201(19) (Vernon 1968). The test for good faith is the\nactual belief of the party and not the reasonableness of that belief. La Sara Grain v. First\nNat\xe2\x80\x99l Bank, 673 S.W.2d 558, 563 (Tex.1984).\nKotis was a dealer in used cars and testified that he had bought several cars from Sitton\nin the past and had no reason not to trust Sitton. He also testified that on June 12, 1990,\nSitton called and asked Kotis if he was interested in buying a Ladies Rolex. Once Kotis\nindicated his interest in the watch, Sitton came to Kotis\xe2\x80\x99s place of business. According\nto Kotis, Sitton said that he had received $18,000.00 upon the sale of his house and\nthat he had used this to purchase the watch for his girlfriend several months before.\nKotis paid $3,550.00 for the watch. Kotis further testified that he then spoke to a friend,\nGary Neal Martin, who also knew Sitton. Martin sagely advised Kotis to contact\nNowlin\xe2\x80\x99s to check whether Sitton had financed the watch. Kotis testified that he called\nNowlin\xe2\x80\x99s after buying the watch.\n\n\x0c258\n\nProperty\n\nCherie Nowlin testified that she received a phone call from Kotis on June 12, 1990,\nalthough Kotis did not immediately identify himself. Kotis asked if Nowlin\xe2\x80\x99s had sold\na gold President model Rolex watch with a diamond bezel about a month before. When\nasked, Kotis told Ms. Nowlin that Sitton had come to Kotis\xe2\x80\x99 car lot and was trying to\nsell the watch. Ms. Nowlin testified that Kotis told her he did not want the watch\nbecause he already owned a Rolex. Ms. Nowlin told Kotis that Sitton had purchased\nthe watch the day before. Kotis asked about the method of payment. Because Ms.\nNowlin did not know, she agreed to check and call Kotis back. She called Kotis back\nand advised him that Sitton had paid for the watch with a check that had not yet cleared.\nWhen Ms. Nowlin asked if Kotis had the watch, Kotis said no and would not tell her\nhow much Sitton was asking for the watch. Ms. Nowlin did advise Kotis of the amount\nof the check.\nAfter these calls, the owner of Nowlin\xe2\x80\x99s asked his bookkeeper to call the bank regarding\nSitton\xe2\x80\x99s check. They learned on June 15, 1990 that the check would be dishonored.\nJohn Nowlin called Kotis the next day and advised him about the dishonored check.\nKotis refused to talk to Nowlin and told Nowlin to contact his attorney. Nowlin also\ntestified that a reasonable amount to pay for a Ladies President Rolex watch with a\ndiamond bezel in mint condition was $7,000.00-$8,000.00. Nowlin maintained that\n$3,500.00 was an exorbitantly low price for a watch like this.\nThe trier of fact is the sole judge of the credibility of the witnesses and the weight to\nbe given their testimony. Kotis testified that he lied when he spoke with Cherie Nowlin\nand that he had already purchased the watch before he learned that Sitton\xe2\x80\x99s story was\nfalse. The judge, as the trier of fact, may not have believed Kotis when he said that he\nhad already purchased the watch. If the judge disbelieved this part of Kotis\xe2\x80\x99 testimony,\nother facts tend to show that Kotis did not believe the transaction was lawful. For\nexample, when Kotis spoke with Nowlin\xe2\x80\x99s, he initially refused to identify himself, he\nsaid that he did not have the watch and that he did not want the watch, he refused to\ndivulge Sitton\xe2\x80\x99s asking price, and he later refused to talk with Nowlin and advised\nNowlin to contact Kotis\xe2\x80\x99 attorney. Thus, there is evidence supporting the trial court\xe2\x80\x99s\nfinding that Kotis did not act in good faith.\nThere are sufficient facts to uphold the trial court\xe2\x80\x99s findings even if the judge had\naccepted as true Kotis\xe2\x80\x99 testimony that, despite his statements to Nowlin\xe2\x80\x99s, he had\n\n\x0cImprovers and Good-Faith Purchasers\n\n259\n\nalready purchased the watch when he called Nowlin\xe2\x80\x99s. The testimony indicated that\nKotis was familiar with the price of Rolex watches and that $3,550.00 was an extremely\nlow price for a mint condition watch of this type. An unreasonably low price is evidence\nthe buyer knows the goods are stolen. Although the test is what Kotis actually believed,\nwe agree with appellee that we need not let this standard sanction willful disregard of\nsuspicious facts that would lead a reasonable person to believe the transaction was\nunlawful. Thus, we find sufficient evidence to uphold the trial court\xe2\x80\x99s findings\nregarding Kotis\xe2\x80\x99 lack of status as a good faith purchaser. We overrule points of error\nthree through eight. \xe2\x80\xa6\nWe affirm the trial court\xe2\x80\x99s judgment.\nNotes and Questions\n1. The common-law baseline is nemo dat quod non habet: no man can give what he\ndoes not have. If I \xe2\x80\x9cgive\xe2\x80\x9d you a car I don\xe2\x80\x99t own, you don\xe2\x80\x99t own it either. If I sell\nyou a tract of land encumbered by a mortgage and an easement, you receive\nonly as much as I owned, so you take the land subject to the mortgage and the\neasement. This nemo dat baseline is the source of the maxim that a thief cannot\ngive good title. So if Sitton had held up Nowlin\xe2\x80\x99s at gunpoint, how would the\ncase have come out, and on what reasoning?\n\xc2\xa7 2-403(1), as applied in Kotis, distinguishes the thief\xe2\x80\x99s \xe2\x80\x9cvoid\xe2\x80\x9d title from merely\n\xe2\x80\x9cvoidable\xe2\x80\x9d title: the quality of title obtained by the buyer in a transaction that is\nfor some reason defective, or held by a merchant entrusted with the chattel who\nordinarily deals in similar goods. If the seller in that defective transaction\ndiscovers the problem, she has a right to unwind the transaction (and get her\nstuff back), and likewise someone who entrusts their chattel to a merchant\nwithout transferring title can take it back if they so choose. But until she does,\nthe buyer or merchant has the power to convey not just his own, voidable title,\nbut something even better. A good-faith purchaser for value receives good title,\neven as against the original seller/entruster. The original owner\xe2\x80\x99s right to unwind the\ntransaction has been cut off. This is a harsh way to treat a victim of fraud or\nmistake. Why would property law do something like that?\n\n\x0c260\n\nProperty\n\n2. Back to Kotis: How did the parties get into this mess? Obviously Sitton is most\nto blame, but is there anything Kotis or Nowlin could have done? Who is left\nholding the bag and why? Is there anything Kotis can do to recover his\n$3,550.00?\n3. Section 2-403 provides for two tests that the buyer must meet to be protected\n(in addition to the threshold question of whether his seller had voidable title):\nhe must act in good faith and he must give \xe2\x80\x9cvalue.\xe2\x80\x9d Which of these tripped up\nKotis? And what is the reason for not protecting donees along with buyers?\n4. Note that in distinguishing between void and voidable title, we must take care\nto identify three distinct parties: (1) the original possessor; (2) the intermediary\npossessor (a thief in the case of void title, or the buyer or trusted merchant in\nthe case of voidable title); and (3) the person who receives possession from the\nintermediary possessor. Have we seen other factual scenarios in which such a\nthree-person chain of possessors presents itself?\nOf course we have: Armory v. Delamirie is such a case. The main difference is\nthat the original possessor (our hypothetical Lord Hobnob) is not to be found\xe2\x80\x94\nwe don\xe2\x80\x99t even know who he is. Is this difference important? What other\ndifferences are there among the various three-possessor problems we\xe2\x80\x99ve seen?\nDo these differences suggest that the rights of these three serial possessors as\nagainst one another ought to be different depending on whether the chattel at\nissue was found, stolen, or obtained by fraud or mistake by Possessor #2? If so,\nhow?\n\n\x0cBailments and Liens\nWe have seen numerous cases in which a possessor\xe2\x80\x94a fox hunter, a finder of a jewel,\na lumber thief\xe2\x80\x94is not the true owner according to the law. There are more. The\nproperty could have been entrusted by the owner to the possessor: this is called a\nbailment. (Note that the owner/entruster is the bail-OR and the temporary possessor is\nthe bail-EE.) Common bailees include delivery services, dry cleaners, and friends who\nborrow each others\xe2\x80\x99 casebooks. Or perhaps the property is owned by the possessor,\nbut subject to a security interest held by a third party. Car loans are a familiar class of\nthese liens: the bank has a right to repossess the car if the buyer fails to make payments\non time. Sometimes the two go together. A pawn shop, for example, is both a bailee\nand lienholder: it has possession of the pawnor\xe2\x80\x99s gold-plated fish tank on skis and a\nlien against it, which it uses to secure the loan it makes to the pawnor.\nThese arrangements, all of which split full ownership from physical possession,\nsystematically raise the same kinds of issues. First, there is the question of the duties\nbetween the possessor and the party out of possession: bailees have a duty to return\nthe property, and secured creditors can satisfy unpaid debts by taking ownership of the\nproperty. Second, there is the question of which of the parties has enough of an interest\nin the property to sue if some third party steals or damages it. Third, there is the difficult\nproblem of protecting the legitimate expectations of third parties dealing with a person\nin possession of property who may or may not be its full owner\xe2\x80\x94problems that should\nbe familiar from the materials on good-faith purchasers.\n\nA. Bailments\nAllen v. Hyatt Regency-Nashville Hotel\n668 S.W.2d 286 (Tenn. 1984)\nHARBISON, Justice.\nIn this case the Court is asked to consider the nature and extent of the liability of the\noperator of a commercial parking garage for theft of a vehicle during the absence of\n261\n\n\x0c262\n\nProperty\n\nthe owner. Both courts below, on the basis of prior decisions from this state, held that\na bailment was created when the owner parked and locked his vehicle in a modern,\nindoor, multi-story garage operated by appellant in conjunction with a large hotel in\ndowntown Nashville. We affirm.\nThere is almost no dispute as to the relevant facts. Appellant is the owner and operator\nof a modern high-rise hotel in Nashville fronting on the south side of Union Street.\nImmediately to the rear, or south, of the main hotel building there is a multi-story\nparking garage with a single entrance and a single exit to the west, on Seventh Avenue,\nNorth. As one enters the parking garage at the street level, there is a large sign reading\n\xe2\x80\x9cWelcome to Hyatt Regency-Nashville.\xe2\x80\x9d There is another Hyatt Regency sign inside\nthe garage at street level, together with a sign marked \xe2\x80\x9cParking.\xe2\x80\x9d The garage is available\nfor parking by members of the general public as well as guests of the hotel, and the\npublic are invited to utilize it.\nOn the morning of February 12, 1981, appellee\xe2\x80\x99s husband, Edwin Allen, accompanied\nby two passengers, drove appellee\xe2\x80\x99s new 1981 automobile into the parking garage.\nNeither Mr. Allen nor his passengers intended to register at the hotel as a guest. Mr.\nAllen had parked in this particular garage on several occasions, however, testifying that\nhe felt that the vehicle would be safer in an attended garage than in an unattended\noutside lot on the street.\nThe single entrance was controlled by a ticket machine. The single exit was controlled\nby an attendant in a booth just opposite to the entrance and in full view thereof.\nAppellee\xe2\x80\x99s husband entered the garage at the street level and took a ticket which was\nautomatically dispensed by the machine. The machine activated a barrier gate which\nrose and permitted Mr. Allen to enter the garage. He drove to the fourth floor level,\nparked the vehicle, locked it, retained the ignition key, descended by elevator to the\nstreet level and left the garage. When he returned several hours later, the car was gone,\nand it has never been recovered. Mr. Allen reported the theft to the attendant at the\nexit booth, who stated, \xe2\x80\x9cWell, it didn\xe2\x80\x99t come out here.\xe2\x80\x9d The attendant did not testify at\nthe trial.\nMr. Allen then reported the theft to security personnel employed by appellant, and\nsubsequently reported the loss to the police. Appellant regularly employed a number\nof security guards, who were dressed in a distinctive uniform, two of whom were on\n\n\x0cBailments and Liens\n\n263\n\nduty most of the time. These guards patrolled the hotel grounds and building as well\nas the garage and were instructed to make rounds through the garage, although not\nnecessarily at specified intervals. One of the security guards told appellee\xe2\x80\x99s husband\nthat earlier in the day he had received the following report:\nHe said, \xe2\x80\x9cIt\xe2\x80\x99s a funny thing here. On my report here a lady called me\nsomewhere around nine-thirty or after and said that there was someone\nmessing with a car.\xe2\x80\x9d\nThe guard told Mr. Allen that he closed his office and went up into the garage to\ninvestigate, but reported that he did not find anything unusual or out of the ordinary.\nCustomers such as Mr. Allen, upon entering the garage, received a ticket from the\ndispensing machine. On one side of this ticket are instructions to overnight guests to\npresent the ticket to the front desk of the hotel. The other side contains instructions to\nthe parker to keep the ticket and that the ticket must be presented to the cashier upon\nleaving the parking area. The ticket states that charges are made for the use of parking\nspace only and that appellant assumes no responsibility for loss through fire, theft,\ncollision or otherwise to the car or its contents. The ticket states that cars are parked at\nthe risk of the owner, and parkers are instructed to lock their vehicles. The record\nindicates that these tickets are given solely for the purpose of measuring the time during\nwhich a vehicle is parked in order that the attendant may collect the proper charge, and\nthat they are not given for the purpose of identifying particular vehicles.\nThe question of the legal relationship between the operator of a vehicle which is being\nparked and the operator of parking establishments has been the subject of frequent\nlitigation in this state and elsewhere. The authorities are in conflict, and the results of\nthe cases are varied.\nIt is legally and theoretically possible, of course, for various legal relationships to be\ncreated by the parties, ranging from the traditional concepts of lessor-lessee, licensorlicensee, bailor-bailee, to that described in some jurisdictions as a \xe2\x80\x9cdeposit.\xe2\x80\x9d Several\ncourts have found difficulty with the traditional criteria of bailment in analyzing parkand-lock cases. One of the leading cases is McGlynn v. Parking Authority of City of Newark,\n432 A.2d 99 (N.J. 1981). There the Supreme Court of New Jersey reviewed numerous\ndecisions from within its own state and from other jurisdictions, and it concluded that\n\n\x0c264\n\nProperty\n\nit was more \xe2\x80\x9cuseful and straightforward\xe2\x80\x9d to consider the possession and control\nelements in defining the duty of care of a garage operator to its customers than to\nconsider them in the context of bailment. That Court concluded that the \xe2\x80\x9crealities\xe2\x80\x9d of\nthe relationship between the parties gave rise to a duty of reasonable care on the part\nof operators of parking garages and parking lots. It further found that a garage owner\nis usually better situated to protect a parked car and to distribute the cost of protection\nthrough parking fees. It also emphasized that owners usually expect to receive their\nvehicles back in the same condition in which they left them and that the imposition of\na duty to protect parked vehicles and their contents was consistent with that\nexpectation. The Court went further and stated that since the owner is ordinarily absent\nwhen theft or damage occurs, the obligation to come forward with affirmative evidence\nof negligence could impose a difficult, if not insurmountable, burden upon him. After\nconsidering various policy considerations, which it acknowledged [to] be the same as\nthose recognized by courts holding that a bailment is created, the New Jersey Court\nindulged or authorized a presumption of negligence from proof of damage to a car\nparked in an enclosed garage.\nAlthough the New Jersey Court concluded that a more flexible and comprehensive\napproach could be achieved outside of traditional property concepts, Tennessee courts\ngenerally have analyzed cases such as this in terms of sufficiency of the evidence to\ncreate a bailment for hire by implication. We believe that this continues to be the\nmajority view and the most satisfactory and realistic approach to the problem, unless\nthe parties clearly by their conduct or by express contract create some other\nrelationship.\nThe subject has been discussed in numerous previous decisions in this state. One of\nthe leading cases is Dispeker v. New Southern Hotel Co., 373 S.W.2d 904 (Tenn. 1963). In\nthat case the guest at a hotel delivered his vehicle to a bellboy who took possession of\nit and parked it in a lot adjoining the hotel building. The owner kept the keys, but the\ncar apparently was capable of being started without the ignition key. The owner\napparently had told the attendant how to so operate it. Later the employee took the\nvehicle for his own purposes and damaged it. Under these circumstances the Court\nheld that a bailment for hire had been created and that upon proof of misdelivery of\nthe vehicle the bailee was liable to the customer.\n\n\x0cBailments and Liens\n\n265\n\nIn the subsequent case of Scruggs v. Dennis, 440 S.W.2d 20 (Tenn. 1969), upon facts\npractically identical to those of the instant case, the Court again held that an implied\nbailment contract had been created between a customer who parked and locked his\nvehicle in a garage. Upon entry he received a ticket dispensed by a machine, drove his\nautomobile to the underground third level of the garage and parked. He retained his\nignition key, but when he returned to retrieve the automobile in the afternoon it had\ndisappeared. It was recovered more than two weeks later and returned to the owner in\na damaged condition.\nIn that case the operator of the garage had several attendants on duty, but the\nattendants did not ordinarily operate the parked vehicles, as in the instant case.\nAlthough the Court recognized that there were some factual differences between the\nScruggs case and that of Dispeker v. New Southern Hotel Co., supra, it concluded that a\nbailment had been created when the owner parked his vehicle for custody and safe\nkeeping in the parking garage, where there was limited access and where the patron had\nto present a ticket to an attendant upon leaving the premises.\nA bailment relationship was also found in Jackson v. Metropolitan Government of Nashville,\n483 S.W.2d 92 (Tenn. 1972), when faculty members of a high school conducted an\nautomobile parking operation for profit upon the high school campus. A customer\nwho parked his vehicle there was allowed recovery for theft, even though he had parked\nthe vehicle himself after paying a fee, had locked the vehicle and had kept the keys.\nOn the contrary, in the case of Rhodes v. Pioneer Parking Lot, Inc., 501 S.W.2d 569 (Tenn.\n1973), a bailment was found not to exist when the owner left his vehicle in an open\nparking lot which was wholly unattended and where he simply inserted coins into a\nmeter, received a ticket, then parked the vehicle himself and locked it.\nDenying recovery, the Court said:\nIn the case at bar, however, we find no evidence to justify a finding that\nthe plaintiff delivered his car into the custody of the defendant, nor do\nwe find any act or conduct upon the defendant\xe2\x80\x99s part which would justify\na reasonable person believing that an obligation of bailment had been\nassumed by the defendant. 501 S.W.2d at 571.\n\n\x0c266\n\nProperty\n\nIn the instant case, appellee\xe2\x80\x99s vehicle was not driven into an unattended or open\nparking area. Rather it was driven into an enclosed, indoor, attended commercial garage\nwhich not only had an attendant controlling the exit but regular security personnel to\npatrol the premises for safety.\nUnder these facts we are of the opinion that the courts below correctly concluded that\na bailment for hire had been created, and that upon proof of nondelivery appellee was\nentitled to the statutory presumption of negligence provided in T.C.A. \xc2\xa7 24-5-111.\nWe recognize that there is always a question as to whether there has been sufficient\ndelivery of possession and control to create a bailment when the owner locks a vehicle\nand keeps the keys. Nevertheless, the realities of the situation are that the operator of\nthe garage is, in circumstances like those shown in this record, expected to provide\nattendants and protection. In practicality the operator does assume control and custody\nof the vehicles parked, limiting access thereto and requiring the presentation of a ticket\nupon exit. As stated previously, the attendant employed by appellant did not testify,\nbut he told appellee\xe2\x80\x99s husband that the vehicle did not come out of the garage through\nthe exit which he controlled. This testimony was not amplified, but the attendant\nobviously must have been in error or else must have been inattentive or away from his\nstation. The record clearly shows that there was no other exit from which the vehicle\ncould have been driven.\nAppellant made no effort to rebut the presumption created by statute in this state\n(which is similar to presumptions indulged by courts in some other jurisdictions not\nhaving such statutes). While the plaintiff did not prove positive acts of negligence on\nthe part of appellant, the record does show that some improper activity or tampering\nwith vehicles had been called to the attention of security personnel earlier in the day of\nthe theft in question, and that appellee\xe2\x80\x99s new vehicle had been removed from the garage\nby some person or persons unknown, either driving past an inattentive attendant or\none who had absented himself from his post, there being simply no other way in which\nthe vehicle could have been driven out of the garage.\nUnder the facts and circumstances of this case, we are not inclined to depart from prior\ndecisions or to place the risk of loss upon the consuming public as against the operators\nof commercial parking establishments such as that conducted by appellant. We\nrecognize that park-and-lock situations arise under many and varied factual\n\n\x0cBailments and Liens\n\n267\n\ncircumstances. It is difficult to lay down one rule of law which will apply to all cases.\nThe expectations of the parties and their conduct can cause differing legal relationships\nto arise, with consequent different legal results. We do not find the facts of the present\ncase, however, to be at variance with the legal requirements of the traditional concept\nof a bailment for hire. In our opinion it amounted to more than a mere license or hiring\nof a space to park a vehicle, unaccompanied by any expectation of protection or other\nobligation upon the operator of the establishment.\nThe judgment of the courts below is affirmed at the cost of appellant. The cause will\nbe remanded to the trial court for any further proceedings which may be necessary.\nDROWOTA, Justice, dissenting.\nIn this case we are asked to consider the nature and extent of liability of the operator\nof a commercial \xe2\x80\x9cpark and lock\xe2\x80\x9d parking garage. In making this determination, we must\nlook to the legal relationship between the operator of the vehicle and the operator of\nthe parking facility. The majority opinion holds that a bailment contract has been\ncreated, and upon proof of non-delivery Plaintiff is entitled to the statutory\npresumption of negligence provided in T.C.A. \xc2\xa7 24-5-111. I disagree, for I find no\nbailment existed and therefore the Plaintiff does not receive the benefit of the\npresumption. Consequently, the Plaintiff had the duty to prove affirmatively the\nnegligence of the operator of the parking facility and this Plaintiff failed to do.\nThe majority opinion states that \xe2\x80\x9ccourts have found difficulty with the traditional\ncriteria of bailment in analyzing park and lock cases.\xe2\x80\x9d The majority discusses the case\nof McGlynn v. Parking Authority of City of Newark, 86 N.J. 551, 432 A.2d 99 (1981), which\nsuggests that bailment is an outmoded concept for analyzing parking lot and garage\ncases. In Garlock v. Multiple Parking Services, Inc., 427 N.Y.S.2d 670, 677 (1980), the court\nstated that \xe2\x80\x9cthe \xe2\x80\x98bailment theory\xe2\x80\x99 as a basis for recovery in parking lot cases is no longer\nappropriate.\xe2\x80\x9d That court concluded that since the concept of bailment is no longer a\nviable theory in application to a very real modern problem that the proper standard to\nbe followed in such cases is \xe2\x80\x9creasonable care under the circumstances whereby\nforeseeability shall be a measure of liability.\xe2\x80\x9d Id. 427 N.Y.S.2d at 678.\nEven though some courts now suggest that the theory of bailment is an archaic and\ninappropriate theory upon which to base liability in modern park and lock cases, the\n\n\x0c268\n\nProperty\n\nmajority opinion states that \xe2\x80\x9cTennessee courts generally have analyzed cases such as\nthis in terms of sufficiency of the evidence to create a bailment for hire by implication,\xe2\x80\x9d\nand concludes that this is \xe2\x80\x9cthe most satisfactory and realistic approach to the problem.\xe2\x80\x9d\nI do not disagree with the longstanding use of the bailment analysis in this type of case.\nI do disagree, however, with the majority\xe2\x80\x99s conclusion that a bailment for hire has been\ncreated in this case.\nThe record shows that upon entering this parking garage a ticket, showing time of\nentry, is automatically dispensed by a machine. The ticket states that charges are made\nfor the use of a parking space only and that the garage assumes no responsibility for\nloss to the car or its contents. The ticket further states that cars are parked at the risk\nof the owner, and parkers are instructed to lock their vehicles. The majority opinion\npoints out that it is not insisted that this language on the ticket is sufficient to exonerate\nthe garage, since the customer is not shown to have read it or to have had it called to\nhis attention. Savoy Hotel Corp. v. Sparks, 421 S.W.2d 98 (Tenn. Ct. App. 1967). The\nticket in no way identifies the vehicle, it is given solely for the purpose of measuring\nthe length of time during which the vehicle is parked in order that a proper charge may\nbe made.\nIn this case Mr. Allen, without any direction or supervision, parked his car, removed\nhis keys, and locked the car and left the parking garage having retained his ignition key.\nThe presentation of a ticket upon exit is for the sole purpose of allowing the cashier to\ncollect the proper charge. The cashier is not required to be on duty at all times. When\nno cashier is present, the exit gate is opened and no payment is required. * As the\nmajority opinion states, the ticket is \xe2\x80\x9cnot given for the purpose of identifying particular\nvehicles.\xe2\x80\x9d The ticket functioned solely as a source of fee computation, not of vehicle\nidentification.\nThe majority opinion states: \xe2\x80\x9c[W]e do not find the facts of the present case to be at\nvariance with the legal requirements of the concept of a bailment for hire.\xe2\x80\x9d I must\n\nBetween one or two in the morning and six or seven a.m., the garage is entirely open without a cashier to collect\nparking fees. During the day if the cashier leaves his or her post on a break, the exit gate is opened and the vehicle\nowner may exit without payment.\n\n*\n\n\x0cBailments and Liens\n\n269\n\ndisagree, for I feel the facts of the present case are clearly at variance with what I\nconsider to be the legal requirements of the traditional concept of a bailment for hire.\nBailment has been defined by this Court in the following manner:\nThe creation of a bailment in the absence of an express contract requires\nthat possession and control over the subject matter pass from the bailor\nto the bailee. In order to constitute a sufficient delivery of the subject\nmatter there must be a full transfer, either actual or constructive, of the\nproperty to the bailee so as to exclude it from the possession of the\nowner and all other persons and give to the bailee, for the time being,\nthe sole custody and control thereof.\nIn parking lot and parking garage situations, a bailment is created where\nthe operator of the lot or garage has knowingly and voluntarily assumed\ncontrol, possession, or custody of the motor vehicle; if he has not done\nso, there may be a mere license to park or a lease of parking space.\nRhodes v. Pioneer Parking Lot, Inc., 501 S.W.2d 569, 570 (Tenn. 1973).\nFrom its earliest origins, the most distinguishing factor identifying a bailment has been\ndelivery. Our earliest decisions also recognize acceptance as a necessary factor,\nrequiring that possession and control of the property pass from bailor to bailee, to the\nexclusion of control by others. The test thus becomes whether the operator of the\nvehicle has made such a delivery to the operator of the parking facility as to amount to\na relinquishment of his exclusive possession, control, and dominion over the vehicle\nso that the latter can exclude it from the possession of all others. If so, a bailment has\nbeen created.\nWhen the automobile began replacing the horse and buggy, our courts allowed\nbailment law to carry over and govern the parking of vehicles. In cases such as Old\nHickory Parking Corp. v. Alloway, 177 S.W.2d 23 (Tenn. Ct. App. 1943), and Savoy Hotel\nv. Sparks, 421 S.W.2d 98 (Tenn. Ct. App. 1967), where the operator of the vehicle left\nhis vehicle with an attendant and left the keys for the attendant to move the vehicle as\nhe wished, the bailment relationship was evident for we had a clear delivery, acceptance\nof possession, control, and exercise of dominion over the vehicle\xe2\x80\x94all the traditional\nelements of a bailment. In Dispeker v. New Southern Hotel Company, 373 S.W.2d 904\n\n\x0c270\n\nProperty\n\n(Tenn. 1963), a bellboy parked plaintiff\xe2\x80\x99s car, plaintiff retained the keys but explained\nto the bellboy that the car could be operated without the key, and apparently showed\nhim how to operate it. The bellboy went off duty, then returned and stole the car. Once\nagain, the traditional elements of delivery and control were present.\nThese cases involving parking attendants and personalized service have caused us no\nproblems. The problem arises in this modern era of automated parking, when courts\nhave attempted to expand the limits of existing areas of the law to encompass\ntechnological and commercial advances. Such is the case of Scruggs v. Dennis, 440 S.W.2d\n20 (Tenn. 1969), relied upon in the majority opinion. In Scruggs, as in this case, the entire\noperation is automated, with the exception of payment upon departure. The operation\nbears little, if any, resemblance to the circumstances found in Old Hickory Parking Corp.,\nSavoy Hotel, and Dispeker. Yet the Court in Scruggs, in quoting extensively from the\nDispeker opinion, states that \xe2\x80\x9cThere are some minute differences of fact \xe2\x80\xa6\xe2\x80\x9d Id., 440\nS.W.2d at 22. As pointed out above, the differences of fact in Dispeker are not minute\nor so similar as the Scruggs court would suggest. Delivery, custody and control are clearly\npresent in Dispeker. I fail to find such delivery, custody and control in Scruggs or in the\ncase at bar. In Dispeker, the vehicle was actually taken from the owner by an attendant.\nI believe the Scruggs court and the majority opinion today attempt to apply bailment law\nin situations where there is not a true bailment relationship. \xe2\x80\xa6\nThe majority opinion, as did the Scruggs court, finds custody and control implied\nbecause of the limited access and because \xe2\x80\x9cthe presentation of a ticket upon exit\xe2\x80\x9d is\nrequired. I cannot agree with this analysis as creating a bailment situation. I do not\nbelieve that based upon the fact that a ticket was required to be presented upon leaving,\nthat this factor created a proper basis upon which to find a bailment relationship. The\nticket did not identify the vehicle or the operator of the vehicle, as do most bailment\nreceipts. The cashier was not performing the traditional bailee role or identifying and\nreturning a particular article, but instead was merely computing the amount owed and\naccepting payment due for use of a parking space. I do not believe the Defendant\nexercised such possession and control over Plaintiff\xe2\x80\x99s automobile as is necessary in an\nimplied bailment. \xe2\x80\xa6\nThe full transfer of possession and control, necessary to constitute delivery, should not\nbe found to exist simply by the presentation of a ticket upon exit. In the case at bar, I\n\n\x0cBailments and Liens\n\n271\n\nfind no such delivery and relinquishment of exclusive possession and control as to\ncreate a bailment. Plaintiff parked his car, locked it and retained the key. Certainly\nDefendant cannot be said to have sole custody of Plaintiff\xe2\x80\x99s vehicle, for Defendant\ncould not move it, did not know to whom it belonged, and did not know when it would\nbe reclaimed or by whom. Anyone who manually obtained a ticket from the dispenser\ncould drive out with any vehicle he was capable of operating. Also, a cashier was not\nalways on duty. When on duty, so long as the parking fee was paid\xe2\x80\x94by what means\ncould the Defendant reasonably exercise control? The necessary delivery and\nrelinquishment of control by the Plaintiff, the very basis upon which the bailment\ntheory was developed, is missing.\nWe should realize that the circumstances upon which the principles of bailment law\nwere established and developed are not always applicable to the operation of the\nmodern day automated parking facility. The element of delivery, of sole custody and\ncontrol are lacking in this case.\nNotes and Questions\n1. From time immemorial, potential bailees have attempted to limit their potential\nliability by contract. Why didn\xe2\x80\x99t the ticket in Allen suffice to protect the hotel\nfrom liability for the lost car?\n2. A common concern of bailees is taking responsibility for unexpectedly valuable\nitems. In Peet v. Roth Hotel, 253 N.W. 546 (Minn. 1934), the plaintiff left her\nengagement ring with a hotel employee with instructions to give it to a jeweler\nwho paid regular visits to the hotel and was known to its employees. She\ntestified:\nI had it [the ring] on my finger, and took it off my finger. The\nCashier\xe2\x80\x94I told the Cashier that it was for Mr. Ferdinand Hotz.\nShe took out an envelope and wrote \xe2\x80\x98Ferdinand Hotz.\xe2\x80\x99 I\nremember spelling it to her, and then I left. \xe2\x80\xa6 I handed the ring\nto the Cashier, and she wrote on the envelope. \xe2\x80\xa6 The only\ninstructions I remember are telling her that it was for Mr.\nFerdinand Hotz who was stopping at the hotel.\n\n\x0c272\n\nProperty\nThe ring was stolen while in the hotel\xe2\x80\x99s possession and a jury awarded $2,140.66\nin damages. The hotel objected, arguing that plaintiff \xe2\x80\x9cfailed to divulge the\nunusual value of her ring when she left it with [the cashier, who] testified that,\nat the moment, she did not realize its value.\xe2\x80\x9d The court was unsympathetic,\nwriting, \xe2\x80\x9cNo decision has been cited and probably none can be found where\nthe bailee of an article of jewelry, undeceived as to its identity, was relieved of\nliability because of his own erroneous underestimate of its value.\xe2\x80\x9d Is this fair?\nCompare Minnesota\xe2\x80\x99s modern statute on innkeepers\xe2\x80\x99 liability, in MINN. STAT.\n\xc2\xa7 327.71(1):\nNo innkeeper who has in the establishment a fireproof, metal\nsafe or vault, in good order and fit for the custody of valuables,\nand who keeps a copy of this subdivision clearly and\nconspicuously posted at or near the front desk and on the inside\nof the entrance door of every bedroom, shall be liable for the loss\nof or injury to the valuables of a guest unless: (1) the guest has\noffered to deliver the valuables to the innkeeper for custody in\nthe safe or vault; and (2) the innkeeper has omitted or refused to\ntake the valuables and deposit them in the safe or vault for\ncustody and to give the guest a receipt for them. Except as\notherwise provided in subdivision 6, the liability of an innkeeper\nfor the loss of or injury to the valuables of a guest shall not exceed\n$1,000. No innkeeper shall be required to accept valuables for\ncustody in the safe or vault if their value exceeds $1,000, unless\nthe acceptance is in writing.\nWould this statute have changed the result in Peet? How does it alter the\nrelationship between hotels and guests? Does it explain why hotel rooms\ntypically have a statement of this sort posted on the inside of their doors?\nHere is part of the Uniform Commercial Code\xe2\x80\x99s take on the issue (in the context\nof carriers\xe2\x80\x99 liability for lost or damaged goods given to them for delivery):\nDamages may be limited by a term in the bill of lading or in a\ntransportation agreement that the carrier\xe2\x80\x99s liability may not\nexceed a value stated in the bill or transportation agreement if the\n\n\x0cBailments and Liens\n\n273\n\ncarrier\xe2\x80\x99s rates are dependent upon value and the consignor is\nafforded an opportunity to declare a higher value and the\nconsignor is advised of the opportunity. However, such a\nlimitation is not effective with respect to the carrier\xe2\x80\x99s liability for\nconversion to its own use. \xe2\x80\xa6\nUCC \xc2\xa7 7-309(b). What do you think of this solution?\n3. Bailments raise interesting issues about the bailor\xe2\x80\x99s and bailee\xe2\x80\x99s relationships\nwith third parties. Suppose Lord Hobnob takes a valuable jewel to a jewelry\nshop for repair. While it is there, a chimney-sweep smashes the window and\nruns off with it. Obviously Lord Hobnob sue the chimney-sweep to recover the\njewel or its value. (Is this so obvious?) What about the jeweler? He\xe2\x80\x99s admittedly\nnot the owner of the jewel. Should he nonetheless be allowed to sue the\nchimney-sweep? If the answer is yes, and he wins damages, can he keep the\nmoney? If the jeweler wins damages from the chimney-sweep, can the chimneysweep be held liable in a subsequent suit by Lord Hobnob for the same amount?\nConsider the following case:\nThe Winkfield\n[1902] P. 42 (C.A. 1901)\nAPPEAL by the Postmaster-General against a decision of Sir F. H. Jeune P. confirming\na report of the registrar disallowing a portion of a claim in respect of the contents of\ncertain mail-bags lost in a collision.\nThe case raised the question as to the rights of the Postmaster-General as bailee of\nletters and parcels in transit by post.\nThe facts were shortly as follows:-On April 5, 1900, a collision occurred in a fog off Table Bay, on the coast of Cape\nColony, South Africa, between the Government transport Winkfield, belonging to the\nSeafield Shipping Company, Limited, outward bound to the Cape with troops for\nservice in South Africa, and the Union mail steam vessel Mexican from Cape Town,\nhomeward bound to Southampton with mails, passengers, and cargo. The Winkfield\n\n\x0c274\n\nProperty\n\nwas damaged and the Mexican sank, but not until all the passengers, crew, and some of\nthe mails and luggage of the Mexican had been got on board the other vessel.\nThe owners, master, and crew of the Mexican and the owners of the Winkfield\ncommenced cross-actions, which resulted in the owners of the Winkfield admitting\nliability for [half] of the damage sustained by the Mexican, and, the owners of the\nWinkfield having commenced proceedings against the owners of the Mexican and all\nother persons having claims arising out of the collision, they \xe2\x80\xa6 obtained [a] decree,\nunder s. 503 of the Merchant Shipping Act, 1894, limiting their liability \xe2\x80\xa6 to 8\xc2\xa3. per\nton, and paid into court \xe2\x80\xa6 the sum of 32,514\xc2\xa3\xe2\x80\xa6.\nAgainst this fund claims by the owners of the Mexican, by her master and crew, by\npassengers, and by cargo owners, were filed in the Admiralty Registry amounting to\n90,085\xc2\xa3. \xe2\x80\xa6 These were allowed at 75810\xc2\xa3, including a claim for 5147\xc2\xa3 \xe2\x80\xa6 filed by the\nPostmaster-General \xe2\x80\xa6, and made up of the two following items, namely:\xe2\x80\x94\n(1) 105\xc2\xa3\xe2\x80\xa6., the value of 282 cases of postal parcels and 678 mail-bags lost\non board the Mexican. This claim, made on behalf of the Crown in\nrespect of its own property, was admitted by the registrar....\n(2) 5041\xc2\xa3\xe2\x80\xa6, the value of the contents of 334 parcels, and 1155 registered\nletters, in respect of which the parties interested had made claims upon\nthe Postmaster-General, and given him written authority to represent\nthem in these proceedings. This claim was admitted by the registrar on\nthe ground of the saving of expense by allowing the Postmaster-General\nto make a claim instead of separate claims by the parties concerned\xe2\x80\xa6.\n[But the Postmaster-General objects to the Registrar\xe2\x80\x99s disallowance of:\xe2\x80\x94]\n(3) A claim of 1706\xc2\xa3..., the estimated value of the contents of letters and\nparcels in respect of which no claim had been made by, or instructions\nreceived from, the senders or addressees, but which the PostmasterGeneral undertook to distribute amongst them, and \xe2\x80\xa6 further\nundertook to indemnify the fund in court against any claims put forward\nby the actual owners.\n\n\x0cBailments and Liens\n\n275\n\nOn June 10, 1901, the President [of the Probate, Divorce and Admiralty Division] (Sir\nF. H. Jeune) overruled the objection, and upheld the decision of the registrar, on the\nsame ground, namely, that the Postmaster-General, as representing the Crown, was not\nunder any liability to the parties interested in the lost letters and parcels included under\nthe third head, and, therefore, was precluded \xe2\x80\xa6 from claiming for their value. [The\nPostmaster-General then appealed.]\n[Arguments of counsel on appeal omitted.]\nCOLLINS, M.R.\n\xe2\x80\xa6The case was dealt with by all parties in the Court below as a claim by a bailee who\nwas under no liability to his bailor for the loss in question\xe2\x80\xa6\nIt seems to me that the position, that possession is good against a wrongdoer and that\nthe latter cannot set up the jus tertii unless he claims under it, is well established in our\nlaw, and really concludes this case against the respondents. As I shall shew presently, a\nlong series of authorities establishes this in actions of trover and trespass at the suit of\na possessor. And the principle being the same, it follows that he can equally recover\nthe whole value of the goods in an action on the case for their loss through the tortious\nconduct of the defendant. I think it involves this also, that the wrongdoer who is not\ndefending under the title of the bailor is quite unconcerned with what the rights are\nbetween the bailor and bailee, and must treat the possessor as the owner of the goods\nfor all purposes quite irrespective of the rights and obligations as between him and the\nbailor.\nI think this position is well established in our law, though it may be that reasons for its\nexistence have been given in some of the cases which are not quite satisfactory. I think\nalso that the obligation of the bailee to the bailor to account for what he has received\nin respect of the destruction or conversion of the thing bailed has been admitted so\noften in decided cases that it cannot now be questioned; and, further, I think it can be\nshewn that the right of the bailee to recover cannot be rested on the ground suggested\nin some of the cases, namely, that he was liable over to the bailor for the loss of the\ngoods converted or destroyed. It cannot be denied that since the case of Armory v.\nDelamirie, not to mention earlier cases from the Year Books onward, a mere finder may\nrecover against a wrongdoer the full value of the thing converted. That decision\n\n\x0c276\n\nProperty\n\ninvolves the principle that as between possessor and wrongdoer the presumption of\nlaw is, in the words of Lord Campbell in Jeffries v. Great Western Ry. Co., \xe2\x80\x9cthat the person\nwho has possession has the property\xe2\x80\xa6\xe2\x80\x9d\n\xe2\x80\xa6 But, if this be the fact in the case of a finder, why should it not be equally the fact\nin the case of a bailee? Why, as against a wrongdoer, should the nature of the plaintiff\xe2\x80\x99s\ninterest in the thing converted be any more relevant to the inquiry, and therefore\nadmissible in evidence, than in the case of a finder? It seems to me that neither in one\ncase nor the other ought it to be competent for the defendant to go into evidence on\nthat matter.\n\xe2\x80\xa6[T]he root principle of the whole discussion is that, as against a wrongdoer,\npossession is title. The chattel that has been converted or damaged is deemed to be the\nchattel of the possessor and of no other, and therefore its loss or deterioration is his\nloss, and to him, if he demands it, it must be recouped. His obligation to account to\nthe bailor is really not ad rem in the discussion. \xe2\x80\xa6As between bailee and stranger\npossession gives title \xe2\x80\x94 that is, not a limited interest, but absolute and complete\nownership, and he is entitled to receive back a complete equivalent for the whole loss\nor deterioration of the thing itself. As between bailor and bailee the real interests of\neach must be inquired into, and, as the bailee has to account for the thing bailed, so he\nmust account for that which has become its equivalent and now represents it. What he\nhas received above his own interest he has received to the use of his bailor. The\nwrongdoer, having once paid full damages to the bailee, has an answer to any action by\nthe bailor.\nNotes and Questions\n1. The Winkfield presents yet another of our three-party serial possessor scenarios,\nwith subtle variations. Here we have an owner-bailor (the postal customers), a\nbailee (the Postmaster-General), and a wrongdoer (the Mexican). Do the rights\nand obligations among these three parties track those in a finders scenario? A\ntheft scenario? A good-faith purchaser scenario? Look closely at the last line of\nThe Winkfield: \xe2\x80\x9cThe wrongdoer, having once paid full damages to the bailee, has\nan answer to any action by the bailor\xe2\x80\x9d\xe2\x80\x94is this rule regarding the rights of\nPossessor #1 against Possessor #3 (after Possessor #2 has already recovered\nfrom Possessor #3) one that we\xe2\x80\x99ve seen before?\n\n\x0cBailments and Liens\n\n277\n\n2. Here\xe2\x80\x99s another variation. Suppose a chimney-sweep finds a jewel and gives it to\na jeweler for safekeeping. Lord Hobnob, the true owner, shows up in a carriage\nand a huff, and demands the jewel from the jeweler. Can the jeweler turn it\nover? Must he? If he does, is he liable to his bailor, the chimney-sweep, for\nmisdelivery?\n\nB. Liens\nWilliams v. Ford Motor Credit Co.\n674 F.2d. 717 (8th Cir. 1982)\nBENSON, Chief Judge.\nIn this diversity action brought by Cathy A. Williams to recover damages for\nconversion arising out of an alleged wrongful repossession of an automobile, Williams\nappeals from a judgment notwithstanding the verdict entered on motion of defendant\nFord Motor Credit Company (FMCC). In the same case, FMCC appeals a directed\nverdict in favor of third party defendant S & S Recovery, Inc. (S & S) on FMCC\xe2\x80\x99s third\nparty claim for indemnification. We affirm the judgment n.o.v. FMCC\xe2\x80\x99s appeal is\nthereby rendered moot.\nIn July, 1975, David Williams, husband of plaintiff Cathy Williams, purchased a Ford\nMustang from an Oklahoma Ford dealer. Although David Williams executed the sales\ncontract, security agreement, and loan papers, title to the car was in the name of both\nDavid and Cathy Williams. The car was financed through the Ford dealer, who in turn\nassigned the paper to FMCC. Cathy and David Williams were divorced in 1977. The\ndivorce court granted Cathy title to the automobile and required David to continue to\nmake payments to FMCC for eighteen months. David defaulted on the payments and\nsigned a voluntary repossession authorization for FMCC. Cathy Williams was informed\nof the delinquency and responded that she was trying to get her former husband David\nto make the payments. There is no evidence of any agreement between her and FMCC.\nPursuant to an agreement with FMCC, S & S was directed to repossess the automobile.\n\n\x0c278\n\nProperty\n\nOn December 1, 1977, at approximately 4:30 a.m., Cathy Williams was awakened by a\nnoise outside her house trailer in Van Buren, Arkansas. 2 She saw that a wrecker truck\nwith two men in it had hooked up to the Ford Mustang and started to tow it away. She\nwent outside and hollered at them. The truck stopped. She then told them that the car\nwas hers and asked them what they were doing. One of the men, later identified as\nDon Sappington, president of S & S Recovery, Inc., informed her that he was\nrepossessing the vehicle on behalf of FMCC. Williams explained that she had been\nattempting to bring the past due payments up to date and informed Sappington that\nthe car contained personal items which did not even belong to her. Sappington got out\nof the truck, retrieved the items from the car, and handed them to her. Without further\ncomplaint from Williams, Sappington returned to the truck and drove off, car in tow.\nAt trial, Williams testified that Sappington was polite throughout their encounter and\ndid not make any threats toward her or do anything which caused her to fear any\nphysical harm. The automobile had been parked in an unenclosed driveway which\nplaintiff shared with a neighbor. The neighbor was awakened by the wrecker backing\ninto the driveway, but did not come out. After the wrecker drove off, Williams returned\nto her house trailer and called the police, reporting her car as stolen. Later, Williams\ncommenced this action.\nThe case was tried to a jury which awarded her $5,000.00 in damages. FMCC moved\nfor judgment notwithstanding the verdict, but the district court, on Williams\xe2\x80\x99 motion,\nordered a nonsuit without prejudice to refile in state court. On FMCC\xe2\x80\x99s appeal, this\ncourt reversed and remanded with directions to the district court to rule on the motion\nfor judgment notwithstanding the verdict. The district court entered judgment\nnotwithstanding the verdict for FMCC, and this appeal followed.\nArticle 9 of the Uniform Commercial Code (UCC), which Arkansas has adopted and\ncodified as Ark.Stat.Ann. \xc2\xa7 85-9-503 (Supp.1981), provides in pertinent part:\nUnless otherwise agreed, a secured party has on default the right to take\npossession of the collateral. In taking possession, a secured party may\n\n2\n\nCathy Williams testified that the noise sounded like there was a car stuck in her yard.\n\n\x0cBailments and Liens\n\n279\n\nproceed without judicial process if this can be done without breach of\nthe peace \xe2\x80\xa6. 4\nIn Ford Motor Credit Co. v. Herring, 589 S.W.2d 584, 586 (Ark. 1979), which involved an\nalleged conversion arising out of a repossession, the Supreme Court of Arkansas cited\nSection 85-9-503 and referred to its previous holdings as follows:\nIn pre-code cases, we have sustained a finding of conversion only where\nforce, or threats of force, or risk of invoking violence, accompanied the\nrepossession.\nThe thrust of Williams\xe2\x80\x99 argument on appeal is that the repossession was accomplished\nby the risk of invoking violence. The district judge who presided at the trial commented\non her theory in his memorandum opinion:\nMrs. Williams herself admitted that the men who repossessed her\nautomobile were very polite and complied with her requests. The\nevidence does not reveal that they performed any act which was\noppressive, threatening or tended to cause physical violence. Unlike the\nsituation presented in Manhattan Credit Co. v. Brewer, supra, it was not\nshown that Mrs. Williams would have been forced to resort to physical\nviolence to stop the men from leaving with her automobile.\nIn the pre-Code case Manhattan Credit Co. v. Brewer, S.W.2d 765 (Ark. 1961), the court\nheld that a breach of peace occurred when the debtor and her husband confronted the\ncreditor\xe2\x80\x99s agent during the act of repossession and clearly objected to the repossession.\nIn Manhattan, the court examined holdings of earlier cases in which repossessions were\ndeemed to have been accomplished without any breach of the peace. In particular, the\nSupreme Court of Arkansas discussed the case of Rutledge v. Universal C.I.T. Credit Corp,\n237 S.W.2d 469 (Ark. 1951). In Rutledge, the court found no breach of the peace when\nthe repossessor acquired keys to the automobile, confronted the debtor and his wife,\ninformed them he was going to take the car, and immediately proceeded to do so. As\nIt is generally considered that the objectives of this section are (1) to benefit creditors in permitting them to\nrealize collateral without having to resort to judicial process; (2) to benefit debtors in general by making credit\navailable at lower costs; and (3) to support a public policy discouraging extrajudicial acts by citizens when those\nacts are fraught with the likelihood of resulting violence.\n\n4\n\n\x0c280\n\nProperty\n\nthe Rutledge court explained and the Manhattan court reiterated, a breach of the peace\ndid not occur when the \xe2\x80\x9cAppellant [debtor-possessor] did not give his permission but\nhe did not object.\xe2\x80\x9d Manhattan, supra, 341 S.W.2d at 767-68; Rutledge, supra, 237 S.W.2d\nat 470.\nWe have read the transcript of the trial. There is no material dispute in the evidence,\nand the district court has correctly summarized it. Cathy Williams did not raise an\nobjection to the taking, and the repossession was accomplished without any incident\nwhich might tend to provoke violence.\nAppellees deserve something less than commendation for the taking during the night\ntime sleeping hours, but it is clear that viewing the facts in the light most favorable to\nWilliams, the taking was a legal repossession under the laws of the State of Arkansas.\nThe evidence does not support the verdict of the jury. FMCC is entitled to judgment\nnotwithstanding the verdict.\nHEANEY, Circuit Judge, dissenting.\nThe only issue is whether the repossession of appellant\xe2\x80\x99s automobile constituted a\nbreach of the peace by creating a \xe2\x80\x9crisk of invoking violence.\xe2\x80\x9d See Ford Motor Credit Co.\nv. Herring, 589 S.W.2d 584, 586 (Ark. 1979). The trial jury found that it did and awarded\n$5,000 for conversion. Because that determination was in my view a reasonable one, I\ndissent from the Court\xe2\x80\x99s decision to overturn it.\nCathy Williams was a single parent living with her two small children in a trailer home\nin Van Buren, Arkansas. On December 1, 1977, at approximately 4:30 a.m., she was\nawakened by noises in her driveway. She went into the night to investigate and\ndiscovered a wrecker and its crew in the process of towing away her car. According to\nthe trial court, \xe2\x80\x9cshe ran outside to stop them \xe2\x80\xa6 but she made no strenuous protests to\ntheir actions.\xe2\x80\x9d (Emphasis added.) In fact, the wrecker crew stepped between her and\nthe car when she sought to retrieve personal items from inside it, although the men\nretrieved some of the items for her. The commotion created by the incident awakened\nneighbors in the vicinity.\nFacing the wrecker crew in the dead of night, Cathy Williams did everything she could\nto stop them, short of introducing physical force to meet the presence of the crew. The\n\n\x0cBailments and Liens\n\n281\n\nconfrontation did not result in violence only because Ms. Williams did not take such\nsteps and was otherwise powerless to stop the crew.\nThe controlling law is the UCC, which authorizes self-help repossession only when\nsuch is done \xe2\x80\x9cwithout breach of the peace \xe2\x80\xa6 .\xe2\x80\x9d Ark.Stat.Ann. \xc2\xa7 85-9-503 (Supp.1981).\nThe majority recognizes that one important policy consideration underlying this\nrestriction is to discourage \xe2\x80\x9cextrajudicial acts by citizens when those acts are fraught\nwith the likelihood of resulting violence.\xe2\x80\x9d Supra, at 719. Despite this, the majority holds\nthat no reasonable jury could find that the confrontation in Cathy Williams\xe2\x80\x99 driveway\nat 4:30 a.m. created a risk of violence. I cannot agree. At a minimum, the largely\nundisputed facts created a jury question. The jury found a breach of the peace and this\nCourt has no sound, much less compelling, reason to overturn that determination.\nIndeed, I would think that sound application of the self-help limitation might require\na directed verdict in favor of Ms. Williams, but certainly not against her. If a \xe2\x80\x9cnight\nraid\xe2\x80\x9d is conducted without detection and confrontation, then, of course, there could\nbe no breach of the peace. But where the invasion is detected and a confrontation\nensues, the repossessor should be under a duty to retreat and turn to judicial process.\nThe alternative which the majority embraces is to allow a repossessor to proceed\nfollowing confrontation unless and until violence results in fact. Such a rule invites\ntragic consequences which the law should seek to prevent, not to encourage. I would\nreverse the trial court and reinstate the jury\xe2\x80\x99s verdict.\nNotes and Questions\n1. True or false: Cathy Williams would have been better off if she had thrown a\npunch or two. What do you make of the UCC\xe2\x80\x99s purported policy of\ndiscouraging private extrajudicial violence? Where does Williams leave other\nsingle mothers facing towing crews at 4:30 AM?\n2. Is the breach-of-the-peace test really about deterring violence, or is it a proxy\nfor the other kinds of individual and social harms repossession can cause? If so,\nhow good a proxy is it? Are there better ways to avoid those harms?\n3. Notice that FMCC\xe2\x80\x99s lien is a property interest. One key indicium of this fact\xe2\x80\x94\nor perhaps a component of it\xe2\x80\x94is that it is freely assignable. FMCC was not the\noriginal lender. Who was? How did FMCC end up owning the lien?\n\n\x0c282\n\nProperty\n\n4. On the other side of the loan, Cathy Williams was not the original borrower;\nDavid Williams was. Why is his failure to pay her problem? Indeed, he was\nunder a court order to continue making payments. Why doesn\xe2\x80\x99t that protect her\nfrom repossession? This aspect of liens\xe2\x80\x94that they run with the property\xe2\x80\x94is\nconsidered crucial to secured lending. Why? Would FMCC be willing to extend\ncredit in the first place if its resulting security interest did not bind David\xe2\x80\x99s\nsuccessors in title?\n5. In Williams the lienholder is not in physical possession of the collateral. Why\nnot? Would car loans work if the lender retained possession? This creates two\ndistinctive problems. First, how and when the lender can retake possession?\n(Answer: with a tow truck in the middle of the night.) But what if Cathy Williams\ndrives the car out of state and hides it? For that matter, what if she destroys it\nrather than let FMCC repossess it? So FMCC\xe2\x80\x99s property interest in the car\nprovides some protection for its contract rights, but hardly perfect protection.\nCould FMCC insist that Cathy Williams install a GPS device on the car that\ncontinually broadcasts its location? Cf. American Car Rental, Inc. v.\nCommissioner of Consumer Protection, 869 A.2d 1198 (Conn. 2005) (unfair\nconsumer practice for car rental agency to charge customer $150 per instance\nof drivng over 79 miles per hour for more than two mintues, as revealed by\nGPS tracker in car). Are there privacy concerns with this type of close\nmonitoring? Safety concerns? Are these more or less severe than if the lender\nsent employees to personally follow Cathy Williams around and keep tabs on\nthe car? What about a kill-switch that automatically shuts down the car\xe2\x80\x99s engine\nif it is driven more than fifty miles from her house? If FMCC can shut down\nthe car remotely, could someone else? See Andy Greenberg, Hackers Remotely Kill\na Jeep on the Highway\xe2\x80\x94With Me In It, WIRED (July 21, 2015).\n6. The second distinctive problem when the lienholder is out of possession is\nnotice to third parties. What happens if Cathy Williams sells the car without\ninforming the buyer of the lien? Yes, this is yet another good-faith-purchaser\nproblem; they are everywhere in property law. Consider the following case:\n\n\x0cBailments and Liens\n\n283\nM&I Western State Bank v. Wilson\n493 N.W.2d 387 (Wisc. Ct. App. 1992)\n\nANDERSON, Judge.\nDarin Treleven appeals from a judgment of the trial court which awarded possession\nof a truck owned by Marilyn A. Wilson to the M & I Western State Bank (bank).\nBecause the earlier release of the truck was a conditional release and the bank had\nnotice of Treleven\xe2\x80\x99s lien through his possession of the truck, we reverse.\nThe bank holds a security interest in a 1978 Peterbilt truck owned by Wilson. Treleven\nrepaired the truck seven times, each time releasing the vehicle to Wilson so she could\nearn the money to pay Treleven for the repairs. The repairs were invoiced between\nNovember 20, 1990 and April 23, 1991.\nAfter Wilson defaulted on her payments to the bank, the bank commenced a replevin\naction. The parties made a repayment agreement; however, Wilson again defaulted and\nthe bank obtained a judgment of replevin on April 9, 1990. The sheriff attempted to\nenforce the judgment but was unable to locate the truck. On May 12, 1991, employees\nof the bank saw the vehicle and followed it to Treleven\xe2\x80\x99s place of business, D.T. Truck\nRepair, Inc. The sheriff again tried to serve the writ of execution, but Treleven refused\nto release the vehicle, asserting that he held a mechanic\xe2\x80\x99s lien for services rendered.\nAfter the attempted levy, the bank filed a second replevin action to determine who was\nentitled to possession of the truck and named Treleven as a third-party defendant. At\nthe date of the hearing, Treleven still was owed $3497.26 for the repairs plus $1273.10\nfor interest and storage as of the date of the hearing, January 30, 1992. The bank\xe2\x80\x99s\nbalance as of January 2, 1992 was $3032.16. The bank\xe2\x80\x99s estimate of the value of the\ntruck is approximately $3000. If this estimate is correct, only the lien with first priority\nwould be paid from the proceeds of the sale of the truck.\nThe trial court held that Treleven\xe2\x80\x99s release of the vehicle to Wilson constituted a waiver\nof Treleven\xe2\x80\x99s lien as to the bank and that the bank\xe2\x80\x99s lien had priority. The trial court\nordered the bank to take possession and conduct a sale of the truck. On appeal,\nTreleven argues that the conditional release of the truck to the owner does not amount\nto a waiver of the lien and, alternatively, that he should be able to recover from the\nbank on the theory of unjust enrichment. Because we agree that the conditional release\n\n\x0c284\n\nProperty\n\nand regained possession do not waive Treleven\xe2\x80\x99s mechanic\xe2\x80\x99s lien or affect its priority\nover the prior secured interest, we do not have to address Treleven\xe2\x80\x99s unjust enrichment\nclaim.\nIt is not disputed that before Treleven released possession of the truck, he had a\nmechanic\xe2\x80\x99s lien on Wilson\xe2\x80\x99s truck. Section 779.41(1), Stats., governs mechanic\xe2\x80\x99s liens\nand states in part:\nEvery mechanic and every keeper of a garage or shop, and every\nemployer of a mechanic who transports, makes, alters, repairs or does\nany work on personal property at the request of the owner or legal\npossessor of the personal property, has a lien on the personal property for the\njust and reasonable charges therefor, including any parts, accessories,\nmaterials or supplies furnished in connection therewith and may retain\npossession of the personal property until the charges are paid. [Emphasis added.]\nIt also is not disputed that before Treleven released the truck to Wilson, Treleven\xe2\x80\x99s\nmechanic\xe2\x80\x99s lien had priority over the bank\xe2\x80\x99s security interest. Section 409.310, Stats.,\nstates:\nWhen a person in the ordinary course of his business furnishes services\nor materials with respect to goods subject to a security interest, a lien upon\ngoods in the possession of such person given by statute or rule of law for such materials\nor services takes priority over a perfected security interest unless the lien is\nstatutory and the statute expressly provides otherwise. [Emphasis\nadded.]\nSection 409.310 gave Treleven\xe2\x80\x99s mechanic\xe2\x80\x99s lien priority over the security interest\nbecause Treleven was in possession of the truck, Treleven\xe2\x80\x99s lien was created by sec.\n779.41(1), Stats., and sec. 779.41(1) does not expressly address the priority given to the\nlien created.\nThe issue in this case is whether the mechanic, by allowing the owner to use her vehicle\non a temporary basis before paying the repair bill, lost the lien or its priority on that\nvehicle. The interpretation of statutes is a question of law which we review de novo.\nWe first must examine the language of sec. 779.41(1), Stats., to see if the relinquishment\nand resumption of possession have any affect on the existence of Treleven\xe2\x80\x99s mechanic\xe2\x80\x99s\n\n\x0cBailments and Liens\n\n285\n\nlien. Section 779.41(1) provides that a mechanic \xe2\x80\x9cmay retain possession of the personal\nproperty until the charges are paid.\xe2\x80\x9d This provision allows the mechanic to keep a\ncustomer\xe2\x80\x99s property until the mechanic has been paid, without a court order. However,\nonce the mechanic has relinquished possession of the vehicle, this statute does not\nprovide the mechanic with a remedy even if the bill has not been paid. The statute also\ndoes not tell us whether the mechanic must retain possession of the vehicle to retain\nthe lien\xe2\x80\x94it states only that the mechanic \xe2\x80\x9cmay retain possession.\xe2\x80\x9d\nBut the mechanic\xe2\x80\x99s lien statute may not be interpreted in a vacuum. \xe2\x80\x9c[M]echanic\xe2\x80\x99s lien\nlaws provide new and additional remedies to those of the common law and are to be liberally\nconstrued to accomplish their equitable purpose of aiding materialmen and laborers to\nobtain compensation for material used and services bestowed upon property of\nanother and thereby enhancing its value.\xe2\x80\x9d Wiedenbeck\xe2\x80\x93Dobelin Co. v. Mahoney, 152 N.W.\n479, 481 (Wisc. 1915) (emphasis added). Accordingly, in addition to the statutory\nlanguage of sec. 779.41(1), Stats., we may look to the common law of mechanic\xe2\x80\x99s liens\nand those Wisconsin decisions incorporating common law principles into the statutory\nmechanic\xe2\x80\x99s lien law to determine whether Treleven\xe2\x80\x99s lien survives.\nTreleven argues that according to Sensenbrenner v. Mathews, 3 N.W. 599, 600 (Wis. 1879),\nthe delivery of the vehicle to the owner must be both voluntary and unconditional in\norder to constitute a waiver of the lien. Treleven maintains that because he returned\nthe vehicle to the owner so she could pay for the repairs and the allowed use was only\non a temporary basis, the delivery of the vehicle was conditional and his lien survives.\nThe bank also relies on Sensenbrenner for its argument that Treleven waived his lien by\nreleasing the vehicle to Wilson. Alternatively, the bank asserts that even if the lien was\nnot destroyed between Treleven and Wilson when the vehicle was conditionally\nreleased to Wilson, the lien was destroyed as to third persons.\nBecause Sensenbrenner is distinguishable on its facts from the present case, neither party\xe2\x80\x99s\nreliance on that case is warranted. The court in Sensenbrenner found that the delivery of\na buggy by the mechanic to the owner was unconditional and held that this\nunconditional delivery operated as a waiver of the lien. In contrast, Treleven\xe2\x80\x99s release\nof the vehicle was conditional\xe2\x80\x94Sensenbrenner says nothing of the effect of a\nconditional release to the owner. Sensenbrenner also does not explicitly hold that the\nonly way to waive a lien is through the voluntary and unconditional release of the\n\n\x0c286\n\nProperty\n\nproperty; Sensenbrenner merely states that this is one way to waive a lien. For these\nreasons, Sensenbrenner is not controlling precedent based on the facts of this case.\nNo Wisconsin court has decided whether the lien is lost once the mechanic\nconditionally releases the vehicle to the owner. The general and modern rule can be\nfound in Restatement of Security \xc2\xa7 80 (1941). This rule states that when the bailor\n(owner) is under an obligation to return the vehicle to the lienor (mechanic), the lien is\nrevived upon the recovery of the vehicle, subject only to the interests of bona fide\npurchasers for value and attaching or levying creditors who do not have notice of the\nlienor\xe2\x80\x99s interest.\nThe bank would like a rule that upon a conditional release, the lien is lost as to all third\nparties. The Restatement reflects a more balanced view, recognizing that not all\ninterests of third parties are affected by the conditional release. While the mechanic\nretains possession, third parties at least would have constructive notice of the\nmechanic\xe2\x80\x99s lien because they would be expected to examine the property in the\nmechanic\xe2\x80\x99s possession and be expected to know of the mechanic\xe2\x80\x99s lien statute. After a\nconditional release, those parties purchasing the vehicle, extending new credit, or\nlevying on the vehicle would be vulnerable because even after examinations of the\nmotor vehicle filings and the vehicle, there would be no way for them to know of the\nmechanic\xe2\x80\x99s prior interest. A creditor whose interest arose before the mechanic\xe2\x80\x99s lien\nwould not have this concern. At the time the creditor extends credit, it is presumed to\nknow the mechanic\xe2\x80\x99s lien statutes which could subordinate its interest to that of a\nmechanic making a later repair. This is a known risk to the creditor. A creditor also has\nthe opportunity to protect itself by writing into the security agreement that all\nsubsequent repairs must be approved by the creditor.\nOnce the mechanic\xe2\x80\x99s lien arises, in most circumstances, the later conditional release\ndoes no further damage to the prior creditor and actually can be advantageous to the\ncreditor. For example, in a case such as this where the vehicle is necessary to the\nowner\xe2\x80\x99s business, the conditional release allows the owner to generate cash to pay off\nthe mechanic\xe2\x80\x99s lien and make payments on the creditor\xe2\x80\x99s prior loan. If the mechanic\nwere forced to keep possession of the vehicle, the owner would be unable to raise the\ncash to pay off either the mechanic or the creditor.\n\n\x0cBailments and Liens\n\n287\n\nThe circumstance where a prior creditor could be damaged by the conditional release\nalso is covered by the Restatement. If a prior creditor does not have notice of the\nmechanic\xe2\x80\x99s lien and goes through the expense of levying upon the vehicle while it is in\nthe owner\xe2\x80\x99s possession, then the levying creditor is accorded the same protection as\nthe bona fide purchaser for value or the new attaching creditor. This rule gives the\nprior creditor a \xe2\x80\x9cwindow of opportunity\xe2\x80\x9d to levy, but the mechanic can protect the lien\nby notifying prior creditors of the conditional release arrangement.\nFor the reasons stated above, we reject the bank\xe2\x80\x99s argument that a conditional release\nof the vehicle destroys the lien as to all third parties. Instead, we adopt the\nRestatement\xe2\x80\x99s rule that upon a conditional release, the lien is enforceable against all\nparties except a bona fide purchaser for value or a subsequent attaching or levying\ncreditor who has no notice of the mechanic\xe2\x80\x99s interest. Upon the resumption of\npossession, the lien is revived and retains its priority as before the release, except it is\nsubordinate to the bona fide purchaser or attaching or levying creditor. Applying this\nrule to the facts of the case, it is apparent that the mechanic\xe2\x80\x99s lien is superior to the\nbank\xe2\x80\x99s security interest. The fact that the truck was found at the mechanic\xe2\x80\x99s place of\nbusiness well after the repairs were made supports Treleven\xe2\x80\x99s claim that the release of\nthe vehicle was conditional. Furthermore, the bank is not afforded the protection given\nto the levying creditor because the sheriff levied upon the vehicle while it was in\nTreleven\xe2\x80\x99s possession, and thus had notice of Treleven\xe2\x80\x99s interest.\nBecause Treleven\xe2\x80\x99s lien was not waived by the conditional release under sec. 779.41(1),\nStats., we next must examine whether the conditional release destroyed the lien\xe2\x80\x99s\npriority under sec. 409.310, Stats. Neither party addressed this issue, but commentary\nand cases interpreting Uniform Commercial Code \xc2\xa7 9\xe2\x80\x93310, the model upon which sec.\n409.310 is based, make clear that the possession requirement of this statute is separate\nfrom any possession requirement of the underlying mechanic\xe2\x80\x99s lien.\nU.C.C. \xc2\xa7 9\xe2\x80\x93310 gives priority only to the mechanic in possession of the vehicle. It is\nuniformly held that if the mechanic voluntarily gives up possession of the vehicle, \xc2\xa7 9\xe2\x80\x93\n310 cannot be relied upon by the mechanic to give his lien priority over the prior\nsecured interest. See United States v. Crittenden, 563 F.2d 678, 691 (5th Cir. 1977), vacated\nand remanded, 440 U.S. 715 (1979); In re Glenn, 20 B.R. 98, 99 (Bankr. E.D. Tenn. 1982);\nForrest Cate Ford, Inc. v. Fryar, 465 S.W.2d 882, 884 (Tenn. Ct. App. 1970).\n\n\x0c288\n\nProperty\n\nThe question then becomes whether the resumption of possession will allow sec.\n409.310, Stats., to be applied to give the mechanic\xe2\x80\x99s lien priority. The statute\xe2\x80\x99s language\ndoes not tell us whether continuous possession is required. When a statute is\nambiguous we must look to other sources to determine legislative intent. Among the\nfew courts that have decided this issue, the jurisdictions do not agree as to the effect\nof resuming possession under \xc2\xa7 9\xe2\x80\x93310. The three cases discussing this issue the most\nthoroughly are Glenn, Crittenden and Thorp Commercial Corp. v. Mississippi Road Supply Co.,\n348 So. 2d 1016 (Miss. 1977).\nThe opinion of the Mississippi Supreme Court in Thorp held that the mechanic retained\npriority under the Mississippi equivalent to \xc2\xa7 9\xe2\x80\x93310 when he resumed possession of\nequipment. The court reasoned that the status or rights of the parties did not change\nbetween the date the mechanic lost possession of the equipment and the date it was\nrestored to the possession of the mechanic. Furthermore, the court recognized that the\nsecured party was not and could not be prejudiced by the restoration. Finally, the court\nconcluded that because the Mississippi equivalent of \xc2\xa7 9\xe2\x80\x93310 did not clearly express an\nintention to reverse long-established principles of law, \xc2\xa7 9\xe2\x80\x93310 had to be read together\nwith the older mechanic\xe2\x80\x99s lien statute and prior case law which established that\nmechanic\xe2\x80\x99s liens take priority over prior security interests. These justifications\nsupported the court\xe2\x80\x99s opinion that priority status of the mechanic\xe2\x80\x99s lien was retained\nunder \xc2\xa7 9\xe2\x80\x93310 when the mechanic regained possession.\nGlenn and the dissenting opinion in Thorp stated that the priority of the mechanic\xe2\x80\x99s lien\nis lost under statutes based on \xc2\xa7 9\xe2\x80\x93310 when there is a lapse in the mechanic\xe2\x80\x99s\npossession. Glenn reasoned that a rule which allowed the reinstatement of priority\n\xe2\x80\x9cwould create an ever-present dangerous uncertainty for parties, including prior\nsecured parties, who deal with the debtor with respect to goods in his possession\xe2\x80\x9d\nbecause the prior secured party would have no notice of the mechanic\xe2\x80\x99s lien. Glenn, 20\nB.R. at 99. Glenn also based its conclusion on the same concerns of the dissent in\nThorp\xe2\x80\x94a rule reinstating priority under the statute would permit the priority of the\ncreditors to be determined by the debtor.\nIf he chooses to return property once relinquished by a repairman, the\nrepairman prevails, but if he chooses not to relinquish possession of the\nproperty the secured creditor prevails\xe2\x80\xa6. [A rule reinstating priority\n\n\x0cBailments and Liens\n\n289\n\nunder the statute] invites competition for possession between a secured\nparty and a repairman who has previously relinquished possession of the\nproperty.\nId. at 100\xe2\x80\x9301.\nThe Fifth Circuit Court of Appeals held that a mechanic retained his priority over a\nprior security interest only to the extent that the mechanic continuously possessed the\ncollateral. Crittenden, 563 F.2d at 691. The court analogized \xc2\xa7 9\xe2\x80\x93310 to 26 U.S.C. \xc2\xa7\n6323(b)(5), a provision of the Federal Tax Lien Act, which gives priority to the\nmechanic\xe2\x80\x99s lien only if the mechanic \xe2\x80\x9cis, and has been, continuously in possession of\nsuch property from the time such lien arose.\xe2\x80\x9d 26 U.S.C. \xc2\xa7 6323(b)(5). The court justified\nthe continuous possession requirement by reasoning that while considerations of equity\nand fairness created the mechanic\xe2\x80\x99s lien exception to the normal priority rules, at some\npoint when the mechanic gives up possession and the repairs were made in the more\ndistant past the mechanic\xe2\x80\x99s interest becomes indistinguishable from the ordinary\ncreditor.\nIn light of the longstanding Wisconsin policy of protecting materialmen and laborers,\nwe find the Mississippi court\xe2\x80\x99s opinion in Thorp to be the most persuasive. The bank\nhas not presented any facts which would show how its rights were affected or its\ninterest was prejudiced by the release of the property to Wilson and Treleven\xe2\x80\x99s\nsubsequent repossession. If anything, the facts show that the bank was better off\nthrough the conditional release because it afforded Wilson the resources to pay off\nboth debts.\nLike Mississippi\xe2\x80\x99s law in Thorp, Wisconsin case law decided prior to the enactment of\nsec. 409.310, Stats., gave priority to a mechanic\xe2\x80\x99s lien over a prior security interest. See\nJesse A. Smith Auto Co. v. Kaestner, 159 N.W. 738 (Wisc. 1916). Wisconsin\xe2\x80\x99s enactment\nof sec. 409.310 did not expressly state that its effect was to displace prior law in this\narea. Commentary to the Uniform Commercial Code reveals the drafter\xe2\x80\x99s view that \xc2\xa7\n9\xe2\x80\x93310 was to reverse prior case law which subordinated the mechanic\xe2\x80\x99s lien to prior\nsecurity interests, but it does not state how the rule was to affect prior decisions holding\nthe mechanic\xe2\x80\x99s lien superior. See U.C.C. \xc2\xa7 9\xe2\x80\x93310 comment 2. Because Wisconsin\xe2\x80\x99s\nprior case law and sec. 409.310 can be read in a consistent manner, we decline to\ninterpret the statute otherwise.\n\n\x0c290\n\nProperty\n\nFinally, but not least importantly, the plain language of sec. 409.310, Stats., gives\npriority to the mechanic \xe2\x80\x9cin possession.\xe2\x80\x9d It does not require \xe2\x80\x9ccontinuous possession\xe2\x80\x9d\nor \xe2\x80\x9cretained possession.\xe2\x80\x9d We must construe laws relating to mechanic\xe2\x80\x99s liens in a way\nto accomplish their equitable purpose of aiding mechanics in obtaining compensation.\nThe fifth circuit\xe2\x80\x99s opinion in Crittenden which read the continuous possession\nrequirement into \xc2\xa7 9\xe2\x80\x93310 is not persuasive. In Crittenden, the fifth circuit was interested\nin formulating a federal standard to determine priorities under the Uniform\nCommercial Code. Thus, it looked to the Federal Tax Lien Act for guidance in its\ninterpretation of the \xe2\x80\x9cpossession\xe2\x80\x9d requirement of \xc2\xa7 9\xe2\x80\x93310. Crittenden, 563 F.2d at 691.\nOn appeal the Supreme Court reversed, stating that the court should not be looking to\nfederal standards to determine priorities, but should apply Georgia\xe2\x80\x99s statutes. United\nStates v. Kimbell Foods, 440 U.S. 715, 740 (1979). On remand, the fifth circuit held that\nGeorgia\xe2\x80\x99s priority statute was basically the same as model \xc2\xa7 9\xe2\x80\x93310 and, without\ndiscussion, applied the same interpretation of the statute to the facts in the case. United\nStates v. Crittenden, 600 F.2d 478, 479\xe2\x80\x9380 (5th Cir. 1979). Unlike the fifth circuit\xe2\x80\x99s first\nCrittenden opinion, we are not concerned with formulating a national standard and do\nnot need to look at other federal laws interpreting \xe2\x80\x9cpossession;\xe2\x80\x9d under Wisconsin law,\nwe must interpret sec. 409.310, Stats., in a way that aids the mechanic in obtaining\ncompensation. It is not in a mechanic\xe2\x80\x99s best interest to interpret \xe2\x80\x9cpossession\xe2\x80\x9d in sec.\n409.310 as \xe2\x80\x9ccontinuous possession,\xe2\x80\x9d and we decline to do so. Therefore, because\nTreleven was in possession of the vehicle at the time the bank\xe2\x80\x99s lien was enforced,\nTreleven\xe2\x80\x99s mechanic\xe2\x80\x99s lien had priority over the bank\xe2\x80\x99s interest under sec. 409.310.\nNotes and Questions\n1. In re Housecraft Industries, 155 B.R. 79, 86\xe2\x80\x9387 (Bankr. D. Vt. 1993) gives some\nbackground on the evolution of security interests in personal property:\nUntil the early nineteenth century, the only way to create a valid\ninterest in personal property was by physical pledge\xe2\x80\x94the transfer\nof possession of the property (collateral) by a debtor (the pledgor)\nto the creditor or secured party (the pledgee). Possession\nprovided public notice of a secured party\xe2\x80\x99s interest in collateral\nand prevented debtors from selling their pledged property to\ninnocent purchasers or from obtaining credit based on\n\n\x0cBailments and Liens\n\n291\n\nencumbered assets. To further protect third parties against\nundisclosed interests in property, the common law presumed that\nnonpossessory interests were fraudulent and therefore\nunenforceable against third parties. Twyne\xe2\x80\x99s Case, 76 Eng. Rep.\n809 (Star Chamber 1601).\nThe increasing demands of the credit economy eventually created\na need for collateral that remained in a debtor\xe2\x80\x99s possession.\nLimited only by their creativity, debtors, creditors, and their\ncounsel formulated methods of perfection that provided both\npossession to debtors and security to creditors. The resulting\nrules varied from jurisdiction to jurisdiction, producing what one\ncommentator has called a \xe2\x80\x9clabyrinthine melange\xe2\x80\x9d of personal\nproperty securities laws. Throughout this development toward\nmodern commercial law, the common law pledge existed side by\nside with other forms of perfecting security interests in personal\nproperty.\nThe Uniform Commercial Code \xe2\x80\xa6 streamlined commercial law\nand preserved the pledge to complement a public filing system.\nArticle 9 of the UCC, \xe2\x80\xa6 governs security interests in most forms\nof personal property and fixtures. Article 9 recognizes three\ngeneral ways to perfect a security interest: filing (public\nregistration); possession of the collateral, either directly,\nconstructively or through an agent; and third party notice,\nincluding notice given by the secured party to another holding\nthe collateral.\n2. Treleven, the mechanic, wins in Wilson. But why? Critique the following\nsummaries of the holding:\n\xe2\x80\xa2 \xe2\x80\x9cMechanics in possession have priority over other creditors.\xe2\x80\x9d\n\xe2\x80\xa2 \xe2\x80\x9cTrevelen\xe2\x80\x99s lien arose before the bank\xe2\x80\x99s.\xe2\x80\x9d\n\xe2\x80\xa2 \xe2\x80\x9cTrevelen put the bank on notice of his lien.\xe2\x80\x9d\n\n\x0c292\n\nProperty\nEach of these statements is misleading standing alone, but the holding draws\non them all. What is the rule of the case?\n\n3. Suppose Groucho takes his car to Harpo\xe2\x80\x99s Transmissions for repairs and parks\nit on Harpo\xe2\x80\x99s lot. That\xe2\x80\x99s a bailment; Harpo must turn over the car when\nGroucho demands it back. But now suppose that Harpo does $400 worth of\nrepairs on the car at Groucho\xe2\x80\x99s request and Groucho fails to pay. Harpo now\nhas a mechanic\xe2\x80\x99s lien on the car. Can Groucho get his car back? What remedies\ncould Harpo obtain if he sued Groucho for breach of contract? Does having\nthe car on his lot give him any additional options? What if Groucho sells the\ncar to Chico without telling Chico about Harpo\xe2\x80\x99s lien? What if Harpo lets\nGroucho drive the car off the lot to confirm that the transmission has been\nfixed and Groucho floors it as soon as he reaches the highway and never comes\nback? If Harpo finds the car in Groucho\xe2\x80\x99s driveway, can he tow it back to his\nlot?\n4. What are Groucho and Harpo\xe2\x80\x99s respective rights and obligations if Zeppo steals\nthe car while it\xe2\x80\x99s parked on Harpo\xe2\x80\x99s lot? If the police subsequently find the car\nabandoned on the side of the road, who is entitled to it? Conversely, if Zeppo\ntotals the car by driving it into a tree and both Groucho and Harpo sue him for\nconversion, what result?\n5. Wilson gives a glimpse at the perennial problem of priority, which arises whenever\na debtor has multiple creditors and is unable to pay them all. The ultimate\nsystem for sorting out priority is federal bankruptcy law, but as Wilson illustrates,\nstate commercial law (especially Article 9 of the UCC) plays a significant role\ntoo. Even a quick skim through Article 9 shows how extensively its rules are\nadapted to the particular characteristics of the class of property at issue (or\nperhaps, to the demands of special-interest lobbying and the successive\nencrustations of history). See, e.g., UCC \xc2\xa7 9-102, which distinguishes accounts;\nfarm products; oil, gas, and minerals both in and out of the ground; tort claims;\ncommodity futures; consumer goods; health-care debts; manufactured homes;\nsoftware; and much, much, more.\n6. Many states attempt to solve the core problem in Wilson by requiring that car\nliens be recorded with the state Department of Motor Vehicles and indicated\n\n\x0cBailments and Liens\n\n293\n\non car owners\xe2\x80\x99 certificates of title. The Maryland system, for example, provides\nthat a security interest in a vehicle is \xe2\x80\x9cperfected\xe2\x80\x9d by \xe2\x80\x9cDelivery to the [Motor\nVehicle] Administration of every existing certificate of title of the vehicle and\nan application for certificate of title [including the necessary information about\nthe security interest]\xe2\x80\x9d and that a security interest that has not been so perfected\n\xe2\x80\x9cis not valid against any creditor of the owner or any subsequent transferee or\nsecured party.\xe2\x80\x9d Md. Code Transp. \xc2\xa7 13.202. The theory is that the buyer or\nlender can protect itself by demanding to see the title certificate\xe2\x80\x94indeed, a\nbuyer will need to turn in the old title certificate to register the car and a lender\nwill need to turn it in to record its own security interest. Is this system fair to\nsenior lenders? Fair to buyers and junior lenders? How might the system go\nwrong? How might a fraudster make it go wrong? All things considered, is this\na better system than the Wisconsin one discussed in Wilson?\n\n\x0cPart III: Interests\nTo this point we have largely been conceiving the res of property law\xe2\x80\x94the \xe2\x80\x9cthing\xe2\x80\x9d in\nwhich property rights inhere\xe2\x80\x94as a physical thing (a plot of land, a jewel, an animal), or\nperhaps a circumscribed intangible concept that we can treat as such a thing (a\ntrademark, a domain name, a radio frequency). But typically\xe2\x80\x94and especially when\ndealing with that most primal and valuable res: land\xe2\x80\x94property does not confer\nownership of a thing. Rather, it confers ownership of a particular interest in a thing.\nWhile in lay conversation and informal contexts it might be perfectly acceptable to say\nyou own a plot of land, to be precise you would have to say that you own a legal interest\nin that plot of land\xe2\x80\x94most likely a legal estate we will come to know as a fee simple\nabsolute. The conceptual separation between legal interests in a valuable physical (or\nintangible) resource and the resource itself allows lawyers to structure a diverse array\nof legal relations regarding the possession, use, disposition, and control of such\nresources. Interests can be divided up among multiple people at the same time, or\namong a succession of people over time, or any combination thereof, allowing for\nsubtle control of\xe2\x80\x94and deep predictability about\xe2\x80\x94the rights of all interested parties in\nparticular resources. In this part we will explore the legal tools and concepts that make\nsuch arrangements possible.\nThe tools of control and planning that the common law puts in the hands of owners\n(and their lawyers) are powerful, but they carry risks of both malice and incompetence.\nMalice, because they can be abused by overzealous owners and attorneys in ways that\nare detrimental to society\xe2\x80\x99s interest in the appropriate allocation of scarce and contested\nresources. Incompetence, because they are complex and subtle, and therefore provide\nlots of opportunities for laypeople\xe2\x80\x94and even lawyers and judges\xe2\x80\x94to make mistakes\nthat have the effect of thwarting their wishes. Property law has developed tools to\nguard against these dangers, and we will be investigating those tools as well.\n\n294\n\n\x0cEstates and Future Interests\nA. Introduction\nAll land under the dominion of the English\ncrown is held \xe2\x80\x9cmediately or immediately, of the\nking\xe2\x80\x9d\xe2\x80\x94that is, the crown has \xe2\x80\x9cradical title\xe2\x80\x9d to all\nland under its political dominion. William the\nConqueror declared that all land in England was\nliterally the king\xe2\x80\x99s property; everyone else had to\nsettle for the privilege of holding it for him\xe2\x80\x94the\nprivilege of tenure (from the Norman French\nword tenir\xe2\x80\x94to hold). Tenurial rights were\nintensely personal in early feudal society: the\nright to hold land was a privilege granted by the\nHomage Ceremony\ncrown in exchange for an oath of allegiance and\na promise of military service by the tenant\xe2\x80\x94the\nSource: JAMES HENRY BREASTED & JAMES HARVEY\nROBINSON, 1 OUTLINES OF EUROPEAN HISTORY 399\noath of homage. The word homage derives from\n(1914).\nthe French word homme\xe2\x80\x94literally \xe2\x80\x9cman\xe2\x80\x9d\xe2\x80\x94\nprecisely because the ceremony surrounding the\noath created not only the right of tenure, but a\npolitical and military relationship between \xe2\x80\x9clord and man.\xe2\x80\x9d * In exchange for the\n\nThe ceremony of homage, recorded by the 13th-century jurist and ecclesiastic Henry de Bracton, required the\ntenant to come to the lord in a public place, and there \xe2\x80\x9cto place both his hands between the two hands of his\nlord, by which there is symbolized protection, defense and warranty on the part of the lord and subjection and\nreverence on that of the tenant, and say these words: \xe2\x80\x98I become your man with respect to the tenement which I\nhold of you \xe2\x80\xa6 and I will bear you fealty in life and limb and earthly honour \xe2\x80\xa6 and I will bear you fealty against\nall men \xe2\x80\xa6 saving the faith owed the lord king and his heirs.\xe2\x80\x99 And immediately after this [to] swear an oath of\nfealty to his lord in these words: \xe2\x80\x98Hear this, lord N., that I will bear you fealty in life and limb, in body, goods,\nand earthly honour, so help me God and these sacred relics.\xe2\x80\x99\xe2\x80\x9d 2 Bracton Online 232\nhttp://bracton.law.harvard.edu/Unframed/English/v2/232.htm. The Anglo-Saxon Chronicle contains a\nremarkable and much-debated passage in which William the Conqueror is said to have held court at Salisbury\n*\n\n295\n\n\x0c296\n\nProperty\n\ntenant\xe2\x80\x99s faithful support, or fealty, the lord warranted the tenant\xe2\x80\x99s right to hold a plot of\nland, called a fief, or fee.\nAcceptance of this form of military tenure obligated the tenant to provide a certain\nnumber of knights when called on by the king, and the land held by the tenant was\nsupposed to provide sufficient material support to enable him to meet this military\nobligation. Sometimes, by the process of subinfeudation, the King\xe2\x80\x99s direct tenants (or\n\xe2\x80\x9ctenants-in-chief\xe2\x80\x9d) could spread this burden around by in turn accepting homage from\nother, lesser nobles and freemen, each of whom would be responsible to the tenantin-chief for a portion of the tenant-in-chief\xe2\x80\x99s obligation to provide knight-service. The\ntenants-in-chief thereby became \xe2\x80\x9cmesne lords\xe2\x80\x9d in their own right (\xe2\x80\x9cmesne\xe2\x80\x9d being\nNorman French for \xe2\x80\x9cmiddle\xe2\x80\x9d or \xe2\x80\x9cintermediate,\xe2\x80\x9d today pronounced \xe2\x80\x9cmean\xe2\x80\x9d). There\ncould be several layers of mesne lords (i.e., \xe2\x80\x9cland lords\xe2\x80\x9d) in the feudal hierarchy, at the\nbottom of which were \xe2\x80\x9ctenants in demesne\xe2\x80\x9d (\xe2\x80\x9cdemesne\xe2\x80\x9d being Norman French for\n\xe2\x80\x9cdomain\xe2\x80\x9d or \xe2\x80\x9cdominion\xe2\x80\x9d)\xe2\x80\x94who actually held the land rather than subinfeudating it\nfurther. Of course, holding land did not mean one actually worked it; a tenant in\ndemesne often left the cultivation and productive use of land to those of lower social\nstatus. These could be \xe2\x80\x9cvilleins\xe2\x80\x9d\xe2\x80\x94serfs legally bound to the land by birth\xe2\x80\x94or\n\xe2\x80\x9cleasehold\xe2\x80\x9d tenants\xe2\x80\x94a leasehold being a right to hold land for a term of years in\nexchange for payment of rent in cash or (more often) kind, and of lesser status than\nthe \xe2\x80\x9cfreehold\xe2\x80\x9d estate held by feudal tenants tracing their rights up the feudal pyramid\nto the crown.\nBecause a feudal tenant\xe2\x80\x99s land rights were intimately connected to this web of personal,\npolitical, and military relationships, there was no logical reason why the tenant ought\nto be free to transfer those rights to anyone else\xe2\x80\x94and good reason for the lords to\nresist such alienation of the fee by their tenants. Indeed, fees could be forfeited to the\nlord for the tenant\xe2\x80\x99s breach of the homage relationship or commission of some other\n\xe2\x80\x9cfelony,\xe2\x80\x9d and on the tenant\xe2\x80\x99s death it was not clear that his family members had the\nright to inherit the fee. The king was assumed to have the right to retake the fee and\nre-grant it to a preferable new tenant upon his displeasure with or the death of the old\n\ntwenty years into his reign, and there summoned and taken direct oaths of homage and fealty from every\nlandowner \xe2\x80\x9cof any account\xe2\x80\x9d in the whole of England. See H. A. Cronne, The Salisbury Oath, 19 HISTORY 248\n(1934); J.C. Holt, 1086, in COLONIAL ENGLAND, 1066-1215, at 31 (1997).\n\n\x0cEstates and Future Interests\n\n297\n\ntenant (it was his land, after all). Within a century, however, the dynastic ambitions of\nthe baronage compelled King Henry I to concede (in his Coronation Charter of 1100)\nthat a recently deceased baron\xe2\x80\x99s heir could redeem his fee upon payment of \xe2\x80\x9ca just and\nlawful relief\xe2\x80\x9d\xe2\x80\x94i.e., a payment of money to the crown, as a kind of inheritance tax.\nUnder the principle of primogeniture that took hold in England around this time, the\nlord\xe2\x80\x99s heir was his eldest son; landowners were not free to choose who would take over\ntheir tenancy after their death. Thus, subject to the payment of a relief, the fee became\ndescendible\xe2\x80\x94capable of being inherited from one generation to the next\xe2\x80\x94and the grant\nof a descendible tenancy by the crown was now made not \xe2\x80\x9cto Lord Hobnob,\xe2\x80\x9d but \xe2\x80\x9cto\nLord Hobnob and his heirs.\xe2\x80\x9d To this day, the latter phrase remains the classic commonlaw formula for creating the broadest interest in land that the law will recognize: the fee\nsimple absolute.\nDescendibility of the fee simple having been settled early in the history of English land\nlaw, the broader question of full alienability took several more centuries to work out.\nThe history of medieval English land law is a history of tenants trying to secure their\nfamilies\xe2\x80\x99 wealth and power by expanding alienability and evading tenurial obligations\nto their lords and the crown, while the crown and higher nobility tried to adapt the law\nto preserve their status and prevent such evasions. There is a dialectical quality to this\nhistory. For example: for complicated reasons subinfeudation quickly came to present\na greater threat to the economic interests of the higher ranks of the feudal hierarchy\nthan simple substitution of one tenant for another. Thus, in 1290 the Statute of Quia\nEmptores banned subinfeudation. (Quia Emptores is Latin for \xe2\x80\x9cWhereas Purchasers,\xe2\x80\x9d the\nfirst two words of the statute which opens with a complaint against land purchasers\nwho engage in transactions that might effectively deprive a lawful lord of his fiefdom.)\nBut in banning subinfeudation Quia Emptores validated substitution, and with it the\npractice of selling an entire fee in exchange for money during the life of the tenant.\nSimilarly, in 1536, at the insistence of King Henry VIII, the Statute of Uses abolished\nmany clever schemes adopted by tenants to use intermediaries to direct the disposition\nof real property interests after death, and to put those interests outside the reach of the\nlaw courts (and of the crown\xe2\x80\x99s feudal authority). But in doing so, the statute validated\none type of flexible property arrangement we have come to know as a trust. Moreover,\nthe removal of the primary mechanism lawyers had developed to meet tenants\xe2\x80\x99 demand\nfor intergenerational planning was sufficiently unpopular that Henry felt compelled to\nconsent to the enactment of the Statute of Wills in 1540\xe2\x80\x94finally permitting tenants to\n\n\x0c298\n\nProperty\n\npass their legal estates in land by will rather than being at the whim of the rule of\nprimogeniture. Finally, since the 16th century, primogeniture has given way to a more\ncomplex system of default inheritance rights for various relatives of the deceased who\nleaves no will; these rights are designed to try to approximate what legislatures think\nthe decedent would have wanted, not necessarily what is best for the government. This\nset of default rights comprises the law of intestate succession, which we will discuss briefly\nin a separate unit (and which you may study more thoroughly in a separate course on\ntrust and estates law).\nVarious other statutes and common-law developments over the centuries culminated\nin the system of possessory estates and future interests that were imported into the\nNorth American English colonies, and thus into the independent American states\n(excluding Louisiana). Underlying them all is a fundamental distinction that traces back\nto the \xe2\x80\x9cradical title\xe2\x80\x9d asserted by William the Conqueror in 1066: there is a conceptual\ndifference between the ownership of land and the ownership of a legal interest\nin that land . This distinction remains important to modern property law, and this unit\nwill introduce you to the types of legal interests in land that American law will recognize.\nIn particular, it examines how the common law divides up legal interests in land among\nsuccessive owners over time.\nBefore delving into this material, we should warn you that the estates system has limited\nrelevance even for the practicing real estate lawyer of today. The study of estates and\nfuture interests remains in property courses for three primary reasons: (1) the estates\nare still legally valid property interests, and their complexity can therefore can be a\ndanger to lawyers who encounter them and are unfamiliar with them; (2) some of the\nlegal estates and future interests in real property can be usefully extended to equitable\ninterests in property held in trust; and (3) the bar examiners are fond of testing aspirant\nattorneys on future interests\xe2\x80\x94perhaps simply because they are fairly mechanical and\ntherefore highly testable. To be sure, mastering the system of estates and future\ninterests requires considerable exercise of the lawyerly skills of close reading, logical\nreasoning, and breaking down a big problem into lots of smaller problems. But there\nare other ways of learning those things, and a contemporary lawyer whose client wanted\nto divide up interests in property would be courting malpractice by relying on legal\nestates and future interests in land (which makes the bar examiners\xe2\x80\x99 continued affection\nfor them even more baffling). Instead, the modern lawyer should look to the much\n\n\x0cEstates and Future Interests\n\n299\n\nmore flexible law of trusts and to the various forms of business associations\xe2\x80\x94such as\ncorporations\xe2\x80\x94that can own property in their capacity as fictional legal \xe2\x80\x9cpersons.\xe2\x80\x9d We\ndiscuss these strategies in a separate chapter on trusts and corporate property.\n\nB. Concepts, Vocabulary, and Conventions\nTo begin understanding how the law divides up interests in land over time, we begin\nwith the fundamental distinction between possessory estates and future interests. A\npossessory estate is a legal interest that confers on its owner the right to present possession\nof some thing. A future interest is a legal interest that exists in the present, but does not\nentitle the owner to possession until some point in the future.\nThis may sound confusing, but you are probably already familiar with an arrangement\nthat follows this pattern: a lease. A lease is a transaction in which the landlord gives the\ntenant a possessory estate (a leasehold estate), and retains a future interest\xe2\x80\x94the right to\nretake possession after the lease term ends. This retained future interest\xe2\x80\x94an\nunqualified right to future possession retained by the party who created the possessory\ninterest that precedes it\xe2\x80\x94is called a reversion. (Landlord-tenant relationships are\nobviously more complicated than this\xe2\x80\x94they entail a number of contractual rights and\nobligations and are heavily regulated by statutory and decisional law and, in many cases,\nadministrative codes. We cover these relationships more thoroughly in our unit on\nLandlord and Tenant.)\nThe idea that both landlord and tenant can have legal interests in the same parcel of\nland at the same time, even though only one of them has the right to possess the land at\nany given time, is a good introduction to the concept of future interests. If you think\nabout it, you will probably recognize that the basic idea of a lease implies certain rights\nand powers of a landlord in the leased premises even during the term of the lease. The\nmost important one is the reversionary right itself: the right to take possession at some\npoint in the future. That\xe2\x80\x99s a right the tenant can\xe2\x80\x99t take away, even while the tenant has\nthe right to possession. The landlord might be interested in selling (or mortgaging) this\nreversionary right, even before the lease ends. And if she does sell or mortgage her\ninterest (which she may, subject to the tenant\xe2\x80\x99s interest), the thing sold is not \xe2\x80\x9cthe\nproperty\xe2\x80\x9d; it is the landlord\xe2\x80\x99s reversion: a legal interest in real property that exists in the present\nbut will not entitle its holder to possession of that real property until some point in the\nfuture.\n\n\x0c300\n\nProperty\n\nWhen learning about estates and future interests, we will follow some conventions that\nwill simplify our discussion as much as possible. Most of our problems will involve an\nowner of land transferring some interest in that land to one or more other parties.\nFollowing longstanding tradition in the study of Anglo-American property law, we will\nrefer to the parcel of land in question as \xe2\x80\x9cBlackacre\xe2\x80\x9d (or \xe2\x80\x9cWhiteacre,\xe2\x80\x9d \xe2\x80\x9cGreenacre,\xe2\x80\x9d\n\xe2\x80\x9cOchreacre,\xe2\x80\x9d etc. if more than one parcel is at issue). We will refer to the original owner\nas O, and the other parties as A, B, C, etc.\nIn addition, there are a variety of technical terms that arise, a few of which you should\nbe familiar with:\n\xe2\x80\xa2 A grant or conveyance is a transfer of an interest in property. The person making\nthe grant is the grantor (or transferor); the person receiving the grant is the grantee\n(or transferee). If the grant is made during the life of the grantor, it is said to be\nan inter vivos conveyance (literally, \xe2\x80\x9cbetween the living\xe2\x80\x9d). If in a will, it is said to\nbe a testamentary conveyance. A testamentary conveyance of real property is\ncalled a devise. A testamentary conveyance of personal property is called a\nbequest (or sometimes a legacy).\n\xe2\x80\xa2 When a person dies, they will either have left a valid will or not. A person who\ndies with a valid will dies testate; one who dies without a valid will dies intestate.\nEither way, the dead person can be referred to as a decedent. If the decedent did\nleave a valid will, they may also be referred to as a testator if male, or a testatrix\nif female.\n\xe2\x80\xa2 The assets that a decedent owned at her death are collectively referred to as\nthe decedent\xe2\x80\x99s estate. An estate can sometimes take on the qualities of a legal\nperson\xe2\x80\x94it is not uncommon to say that a certain asset is owned by \xe2\x80\x9cthe estate\nof O.\xe2\x80\x9d The property rights of this fictional legal person are managed by an\nactual person whose title depends on whether the decedent left a will. The\ninstructions in a will are carried out by an executor, designated as such in the will\nitself. An intestate estate is disposed of by a court-appointed administrator. In\nsome jurisdictions these titles are subject to binary gender distinctions; a female\nexecutor may be referred to as an executrix and a female administrator as an\nadministratrix.\n\n\x0cEstates and Future Interests\n\n301\n\n\xe2\x80\xa2 The authority of an administrator or executor to dispose of the estate\xe2\x80\x99s assets\nis conferred by a probate court. When a valid will is filed with the probate court\nand deemed valid, the court will admit the will to probate (or probate the will), and\nwill issue letters testamentary to the executor authorizing him to take possession\nof the estate\xe2\x80\x99s assets and dispose of them according to the will\xe2\x80\x99s instructions.\nIf the decedent died intestate, the court will issue letters of administration to an\nadministrator authorizing him to take possession of the estate\xe2\x80\x99s assets and\ndispose of them according to the laws of intestate succession.\n\xe2\x80\xa2 If the decedent did leave a valid will, it will typically contain instructions for\ntransferring assets to various identified people or entities. The parties receiving\nthe bequests are referred to as the will\xe2\x80\x99s beneficiaries, devisees (for real property),\nor legatees (for personal property). When a decedent passes property by will he\nor she is said to have devised that property. A property interest that the decedent\nhas the power to transfer by will is said to be devisable.\n\xe2\x80\xa2 Sometimes a will fails to provide instructions for all the assets owned by the\ntestator at death; in this case the unallocated assets are said to create a partial\nintestacy. When this happens, assets designated in the will are distributed\naccording to the will\xe2\x80\x99s terms, while the estate\xe2\x80\x99s remaining assets are distributed\naccording to the laws of intestate succession. In order to avoid partial intestacy,\nit is good practice to include a residuary clause in a will, disposing of all the assets\nof the decedent not designated in specific bequests. Such unenumerated assets\nare referred to as the residuary estate.\n\xe2\x80\xa2 If the decedent did not leave a valid will, her property will pass to her heirs\n(sometimes referred to as heirs at law). Heirs are those who are designated by\nlaw as successors to property that passes by intestate succession rather than by\nwill. When heirs take such property, they are said to inherit it. A property\ninterest that can pass by intestate succession is said to be descendible.\n\xe2\x80\xa2 Note that until the decedent actually dies, we don\xe2\x80\x99t know who her heirs are;\nrights of inheritance are allocated only to relatives of the decedent who survive\nher\xe2\x80\x94who are still alive when the decedent dies. Thus, until a property owner\ndies, her relatives have no legally enforceable rights in her property under the\n\n\x0c302\n\nProperty\nlaws of intestate succession. It is sometimes said that such relatives have a mere\nexpectancy, and they are sometimes referred to as heirs apparent; but neither title\ngives them any enforceable interest in property. Similarly, because a will can\nalways be changed by the testator prior to their death, the beneficiaries of a\nwill have no legally enforceable rights in a testator\xe2\x80\x99s property until the testator\ndies; they too are sometimes said to have a mere unenforceable expectancy.\n\xe2\x80\xa2 Heirs under intestacy laws are drawn from various categories of relatives. In\naddition to spouses, there are issue: the direct descendants of the decedent\n(children, grandchildren, great-grandchildren, etc.); ancestors (parents,\ngrandparents, great-grandparents, etc.); and collaterals: relatives who are not\ndirect ancestors or descendants (siblings, aunts, uncles, nieces, nephews,\ncousins).\n\xe2\x80\xa2 If a person dies without a will and without any heirs at law, any property in\ntheir estate escheats to the state, which becomes its owner.\n\nC. Basic Estates and Future Interests\nWe will begin by examining two possessory estates\xe2\x80\x94the fee simple absolute and the\nlife estate\xe2\x80\x94and two future interests (one of which you have already encountered)\xe2\x80\x94\nthe reversion and the remainder.\n\n1. The Fee Simple Absolute\nThe fee simple absolute is the most complete interest in land that the law will recognize.\nWhen we say that \xe2\x80\x9cO owns Blackacre\xe2\x80\x9d without any further qualification, what we\nactually mean is that O owns a presently possessory fee simple absolute in Blackacre. The key\ndistinguishing characteristic of the fee simple absolute is that it has no inherent end\xe2\x80\x94\nit is an estate of indefinite duration. It is descendible, devisable, and alienable inter vivos; so\nit can be transferred to a new owner, but it cannot be destroyed. At most, it can be carved\nup into lesser estates and interests for a while, and we will spend most of the rest of\nthis chapter understanding how that happens.\nAt common law, as previously noted, the fee simple absolute was created by the\nformula: \xe2\x80\x9cto A and his heirs.\xe2\x80\x9d (This reflected the medieval innovation of a fee that\n\n\x0cEstates and Future Interests\n\n303\n\ncould be passed from father to son by inheritance, as opposed to one that reverted\nback to the king on the death of the tenant.) That formula still works, but in modern\nusage it is sufficient to simply say \xe2\x80\x9cto A,\xe2\x80\x9d and the use of such language in a conveyance\nfrom the owner of a fee simple absolute will be presumed to create a fee simple absolute\nin A. Note, however, that the traditional language creates no legal interest in anyone\nother than A; the words \xe2\x80\x9cand his heirs\xe2\x80\x9d are simply a legal formula that has been passed\ndown over the centuries to indicate this particular type of estate. (Remember: a living\nperson has no heirs, and once A dies A\xe2\x80\x99s property will pass by will or intestate\nsuccession.)\n\n2. The Life Estate\nThe life estate is just what it sounds like: an estate that confers a right to possession for\nthe life of its owner. The owner of a life estate is referred to as a life tenant. The life\nestate terminates by operation of law upon the owner\xe2\x80\x99s death (i.e., it ceases to exist). It\nis created by the formula: \xe2\x80\x9cto A for life.\xe2\x80\x9d Because it must by definition end\xe2\x80\x94we all\nhave to die sometime\xe2\x80\x94any land held by a life tenant must also be subject to a future\ninterest in some other person. We\xe2\x80\x99ll explore what those future interests might be shortly.\nRecall the legal principle of nemo dat quod non habet (or nemo dat for short), which we\nencountered in our discussion of good faith purchasers: a grantor cannot convey title\nto something she doesn\xe2\x80\x99t herself own. Following this principle, life estates are alienable\ninter vivos during the life of the life tenant, but obviously not devisable or descendible:\nthey cease to exist upon the death of their owner, so the life tenant\xe2\x80\x99s estate has nothing\nto convey. Nemo dat also implies that the owner of an interest in real property cannot\nconvey more than their interest; a life tenant cannot convey a fee simple absolute, for\nexample. More to the point, if a life tenant A transfers their life estate to a grantee B,\nB cannot receive anything more than what A owns: a possessory estate that will\nterminate by operation of law when A dies. Because such an interest is measured by the\nlife of someone other than its owner, it is called a life estate pur autre vie (literally, in\nLaw French, \xe2\x80\x9cfor another life\xe2\x80\x9d). A life estate pur autre vie can also be created explicitly,\nas by a grant \xe2\x80\x9cto A for the life of B.\xe2\x80\x9d\nWe\xe2\x80\x99ll hold off on any further illustrative problems at this point, because we still need\nsome exposition of what happens after a life tenant dies. The answer, as we\xe2\x80\x99ve already\nnoted, involves future interests.\n\n\x0c304\n\nProperty\n\n3. The Reversion\nWe encountered the reversion once before, when discussing leases as an introduction\nto the concept of a future interest. But reversions often arise in non-leasehold contexts\ntoo. Consider what happens when A, owning a life estate in Blackacre, dies. A\xe2\x80\x99s life\nestate terminates by operation of law; it simply ceases to exist and disappears. Who\n\xe2\x80\x9cowns\xe2\x80\x9d Blackacre now? It seems obvious that somebody must have a right to possession\nof the land, but it seems equally obvious that whoever that somebody is, they had no\nright to possession before A died. Whoever they are, during the term of A\xe2\x80\x99s life estate they\nmust have held an interest that would entitle them to take possession at some point in the\nfuture (that is, a future interest).\nThere are two candidates for such an interest. We will begin with the most basic: the\nreversion. Suppose that O, owning a fee simple absolute in Blackacre, conveys\nBlackacre \xe2\x80\x9cto A for life,\xe2\x80\x9d and says nothing more? What is the legal effect of this grant?\nBased on the formula we just learned, it should be clear that A receives a life estate in\nBlackacre. But what other effects does the grant have on the legal rights of the parties?\nThink about the interest O held prior to the conveyance: the fee simple absolute.\nRemember that a fee simple absolute is an interest of infinite duration\xe2\x80\x94it never ends. So\nwhen O starts with a possessory interest of infinite duration, and then gives away a life\nestate\xe2\x80\x94whose duration is limited by a human lifespan\xe2\x80\x94to A, something was left over.\nSpecifically, O never gave away the right to possession of Blackacre from the day of\nA\xe2\x80\x99s death to the end of time. Whether meaning to or not, O gave away less of an\ninterest in Blackacre than what he owned, meaning he still holds some interest. We call this\ntype of interest\xe2\x80\x94the residual interest left over when a grantor gives away less than they\nhave\xe2\x80\x94a retained interest.\nThis retained interest can\xe2\x80\x99t entitle O to possession during A\xe2\x80\x99s life\xe2\x80\x94A has the exclusive\nright to possession as the life tenant. So O\xe2\x80\x99s interest must be a future interest during the\nterm of A\xe2\x80\x99s life estate: an interest that will entitle O to possession after the natural\ntermination of the life estate. As we discussed in the example of the lease, we call this kind\nof future interest a reversion. It is a retained interest in the grantor\xe2\x80\x94created when a grantor\nconveys less than his entire interest\xe2\x80\x94that will become possessory by operation of law\nupon the natural termination of the preceding estate. Colloquially, we say that Blackacre\n\n\x0cEstates and Future Interests\n\n305\n\n\xe2\x80\x9creverts\xe2\x80\x9d to O. In some opinions, you will see the holder of a reversion referred to as\na \xe2\x80\x9creversioner.\xe2\x80\x9d\nA reversion can of course also be created explicitly, for example, if O conveys Blackacre\n\xe2\x80\x9cto A for life, then to O.\xe2\x80\x9d In this case, O has explicitly created a life estate in A followed\nby a reversion in O.\n\n4. The Remainder (Part 1)\nA remainder is a type of future interest created in someone other than the grantor. The\ndistinguishing characteristic of the remainder is that\xe2\x80\x94like a reversion\xe2\x80\x94it cannot cut short\nor divest any possessory or vested estate. (We will later encounter other future interests that\ncan.) A remainder simply \xe2\x80\x9cremains,\xe2\x80\x9d sitting around and waiting for the natural\ntermination of the preceding possessory estate (be it a life estate or a lease), at which\npoint the remainder will become possessory by operation of law. Suppose that O,\nowning a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for life, and then to\nB.\xe2\x80\x9d Again, A would have a life estate, but now O has also affirmatively created a future\ninterest in B. Because the future interest is created in someone other than the grantor, it\nisn\xe2\x80\x99t a reversion. And because it cannot cut short A\xe2\x80\x99s life estate (note the \xe2\x80\x9cand then\xe2\x80\x9d\nlanguage), it must therefore be a remainder. Due to the persistence of dated gendered\nterms in legal discourse, you will often see the holder of a remainder referred to as a\n\xe2\x80\x9cremainderman,\xe2\x80\x9d even today, regardless of that person\xe2\x80\x99s gender.\nFuture interests get a lot more complicated than this, but you now have enough to\nbegin examining some problems that can arise from even this limited set of interests.\nQuestions\n1. O, owner of a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for life,\nthen to B for life.\xe2\x80\x9d (Assume that both A and B are alive at the time of the grant.)\nWhat is the state of title in Blackacre?\na. What will be the state of title if A dies, survived by B and O?\nb. What will be the state of title if B dies, survived by A and O?\nc. What will be the state of title if O dies, then A dies, then B dies?\n\n\x0c306\n\nProperty\n\n2. What will be the state of title if, while O, A, and B are still alive, B conveys her\ninterest to C?\na. What will be the state of title if, after B conveys her interest to C, A dies,\nsurvived by B, C, and O?\nb. What will be the state of title if, after B conveys her interest to C, C dies,\nleaving D as his heir, and is survived by A, B, and O?\nc. What will be the state of title if, after B conveys her interest to C, B dies,\nsurvived by A, C, and O?\n\nD. Construing Ambiguous Grants\nWe\xe2\x80\x99ve recited a few formulas for creating the small number of common-law interests\nyou\xe2\x80\x99ve encountered. For example, \xe2\x80\x9cto A and his heirs\xe2\x80\x9d creates a fee simple absolute in\nA; \xe2\x80\x9cto B for life, then to C\xe2\x80\x9d creates a life estate in B and a remainder in C. But the\nactual language of documents conveying legal interests in real property don\xe2\x80\x99t always\nstick to the formula\xe2\x80\x94especially (but unfortunately not exclusively) when they are\ndrafted without the assistance of counsel. Consider the following case.\nIn the Estate of Dalton Edward Craigen\n305 S.W.3d 825 (Ct. App. Tex. 2010)\nHOLLIS HORTON, Justice.\nWe are asked to determine whether the trial court properly interpreted the dispository\nlanguage in a holographic will. If the will is ambiguous, the applicable rules of will\nconstruction yield one result. If the will is unambiguous, the trial court was required to\ngive effect to the express language of the will, and arguably should have reached a\ndifferent result.\nThe trial court, in construing the testator\xe2\x80\x99s intentions under the will, found \xe2\x80\x9c[t]hat it\nwas the intent of the [t]estator to leave his entire estate to his surviving wife in full.\xe2\x80\x9d\nThe trial court further found \xe2\x80\x9c[t]hat there was no intention to leave a life estate to her.\xe2\x80\x9d\nIn a single issue on appeal, the testator\xe2\x80\x99s adult children contend the testator intended\nto leave a life estate to his wife, and they argue that the remainder of the estate passed\n\n\x0cEstates and Future Interests\n\n307\n\nto them through the laws of descent and distribution. We find the will is ambiguous\nand hold that under the appropriate rules of will construction, the trial court properly\nconstrued the will. Accordingly, we affirm the judgment.\nTHE WILL\nDalton Edward Craigen left a holographic will that in its entirety stated:\nLast Will & testament\nDebbie gets everything till\nshe dies.\nBeing of sound mind & this\nis my w. last will & testament.\nI leave to my Wife Daphne\nCraigen all p. real & personal property.\n12\xe2\x80\x9317\xe2\x80\x9399 Dalton Craigen\nCONTENTIONS OF THE PARTIES\nThe parties stipulated \xe2\x80\x9c[t]hat Debbie and Daphne named in Dalton Craigen\xe2\x80\x99s will are\none and the same person.\xe2\x80\x9d Brian Craigen and Sabrina Brumley, Craigen\xe2\x80\x99s adult children,\nargue that the testator\xe2\x80\x99s intent under the will is \xe2\x80\x9ccrystal clear\xe2\x80\x94the testator left\neverything (all of his real and personal property, his definition of \xe2\x80\x98everything\xe2\x80\x99) to his\nwife for as long as she lived.\xe2\x80\x9d According to Brian and Sabrina, the dominant provision\nof the will (the first sentence) creates a life estate, and the will\xe2\x80\x99s third sentence can be\nharmonized with the will\xe2\x80\x99s first sentence by construing the third sentence to define the\nproperty that Craigen intended to include in his wife\xe2\x80\x99s life estate. Brian and Sabrina ask\nthat we render a judgment in their favor by holding that Daphne received only a life\nestate under Craigen\xe2\x80\x99s will.\nDaphne died on January 17, 2009. Yvonne Christian, the independent administratrix\nof Daphne\xe2\x80\x99s estate, argues we should affirm the trial court\xe2\x80\x99s judgment. According to\nChristian, the will is not ambiguous as it reflects Craigen\xe2\x80\x99s intent to leave his entire\nestate to Daphne.\n\n\x0c308\n\nProperty\nRULES OF CONSTRUCTION\n\nThe rules involved in construing wills are well settled. \xe2\x80\x9cThe primary object of inquiry\nin interpreting a will is determining the intent of the testator.\xe2\x80\x9d Gee v. Read, 606 S.W.2d\n677, 680 (Tex.1980). \xe2\x80\x9cThe [testator\xe2\x80\x99s] intent must be drawn from the will, not the will\nfrom the intent.\xe2\x80\x9d Id. We ascertain intent from the language found within the four\ncorners of the will. \xe2\x80\x9cIn construing the will, all its provisions should be looked to, for\nthe purpose of ascertaining what the real intention of the [testator] was; and, if this can\nbe ascertained from the language of the instrument, then any particular paragraph of\nthe will which, considered alone, would indicate a contrary intent, must yield to the\nintention manifested by the whole instrument.\xe2\x80\x9d McMurray v. Stanley, 69 Tex. 227, 6 S.W.\n412, 413 (1887).\nWhen a will has been drafted by a layperson who is not shown to be familiar with the\ntechnical meanings of certain words, courts do not place \xe2\x80\x9c\xe2\x80\x98too great emphasis on the\nprecise meaning of the language used where the will is the product of one not familiar\nwith legal terms, or not trained in their use.\xe2\x80\x99\xe2\x80\x9d Gilkey v. Chambers, 146 Tex. 355, 207\nS.W.2d 70, 71 (1947) (quoting 69 C.J. Wills \xc2\xa7 1120 (1934)). Instead, in arriving at the\nmeaning intended by the layman-testator, courts refer to the popular meaning of the\nwords the testator chose to use. In summary, the testator\xe2\x80\x99s intent, as gathered from the\nwill as a whole, prevails against a technical meaning that might be given to certain words\nor phrases, unless the testator intended to use the word or phrase in the technical sense.\nWith respect to the creation of a life estate, no particular words are needed to create a\nlife estate, but the words used must clearly express the testator\xe2\x80\x99s intent to create a life\nestate. A very strong presumption arises that when a person makes a will, the testator\nintended a complete disposition of his property. \xe2\x80\x9c[T]he very purpose of a will is to\nmake such provisions that the testator will not die intestate.\xe2\x80\x9d Gilkey, 207 S.W.2d at 73.\nWhen faced with ambiguity, and in applying that presumption, courts generally\ninterpret wills to avoid creating an intestacy.\n\xe2\x80\xa6In reconciling different parts of a will, the Texas Supreme Court has explained:\nWhere, however, the language of one part of a will is not easily reconciled with\nthat used in another, the principal and subordinate provisions should be\nconstrued in their due relation to each other, and the intent which is disclosed\n\n\x0cEstates and Future Interests\n\n309\n\nin the express clause ought to prevail over the language used in subsidiary\nprovisions, unless modified or controlled by the latter. And a clearly expressed\nintention in one portion of the will will not yield to a doubtful construction in\nany other portion of the instrument.\nHeller v. Heller, 114 Tex. 401, 269 S.W. 771, 774 (1925).\nANALYSIS\nA will is ambiguous if it is capable of more than one meaning. Because Debbie and\nDaphne are in fact the same person, the ambiguity in Craigen\xe2\x80\x99s will becomes apparent.\nWhy would Craigen in the first sentence grant his wife a life estate, but then in the\nconcluding sentences bestow upon her all of his property? The resolution of that\nquestion by Craigen\xe2\x80\x99s children seems reasonable, as the last sentence could be\nconstrued to merely describe the property that Craigen intended to include in Daphne\xe2\x80\x99s\nlife estate.\nOn the other hand, Craigen did not mention his children in his will and he made no\nprovisions to expressly benefit them. Moreover, Brian and Sabrina\xe2\x80\x99s construction of\nCraigen\xe2\x80\x99s will would, if adopted, allow all of Craigen\xe2\x80\x99s property to pass under the laws\nof intestacy at Daphne\xe2\x80\x99s death. Brian and Sabrina\xe2\x80\x99s construction assumes that Craigen,\nwhen writing his will, did not intend to completely dispose of his estate. The rule that\nCraigen did not likely intend to create an intestacy favors the construction of the will\nthat the trial court adopted.\nBrian and Sabrina contend that the will gave Daphne a life estate, but Craigen did not\nutilize those exact words in his will. Although no particular words are needed to create\na life estate, the words used must clearly express the testator\xe2\x80\x99s intent to create one. In\nthe absence of a remainderman clause, we are skeptical that Craigen used the phrase\n\xe2\x80\x9ctill she dies\xe2\x80\x9d in a technical sense to create a life estate. Instead, Craigen likely intended\nto limit Daphne\xe2\x80\x99s use of his property; nevertheless, the will manifests an intent that she\nhave his property in fee simple absolute. Consequently, although the first sentence in\nthe will is susceptible to the interpretation that Craigen created a life estate, the will\nbecomes ambiguous when, in the will\xe2\x80\x99s third sentence, Craigen expressly names\nDaphne as the beneficiary of all of his property and he makes no further provision for\nhis estate upon her death.\n\n\x0c310\n\nProperty\n\nWe conclude that the will is reasonably capable of more than one meaning; therefore,\nwe resort to the rules of construction that apply to ambiguous wills\xe2\x80\xa6. Craigen\xe2\x80\x99s will\ncan be interpreted to avoid the intestacy certain to result under Brian and Sabrina\xe2\x80\x99s\nconstruction of the will. The potential intestacy is avoided if the phrase \xe2\x80\x9ctill she dies\xe2\x80\x9d\nis interpreted as a conditional bequest. The third sentence then functions as intended\nto give Daphne all of Craigen\xe2\x80\x99s property in fee simple. The immediate vesting\nconstruction favors Daphne, the sole beneficiary named in Craigen\xe2\x80\x99s will. It also affords\nthe phrase \xe2\x80\x9ctill she dies\xe2\x80\x9d a nontechnical meaning.\nWe decline to apply the presumption that Craigen did not intend to disinherit his\nchildren when the will expressly states that Craigen gave all of his real and personal\nproperty to Daphne and when Brian and Sabrina offered no evidence regarding\nCraigen\xe2\x80\x99s situation and the circumstances surrounding the execution of the will. Taking\nthe will as a whole, the dominant gift is all of Craigen\xe2\x80\x99s real and personal property, and\nhe made that gift to his wife. As this is the dominant clause, Craigen\xe2\x80\x99s expressed\nintention prevails.\nWe hold that under the appropriate rules of will construction, the trial court correctly\nconstrued the will. We overrule the issue and affirm the judgment.\nAFFIRMED.\nNotes and Questions\n1. Holographic Wills. A holographic will\xe2\x80\x94a will handwritten by the testator\xe2\x80\x94\noften presents a particular challenge for courts attempting to interpret it. Indeed,\nthey are thought to be so problematic that about half of American jurisdictions\nrefuse to recognize them as valid wills at all. See Stephen Clowney, In Their Own\nHand: An Analysis of Holographic Wills and Homemade Willmaking, REAL PROPERTY,\nTRUST AND ESTATE LAW JOURNAL 27 (2008) (arguing that the defects of\nholographic wills, though real, are overstated). Lay testators attempting to settle\ntheir affairs without assistance of counsel often make legal or technical errors\nof various kinds, including errors of ambiguity such as the one that generated\nthe litigation in Craigen.\n2. Presumptions and Rules of Construction. The court reviews a number of\nrules of construction applied by courts in construing ambiguous grants. Most\n\n\x0cEstates and Future Interests\n\n311\n\njurisdictions have similar rules of construction\xe2\x80\x94sometimes promulgated by\nstatute, other times judge-made. In Craigen, two rules in particular do\nconsiderable work: the presumption against intestacy and the clear-statement\nrule for creation of a life estate. The latter rule is sometimes expressed in other\njurisdictions as a presumption in favor of the largest estate the grantor could\nconvey. See, e.g., White v. Brown, 559 S.W.2d 938, 939 (Tenn. 1977) (quoting\nTenn. C. Ann. \xc2\xa7 32-301) (\xe2\x80\x9cEvery grant or devise of real estate, or any interest\ntherein, shall pass all the estate or interest of the grantor or devisor, unless the\nintent to pass a less estate or interest shall appear by express terms, or be\nnecessarily implied in the terms of the instrument.\xe2\x80\x9d).\nWhat justification is there for presuming that an ambiguous grant conveys a fee\nsimple absolute rather than a life estate? Is it any different for the justification\nunderlying the presumption against intestacy? Was Craigen an appropriate case\nfor the application of these presumptions?\n3. Finding Ambiguity. Are you convinced by the court\xe2\x80\x99s arguments that the\nlanguage \xe2\x80\x9ctill she dies\xe2\x80\x9d does not \xe2\x80\x9cclearly express the testator\xe2\x80\x99s will to create a\nlife estate\xe2\x80\x9d? What do you think Dalton Craigen meant by this phrase?\n4. Dueling Presumptions. The court mentions another rule of construction\xe2\x80\x94\nthe presumption against disinheritance\xe2\x80\x94but declines to apply it. Why? Is its\nreason for following the presumption against intestacy but declining to follow\nthe presumption against disinheritance persuasive? How is a court to decide\nwhen a presumption or other rule of construction applies and when it doesn\xe2\x80\x99t?\n\nE. Present vs. Future: The Doctrine of Waste\nEven if we are very clear on the nature and allocation of possessory and future interests\nin a parcel of land, we soon run into a practical problem: it can be difficult to protect\nthe value of a future interest while someone else is in possession of the land, acting for\nmost purposes as its owner. What if a life tenant burns down the structures on the\nparcel? Or decides to undertake a remodeling project that would make the parcel less\ndesirable to future renters? Or fails to do anything about a leaky pipe, leading to a costly\nmold infestation? What if the possessor uses the property in such a way as to maximize\nits current value at the expense of its future value\xe2\x80\x94depleting natural resources, wearing\n\n\x0c312\n\nProperty\n\nout buildings and fixtures without repairing or maintaining them\xe2\x80\x94in ways that can\xe2\x80\x99t\nbe recovered? Can it be wrongful\xe2\x80\x94as a matter of property law\xe2\x80\x94for a lawful possessor\nto use the possessed premises however they wish, for good or for ill?\nThe common law recognized that it could be wrongful for a present lawful possessor to\ntake (or fail to take) certain acts with respect to land in their possession\xe2\x80\x94if those acts\naffected the ability of a future possessor to enjoy their interest when their turn came\naround. To vindicate the rights of these future interest holders, the common law gave\nthem a private right of action to enjoin, and obtain damages for, the acts and omissions\nof possessors that permanently decrease the value of the future interest. This was the\naction for waste.\nJackson v. Brownson\n7 Johns. 227 (N.Y. Sup. Ct. 1810)\n\xe2\x80\xa6 THIS was an action of ejectment for a farm in Whitestown. The cause was tried at\nthe Oneida circuit, the 5th June, 1809, before Mr. Justice Yates.\nAt the trial, the plaintiff gave in evidence the counterpart of a lease, dated the 3d\nSeptember, 1790, from Philip Schuyler, * of Albany, to the defendant, for the premises\nin question, for the lives of the defendant, his wife, and Samuel Shaw, respectively. The\nfarm contained 133 acres and a half. The lease contained various covenants,\nreservations and conditions, among which was the following: \xe2\x80\xa6\xe2\x80\x9cAnd it is further\nconditioned on the part of the said lessee, that neither the said lessee, his executors,\n&c., \xe2\x80\xa6 shall, at any time hereafter, commit any waste.\xe2\x80\x9d\n\xe2\x80\x9cAnd in case the said lessee, his, &c., shall not perform, fulfil, abide by, and keep all\nand every of the covenants and conditions herein covenanted and conditioned, &c.,\nthen in each of the said cases, it shall thenceforth be lawful for the lessor, his, &c., into\nthe whole of the said premises, or into any part thereof, in the name of the whole, to\nre\xc3\xabnter, and the same to have again, repossess and enjoy, as his or their former estate,\xe2\x80\x9d\n&c.\n\n*\n\n[Yes, that Philip Schuyler.\xe2\x80\x94eds.]\n\n\x0cEstates and Future Interests\n\n313\n\nThe lessors were the heirs of Philip Schuyler; this action was brought to recover the\npossession of the south half of the premises, on the ground of forfeiture by a breach\nof the covenant; the lessee or his assigns having committed waste thereon by clearing\nand draining off the land more than a reasonable and due proportion of the wood. It\nwas admitted that, at the date of the lease, the premises were wild and uncultivated,\nand covered throughout with a forest of heavy timber.\nThe plaintiff proved that the defendant occupied the south half of the premises, which\nwere entirely cleared of wood, before the commencement of the suit; and that on the\nnorth half occupied by Shaw, the whole was cleared except about six or eight acres, on\nwhich more than half the wood and timber had been cut down and removed, before\nthe commencement of the suit.\nIt was also proved, that a permanent supply of fuel, timber for buildings, and wood for\nfences, for the use of the demised premises, would require that, at least, thirty acres\nshould have been preserved in wood.\n\xe2\x80\xa6 It was also proved, that about 12 years since, there were 35 acres of land covered\nwith wood and timber on the premises, and about 12 acres of woodland, on that part\nin the possession of the defendant, only half of which was good for timber, \xe2\x80\xa6 that the\ndefendant had cut no wood or timber on the part in his possession, except for fuel,\nfences, and building for the use of the farm, and which had been gradually cut, \xe2\x80\xa6 [that]\nthe defendant had built a house on the premises, which was completed about four years\nsince; and had used the farm in a husbandlike manner, and had carried on more\nmaterials for fences than he had taken off; that \xe2\x80\xa6 cleared land was of much greater\nvalue than land covered with wood and timber; and that good farms in the vicinity of\nthe premises had not reserved more than 12 acres of woodland out of 100 acres\xe2\x80\xa6.\nThe judge was of opinion, \xe2\x80\xa6 that the gradual clearing of that part in possession of the\ndefendant, \xe2\x80\xa6 did not, in law, amount to waste; and he directed the jury to find a verdict\nfor the defendant; and the jury found accordingly.\nA motion was made to set aside the verdict and for a new trial, for the misdirection of\nthe judge.\xe2\x80\xa6\n\n\x0c314\n\nProperty\n\nVAN NESS, J.\n\xe2\x80\xa6 It is a general principle, that the law considers every thing to be waste which does a\npermanent injury to the inheritance. Now, to say that cutting down the wood on almost\nevery acre of the demised premises is not waste, within the spirit and meaning of the\ncovenant in the case, is to say that no waste, by the destruction of wood, can be\ncommitted at all. We are bound to give effect to this covenant if we can, but to decide\nthat the facts stated in the case do not constitute waste, would be destroying it almost\naltogether. That the destruction of the timber is a lasting injury to the reversion cannot\nbe disputed. For this injury the lessors of the plaintiff may, at their election, bring\ncovenant, or enter as for condition broken.\n\xe2\x80\xa6 It is true, that what would in England be waste, is not always so here. The covenant\nmust be construed with reference to the state of the property at the time of the demise.\nThe lessee undoubtedly had a right to fell part of the timber, so as to fit the land for\ncultivation; but it does not follow that he may, with impunity, destroy all the timber,\nand thereby essentially and permanently diminish the value of the inheritance. Good\nsense and sound policy, as well as the rules of good husbandry, require that the lessee\nshould preserve so much of the timber as is indispensably necessary to keep the fences\nand other erections upon the farm in proper repair. The counsel for the defendant is\nmistaken when he says that lessees in England are prohibited from cutting wood upon\nthe demised premises altogether; the prohibition, in principle, extends no further, in\nthis respect, there than it does here. In England, that species of wood which is\ndenominated timber shall not be cut down, because felling it is considered as an injury\ndone to the inheritance, and therefore waste. Here, from the different state of many\nparts of our country, timber may, and must be cut down to a certain extent, but not so\nas to cause an irreparable injury to the reversioner. To what extent wood may be cut\nbefore the tenant is guilty of waste, must be left to the sound discretion of a jury, under\nthe direction of the court, as in other cases.\xe2\x80\xa6 The principle upon which all these cases\nwere decided is that which I have before stated, namely, that whenever wood has been\ncut in such a manner as materially to prejudice the inheritance, it is waste; and that is\nthe principle upon which I place the decision of this cause.\n\xe2\x80\xa6My opinion, therefore, is, that the motion for setting aside the nonsuit, and granting\na new trial, ought to be granted.\n\n\x0cEstates and Future Interests\n\n315\n\nKENT, Ch. J., and THOMPSON, J., were of the same opinion.\nSPENCER, J.\n... The land was covered with heavy timber; and, for the use of it, the lessee was to pay\na rent. The parties must, therefore, have intended that the lessee should be at liberty to\nfell the timber to a certain extent, at least, for agricultural purposes.\nIf the restriction to commit waste would operate to restrain the lessee from the use of\nthe premises, it would be void, as repugnant to the grant. I shall have no difficulty in\nmaintaining that, according to the common law of England, the lessee could not enjoy\nthe land, nor derive any benefit from it, without the commission of waste; and should\nthat point be established, this covenant must be rejected. The general definition of\nwaste is, that it is a destruction in houses, gardens, trees, or other corporeal\nhereditaments, to the disherison of him in remainder or reversion. It is not every injury\nto lands that the law considers as waste, nor every act which injures the remainder-man,\nor the reversioner. To test this supposed waste, by considering the reversioner injured\nby the acts done, is not warranted by law; and, in point of fact, when the premises were\ncleared of the timber, cleared land was more valuable than wood land.\xe2\x80\xa6 I insist that,\naccording to the common law of England, no tenant can cut down timber, &c., or clear\nland for agricultural purposes; and that the quantity of timber cut down never enters\ninto the consideration whether waste has or has not been committed; but that it is\nalways tested by the fact of cutting timber, without the justifiable excuse of having done\nit\xe2\x80\xa6. A single tree cut down, without such justifiable cause, is waste as effectually as if\na thousand had been cut down; and the reason is this, that such trees belong to the\nowner of the inheritance, and the tenant has only a qualified property in them for shade\nand shelter.\nThe doctrine of waste, as understood in England, is inapplicable to a new, unsettled\ncountry. \xe2\x80\xa6The rule furnished by the common law is fixed and certain; and the lessor\nknows what wood he may cut, and for what purposes; but if a covenant not to commit\nwaste is hereafter to be considered as a covenant to leave a sufficient quantity of land\nin wood, no lessee is safe. If the act of cutting timber on the premises, without the\njustifiable excuse already stated, was not waste, cutting more or less was immaterial.\nUnder the covenant not to commit waste, we have no right to say some waste might\n\n\x0c316\n\nProperty\n\nbe committed, and other waste might not; the covenant is inapt to the case, and if any\nremedy exists, it must lie in covenant. I am, therefore, against granting a new trial.\nYATES, J., was of the same opinion.\nRule granted.\nNotes and Questions\n1. What exactly is the dispute between the majority and the dissent? Do they agree\non the existence of a remedy for waste under New York law? On the definition\nof waste? On the applicability of waste doctrine to the lease before the court?\nOn the remedy for waste?\n2. Although this case deals with a lease for life\xe2\x80\x94a peculiar hybrid estate that is not\nrecognized in many jurisdictions\xe2\x80\x94the doctrine of waste applies between\nfreehold possessory estate holders and future interest holders just as it applies\nbetween leasehold tenants and landlords. Thus, even in the absence of a lease\ncontract, Brownson could have been held liable for damages, or enjoined from\nfelling any further timber, in an action for waste by the reversioners (if the jury\nconcluded that it would indeed be waste for a possessor in Brownson\xe2\x80\x99s position\nto fell such timber).\n3. Forms of Waste. Waste can be either voluntary or permissive. Voluntary waste\n(sometimes called affirmative waste) refers to acts of the holder of the possessory\nestate, such as erecting or demolishing a structure, or extracting nonreplenishing natural resources. Permissive waste refers to omissions of the holder\nof the possessory estate, such as failing to pay property taxes, or failure to make\nneeded repairs. Either can support a claim for waste by the owner of a future\ninterest whose rights are permanently devalued as a result. Which form of waste\nwas at issue in Jackson?\n4. Theories of Waste. One commentator argues that Jackson was the starting\npoint for a peculiarly American departure from the English doctrine of waste\ndeplored by the dissenters. In this view, \xe2\x80\x9ccourts created the American law of\nwaste for several reasons: to promote efficient use of resources that the English\nrule would have inhibited; to advance an idea of American landholding as a\n\n\x0cEstates and Future Interests\n\n317\n\nrepublican enterprise, free of feudal hierarchy; and perhaps to advance a belief\nthat a natural duty to cultivate wild land underlay the Anglo-American claim to\nNorth America.\xe2\x80\x9d Jedediah Purdy, The American Transformation of Waste Doctrine:\nA Pluralist Interpretation, 91 CORNELL L. REV. 653, 661 (2006). And indeed, the\nsensitivity of both opinions in Jackson to local conditions, the desirability of\nconverting wild lands to agricultural use, and the sustainability of yeoman\nfarming tend to support this pluralist view.\n5. Law-and-economics theorists, in contrast, identify waste doctrine solely with\nthe criterion of efficiency, and particularly the internalization of externalities and\nmitigation of holdout problems. As Judge Posner puts it: \xe2\x80\x9cThe incentive of a\nlife tenant is to maximize not the value of the property\xe2\x80\x94that is, the present\nvalue of the entire stream of future earnings obtainable from it\xe2\x80\x94but only the\npresent value of the earnings stream obtainable during his expected lifetime. So\nhe will, for example, want to cut timber before it has attained its mature growth\neven though the present value of the timber would be greater if the cutting of\nsome or all of it were postponed; for the added value from waiting would inure\nto the remainderman\xe2\x80\xa6. [Moreover,] since tenant and remainderman would\nhave only each other to contract with, the situation would be one of bilateral\nmonopoly and transaction costs might be high.\xe2\x80\x9d To avoid these problems,\n\xe2\x80\x9c[t]he law of waste forbids the tenant to reduce the value of the property as a\nwhole by considering only his own interest in it.\xe2\x80\x9d Richard A. Posner, Comment\non Merrill on the Law of Waste, 94 MARQ. L. REV. 1095-96 (2011).\nA Note on Ameliorative Waste\nWhat if, instead of doing something that decreases the value of the future interest, the\nholder of the possessory estate does something that increases the market value of the\nland, but in doing so changes the premises in ways the future interest holder doesn\xe2\x80\x99t\nlike? Such alterations\xe2\x80\x94known as ameliorative waste\xe2\x80\x94have generated two types of\napproaches in the courts.\nThe first approach, adopted in Melms v. Pabst Brewing Co., 79 N.W. 738 (Wisc. 1899),\nlooks to the effect of the life tenant\xe2\x80\x99s actions on the market value of the parcel and\nwhether those actions were necessitated by a change in conditions surrounding the\nparcel. In Melms, the Pabst Brewing Company had torn down an old mansion abutting\n\n\x0c318\n\nProperty\n\na brewery it owned, mistakenly believing it owned the lot in fee simple when in fact it\nowned only the life estate of the widow Melms (the remainder being owned by her\nchildren). At the time of the demolition, the neighborhood around the house had\nbecome heavily industrialized, and had been re-graded such that the house stood 2030 feet above street level and was worthless as a residential property. In these\ncircumstances, the court held, whether the act of destroying the mansion and regrading the lot on which it stood to street level constitutes waste is a question of fact\nfor the jury. The court suggested that such actions will not constitute waste \xe2\x80\x9cwhen it\nclearly appears that the change will be, in effect, a meliorating change, which rather\nimproves the inheritance than injures it.\xe2\x80\x9d Id. at 739.\nThe second approach\xe2\x80\x94more consistent with the common-law roots of waste\ndoctrine\xe2\x80\x94holds that any material change to real property caused by a lawful possessor\nwithout the consent of the holder of the future interest is waste, full stop. This\napproach informed the decision of the New York Supreme Court in Brokaw v. Fairchild,\n237 N.Y.S. 6 (Sup. Ct. N.Y. Cty. 1929). In that case, the court refused to allow the life\ntenant of a stately mansion on New York\xe2\x80\x99s Fifth Avenue at 79th Street to tear the\nmansion down over the objections of the holders of future interests in the lot, even\nthough living in the mansion had become cost-prohibitive and the neighborhood had\nbecome a prime location for luxury apartment buildings, which could be built and\noperated on the site for a substantial profit. The theory underlying this result is that a\nlife tenant has merely the rights of use, not full rights of ownership, and that the holder\nof the future interest is entitled to take possession of the parcel in substantially the\nsame condition as it existed at the time the future interest was created: \xe2\x80\x9cThe act of the\ntenant in changing the estate, and whether or not such act is lawful or unlawful, i.e.,\nwhether the estate is so changed as to be an injury to the inheritance, is the sole question\ninvolved.\xe2\x80\x9d Id. at 15.\nThe opinion in Brokaw generated a backlash in New York\xe2\x80\x99s reform-minded legislature,\nwhich enacted a statute redefining waste law along the lines set forth in Melms; that\nstatute remains in force today. See N.Y. REAL PROP. ACTS. LAW \xc2\xa7 803. But interestingly,\nthe opinion in Melms itself seems to have arisen from a number of questionable factual\nand legal pronouncements from the Wisconsin courts. The full, fascinating story is\nrecounted in Thomas W. Merrill, Melms v. Pabst Brewing Co. and the Doctrine of Waste\nin American Property Law, 94 MARQ. L. REV. 1055 (2011). As of 2009, the rule of Melms\n\n\x0cEstates and Future Interests\n\n319\n\nwas followed in most U.S. jurisdictions, while a small number continued to follow the\nrule of Brokaw. Id. at 1083 (citing Gina Cora, Want Not, Waste Not: Contracting Around\nthe Law of Ameliorative Waste (Apr. 1, 2009) (Yale Law School Student Prize Papers:\nPaper 47), http://digitalcommons.law.yale.edu/ylsspps_papers/47).\nWhich of these two rules do you think is most consistent with the pluralist justifications\nfor waste doctrine described by Professor Purdy? Which do you think is most\nconsistent with the law-and-economics approach? Do either of the rules require some\nother form of justification, and if so, what might that justification be?\n\n\x0cMore Complex Estates\nStrategy and Method\n\nProblems:\n\nWe now turn to a more comprehensive review of the system of common law estates\nand future interests. We begin with a warning: estates and future interests problems do\nnot generally reward creative thinking. They reward mechanical, tedious, careful\napplication of logical rules according to a set procedure\xe2\x80\x94an algorithmic approach.\nThey require you to break a big problem up into lots of smaller problems, and solve\neach small problem one at a time, in order. Attempts to short-circuit the analysis will\nget you into trouble. In this chapter, we are going to adopt a routine process for\nbreaking down future interest problems into a series of questions that will generate\npieces of the answer we are trying to reach, then build the answer out of those pieces.\nThe best way to really learn this material is with practice, and you should review the\nexplanatory problems in the text several times before trying your hand at the questions\nat the end of this section.\n\n320\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n321\n\nA. The Method\nIn any problem involving estates and future interests, we must:\n1. Break the fact pattern down into chronological steps, or points\nin time.\n2. For each point in time:\na. If the point in time is the making of a conveyance,\nconstrue the language of any conveyance by\ni. Parsing the interests created by the conveyance\nii. Identifying the nature and quantum of each\ninterest\niii. Determining whether there is any residual\ninterest in the grantor, and if so its nature and\nquantum.\nb. If the point in time is any other event (e.g., a birth, a\ndeath, or the satisfaction or failure of a condition)\nconstrue the effect of the event on the interests of the\nparties.\nc. Based on the analysis of Steps 2.a or 2.b, describe the\ninterests of every party at each point in time: this is the\nstate of title as of that step.\n3. Arrange the state of title for each point in time sequentially to\ncompose a chain of title .\nOnce you have a chain of title, you can answer any question you might be asked about\nthe rights of any party at any point in time. We will talk about how to go about Step 2\nin more detail as we dig in to the substance of the various estates and future interests.\nThroughout this chapter, important rules that we will apply in Step 2 of our method\nwill be in bold, indented type, just like the description of the method above. At the end\nof the exposition, we will plug all these rules we have learned into the method above\nto arrive at a comprehensive approach to the subject.\n\n\x0c322\n\nProperty\n\nStep 1: Building A Chronology\nLet\xe2\x80\x99s revisit a problem we encountered earlier in introducing the life estate:\nLet\xe2\x80\x99s apply Step 1 of our method to this problem.\nProblem 1\nO, owner of a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to B for life.\xe2\x80\x9d (Assume that both A and B are alive at the time of the\ngrant.) What is the state of title in Blackacre?\nNote that, even though it isn\xe2\x80\x99t explicit on the face of the problem, we really have two\npoints in time here that we need to distinguish:\n1. O owns a fee simple absolute in Blackacre.\n2. O conveys Blackacre \xe2\x80\x9cto A for life, then to B for life.\xe2\x80\x9d\nAgain, the state of title at Point 1 is self-explanatory. Point 2 involves a conveyance,\nwhich we will have to parse in Step 2.a.i. of our method. We\xe2\x80\x99ll learn how to do that\nshortly. First, note that Step 1 generates longer chronologies as our problem becomes\nmore complex. For example, we could add on the complications we encountered when\nfirst considering this problem:\nProblem 1A\nO, owner of a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to B for life.\xe2\x80\x9d (Assume that both A and B are alive at the time of the\ngrant.) While O, A, and B are still alive, B conveys her interest to C. B then\ndies, survived by A, C, and O. What is the state of title in Blackacre?\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n323\n\nAlthough our chronology becomes a bit longer in this version of the problem, it begins\nexactly the same way:\n1. O owns a fee simple absolute in Blackacre.\n2. O conveys Blackacre \xe2\x80\x9cto A for life, then to B for life.\xe2\x80\x9d\nWe can then simply add the additional points in time presented by the problem:\n3. B conveys her interest to C.\n4. B dies.\nWe will next learn how to analyze each point in this chronology using Step 2 of our\nmethod, and then put all our analyses together to build a chain of title using Step 3 of\nour method. Let\xe2\x80\x99s get started:\n\nStep 2.a.i: Parsing a Conveyance\nThe conveyance at Point 2 of the chronology for Problem 1 reads \xe2\x80\x9cto A for life, then\nto B for life.\xe2\x80\x9d This is a complex grant\xe2\x80\x94it creates multiple interests in multiple parties.\nWe are going to introduce a rule for breaking up such complex grants for analysis:\nReading from left to right, the first comma, semicolon, or period\nfollowing words of purchase indicates the end of one interest, and\nthe beginning of the next interest.\n\xe2\x80\x9cWords of purchase\xe2\x80\x9d is a technical term in conveyancing law. Despite the ordinary\nEnglish meaning of the word \xe2\x80\x9cpurchase,\xe2\x80\x9d \xe2\x80\x9cwords of purchase\xe2\x80\x9d do not necessarily mean\nthat the grantee paid a valuable consideration in exchange for the grant. They merely\nidentify who the grantee is. So, reading the conveyance in Problem 1 from left to right, we\nfind that the first two words of the conveyance\xe2\x80\x94\xe2\x80\x9cto A\xe2\x80\x9d\xe2\x80\x94are our first words of\npurchase. To determine what interest this grant creates in A, we must take the entire\nclause beginning with those words of purchase and ending with the first comma,\nsemicolon, or period we find. Thus, the first interest under this grant will be created by\nthe words:\n\xe2\x80\x9cto A for life\xe2\x80\x9d\n\n\x0c324\n\nProperty\n\nContinuing to read the conveyance from left to right, we find our next words of\npurchase: \xe2\x80\x9cto B.\xe2\x80\x9d Under our rule, the clause creating B\xe2\x80\x99s interest begins at the end of\nthe previous clause and ends at the first comma, semicolon, or period following the\nwords \xe2\x80\x9cto B.\xe2\x80\x9d thus:\n\xe2\x80\x9cthen to B for life\xe2\x80\x9d\nTaken together, we therefore have two clauses we will have to analyze in Step 2.a.ii of\nour method:\n\xe2\x80\x9cto A for life\xe2\x80\x9d\n\xe2\x80\x9cthen to B for life\xe2\x80\x9d\nYou probably already have a decent idea of what interests are created by this language\n(or you may remember the answer from when we first encountered this problem), but\nlet\xe2\x80\x99s approach the problem methodically so we can express our conclusion more\nprecisely, and later extend our analysis to address novel problems.\n\nStep 2.a.ii: Identifying Legal Interests\nIn order to identify the legal interest created by a particular clause in a grant, we must\nidentify both the nature of that interest and the quantum of the interest.\na. Identifying the Quantum of an Interest\nThe quantum of an estate is a measure of its \xe2\x80\x9csize\xe2\x80\x9d (if size is a meaningful concept\nwith respect to intangible rights like estates). The common-law estates are, in decreasing\norder of quantum:\n\xe2\x80\xa2 The Fee Simple\n\xe2\x80\xa2 The Fee Tail\n\xe2\x80\xa2 The Life Estate\n\xe2\x80\xa2 The Leasehold Estates\nOf these, we will concern ourselves here only with the fees simple and the life estate.\nThe fee tail is relevant today only to those who wish to more fully appreciate certain\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n325\n\nworks of 18th- and 19th-century English literature (and period dramas depicting the\nsame era), in which the estate is a hackneyed plot device. * It was associated with\nhereditary aristocracy in the minds of American legislators and jurists, and accordingly\nit been abolished, was never recognized, or is otherwise essentially moribund in all\nAmerican jurisdictions. \xe2\x80\xa0 The Leasehold Estates, in contrast, are quite important to\nmodern real estate practice, but today they are governed by the law of Landlord and\nTenant, which we cover in a separate unit. Based on the hierarchy of estates, then, the\nkey fact for you to keep in mind during our study of the estates system is that a life estate\nis a lesser estate than a fee simple. This will be an important point when we begin our\ndiscussion of retained interests.\nLet us illustrate the process of identifying the quantum of an interest with an example.\nRecall the first part of the grant we parsed in Problem 1. The language \xe2\x80\x9cto A for life,\xe2\x80\x9d\nas we know, creates a life estate in A. But the quantum of A\xe2\x80\x99s interest\xe2\x80\x94a life estate\xe2\x80\x94\nis not indicated by the words of purchase (\xe2\x80\x9cto A\xe2\x80\x9d). Instead, it is indicated by the two\nwords following the words of purchase: \xe2\x80\x9cfor life.\xe2\x80\x9d These two extra words are called\nwords of limitation: they define or \xe2\x80\x9climit\xe2\x80\x9d the nature or quantum of the estate that will be\nheld by A. For example, the traditional words of limitation of a fee simple are \xe2\x80\x9cand his\nheirs.\xe2\x80\x9d\nBut what if a grant includes no words of limitation? In this case, we require an\nadditional rule to guide our analysis:\n\nThe fee tail was created by a grant \xe2\x80\x9cto A and the heirs of his/her body,\xe2\x80\x9d and land held in tail passed from the\ngrantee to that grantee\xe2\x80\x99s direct descendants at the death of each successive owner. Thus no owner at any point\nin the family line had the power to dispose of the property for longer than their life or to direct its disposition\nupon their death. Land subject to this type of arrangement was said to be \xe2\x80\x9centailed.\xe2\x80\x9d The fee tail could be\xe2\x80\x94and\noften was\xe2\x80\x94limited even further to male heirs; hence the literary trope of the man with no sons nearing the end\nof his life and despairing for the future of his unwed daughters because he holds all his property in tail. See, e.g.,\nJANE AUSTEN, PRIDE & PREJUDICE ch.7 (\xe2\x80\x9cMr. Bennett\xe2\x80\x99s property consisted almost entirely in an estate of two\nthousand a year, which, unfortunately for his daughters, was entailed, in default of heirs male, on a distant\nrelation\xe2\x80\xa6.\xe2\x80\x9d).\n\n*\n\nFor a discussion of the abolition of the fee tail and a review of the vestiges of the estate in the few American\njurisdictions that retain some form of it, see 2-14 POWELL ON REAL PROPERTY (2015).\n\n\xe2\x80\xa0\n\n\x0c326\n\nProperty\nIn the absence of clearly contrary words of limitation, a\nconveyance is presumed to convey the grantor\xe2\x80\x99s entire interest.\n\nThis rule helps explain the modern formula by which the owner of a fee simple absolute\ncan convey a fee simple absolute to another: \xe2\x80\x9cto A.\xe2\x80\x9d Because words of purchase\nwithout any words of limitation convey the grantor\xe2\x80\x99s entire interest, the owner of a fee\nsimple absolute who conveys an interest \xe2\x80\x9cto A\xe2\x80\x9d without any further qualification\nconveys his entire interest\xe2\x80\x94i.e., a fee simple absolute\xe2\x80\x94to A.\nWe will see that the fee simple may be further decomposed into the fee simple absolute\n(with which you are already familiar) and the defeasible fees (which you haven\xe2\x80\x99t seen\nyet). We will deal with the defeasible fees later, because identifying them is dependent\non identifying the future interests that follow them. Let\xe2\x80\x99s turn to the identification of\nfuture interests now.\nb. Identifying the Nature of an Interest\nWe are now going to learn a large number of rules for determining the nature (or type)\nof interest created by a particular grant. Those rules can be applied methodically,\naccording to a kind of algorithm. The flow chart on the next page presents that\nalgorithm, which will make much more sense to you after you read the ensuing sections\nof the text. You will want to keep this flow chart handy as we continue our study of\nthe estates system, and particularly when we start dealing with problems of the kind\nyou might encounter on an exam.\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n327\n\n\x0c328\n\nProperty\n\nc. Possessory Estates vs. Future Interests\nWe now identify our rule for determining whether an interest is a possessory estate or\na future interest:\nAn interest will be a possessory estate if:\n1. it is not preceded by any other interest; and\n2. it is not subject to any condition precedent.\nAn interest that is not a possessory estate is a future interest.\nA condition precedent is just what it sounds like: a condition that precedes the\npossibility of an interest becoming possessory. That is, an interest is subject to a\ncondition precedent if something that has not yet happened must happen in order for that\ninterest to become possessory. For example, a conveyance \xe2\x80\x9cto A when A reaches her 21st\nbirthday,\xe2\x80\x9d made at a time when A is 10 years old, creates a future interest in A because\nA\xe2\x80\x99s interest is subject to a condition precedent: she must reach her 21st birthday in order to\nbe entitled to possession, and she hasn\xe2\x80\x99t done that yet. (We will learn the name of this\nfuture interest shortly.)\nThe question whether an interest is a possessory estate or a future interest is different\nfrom the question of the quantum of that interest. One can hold a future interest in life\nestate, just as one can hold a possessory life estate. To illustrate this point, let\xe2\x80\x99s return\nto the conveyance from Problem 1. Recall that we determined that this conveyance had\ntwo operative clauses:\n\xe2\x80\x9cto A for life\xe2\x80\x9d\n\xe2\x80\x9cthen to B for life\xe2\x80\x9d\nThe first clause, \xe2\x80\x9cto A for life\xe2\x80\x9d creates some interest in A. Is it a possessory estate or a\nfuture interest? First, we ask whether it is preceded by some other interest, and find\nthat it isn\xe2\x80\x99t\xe2\x80\x94it\xe2\x80\x99s the first interest created in the conveyance from O. Next, we ask\nwhether it is subject to a condition precedent\xe2\x80\x94does anything that hasn\xe2\x80\x99t yet happened\nhave to happen in order for A to take possession? Again, the answer is no: the grant is\n\xe2\x80\x9cto A for life\xe2\x80\x9d with no other condition in the text of the relevant clause. Thus, A\xe2\x80\x99s\ninterest is a possessory estate. And because the conveyance to A includes the words of\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n329\n\nlimitation for a life estate (\xe2\x80\x9cfor life\xe2\x80\x9d), we know that the quantum of A\xe2\x80\x99s possessory estate\nis a life estate. Thus, we conclude that under this language, A takes a possessory life estate.\nWhat about B? The language \xe2\x80\x9cthen to B\xe2\x80\x9d creates some interest in B\xe2\x80\x94is it a possessory\nestate or a future interest? The word \xe2\x80\x9cthen,\xe2\x80\x9d following the grant to A, is a clue. When\nwe ask the first question demanded by our rule\xe2\x80\x94whether B\xe2\x80\x99s interest is preceded by\nany other interest\xe2\x80\x94the answer is clearly yes: B\xe2\x80\x99s interest follows A\xe2\x80\x99s possessory life estate.\nTherefore B\xe2\x80\x99s interest must be a future interest. We also know, from the words of\nlimitation \xe2\x80\x9cfor life,\xe2\x80\x9d that the quantum of that interest will be a life estate. So we know\nthat B will take a future interest in life estate under this clause of the conveyance. But\nwe do not yet know what kind of future interest B takes. To answer that question, we\nneed to learn a few more rules.\nd. Reviewing Familiar Interests\nRecall that in our introduction to the basics of the estate system we encountered four\ninterests: the fee simple absolute, the life estate, the remainder, and the reversion.\nYou now understand that the fee simple absolute and the life estate are measures of\nthe quantum of an interest\xe2\x80\x94whether it be a possessory estate or future interest\xe2\x80\x94while\nthe remainder and the reversion are types of future interests. We can now formulate\nrules to identify the remainder and the reversion. Our rule for identifying the remainder\nis as follows:\nIf a future interest:\n1. is created in someone other than the grantor, and\n2. cannot cut short or divest a preceding possessory or\nvested estate, but must instead wait until the\npreceding estate naturally terminates in order to\nbecome possessory,\nthen the future interest is a remainder.\nRemember: the distinguishing characteristic of the remainder is that it cannot cut short or\ndivest a prior estate. It simply \xe2\x80\x9cremains,\xe2\x80\x9d sitting around and waiting for the natural\ntermination of the preceding possessory estate, at which point the remainder will\nbecome possessory by operation of law.\n\n\x0c330\n\nProperty\n\nThe reversion, like the remainder, cannot cut short or divest any possessory or vested\nestate. Our rule for identifying it is as follows:\nIf a future interest:\n1. is created in, or retained by, the grantor of the interest,\nand\n2. cannot cut short or divest a preceding possessory or\nvested estate, but must instead wait until the\npreceding estate naturally terminates in order to\nbecome possessory,\nthen the future interest is a reversion.\nWe now have the tools to complete our analysis of the conveyance at Point 2 of the\nchronology we developed for Problem 1. We identified two operative clauses in that\nconveyance:\n\xe2\x80\x9cto A for life\xe2\x80\x9d\n\xe2\x80\x9cthen to B for life\xe2\x80\x9d\nAnd we further concluded that the first of these clauses created a possessory life estate in\nA, while the second created some future interest in life estate in B. We can now\ndetermine what B\xe2\x80\x99s future interest is. B is not the grantor of this interest, and the\ninterest cannot cut short A\xe2\x80\x99s life estate (the word \xe2\x80\x9cthen\xe2\x80\x9d indicates that B\xe2\x80\x99s interest will\nbecome possessory only after A\xe2\x80\x99s life estate naturally terminates at A\xe2\x80\x99s death). Thus, B\xe2\x80\x99s\ninterest must be a remainder. Moreover, because we know that the quantum of B\xe2\x80\x99s interest\nis a life estate, we can now precisely state exactly what interest B has at Point 2 of our\nchronology: B has a remainder in life estate. (Sometimes you will see this interest referred\nto as a life estate in remainder; the two formulations are equivalent.)\nWe have now analyzed all the language in the conveyance at Point 2 of our chronology\nin Problem 1. But if you refer back to our method, you will see that Step 2 of the\nmethod is not yet complete. We must undertake one more, crucially important, analysis:\nwe must ascertain whether our grantor has retained any interest. This step is often\noverlooked, which can generate compounding errors at later points in the chronology\nof an estates problem.\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n331\n\nStep 2.a.iii: Identifying Residual Interests\nAt Point 1 in our chronology O had a fee simple absolute, and at Point 2 O has\nconveyed two life estates\xe2\x80\x94one possessory and one in remainder. The grant has not\nexplicitly created any interest of the same quantum as O\xe2\x80\x99s interest\xe2\x80\x94a fee simple\nabsolute\xe2\x80\x94and the express words of limitation on the grants to A and B mean that we\ncannot apply our presumption that O granted a fee simple absolute to either grantee.\nTherefore, O must have something left over. As we already know, that something is a\nreversion in fee simple absolute. Again, somebody must be in a position to legally take\npossession of Blackacre when the life estates have both terminated. Unless O identifies\nsuch a taker explicitly, O must have retained that right to take possession in the future.\nAnd because the quantum of O\xe2\x80\x99s original interest was a fee simple absolute, that will\nalso be the quantum of O\xe2\x80\x99s reversion.\nWe can formalize our retained-interest analysis in the following rule:\nIf a conveyance does not create a vested interest of equal quantum\nto the grantor\xe2\x80\x99s interest, then there must be a reversion in the\ngrantor of equal quantum to the grantor\xe2\x80\x99s original interest.\nYou do not yet know what a vested interest is\xe2\x80\x94we will turn to that shortly. For now,\nyou should note the following rule:\nAll possessory estates, and all interests retained out of vested\ninterests, are vested.\nTurning to Step 2.c of our method, we can now fully identify the state of title at Point\n2 in our chronology for Problem 1:\n2. A has a possessory life estate\nB has a remainder in life estate\nO has a reversion in fee simple absolute.\nBefore turning to the rest of the future interests, let us expand our analysis to include\nthe additional Points in the chronology for Problem 1A. To do so, we need to apply\nStep 2.b of our method for solving estates problems.\n\n\x0c332\n\nProperty\n\nStep 2.b: Construing the Effects of Events on Legal Interests\nRecall the chronology we developed for Problem 1A:\n1. O owns a fee simple absolute in Blackacre.\n2. O conveys Blackacre \xe2\x80\x9cto A for life, then to B for life.\xe2\x80\x9d\n3. B conveys her interest to C.\n4. B dies.\nWe have completed Step 2.c for Points 1 and 2 of this chronology:\n1. O owns a fee simple absolute in Blackacre.\n2. A has a possessory life estate\nB has a remainder in life estate\nO has a reversion in fee simple absolute\nAt Point 3, however, we have no conveyance language to parse or analyze. Instead, we\nmust determine what the effect of B conveying \xe2\x80\x9cher interest\xe2\x80\x9d to C is. Whenever faced\nwith this type of problem, it is best to be thorough. We must determine what the effect\nof this event is on each and every interest we identified in the previous Point of our\nchronology.\nWith respect to A\xe2\x80\x99s possessory life estate, B\xe2\x80\x99s conveyance has no effect. Remember the\nprinciple of nemo dat quod non habet: one cannot give away what one does not have. B\xe2\x80\x99s\nremainder in life estate is a different interest than A\xe2\x80\x99s possessory life estate; absent A\xe2\x80\x99s\nconsent B cannot convey any part of A\xe2\x80\x99s interest. So at Point 3, A\xe2\x80\x99s interest remains\nunchanged.\nWhat about B\xe2\x80\x99s interest? The problem tells us that B has conveyed \xe2\x80\x9cher interest\xe2\x80\x9d to C.\nThus, B no longer has any interest in Blackacre. C, meanwhile, has acquired an interest\nin Blackacre\xe2\x80\x94specifically, the remainder in life estate heretofore held by B. But let us\ntake care: when will this interest terminate? Nemo dat again provides us with the answer:\nC can only take what B had. In this case, that is a life estate measured by the life of B. If\nyou recall from our introduction to estates, we call this interest a life estate pur autre vie.\nThat is, C now has a remainder in life estate pur autre vie for the life of B.\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n333\n\nWith respect to O\xe2\x80\x99s reversion, again, nemo dat tells us that B cannot convey that\nreversion without O\xe2\x80\x99s consent. So O\xe2\x80\x99s reversion remains unchanged.\nTurning to Step 2.c of our method, we can now provide the state of title at Point 3 of\nour chronology:\n3. A has a possessory life estate\nC has a remainder in life estate pur autre vie for the life of B\nO has a reversion in fee simple absolute\nWe can perform a similar analysis at Point 4 of our chronology, wherein B dies.\nLooking to A\xe2\x80\x99s interest, again, there is nothing that B can do to affect A\xe2\x80\x99s possessory\nlife estate, which remains unchanged. The same is true for O\xe2\x80\x99s reversion: it too remains\nunchanged. But B\xe2\x80\x99s death terminates C\xe2\x80\x99s remainder in life estate pur autre vie by\noperation of law: the interest simply ceases to exist. (Note that this happens even\nthough the interest never became possessory.) Turning to Step 2.c, we can provide the\nstate of title at Point 4 of our chronology:\n4. A has a possessory life estate\nO has a reversion in fee simple absolute\n\n\x0c334\n\nProperty\n\nStep 3: Building a Chain of Title\nWe have now analyzed the state of title at each of the four Points in our chronology\nfor Problem 1A; let\xe2\x80\x99s put them all together into a chain of title:\n1. O owns a fee simple absolute in Blackacre.\n2. A has a possessory life estate\nB has a remainder in life estate\nO has a reversion in fee simple absolute\n3. A has a possessory life estate\nC has a remainder in life estate pur autre vie for the life of B\nO has a reversion in fee simple absolute\n4. A has a possessory life estate\nO has a reversion in fee simple absolute\nThis chain of title provides all the information we could possibly need to answer any\nquestion about the interests of the parties in this problem at any point in time. As it\nturns out, the question asks for the state of title at the end of this chain of events. To\nanswer that question, we simply look to the relevant Point in our chain of title (here,\nPoint 4) and respond: A has a possessory life estate, O has a reversion in fee simple\nabsolute.\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n335\n\nB. Other Estates and Future Interests\nWe now have a complete method for solving estates problems, but have only scratched\nthe surface of the types of estates and future interests we might encounter. We can now\nlearn about the remaining estates and future interests, plugging them in to our method\nfor additional practice.\n\n1. Remainders, Part 2: Vested and Contingent Remainders\nThe first layer of complexity we will add to the mix is the distinction between vested and\ncontingent remainders. \xe2\x80\x9cContingent\xe2\x80\x9d here means something similar to what it means in\nordinary usage: it refers to something that might or might not come to pass. There is a\nstraightforward rule for distinguishing between vested and contingent remainders:\nA remainder is contingent if:\n1. it is created in an unascertained or unborn person; or\n2. it is subject to a condition precedent other than the natural\ntermination of the preceding possessory estate (i.e., it requires\nthe occurrence of some uncertain event or condition before it\ncan become possessory).\nA remainder that is not contingent is vested .\nLet\xe2\x80\x99s look at a problem involving one of these possibilities.\n\nProblem 2\nO, owning a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to A\xe2\x80\x99s first-born child,\xe2\x80\x9d at a time when A has no children. Two years\nlater, A\xe2\x80\x99s first child, B, is born. What is the state of title in Blackacre?\nAs always, we begin with Step 1 and break up this fact pattern to build a chronology:\n1. O owns a fee simple absolute.\n\n\x0c336\n\nProperty\n2. O conveys Blackacre \xe2\x80\x9cto A for life, then to A\xe2\x80\x99s first-born\nchild.\xe2\x80\x9d A has no children.\n3. A\xe2\x80\x99s first child, B, is born.\n\nNow we must go through each of these points in time to construe any grant or\ndetermine the legal effect of any event at each step. Point 1 is, as usual, self-explanatory.\nAt Point 2, we have a conveyance that we have to parse under Step 2.a.i. Applying our\nrule, we break up the conveyance into two clauses:\n\xe2\x80\x9cto A for life\xe2\x80\x9d\n\xe2\x80\x9cthen to A\xe2\x80\x99s first-born child.\xe2\x80\x9d\nConstruing each of these clauses under Step 2.a.ii of our method, we see that the grant\n\xe2\x80\x9cto A for life\xe2\x80\x9d has no other interest preceding it, and is not subject to any other\ncondition precedent, so it must be a presently possessory estate; the words of limitation\n\xe2\x80\x9cfor life\xe2\x80\x9d indicate that it is a possessory life estate. The grant to A\xe2\x80\x99s first-born child\nfollows A\xe2\x80\x99s life estate; it must therefore be a future interest. Because it is an interest in\nsomeone other than the grantor, and it cannot cut short A\xe2\x80\x99s life estate, it must be a\nremainder.\nBut who owns the remainder? Well \xe2\x80\xa6 nobody we can identify yet, because the only\nperson who could own the remainder\xe2\x80\x94A\xe2\x80\x99s first-born child\xe2\x80\x94hasn\xe2\x80\x99t yet been born\n(indeed, may never be born). But the remainder still exists. Whether or not it will become\npossessory depends on whether its owner\xe2\x80\x94A\xe2\x80\x99s first-born child\xe2\x80\x94ever comes into\nbeing. As you see, this is one of the criteria that will render a remainder contingent rather\nthan vested. We will say that the remainder is a contingent remainder in the first-born\nchild of A (even though there is, as yet, no such person). And what is the quantum of\nthat remainder? Note that the grant to A\xe2\x80\x99s first-born child has no words of limitation\nin it. Thus we can apply our presumption to conclude that A\xe2\x80\x99s first-born child\xe2\x80\x99s\ncontingent remainder is in fee simple absolute\xe2\x80\x94the same estate O had prior to the\ngrant.\nAre we through with Point 2 of our chronology? Not quite. We still have to deal with\nStep 2.a.iii of our method\xe2\x80\x94testing for a retained interest. To understand why this step\nis so tricky here, we have to imagine ourselves standing at Point 2, not knowing what\nthe future holds, and contemplating every conceivable possibility, including the\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n337\n\npossibility that A will die without ever having children. (As you\xe2\x80\x99ll see, future interests\nproblems require lawyers to dream up every manner of improbable tragedy.) If A were\nto die without having had any children, who would have the right to take possession\nof Blackacre at A\xe2\x80\x99s death?\nYou may have surmised that this is a situation similar to the situation in which a grantor\nconveys vested interests of a lesser quantum than his own. In Problem 1, for example, we\nknew that there would come a day when none of O\xe2\x80\x99s grantees had a right to\npossession\xe2\x80\x94everybody dies someday, so A\xe2\x80\x99s and B\xe2\x80\x99s interests would eventually\nterminate. In our current problem, we don\xe2\x80\x99t know for sure that such a day will come,\nbut we can see it as a very real possibility. O has conveyed a future interest in fee simple\nabsolute (the remainder), but that interest is contingent: it is possible that this interest will\nnever become possessory\xe2\x80\x94that A will die without having had a first-born child.\nTherefore we need someone to be able to step in and take possession if this possibility\nmaterializes. And as before, the only person left to take possession is O. Therefore, O\nmust have a future interest at Point 2, and because O\xe2\x80\x99s interest cannot cut short or\ndivest either A\xe2\x80\x99s interest or the interest of A\xe2\x80\x99s first-born child, it must be a reversion.\nMoreover, because O\xe2\x80\x99s interest in Blackacre prior to the grant was a fee simple absolute,\nthe reversion must also be in fee simple absolute.\nNow you can better understand our rule for determining whether a grantor retains a\nreversion. Our rule identified the two circumstances in which the grantor will need to\nbe in the position to retake possession in the future. In the first circumstance, the\nreversion was necessary because the grantor had conveyed vested interests of a lesser\nquantum than his own. In the second, the reversion was necessary because, although the\ngrantor had conveyed an interest of the same quantum as his own, that interest was\ncontingent and therefore not certain to become possessory. Both circumstances reflect\nthe same underlying principle: if a conveyance creates some gap in rightful possession,\nthat gap will be filled by the grantor\xe2\x80\x99s original (and hence retained) right to possession.\nWe are now prepared to move on to Step 2.c of our method and describe the state of\ntitle as of Point 2 in our chronology:\n2. A has a life estate.\n\n\x0c338\n\nProperty\nA\xe2\x80\x99s (non-existent) first-born child has a contingent\nremainder in fee simple absolute.\nO has a reversion in fee simple absolute.\n\nNote that because a reversion is retained from O\xe2\x80\x99s original possessory estate, it is always\nconsidered vested. However, that does not mean that it is certain to become possessory\nagain. Analysis of Point 3 in our chronology will demonstrate why.\nAt Point 3, A has had a child, B. Under Step 2.b of our method, we need to ask: what\neffect does this event have on each of the interests we identified in Point 2? Let\xe2\x80\x99s again\nconsider the interests one at a time.\n\xe2\x80\xa2 A\xe2\x80\x99s life estate would seem to be unaffected; neither the remainder nor the\nreversion identified at Point 2 in our chronology can cut short a preceding\npossessory estate such as A\xe2\x80\x99s.\n\xe2\x80\xa2 Circumstances have changed with respect to the remainder. We can now\npoint to a living person who will have the right to possession of Blackacre\nunder the remainder: B. And there is no future event (other than the natural\ntermination of A\xe2\x80\x99s life estate) that must come to pass in order for the\nremainder to become possessory. As such, the remainder is no longer\ncontingent at Point 3: it is in a known, living person and it is not subject to\nany condition precedent other than the termination of A\xe2\x80\x99s life estate\xe2\x80\x94\nwhich we know will happen someday. We may therefore say that the\nremainder has vested, and that B is its owner. The quantum of the remainder\nremains the same: it is a vested remainder in fee simple absolute.\n\xe2\x80\xa2 What effect does the vesting of B\xe2\x80\x99s remainder have on O\xe2\x80\x99s reversion?\nRecall our test for determining whether there is a reversion: we need to\nknow whether O\xe2\x80\x99s conveyance created a vested interest of equal quantum to\nthe interest O held prior to the grant. The last interest created by O\xe2\x80\x99s grant\nis now a vested remainder in fee simple absolute. We therefore no longer need O\nto stand ready to take possession at A\xe2\x80\x99s death; B is certain to have a right to\npossession. Thus, we say that O\xe2\x80\x99s reversion is divested by the vesting of B\xe2\x80\x99s\nremainder: the reversion simply disappears. In this circumstance\xe2\x80\x94where\nthe occurrence of some condition both vests one future interest and\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n339\n\ndestroys a different future interest\xe2\x80\x94we say that the two interests are\nalternative future interests.\nBased on this analysis, we are finally prepared to move on to Step 2.c of our method\nand give the state of title at Point 3 in our chronology, which is what we\xe2\x80\x99ve been after\nall along:\n3. A has a life estate.\nB has a vested remainder in fee simple absolute.\nProblem 2 dealt with one circumstance that could render a remainder contingent: its\ncreation in unborn or unascertained persons. We have yet to see an example of the\nother circumstance that can render a remainder contingent: being subject to a condition\nprecedent. Let us consider such an example that also expands on the alternative nature\nof the future interests in Problem 2.\n\n2. Remainders, Part 3: Alternative Contingent Remainders\nRecall that in Problem 2, we identified two future interests as alternatives\xe2\x80\x94a contingent\nremainder and a reversion. Either of them could become possessory, but not both.\nMultiple contingent remainders can also be alternatives to one another. Suppose that O,\nwho owns Blackacre in fee simple, grants Blackacre \xe2\x80\x9cto A for life, and then to the first\nof B or C to have a child,\xe2\x80\x9d at a time when neither B nor C has had any children. You\nshould be able to recognize by now that this grant creates a life estate in A, and a future\ninterest in both B and C. Because the future interests are in someone other than the\ngrantor and cannot cut short A\xe2\x80\x99s life estate, they must be remainders. And because\nthere are no words of limitation on the remainders, they are remainders in fee simple\nabsolute (the same interest O had prior to the grant). Finally, because they are both\nsubject to a condition precedent other than the natural termination of A\xe2\x80\x99s life estate before\nthey can come possessory, they are both contingent remainders. But note that logically,\nthey can\xe2\x80\x99t both become possessory. The satisfaction of the condition precedent to B\xe2\x80\x99s\nremainder is logically equivalent to the failure of the condition precedent to C\xe2\x80\x99s\nremainder, and vice versa. In this circumstance, we say that B and C have alternative\ncontingent remainders. The vesting of one alternative contingent remainder necessarily\nmeans the destruction of the other.\n\n\x0c340\n\nProperty\n\nThere are some additional complications regarding vested remainders that we will have\nto discuss, but we will first need to build up some additional knowledge about other\nfuture interests. Before moving on, we should reinforce one final point about future\ninterests raised by the alternative contingent remainders described in the previous\nparagraph. Even though neither B nor C has yet satisfied the condition precedent on\nher interest becoming possessory and may never do so, their contingent remainders are still\ntheir property. That property may not be worth very much, but it exists as soon as the\nconveyance from O is executed. In most American jurisdictions today, B or C could\nsell their interest, could mortgage it, or could give it away (though traditionally at\ncommon law the contingent remainder was merely descendible, not devisable or\nalienable inter vivos).\n\n3. The Defeasible Fees\nWe mentioned earlier that the fee simple could be further decomposed into the fee\nsimple absolute and the defeasible fees. The full taxonomy of the fee simple is as\nfollows:\n\xe2\x80\xa2 The Fee Simple\no The Fee Simple Absolute\no The Defeasible Fees\n\xef\x82\xa7 Fee Simple Determinable\n\xef\x82\xa7 Fee Simple Subject to Condition Subsequent\n\xef\x82\xa7 Fee Simple Subject to Executory Limitation\nYou have already encountered the fee simple absolute\xe2\x80\x94the most complete interest in\nland that the law will recognize. Recall that it is created by the modern formula \xe2\x80\x9cto A\xe2\x80\x9d;\nor the ancient formula \xe2\x80\x9cto A and his heirs.\xe2\x80\x9d\nHopefully you have noticed that the reversion and the remainder share an important\ncharacteristic: they cannot cut short or divest a preceding possessory or vested estate.\nThe reversion is typically a leftover: it sits and waits just in case it is needed. The\nremainder, as we\xe2\x80\x99ve said, remains: it must wait until the natural termination of the\npreceding possessory estate before it can become possessory. But there are future\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n341\n\ninterests that are not so polite. To the contrary, they can be rather pushy. These are\nfuture interests that cut short or divest an estate that precedes them upon the occurrence\nof some event or the satisfaction of some condition. Because the possessory estates\npreceding such \xe2\x80\x9cpushy\xe2\x80\x9d future interests can be taken away\xe2\x80\x94the owner can lose their\n\xe2\x80\x9cfee\xe2\x80\x9d\xe2\x80\x94we call them defeasible fees (\xe2\x80\x9cde-fee\xe2\x80\x9d: get it?).*\nBased on the principle that a defeasible fee is an estate that looks like a fee simple\nabsolute, but can be divested\xe2\x80\x94that is, cut short and destroyed\xe2\x80\x94by some future interest\nupon the occurrence of some condition, we can now formulate a rule for identifying\nthe quantum of an estate created by a conveyance:\nIf an estate can be divested or cut short by a future interest, it is a\ndefeasible fee; if it will terminate at the death of a natural person it\nis a life estate; and if it has no inherent limitation it is a fee simple\nabsolute.\nThere are several different future interests that can cut short or divest a prior interest,\nand each of these \xe2\x80\x9cpushy\xe2\x80\x9d future interests generally goes hand-in-hand with a particular\ndefeasible fee that precedes it; they are matched pairs. These pairings are set forth in\nthe following table:\n\nThe word \xe2\x80\x9cdefeasible\xe2\x80\x9d actually derives from the same source as the word \xe2\x80\x9cdefeat,\xe2\x80\x9d rather than the source for\nthe word \xe2\x80\x9cfealty,\xe2\x80\x9d but this is still a useful mnemonic device. And, strictly speaking, the lesser common-law\nfreehold estates\xe2\x80\x94the fee tail and the life estate\xe2\x80\x94can also be defeasible, but we will ignore that possibility in our\nstudy of the estates system because it is rare and of trivial importance. If you intend to experiment with such\ncreatures of the common law, be aware that the future interest following a defeasible life estate is still called a\nremainder (if in a grantee) or a reversion (if in the grantor); the additional condition on the future interest\nfollowing the life estate does not change it to a different future interest.\n*\n\n\x0c342\n\nProperty\nTable 1: The Defeasible Fees and Their Corresponding Future Interests\n\nDefeasible Fee\n\nCorresponding Future Interest\n\nFee Simple Determinable\n\nPossibility of Reverter\n\nFee Simple Subject to Condition Subsequent Right of Entry\nFee Simple Subject to Executory Limitation\nSpringing Executory Interest\n(in a grantor)\nFee Simple Subject to Executory Limitation\nShifting Executory Interest\n(in a grantee)\n\nIn order to determine which of the defeasible fees is created by a conveyance, we need\nto analyze its relationship to the future interest that follows it. There are a few rules to\nguide us here, having to do with the identity of the holder of each interest and the words of\nlimitation creating the pair of interests. We begin with the first of these criteria:\nIf the future interest that cuts short or divests a prior interest is\ncreated in a grantee, it will be an executory interest, making the\npreceding estate a fee simple subject to executory limitation.\nExecutory interests are traditionally classified further depending on who holds the\npreceding defeasible estate:\nAn executory interest that divests or cuts short an estate held by\nthe grantor of the executory interest is a springing executory\ninterest. An executory interest that divests or cuts short an estate\nof a grantee is a shifting executory interest.\nLet us explore the executory interest a bit further. As our rule indicates, if a defeasible\nfee is held by the grantor of the executory interest that could cut it short, the executory\ninterest is called a \xe2\x80\x9cspringing\xe2\x80\x9d executory interest. (It \xe2\x80\x9csprings up\xe2\x80\x9d to take away the\ngrantor\xe2\x80\x99s retained possessory interest.) This typically happens when an owner conveys\na conditional future interest in another while retaining the possessory estate. For\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n343\n\nexample: if O, owning a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A\nwhen A marries,\xe2\x80\x9d A (assuming she is unmarried at the time) has no present right to\npossession. She has received only a future interest, meaning that O must still have a\npossessory estate. It is tempting to think of A\xe2\x80\x99s interest as a contingent remainder\xe2\x80\x94\nafter all it is subject to the condition precedent that A marry before the interest can\nbecome possessory. But note that the natural termination of O\xe2\x80\x99s possessory estate is\nirrelevant to A\xe2\x80\x99s interest; O\xe2\x80\x99s right to possession could be cut short or divested by A if she\nsatisfies the condition\xe2\x80\x94if she marries. A remainder can\xe2\x80\x99t cut short or divest a preceding\nestate like that; it remains, waiting for the preceding estate to terminate naturally. The\nonly future interest in a grantee that can cut short or divest a possessory estate is an\nexecutory interest, which is what A has. Thus, O\xe2\x80\x99s retained interest can no longer be a fee\nsimple absolute\xe2\x80\x94it must be a fee simple subject to executory limitation\xe2\x80\x94because it can be\ncut short by A\xe2\x80\x99s executory interest. And because the person being divested (O) is the\ngrantor of the future interest doing the divesting, A\xe2\x80\x99s future interest is a springing executory\ninterest.\nIf, in contrast, the defeasible fee is held by a grantee under the conveyance that also\ncreated the executory interest, then the future interest is a shifting executory interest (it\n\xe2\x80\x9cshifts\xe2\x80\x9d the right to possession from one grantee to another). For example: if O,\nowning a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A, but if B marries,\nthen to B,\xe2\x80\x9d A now has a possessory estate while B has a future interest. Because A\xe2\x80\x99s\npresently possessory estate can be cut short by a future interest held by another, it must\nbe a defeasible fee. But which one? To answer that question we need to look at the future\ninterest that could cut it short. Because that future interest is in a grantee (B) and can\ncut short the prior estate, it must be an executory interest, meaning that A\xe2\x80\x99s estate is a fee\nsimple subject to executory limitation. And because the defeasible fee is held by a grantee of\nthe executory interest (A), the satisfaction of the condition (B\xe2\x80\x99s marriage) will simply\n\xe2\x80\x9cshift\xe2\x80\x9d the right to possession from one of O\xe2\x80\x99s grantees to another (i.e., from A to B).\nTherefore, B has a shifting executory interest.\nAn executory interest is never vested, because it is necessarily limited by a condition\nprecedent: there must be some \xe2\x80\x9ctrigger\xe2\x80\x9d that allows the executory interest to cut short\nor divest its predecessor. If that condition comes to pass, the executory interest vests\nand becomes possessory at the same time, cutting short and divesting whatever\npossessory estate is then in existence. The fact that executory interests are not vested\n\n\x0c344\n\nProperty\n\nis important primarily because it means they are subject to the Rule Against Perpetuities,\n(which you may study in a trusts and estates law course).\nWe now turn to our rules concerning defeasible fees followed by future interests in a\ngrantor:\nIf the future interest that cuts short the prior estate is created in (or\nretained by) the grantor, it will be either a possibility of reverter\n(which follows a fee simple determinable ) or a right of entry\n(which follows a fee simple subject to condition subsequent).\nIt is worth noting that at common law, neither the possibility of reverter nor the right\nof entry was transferrable inter vivos or devisable; they could only pass by inheritance to\nthe grantor\xe2\x80\x99s heirs at law. Today, many states have by statute provided for the inter vivos\ntransferrability and devisability of both future interests\xe2\x80\x94though some have also put\nsharp limits on them. For example, in New York the holder of the equivalent of either\na possibility of reverter or a right of entry must record in the title records a detailed\nformal declaration of their intent to preserve their interest \xe2\x80\x9cnot less than twenty-seven\nyears nor more than thirty years after the \xe2\x80\xa6 [interest] was created,\xe2\x80\x9d and follow up\nperiodically with another formal declaration \xe2\x80\x9cafter the expiration of nine years and\nbefore the expiration of ten years from the date when the [previous] declaration was\nrecorded.\xe2\x80\x9d N.Y. REAL PROP. L. \xc2\xa7 345. Failure to do so results in extinguishment of the\ninterest.\nThe precise identity of the defeasible fee/future interest in the grantor pair created by\na conveyance depends on subtle distinctions in the language of the conveyance itself.\nWe begin with the fee simple determinable and its paired future interest, the possibility\nof reverter:\nIf a defeasible fee interest is limited by words of duration, it is a\nfee simple determinable , and the grantor\xe2\x80\x99s retained future interest\nfollowing the defeasible fee is a possibility of reverter.\nThe fee simple determinable is created using words of duration as the words of limitation for\nthe defeasible fee. This could include words such as \xe2\x80\x9cuntil,\xe2\x80\x9d \xe2\x80\x9cso long as,\xe2\x80\x9d \xe2\x80\x9cwhile,\xe2\x80\x9d and\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n345\n\nso forth. The fee simple determinable is followed by a possibility of reverter. * The\npossibility of reverter is a future interest held by the grantor that will cut short the fee\nsimple determinable and become possessory by operation of law if the condition on\nthe continued existence of the fee simple determinable ever fails. It can be explicitly set\nforth in the grant, but it also may be a retained interest, created by implication where a\ngrantor conveys a fee simple determinable and does not designate a future interest to\nfollow it. So, for example, a conveyance \xe2\x80\x9cfrom O to A so long as Blackacre is used for\nresidential purposes\xe2\x80\x9d creates a fee simple determinable in A, followed by a (retained)\npossibility of reverter in fee simple absolute O. In this example, if A builds a factory or\nan office park on Blackacre, A\xe2\x80\x99s interest will terminate and O will have an immediate\nright to possession.\nNote how important it is to be careful about terminology here: there is no such thing\nas a \xe2\x80\x9creverter,\xe2\x80\x9d or a \xe2\x80\x9cpossibility of reversion.\xe2\x80\x9d You should never use such terms. It is\nunfortunate that the common law settled on such similar names for these two different\ninterests, but we are stuck with them and you must be clear which future interest you\nare referring to by using the correct name for it.\nWe can now turn to our final defeasible fee/future interest pairing:\nIf a future interest in the grantor that cuts short or divests a prior\nestate is limited by words of condition, it is a right of entry . The\ndefeasible fee followed by a right of entry is a fee simple subject to\n\na condition subsequent.\n\nThe right of entry (sometimes called a power of termination) is a future interest in the grantor\nthat is limited by words of condition: phrases such as \xe2\x80\x9cbut if,\xe2\x80\x9d \xe2\x80\x9cprovided that,\xe2\x80\x9d \xe2\x80\x9chowever\n\nThere are some authorities that hold that a determinable (i.e., durationally limited) estate can be followed by an\nexecutory interest in a grantee, and indeed the Restatement (First) of Property calls such an estate a \xe2\x80\x9cfee simple\nwith an executory limitation\xe2\x80\x9d (distinguishing it from the fee simple \xe2\x80\x9csubject to\xe2\x80\x9d executory limitation). We will\nnot follow those authorities here; our rule is that any fee interest that can be cut short by a (valid) future interest\nin a grantee is a fee simple subject to executory limitation. The disagreement among courts on this issue is useful\nmainly for showing how confusing the estates system is even to common law judges, and how trivial some of its\ndistinctions can be; the Restatement notes that this distinction \xe2\x80\x9cis applicable to such a restricted combination of\ncircumstances that a set of facts permitting its application seldom exists.\xe2\x80\x9d RESTATEMENT (FIRST) OF PROPERTY\n\xc2\xa7 47, cmt. b (1936).\n*\n\n\x0c346\n\nProperty\n\nif,\xe2\x80\x9d \xe2\x80\x9con condition that,\xe2\x80\x9d and so forth. The key practical distinction between the\npossibility of reverter and the right of entry is that the right of entry does not automatically\nbecome possessory by operation of law upon the satisfaction or failure of the relevant\ncondition. Rather, in order to be entitled to possession the owner of the right of entry\nmust take some affirmative step to assert her rights (for example, by bringing an\nejectment action). Until the owner of the power of entry exercises it, the state of title\nremains the same as it was before the condition triggering the right of entry was\nsatisfied; the only change is that we would now say the right of entry \xe2\x80\x9cmay be presently\nexercised.\xe2\x80\x9d\nThe defeasible fee that can be cut short by a right of entry is called a fee simple subject to\ncondition subsequent. Note here the difference here between a condition precedent\xe2\x80\x94\nwhich is the type of condition that must be satisfied before a future interest such as a\ncontingent remainder, executory interest, or right of entry can become possessory\xe2\x80\x94\nand a condition subsequent\xe2\x80\x94which is the type of condition that can arise after possessory\nestate begins and have the effect of divesting that estate. Put simply: a condition\nprecedent must be satisfied before you can have your interest; a condition subsequent\ncan arise after you get your interest and take it away. We will explore this distinction in\nmore detail shortly.\nConsider an example: O, an adherent of the Church of the Flying Spaghetti Monster\nowning a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto my son A, but if A\never marries a non-Pastafarian, to O.\xe2\x80\x9d Under this conveyance, A has a possessory estate\nwith no inherent limitation, but that estate is followed by a future interest that can cut\nshort A\xe2\x80\x99s estate on the occurrence of an uncertain future condition (A\xe2\x80\x99s marriage\noutside the faith). Because this future interest is owned by the grantor (O), and because\nit can cut short the prior possessory estate, it must be either a possibility of reverter or\na right of entry. And because there are no durational words of limitation on A\xe2\x80\x99s\npossessory interest, but there is a condition precedent on O\xe2\x80\x99s future interest, we know\nthat O\xe2\x80\x99s interest is a right of entry. This, in turn, means that A\xe2\x80\x99s interest is the matching\ndefeasible fee: the fee simple subject to condition subsequent. Now imagine that A falls\nin love with and marries B, an adherent of the Missionary Church of Kopimism. Upon\ntheir marriage, A\xe2\x80\x99s fee simple subject to condition subsequent does not change. Rather, all\nthat happens is that O\xe2\x80\x99s right of entry\xe2\x80\x94which has been there all along\xe2\x80\x94becomes\npresently exercisable. In an ejectment or quiet title action between O and A, O would now\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n347\n\nprevail\xe2\x80\x94but until such an action is brought there is nothing wrongful about A\xe2\x80\x99s\ncontinued possession of Blackacre.\nIf, in contrast, O\xe2\x80\x99s conveyance had been \xe2\x80\x9cto A so long as A does not marry a nonPastafarian,\xe2\x80\x9d A\xe2\x80\x99s interest would have been limited by words of duration, and thus\nwould be a fee simple determinable followed by a possibility of reverter in fee simple\nabsolute in O. Upon A\xe2\x80\x99s marriage to B, A\xe2\x80\x99s estate would immediately terminate by\noperation of law and O would have a presently possessory fee simple absolute. A\xe2\x80\x99s\ncontinued possession, in these circumstances, is wrongful against O.\n\n4. Remainders, Part 4: Divestment of Future Interests; Types of Vested\nRemainders\nBefore finishing off our catalogue of future interests there is one last issue\xe2\x80\x94and one\nmore set of future interests\xe2\x80\x94that we must examine. We already know that certain\n\xe2\x80\x9cpushy\xe2\x80\x9d future interests (the possibility of reverter, the right of entry, and the executory\ninterest) can cut short a possessory interest. But it turns out that they can also divest a\nvested future interest even before it becomes possessory. This is particularly an issue for\nvested remainders (though it applies to the reversion as well). Consider the following\nexample: O, owning a fee simple in Blackacre, conveys Blackacre \xe2\x80\x9cto A for life, and\nthen to B, but if A ever remarries, then to C.\xe2\x80\x9d Note that B\xe2\x80\x99s interest is a vested\nremainder in fee simple absolute: nothing other than the natural termination of A\xe2\x80\x99s life\nestate needs to happen in order for B to take possession. However, there is one thing\nthat could happen that would take away B\xe2\x80\x99s otherwise certain right to possession: A\xe2\x80\x99s\nremarriage could trigger a shifting executory interest in fee simple absolute in C. And note that,\nif this happens, it will happen before B\xe2\x80\x99s remainder becomes possessory\xe2\x80\x94A can\xe2\x80\x99t get remarried\nfrom the grave. So in this case, C\xe2\x80\x99s \xe2\x80\x9cpushy\xe2\x80\x9d future interest can divest B\xe2\x80\x99s future interest,\nbut it could not cut short B\xe2\x80\x99s interest once that interest becomes possessory. We call\nB\xe2\x80\x99s interest a vested remainder subject to divestment (or, as some call it, a vested remainder subject\nto complete defeasance), and we can encapsulate the rule for identifying such a future\ninterest as follows:\n\n\x0c348\n\nProperty\nWhere a vested remainder could be prevented from ever becoming\npossessory by a different future interest, we say that it is a vested\n\nremainder subject to divestment. *\n\nNote that there are potentially other ways that a vested remainder could be affected by\nevents subsequent to its vesting. Consider an example: O, owning a fee simple absolute\nin Blackacre, conveys Blackacre \xe2\x80\x9cto A for life, then to A\xe2\x80\x99s children.\xe2\x80\x9d At the time, A has\nno children. By now you can quickly conclude that A has a life estate and \xe2\x80\x9cA\xe2\x80\x99s children\xe2\x80\x9d\nhave a future interest. Because the future interest is in a grantee and cannot cut short\nthe preceding estate, it must be a remainder. There is no condition other than the\nnatural termination of A\xe2\x80\x99s life estate on the remainder becoming possessory, but there\nis no one yet born who has a right to the remainder, so it must be a contingent remainder\nin fee simple absolute (O would also have a reversion in fee simple absolute\xe2\x80\x94do you\nsee why?).\nSo: what happens once A has her first child, B? Now we can identify at least one currently\nliving individual who can take possession when the remainder becomes possessory.\nAccording to our rule for distinguishing vested from contingent remainders, B would\nseem to now have a vested remainder in fee simple absolute (destroying O\xe2\x80\x99s reversion).\nBut something is still up in the air: what happens if A has more children before dying?\nWould those children have a right to share in the remainder? The answer is yes\xe2\x80\x94they\nwould clearly be within the definition of \xe2\x80\x9cA\xe2\x80\x99s children\xe2\x80\x9d in the words of purchase for\nthe remainder. This is what we call a \xe2\x80\x9cclass grant\xe2\x80\x9d\xe2\x80\x94a conveyance to a group of people\nidentified by their membership in some identified group, rather than as individuals. For\nsuch a grant, the \xe2\x80\x9cclass\xe2\x80\x9d remains \xe2\x80\x9copen\xe2\x80\x9d until it logically could no longer add new\nmembers, at which point it \xe2\x80\x9ccloses.\xe2\x80\x9d In this case, once A dies, the class of \xe2\x80\x9cA\xe2\x80\x99s children\xe2\x80\x9d\nclearly can\xe2\x80\x99t get any new members. Note that this means that B\xe2\x80\x99s remainder, though\nvested, can be diluted by the addition of more members of the class entitled to take\n\nDifferent jurisdictions may have slightly different rules for differentiating between remainders that are\n\xe2\x80\x9ccontingent\xe2\x80\x9d and those that are \xe2\x80\x9cvested subject to divestment\xe2\x80\x9d (or, in the language of Section 157 of the First\nRestatement of Property, \xe2\x80\x9cvested subject to complete defeasance\xe2\x80\x9d), and the distinction has divided leading\nscholars over the centuries. We will confine ourselves to relatively straightforward examples in this course to\navoid such disputations, but for an overview, see 3 POWELL ON REAL PROPERTY \xc2\xa7 20.04 (2018).\n*\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n349\n\npossession at the end of A\xe2\x80\x99s life estate. We call such a future interest a vested remainder\nsubject to open, and can encapsulate the rule for identifying it as follows:\nWhere a vested remainder could be diluted by the addition of new\nmembers to the class of persons entitled to it, we say that it is a\n\nvested remainder subject to open.\n\nFinally, we should note that it is sometimes good practice to make clear when\nidentifying a vested remainder that it is neither subject to divestment nor subject to\nopen. When this is the case, we say it is an indefeasibly vested remainder.\nWhere a vested remainder is neither subject to divestment nor\nsubject to open, it is an indefeasibly vested remainder.\n\n\x0c350\n\nProperty\n\nC. Future Interests Summary and Review\nCongratulations! You\xe2\x80\x99ve made your way through an introduction to all the commonlaw future interests. This is a lot of material to take in, and it can be difficult to keep it\norganized in your mind. You will likely want to refer to the following summary table,\nand back to the flow chart provided earlier in this chapter, to guide your thinking about\nhow to identify a future interest when you come across it.\nTable 2: The Common-Law Future Interests\nFuture Interests in\nthe Grantor\n\nFuture Interests in a Grantee\nRemainders:\nContingent Remainder\n\nCannot divest (cut short) a\npreceding vested or\npossessory estate\n\nIndefeasibly Vested Remainder\n\nReversion\n\nVested Remainder Subject to Open\nVested Remainder Subject to\nDivestment\n\nCan divest (cut short) a\npreceding vested or\npossessory estate\n\nPossibility of\nReverter\n\nExecutory Interests:\n\nRight of Entry\n\nLet\xe2\x80\x99s apply what we\xe2\x80\x99ve learned with a review problem:\n\nSpringing Executory Interest\nShifting Executory Interest\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n351\n\nProblem 3\nDo the following conveyances create the same legal interests?\n1. To A for life, then to B if B survives A, otherwise to A\xe2\x80\x99s heirs.\n2. To A for life, then to B, but if B does not survive A, then to A\xe2\x80\x99s heirs.\nSolution: Let\xe2\x80\x99s return to our method. Step 1 is moot because we are analyzing the\nlanguage of a grant rather than a sequence of events, so we move on to Step 2.a.\nBeginning with Step 2.a.i, and applying our punctuation rule, we can divide up each\ngrant as follows:\n1. To A for life, | then to B if B survives A, | otherwise to A\xe2\x80\x99s heirs.\n2. To A for life, | then to B, | but if B does not survive A, to A\xe2\x80\x99s heirs.\nor, rewriting each grant of an individual interest on a separate line:\n1. (a) To A for life,\n\n2.\n\n(a) To A for life,\n\n(b) Then to B if B survives A,\n\n(b) Then to B,\n\n(c) Otherwise to A\xe2\x80\x99s heirs.\n\n(c) But if B does not survive A, to A\xe2\x80\x99s heirs.\n\nWe can now move on to Step 2.a.ii and identify the interests created by each of these\nclauses. Let us begin with interest 1(a). It is a possessory estate, with words of limitation\n\xe2\x80\x9cfor life,\xe2\x80\x9d meaning it is a life estate. Interest 1(b) is a future interest (we know because\nof the existence of A\xe2\x80\x99s life estate and the introductory word \xe2\x80\x9cthen\xe2\x80\x9d). Because it is an\ninterest in a grantee (B), it must be either a remainder or an executory interest. The\nwords of limitation \xe2\x80\x9cif B survives A\xe2\x80\x9d do not permit B\xe2\x80\x99s interest to cut short A\xe2\x80\x99s life\nestate, so it must be a remainder\xe2\x80\x94it cannot become possessory until the natural\ntermination of A\xe2\x80\x99s life estate. But note that it is also subject to a condition precedent:\nsomething else (besides A\xe2\x80\x99s death) must happen for B\xe2\x80\x99s interest to become possessory.\n\n\x0c352\n\nProperty\n\nThat condition (that B survive\xe2\x80\x94or live longer than\xe2\x80\x94A) means that B\xe2\x80\x99s remainder\nmust be contingent. And its quantum? It contains no inherent limitation, meaning we can\napply our presumption that O conveyed a future interest in fee simple absolute\xe2\x80\x94unless\nthe next estate gives us reason to change this view. Looking at interest 1(c), we find a\nfuture interest in A\xe2\x80\x99s heirs. The word \xe2\x80\x9cotherwise\xe2\x80\x9d refers to the inverse of the condition\non interest 1(b) (B surviving A), meaning that A\xe2\x80\x99s heirs will take if A survives B. This\nis yet another condition precedent, but does it allow interest 1(c) to cut short or divest any\nprior interest? Clearly not: it cannot become possessory during A\xe2\x80\x99s life estate, and the\nword \xe2\x80\x9cotherwise\xe2\x80\x9d indicates that 1(b) and 1(c) are alternative future interests: if B survives\nA, A will not have survived B (and vice versa). So interests 1(b) and 1(c) are alternative\ncontingent remainders, and because neither can be cut short by any later interest (there\nbeing none), they are alternative contingent remainders in fee simple absolute. Finally,\nrecall Step 2.a.iii of our method: we need to know whether O has retained any interest.\nInterest 1(a) is of a lesser quantum than O\xe2\x80\x99s fee simple absolute, and interests 1(b) and\n1(c), while of the same quantum, are contingent, not vested. So O must have a reversion\nin fee simple absolute. Note that this is true even though the alternative nature of these\ninterests would seem to guarantee that either B or A\xe2\x80\x99s heirs will take a fee simple\nabsolute on A\xe2\x80\x99s death. Can you imagine any reason why we might nevertheless insist\non O having a reversion?\nHaving completed Step 2.a of our method, we move on to Step 2.c. Given the analysis\nabove, the state of title under Conveyance #1 is:\n\xe2\x80\xa2 Life estate in A\n\xe2\x80\xa2 Alternative contingent remainders in fee simple absolute in B and A\xe2\x80\x99s heirs\n\xe2\x80\xa2 Reversion in fee simple absolute in O.\nRepeating this process for Conveyance #2, we again begin with a life estate in A.\nInterest 2(b), however, is somewhat different, in that it lacks the condition precedent\nthat was present in interest 1(b)\xe2\x80\x94indeed, it lacks any words of limitation at all. Thus,\nit is a vested rather than a contingent remainder. But what is its quantum? Since it has\nno words of limitation, we can apply our presumption to conclude that it conveys a\nvested remainder in fee simple absolute\xe2\x80\x94unless the estate could be cut short or divested\nby some subsequent interest. And here we come to clause 2(c), which tells us that if B\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n353\n\ndies before A, A\xe2\x80\x99s heirs will take Blackacre instead of B. But this possibility does not\nmean that B\xe2\x80\x99s remainder is contingent: based on the language of the grant creating this\nparticular interest, it is vested. However, there is a condition subsequent (i.e., a condition\nprecedent to the vesting of a subsequent future interest) that could divest B. We therefore\ncall B\xe2\x80\x99s interest a remainder vested subject to divestment. It is vested, but it could still be\ndivested (i.e., taken away) if some subsequent condition is satisfied.\nInterest 2(c), because it is a future interest in a grantee that can divest the interest of\nanother grantee (B), is a shifting executory interest. Again, applying our presumption, the\nquantum of interest 2(c) is a fee simple absolute. Going back now to consider the effect\nof Interest 2(c) on the quantum of Interest 2(b), we should note that there is nothing\nInterest 2(c) could do to cut short interest 2(b) after it becomes possessory: either B will survive\nA and defeat the condition precedent to Interest 2(c), or B will predecease A and the\nvested remainder will be divested and disappear before it becomes possessory. We can\ntherefore conclude that there is no future interest that could cut short B\xe2\x80\x99s possessory\nestate once it becomes possessory, meaning that under our presumption it is a vested\nremainder subject to divestment in fee simple absolute. Finally, we move to Step 2.a.iii, and\nnote that unlike Conveyance #1, Conveyance #2 has created a vested interest of equal\nquantum to the grantor\xe2\x80\x99s interest: Interest 2(b). Therefore, there is no reversion.\nHaving completed Step 2.a of our method with respect to Conveyance #2, we move\non to Step 2.c. The state of title is:\n\xe2\x80\xa2 Life estate in A\n\xe2\x80\xa2 Vested Remainder Subject to Divestment in Fee Simple Absolute in B\n\xe2\x80\xa2 Shifting Executory Interest in Fee Simple Absolute in A\xe2\x80\x99s Heirs.\nAs is apparent, these two conveyances, though appearing quite similar and turning on\nthe same contingencies (the relative timing of the deaths of A and B), create quite\ndifferent sets of legal interests.\nProblems\n1. O, who owns a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife.\xe2\x80\x9d A subsequently conveys \xe2\x80\x9call my right, title, and interest in Blackacre to B.\xe2\x80\x9d\n\n\x0c354\n\nProperty\nSeveral years later, B dies. A is still alive. What is the state of title in Blackacre?\nSupport your conclusion with an analysis of the chain of title\n\n2. O, who owns a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to B if B survives A, but if A survives B then to C.\xe2\x80\x9d Who will own\nBlackacre if A survives B? If B survives A?\n3. O, who owns a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A, but\nif A ever divorces, then to A\xe2\x80\x99s first-born child.\xe2\x80\x9d At the time of the conveyance,\nA is married to B with one child, C. Five years later, A and B have a second\nchild, D. Three years later, B is killed in a car accident. Three years after that, A\nremarries, to E. Two years later, A and E have a child, F. A and E then get a\ndivorce. Who owns Blackacre? Support your answer with an analysis of the\ncomplete chain of title.\n4. Imagine the same sequence of events as presented in Question 3, with the\nexception that the initial conveyance is \xe2\x80\x9cto A so long as A does not divorce,\xe2\x80\x9d\nand that subsequent to A\xe2\x80\x99s divorce from E, A dies leaving a valid will devising\nall her property to her children in equal shares. Who owns Blackacre? Support\nyour answer with an analysis of the complete chain of title.\n5. O, who owns a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to A\xe2\x80\x99s children in equal shares,\xe2\x80\x9d at a time when A has one child, B. A\nthen has a second child, C. B then marries D. B then dies, leaving a valid will\ndevising all her property to her spouse, D. A then dies. What is the state of title\nin Blackacre? Support your answer with an analysis of the complete chain of\ntitle.\n6. O, who owns a fee simple absolute in Blackacre, conveys Blackacre \xe2\x80\x9cto A for\nlife, then to B if B graduates from law school, but if C graduates from law school,\nthen to C.\xe2\x80\x9d B and C are both living at the time of the conveyance. B then\ngraduates from law school. A then dies. C then graduates from law school. Who\nowns Blackacre? Support your answer with an analysis of the complete chain of\ntitle.\n\n\x0cMore Complex Estates Problems: Strategy and Method\n\n355\n\n7. O dies owning a fee simple absolute in Blackacre, and leaves a valid will devising\nBlackacre \xe2\x80\x9cto A for life, then to B and his heirs, unless B fails to graduate law\nschool before his 25th birthday,\xe2\x80\x9d and further devising O\xe2\x80\x99s residuary estate \xe2\x80\x9cto C\nand her heirs.\xe2\x80\x9d B is 15 years old at the time of O\xe2\x80\x99s death. Five years after O\xe2\x80\x99s\ndeath, A dies. Seven years after O\xe2\x80\x99s death, C dies, leaving D as her sole heir.\nNine years after O\xe2\x80\x99s death, D conveys \xe2\x80\x9call my right, title and interest in\nBlackacre to E.\xe2\x80\x9d Ten years after O\xe2\x80\x99s death, B turns 25 years old, not having\ngraduated (or even enrolled in) law school.\nAssume that all future interests are freely devisable, descendible, and alienable.\nProvide a chain of title for Blackacre.\n8. Assume all the same facts as in Problem 7 except that O\xe2\x80\x99s will devises Blackacre\n\xe2\x80\x9cto A for life, then to B and his heirs, but if B fails to graduate law school before\nhis 25th birthday then to C and her heirs.\xe2\x80\x9d\n\n\x0cPreserving Marketability\nAs we saw in our discussion of estates and future interests, the common law gave\nproperty owners a fairly diverse and subtle array of tools to effectuate their intent\nregarding the use and disposition of their property. But this level of control raises\nserious potential for conflicts between the plans and wishes of the property owners of\nyesterday and the needs and desires of (actual and aspiring) property owners of today.\nConsider that about 80 years before the Empire State Building was constructed, the\nland on which it now stands was a farm situated a mile beyond the northern edge of\nthe urban quarters of New York City. See JAMES REMINGTON MCCARTHY & JOHN\nRUTHERFORD, PEACOCK ALLEY: THE ROMANCE OF THE WALDORF-ASTORIA 4-10\n(1931). What if the first private owner of that farm\xe2\x80\x94John Thompson, who purchased\nit in 1799 out of the common lands held by the city government for $2,400 (id.)\xe2\x80\x94had\nexecuted a conveyance of the land that included a future interest in \xe2\x80\x9cthe eldest of my\ngreat-great-great-great-great grandchildren\xe2\x80\x9d? What if he had devised the land to his\neldest child \xe2\x80\x9con condition that the family farm may never be sold\xe2\x80\x9d? Or \xe2\x80\x9con condition\nthat the land may be used for farming purposes only\xe2\x80\x9d? Could the Empire State Building\never have been built? If not, is that a result we would be happy with?\nThe common law recognized that some property owners might try to dictate the\ndisposition of property much farther into the future than could be justified by any\nlegitimate interest or expertise they might have. As one commentator put it, writing in\n1967: \xe2\x80\x9c[I]t would have been utterly impossible for any testator dying in 1866 to foresee\nthe events that have taken place in the succeeding century, and ... any prediction as to\nwhat may occur in the century following 1966 would be even more unlikely to conform\nto reality.\xe2\x80\x9d W. BARTON LEACH, PROPERTY LAW INDICTED! 71 (1967). As years pass,\nnew generations undertake stewardship of resources, and the economic, social, and\ncultural demands on those resources change with the times. Allowing long-dead\nproperty owners to dictate the disposition of those resources to the fourth, fifth, or\nsixth generation after they\xe2\x80\x99re gone significantly limits the ability of the possessors of\ntoday to flexibly direct resources to uses appropriate to the age.\n356\n\n\x0cPreserving Marketability\n\n357\n\nThe common law developed various doctrines designed to balance respect for property\nowners\xe2\x80\x99 wishes to provide for their families as they see fit with vigilance against the\ndangers of dead-hand control. One powerful tool for striking this balance is the\ninfamous Rule Against Perpetuities. We will not be studying the Rule at any length here,\nbut its classic formulation\xe2\x80\x94that an interest in property is void unless it necessarily will\nvest within 21 years of the end of a life in being at the time the interest is created\xe2\x80\x94\nessentially operates to limit a property owner\xe2\x80\x99s control to one generation beyond the\nend of his own life. For example, a grant to John Thompson\xe2\x80\x99s great-great-great-greatgreat grandchild would be clearly invalid under the Rule Against Perpetuities, but a\ngrant by John Thompson to his living daughter\xe2\x80\x99s yet-unborn child would almost\ncertainly be valid. *\nBeyond limiting the duration of property owners\xe2\x80\x99 control, the common law developed\nadditional rules regarding the types of restrictions grantors could place on otherwise\nvalid interests in property that they conveyed. The following cases provide some\nexamples. As you read them, consider how the principles they rely on relate to the\naforementioned balance between respecting property owners\xe2\x80\x99 wishes and guarding\nagainst dead-hand control.\nFord v. Allen\n526 S.W.2d 643 (Ct. Civ. App. Tex. 1975)\nO\xe2\x80\x99QUINN, Justice.\nChester Melvin Ford and Lola Mae Ford, the deceased persons whose wills are under\nreview, were married in August of 1943, and Clyde M. Ford, appellant here and plaintiff\nbelow, was the only child born to their marriage. Mr. [Chester] Ford had been married\ntwice prior to his marriage to Mrs. Ford, but had no children from those marriages.\nMrs. Ford also had been married earlier, and from that marriage she had a son, Otis\nMartin Allen, who died in April of 1958, leaving three sons, resulting from two\n\nWe say \xe2\x80\x9calmost\xe2\x80\x9d only because if Thompson for some reason made the future interest in his unborn grandchild\nsubject to the condition precedent of that grandchild attaining an age of more than 21 years, the interest would\nbe void under the common-law Rule Against Perpetuities.\n\n*\n\n\x0c358\n\nProperty\n\nmarriages. The three surviving sons were defendants below and are appellees in this\nappeal.\nThe undisputed evidence supports the finding of the trial court that Chester Melvin\nFord and his wife, Lola Mae Ford, each executed a holographic will on the same day in\nApril of 1960, and each of them devised \xe2\x80\x98all my property to my beloved\xe2\x80\x99 spouse,\nfollowed by certain additional identical language which is under dispute. Mr. Ford died\nNovember 25, 1972, and less than a month later Mrs. Ford died, on December 18,\n1972.\nIt also appears undisputed that, as the court found, Mr. Ford at the time of his death\nowned approximately 450 acres of land in Bell County\xe2\x80\xa6.\nThe language of the wills giving rise to this suit, as contained in the will of Mr. Ford,\nfollows:\n\xe2\x80\x98After the Payments of my Just Debts I devise all my property to my\nbeloved wife Lola Mae Ford to do with as she See fit except that she is\nnot to Sell, Morage (sic), or Lease any of our real Estate for more than\nThree (3) years without the written agreement of our son Clyde Melvin\nFord.\xe2\x80\x99\nAppellant contends that the language is ambiguous and requires construction, and that\nunder a proper construction the language \xe2\x80\x98created a life estate in real property in Lola\nMae Ford with remainder to Clyde M. Ford in fee simple, or alternatively created a\ntestamentary trust expressly or by implication for the use and benefit of Clyde M. Ford.\xe2\x80\x99\n\xe2\x80\xa6 The trial court concluded (1) that the language in the wills, providing that the devisee\nwas not to sell, mortgage, or lease any of the realty for three years without written\nagreement of Clyde M. Ford, was \xe2\x80\x98void as being a restraint on alienation and repugnant\nto the devise in fee;\xe2\x80\x99 and (2) the language of the wills \xe2\x80\xa6 devised fee simple title to all\nproperty, since the wills contained no \xe2\x80\x98language clearly showing a lesser estate than the\nfee was intended to be devised.\xe2\x80\x99 We approve these conclusions as correct applications\nof the law to the language of the wills.\nAppellant contends that by extrinsic evidence it may be demonstrated that the true\nintent of Mr. and Mrs. Ford was to devise their real property to their only son, Clyde\n\n\x0cPreserving Marketability\n\n359\n\nM. Ford, and that because of the ambiguity of the language in the wills, such evidence\nshould have been considered\xe2\x80\xa6.\nIn brief, the evidence was that the real estate was the separate property of Mr. Ford,\nand that the three grandsons of Mrs. Ford were not kin to Mr. Ford; that Clyde M.\nFord had helped to work the lands contained in the 450 acres, whereas the defendants\nhad never worked any part of the land; that the grandsons were not close to their\ngrandmother or to Mr. Ford, and none of them attended either the funeral of Mr. Ford\nor their grandmother; that Mrs. Ford set up a savings account for the grandsons and\nthis alone was intended to take care of them; that Clyde M. Ford was close to his\nparents and was the natural object of the deceaseds\xe2\x80\x99 bounty, and the defendants were\nnot; that during their life both Mr. and Mrs. Ford indicated orally that they wanted\nClyde to have the land.\nIt is the established rule that an ambiguity arises only when the meaning which\nemanates from language used in the will admits of more than one interpretation. We\nfind no ambiguity in the language of the Ford wills which in each writing clearly and\nplainly devises all property to the other spouse to do with as the other may see fit. The\nattempt, in language that follows, to place a restraint on alienation could not change or\nnullify the devise. It is not a function of the courts, nor is it a role the courts may\nassume, to revise or to make over the writing in a will to achieve results different from\nresults which flow from the plain language used by the maker of the will. The courts\nmay not speculate, from extrinsic evidence or otherwise, that some other result may\nhave been intended.\n\xe2\x80\xa6 Appellant also urges that the trial court erred in refusing to make a determination\nof heirship, and under these points insists that if Mrs. Ford died intestate, appellant is\nentitled to one-half of her estate and defendants are entitled only to the remaining onehalf. The trial court correctly declined to decide the matter of heirship since\nadministration of the estates is still pending in Bell County, where the County Court\nhas acquired jurisdiction to determine heirs of the deceased.\nAll of appellant\xe2\x80\x99s point of error have been carefully examined and considered, and all\npoints are overruled.\n\n\x0c360\n\nProperty\n\nThe trial court in its judgment denied the request of Clyde M. Ford that attorney\xe2\x80\x99s fees,\ncourt costs, and other expenses incurred by this suit to construe the wills be paid out\nof the two estates as costs and expenses of administration, and ordered all such costs\nand expenses to be paid by Ford individually.\nThe judgment of the trial court is in all things affirmed. It is ordered that costs of this\nappeal be taxed against appellant, Clyde M. Ford, individually.\nNotes and Questions\n1. Do you think Clyde is right that his parents wanted him to have the farm after\nboth of them died? Or at least that they would rather Clyde have it than Lola\nMae\xe2\x80\x99s estranged grandchildren from another marriage? If so, why do you think\nboth Chester and Lola Mae executed wills without any explicit devise to Clyde?\nIf not, why do you think the Fords\xe2\x80\x99 wills included a restriction on alienating the\nfarm without Clyde\xe2\x80\x99s consent? (Incidentally, what is a \xe2\x80\x9cholographic\xe2\x80\x9d will?)\n2. Why is the court unwilling to consider Clyde\xe2\x80\x99s evidence that his parents wanted\nhim to have the farm? What\xe2\x80\x99s wrong with looking outside the four corners of\nthe will itself to understand what the testator really wanted? Would we take a\nsimilar view of extrinsic evidence if the document being interpreted were, say,\na contract for the sale of goods?\n3. Justice O\xe2\x80\x99Quinn says that the language of the Fords\xe2\x80\x99 wills \xe2\x80\x9cclearly and plainly\ndevises all property to the other spouse to do with as the other may see fit.\xe2\x80\x9d But\nthis is at best disingenuous and at worst deliberately false: the wills also, in the\nvery next clause, \xe2\x80\x9cclearly and plainly\xe2\x80\x9d purport to limit what the other spouse can\ndo with the property in the absence of Clyde\xe2\x80\x99s consent. Why does the court\nenforce the former clause and render the latter clause void?\nThe reasoning of the trial court in this case may help explain things. Note that\nthe trial court is said to have given two somewhat different reasons for\ninvalidating Clyde\xe2\x80\x99s power to block any effort by his surviving parent to alienate\nthe farm (and with it any future interest he might have claimed by implication\nfrom this right). We are told that an attempt to convey such a power to Clyde\nmust be void, both \xe2\x80\x9cas a restraint on alienation,\xe2\x80\x9d and as \xe2\x80\x9crepugnant to the \xe2\x80\xa6\n\n\x0cPreserving Marketability\n\n361\n\nfee.\xe2\x80\x9d These reasons invoke two long-standing common-law principles: a policy\nagainst restraints on alienation, and the doctrine of numerus clausus.\nCourts have generally strongly disfavored overt restraints on a grantee\xe2\x80\x99s right to\nalienate their interest. Such restraints can make it quite difficult to move\nresources from lower-valued to higher-valued uses. A current owner of a\nresource might well be willing to sell it to a willing buyer who wants it more and\ncan make more valuable use of it, but if we enforce a restraint on alienation\nimposed on the current owner by a past grantor, such a beneficial transaction\ncannot happen. The result would be serious misallocation of resources, and the\nrule that restraints on alienation are void demonstrates the common law\xe2\x80\x99s\nwillingness to defeat even the clearly expressed intent of a grantor where\nnecessary to avoid such misallocation.\nNumerus clausus (literally, \xe2\x80\x9cthe number is closed\xe2\x80\x9d) is a legal principle derived from\ncivil law systems but invoked in Anglo-American property law to refuse\nrecognition of any interest in land other than the traditional common-law\nestates. Under this principle property owners may not create any new \xe2\x80\x9cbundle\nof rights\xe2\x80\x9d other than those that are already represented by the common-law\nestates themselves. So, because a possessory estate subject to a veto on the right\nof alienation by someone other than the possessory estate\xe2\x80\x99s owner is not a\n\xe2\x80\x9cbundle of rights\xe2\x80\x9d that we can identify among our common-law estates, it must\nbe outside the power of the Fords to create it. Courts have similarly rejected\nefforts by testators to, for example, give their surviving spouses unfettered\ncontrol over devised property while also giving any property left over at the\nsurviving spouse\xe2\x80\x99s death to another beneficiary. Such hybrid bequests are, like\nthe devise in Ford, typically treated as a fee simple (rendering the putative future\ninterest void). See, e.g., Sumner v. Borders, 98 S.W.2d 918 (Ky. 1936).\nIs the rule of numerus clausus motivated by the same rationales that give rise to\nthe rule against restraints on alienation? Imagine if, rather than selecting from\nthe fixed menu of common-law estates, property owners were free to build their\nown tailored bundles of property interests for grantees, with their own ad hoc\ncollections of limitations and restrictions on the rights of those grantees, and\nthat these idiosyncratic collections of rights and limitations became\n\n\x0c362\n\nProperty\ncommonplace across society. Suppose you now want to buy a parcel of land in\nthat society. Can you be sure what you\xe2\x80\x99re buying? How? How well would we\nexpect a real estate market built on a potentially infinite variety of interests in\nreal property to function? See generally Thomas W. Merrill & Henry E. Smith,\nOptimal Standardization in the Law of Property: The Numerus Clausus Principle, 110\nYALE L. J. 1 (2000).\n\n4. Are there other principles underlying the rule against restraints on alienation or\nthe numerus clausus principle other than ensuring a well-working market for\nproperty rights? Consider that the law of intellectual property has long included a\nso-called \xe2\x80\x9cfirst sale\xe2\x80\x9d doctrine, which provides that the first authorized purchaser\nof a good embodying an intellectual property right (for example, a book\nembodying a copyrighted work, or a machine embodying a patented invention)\nhas the power to alienate that particular article free of any claim by the intellectual\nproperty right owner. See, e.g., 17 U.S.C. \xc2\xa7 109(a) (copyright); Adams v. Burke,\n84 U.S. 453, 456 (1873) (\xe2\x80\x9c[W]hen the patentee, or the person having his rights,\nsells a machine or instrument whose sole value is in its use, he receives the\nconsideration for its use and he parts with the right to restrict that use.\xe2\x80\x9d) At\nleast where the owners of the relevant intellectual property rights can be clearly\nidentified, can this rule be justified by the same principle as the rule against\nrestraints on alienation of land? If not, what is the rationale for the first-sale\ndoctrine?\n5. Consider the following excerpts from the September 6, 2012 Amazon Kindle\nStore\nTerms\nof\nUse\nAgreement\n(available\nat\nhttp://www.amazon.com/gp/help/customer/display.html?nodeId=20101495\n0), which governs the downloading of electronic copies of copyrighted literary\nworks from Amazon for viewing on electronic devices.\n\xe2\x80\x9cKindle Content\xe2\x80\x9d means digitized electronic content obtained\nthrough the Kindle Store, such as books, newspapers, magazines,\njournals, blogs, RSS feeds, games, and other static and interactive\nelectronic content.\n\xe2\x80\xa6\n\n\x0cPreserving Marketability\n\n363\n\nUse of Kindle Content. Upon your download of Kindle\nContent and payment of any applicable fees (including applicable\ntaxes), the Content Provider grants you a non-exclusive right to\nview, use, and display such Kindle Content an unlimited number\nof times, solely on the Kindle or a Reading Application or as\notherwise permitted as part of the Service, solely on the number\nof Kindles or Supported Devices specified in the Kindle Store,\nand solely for your personal, non-commercial use. Kindle\nContent is licensed, not sold, to you by the Content Provider\xe2\x80\xa6.\nLimitations. Unless specifically indicated otherwise, you may\nnot sell, rent, lease, distribute, broadcast, sublicense, or otherwise\nassign any rights to the Kindle Content or any portion of it to any\nthird party, and you may not remove or modify any proprietary\nnotices or labels on the Kindle Content. In addition, you may not\nbypass, modify, defeat, or circumvent security features that\nprotect the Kindle Content.\n\xe2\x80\xa6\nTermination. Your rights under this Agreement will\nautomatically terminate if you fail to comply with any term of this\nAgreement. In case of such termination, you must cease all use\nof the Kindle Store and the Kindle Content, and Amazon may\nimmediately revoke your access to the Kindle Store and the\nKindle Content without refund of any fees. Amazon\xe2\x80\x99s failure to\ninsist upon or enforce your strict compliance with this\nAgreement will not constitute a waiver of any of its rights.\nIs this agreement consistent with the rules you\xe2\x80\x99ve just learned? If not, is it\nenforceable? See Vernor v. Autodesk, Inc., 621 F.3d 1102, 1111 (9th Cir. 2010).\n6. Might a grantor impose restrictions on a grantee other than explicit limitations on\nthe power to alienate that would raise the same concerns as those that motivate\nthe rule against restraints on alienation? Consider the following cases:\n\n\x0c364\n\nProperty\nWills v. Pierce\n208 Ga. 417 (1951)\n\n\xe2\x80\xa6 Mrs. Walter Tilley Pierce and others filed in Terrell Superior Court, against Mrs. J.\nC. Wills and others, a petition, which alleged substantially the following: On December\n1, 1923, J. W. Tilley by warranty deed conveyed described realty known as the Aven\nHome to J. C. Wills. The deed contained the clause: \xe2\x80\x98The above property is conveyed\nto J. C. Wills [the grantee] to be used as a home by himself, his family and his heirs,\nupon condition that the same be used by him or them as a home and a residence, and\nfurther that upon the failure of the said condition and the abandonment of said\nproperty as a residence by [the grantee], \xe2\x80\xa6 his family or heirs, the same shall revert to\n[the grantor\xe2\x80\x99s] \xe2\x80\xa6 estate and go as directed by [the grantor\xe2\x80\x99s] \xe2\x80\xa6 will.\xe2\x80\x99 The grantor died\ntestate in 1924, and under the terms of his will the petitioners are the owners of the\nreversionary interest in the realty. The grantee died intestate in 1945, leaving as his sole\nsurviving heirs his widow, Mrs. J. C. Wills, and two named children, who are the\ndefendants. The condition under which the realty was conveyed has been violated, in\nthat the defendants have abandoned the property as a home and residence, and are\nnow residing elsewhere. \xe2\x80\xa6 The petitioners prayed \xe2\x80\xa6 that the interest of the\ndefendants in the realty be declared forfeited, and the fee-simple title thereof be\ndecreed to be in the petitioners; and that the petitioners have general equitable relief.\nThe defendants demurred to the petition on the ground that it failed to set forth any\ncause of action against them. The trial court overruled the demurrer, and the\ndefendants excepted\xe2\x80\xa6.\nATKINSON, Presiding Justice (after stating the foregoing facts).\nThe granting clause in the deed under consideration was: \xe2\x80\x98In consideration of the sum\nof one dollar to me paid, I \xe2\x80\xa6 do hereby sell and convey to [the grantee and] \xe2\x80\xa6 his\nheirs, a tract or parcel of land and appurtenances in fee simple.\xe2\x80\x99 Then followed a\ndescription of the land, after which the grantor inserted the provision that the property\nwas to be used as a home by the grantee, his family, and his heirs, and that upon the\nabandonment of the property as a residence by the grantee, his family, or his heirs, the\nsame should revert to the grantor\xe2\x80\x99s estate and go as provided in his will.\n\n\x0cPreserving Marketability\n\n365\n\nStanding alone, the first clause in the deed would have conveyed an unconditional feesimple estate, and the sole question for determination is whether or not the condition\nsubsequent under which the forfeiture is claimed is valid and enforceable.\nA provision in a deed or will that a fee-simple estate may not be sold is void as being\nrepugnant to the estate granted.\nWhile no express language is used in the present deed inhibiting alienation of the\nproperty, nevertheless\xe2\x80\x94the condition being that the property was to be used as a home\nby the grantee, his family, and his heirs\xe2\x80\x94the requirement to use as a home and the\nright to sell are mutually exclusive, and whether or not the case falls within the rule\nagainst perpetuities, the conclusion is inescapable that since the grantee and his heirs\nmust use the premises as a home they cannot sell it.\n\xe2\x80\xa6A different question would have been presented if the condition subsequent had\nbeen that the premises should be used \xe2\x80\x98as a home\xe2\x80\x99 or \xe2\x80\x98for residential purposes\xe2\x80\x99 generally.\nSee, in this connection, City of Barnesville v. Stafford, 161 Ga. 588(1), 131 S.E. 487,\n43 A.L.R. 1045; Taylor v. Bird, 150 Ga. 626, 104 S.E. 502; Rustin v. Butler, 195 Ga.\n389, 24 S.E.2d 318; Williams v. Ramey, 201 Ga. 737(1), 41 S.E.2d 159; Tabor v. Gilmer\nCounty, 205 Ga. 439(1), 53 S.E.2d 915; and similar cases, where conditions subsequent\nrequiring use of property generally for park, school, religious, and courthouse purposes\nwere held valid and enforceable.\nAccordingly, the present petition, seeking to enforce a forfeiture for breach of a void\ncondition subsequent, failed to set forth a cause of action, and the trial court erred in\noverruling the defendants\xe2\x80\x99 general demurrer.\nJudgment reversed.\nAll the Justices concur.\nNotes and Questions\n1. We learned in our unit on estates and future interests that grantors may use the\ndefeasible fees to impose conditions subsequent on the continued enjoyment\nof a possessory estate. Are we still confident that grantors have such a power?\nIf so, what are its limits?\n\n\x0c366\n\nProperty\n\n2. Why does the court consider the enforcement of the condition that the property\nat issue \xe2\x80\x9cbe used as a home by [the grantee], his family and his heirs\xe2\x80\x9d to present\na \xe2\x80\x9cdifferent question\xe2\x80\x9d than the enforcement of a condition \xe2\x80\x9cthat the premises\nshould be used \xe2\x80\x98as a home\xe2\x80\x99 or \xe2\x80\x98for residential purposes\xe2\x80\x99 generally\xe2\x80\x9d? What makes\nthese questions different?\n3. Is there any relationship between the holding of Wills and our previously\ndiscussed rule against restraints on alienation or the principle of numerus clausus?\nIf so, what\xe2\x80\x99s the connection?\nSmedley v. City of Waldron\n739 F.2d 399 (8th Cir. 1984)\nPER CURIAM.\nIn 1940, the City of Waldron, lacking funds to acquire a reservoir site, asked Hannah\nSmedley to donate land for that purpose. The governing agreement provided in part\nthat:\n5. The City of Waldron shall never sell, transfer, convey, lease, rent or\notherwise dispose of the lands herein above described to other persons,\nfirms, groups and/or corporations, except successors and/or assigns of\nitself, and if it attempts to do so, the lands immediately revert to Hannah\nSmedley and her heirs[.]\nIn 1977, Harry Smedley (Hannah Smedley\xe2\x80\x99s sole heir and devisee) sued unsuccessfully\nfor reconveyance, arguing that the city had abandoned the land. In dismissing the\ncomplaint, the district court found that the city had not abandoned the reservoir; rather,\nit continuously maintained and used it as a reserve water supply.\nIn 1981, the city leased the oil and gas rights of the deeded land to Texas Oil and Gas\nCorporation. As a result, Harry Smedley brought this case, alleging that the city\xe2\x80\x99s lease\nof the mineral rights subjacent to the land violated paragraph 5 of the 1940 agreement.\nFor relief, he demanded immediate reconveyance of the land and payment of all monies\nthe city received under the lease. Both parties moved for summary judgment. The\ndistrict court found that the agreement was an impermissible restraint on alienation\n\n\x0cPreserving Marketability\n\n367\n\nand granted the city\xe2\x80\x99s motion for summary judgment. We reverse and remand for\nfurther proceedings.\nSome Arkansas courts have disapproved restraints on alienation. See, e.g., First National\nBank of Fort Smith v. Graham, 195 Ark. 586, 593, 113 S.W.2d 497 (1938); Letzkus v.\nNothwang, 170 Ark. 403, 408, 279 S.W. 1006 (1926). \xe2\x80\xa6 [But w]hen the grant is to a\ngovernmental unit for a public purpose, Arkansas courts have been reluctant to void\nthe grant as impermissibly restraining alienation if doing so would flout the grantor\xe2\x80\x99s\nintent. One line of Arkansas cases, for example, approved disabling language in grants\nto localities where the land was to be used for school purposes. McCrory School Dist. of\nWoodruff v. Brogden, 231 Ark. 664, 333 S.W.2d 246, 249\xe2\x80\x9350 (1960); Vanndale Special School\nDist. No. 6 v. Feltner, 215 Ark. 252, 220 S.W.2d 131, 133 (1949); Taylor v. School Dist. No.\n45 of Searcy County, 214 Ark. 434, 216 S.W.2d 789 (1949); Coffelt v. Decatur School Dist. No.\n17, 212 Ark. 743, 208 S.W.2d 1, 2 (1948); Milner v. New Edinburg School Dist., 211 Ark.\n337, 200 S.W.2d 319, 322 (1947); Williams v. Kirby School Dist., 207 Ark. 458, 181 S.W.2d\n488, 490 (1944); Steel v. Rural Special School Dist. No. 15, 180 Ark. 36, 20 S.W.2d 316, 317\n(1929). Because summary judgment in favor of the city ignores the public purpose of\nthe grant and defeats the donor\xe2\x80\x99s intent, we reverse the district court\xe2\x80\x99s judgment.\nHaving decided that the restraint on alienation here is not impermissible, we remand\nthe case to the district court to resolve the important remaining factual questions. The\ndistrict court shall determine whether the mineral lease is a violation of the parties\xe2\x80\x99\nagreement. Because Arkansas courts hold that if the restraint is valid the intent of the\ndonor controls, Gibson v. Pickett, 256 Ark. 1035, 512 S.W.2d 532, 535 (1974), the district\ncourt shall determine whether the donor intended that the city would lose the land only\nif the land was not used for a reservoir. Finally, the district court should determine the\nbest means of fulfilling the donor\xe2\x80\x99s intent: will her intentions be satisfied merely by\nawarding her heirs the revenues from the lease, or will the extreme remedy of forfeiture\nof the reservoir to the heirs be necessary?\nNotes and Questions\n1. Wait\xe2\x80\xa6what? How can Hannah Smedley\xe2\x80\x99s clearly expressed intent to absolutely\nforbid the City of Waldron from alienating the reservoir get around the\ncommon-law rule against restraints on alienation? And why can\xe2\x80\x99t Chester Ford\xe2\x80\x99s\n\n\x0c368\n\nProperty\nfar more modest but no less clearly expressed intent to restrain Lola Mae\xe2\x80\x99s right\nto alienate do the same thing?\n\n2. Restraints on Alienation vs. Restrictions on Use. In Wills the court seemed\nto be concerned that the condition subsequent restricting the grantee\xe2\x80\x99s use of\nthe land conveyed was a sort of restraint on alienation in disguise. Could a naked\nrestraint on alienation\xe2\x80\x94such as the one in Smedley\xe2\x80\x94really be a restriction on use\nin disguise? If so, would it be any less offensive to the principles underlying the\nrule against restraints on alienation?\n3. Does Smedley reach the opposite result from Ford and Wills because the grantor\xe2\x80\x99s\nmotivation is different in Smedley than in the other cases? (Is it?) Because the\ngrantee is a public entity rather than a private individual? Because the restraint\non the grantee is less onerous? (Is it?)\n\n\x0cEasements\nA. What Is An Easement?\nEasements are interests in land. Unlike fee simple ownership, they are nonpossessory.\nRather, they allow the easement holder to use or control someone else\xe2\x80\x99s land. Suppose\nAnna owns Blackacre, and Brad owns Whiteacre, which borders Blackacre. Anna\nwould like to cross Whiteacre to reach Blackacre. She could ask Brad for permission\nto cross, but even if he says yes, permission can be revoked. Brad might also convey\nWhiteacre to a less welcoming owner. Anna may therefore wish to acquire a property\ninterest that gives her an irrevocable right to cross over Whiteacre. If Brad conveys her\nthis interest (by sale or grant), Anna now owns an easement of access, which is a right\nto enter and cross through someone\xe2\x80\x99s land on the way to someplace else.\nTerminology. Easements come in multiple flavors. The first distinction is between\naffirmative and negative easements. An affirmative easement lets the owner do\nsomething on (or affecting) the land of another, known as the servient estate (or\nservient tenement). The right is the benefit of the easement, and the obligation on\nthe servient estate is its burden.\nAs noted above, a common affirmative easement is an easement of access (also\nknown as an easement of way), which requires the owner of the servient estate to\nallow the easement holder to travel on the land to reach another location. In the\nexample above, Anna has an affirmative easement to cross Whiteacre, the servient\nestate, to access Blackacre. * A negative easement prohibits the owner of the servient\nestate from engaging in some action on the land. For example, if Anna has a solar panel\non her property, she might acquire a solar easement from Brad that would prohibit the\nIf the easement holder is allowed to take something from the land (suppose Anna has the right to harvest wheat\nfrom Whiteacre while in transit to Blackacre), the right is called a profit a prendre or profit. Profits were\ntraditionally classified as distinct from easements, though their legal treatment is typically similar. See, e.g., Figliuzzi\nv. Carcajou Shooting Club of Lake Koshkonong, 516 N.W.2d 410, 414 (Wis. 1994) (\xe2\x80\x9c[W]e can find no distinction\nbetween easements and profits relevant to recording the property interest[.]\xe2\x80\x9d). The Restatement characterizes the\nprofit as a kind of easement. \xc2\xa7 1.2.\n*\n\n369\n\n\x0c370\n\nProperty\n\nconstruction of any structures on Whiteacre that might block the sun from Anna\xe2\x80\x99s\npanel on Blackacre.\nAnother distinction is between easements appurtenant and easements in gross. An\neasement appurtenant benefits another piece of land, the dominant estate. The owner\nof the dominant estate exercises the rights of the easement. If ownership of the\ndominant estate changes, the new owner exercises the powers of the easement; the\nprior owner retains no interest. So if Anna\xe2\x80\x99s easement to cross Whiteacre to reach\nBlackacre is an easement appurtenant, Blackacre is the dominant estate. If she conveys\nBlackacre to Charlie, Charlie becomes the owner of the easement.\nIn an easement in gross, the easement benefits a specific person, who exercises the\nrights of the easement rights regardless of land ownership. If Anna\xe2\x80\x99s easement to cross\nWhiteacre to reach Blackacre is an easement in gross, she keeps her easement even if\nshe conveys Blackacre. In general, the presumption is in favor of an easement\nappurtenant over an easement in gross. Why do you think that is?\nEasements are part of the larger law of servitudes, which include real covenants and\nequitable servitudes. A servitude is a legal device that creates a right or obligation that\nruns with the land. A right runs with the land when it is enjoyed not only by its initial\nowner but also by all successors to that owner\xe2\x80\x99s benefited property interest. A burden\nruns with the land when it binds not only its initial obligor but also all successors to\nthat obligor\xe2\x80\x99s burdened property interest. A servitude can be, among other things, an\neasement, profit, or covenant. These interests overlap, and the Restatement (Third) of\nProperty (Servitudes) (2000) seeks to unify them. * As a matter of history, however,\neasement law developed as a distinct set of doctrines, and this chapter gives them\n\nA covenant is a servitude if either its benefit or its burden runs with the land; otherwise it is merely a contract\nenforceable only as between the original contracting parties (or perhaps a gratuitous promise enforceable by\nnobody at all). When a covenant is a servitude, it may equivalently be described as either a \xe2\x80\x9cservitude\xe2\x80\x9d or \xe2\x80\x9ca\ncovenant running with the land.\xe2\x80\x9d We will discuss covenants in a later chapter.\n\n*\n\n\x0cEasements\n\n371\n\nseparate treatment. * We will discuss equitable servitudes in our chapter on Restrictive\nCovenants.\n\nB. Creating Easements\n1. Express easements\nBecause easements are interests in land, express easements are subject to the Statute of\nFrauds. Failures to comply with the statute may still be enforced in cases of reasonable\ndetrimental reliance. See, e.g., RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES)\n\xc2\xa7 2.9.\nThird parties. Easements are often created as part of the transfer of land (e.g., selling\na property, but retaining the right to use its parking lot). Traditionally, grantors could\nreserve an easement in the conveyed land for themselves, but could not create an\neasement for the benefit of a third party. This rule led to extra transactions. Where the\ntraditional rule applied, if A wanted to convey to B while creating an easement for C,\nA could convey to C who would then convey to B, while reserving an easement.\nThe modern trend discards this restriction. See, e.g., Minton v. Long, 19 S.W.3d 231,\n238 (Tenn. Ct. App. 1999). The California Supreme Court explained:\nThe rule derives from the common law notions of reservations from a\ngrant and was based on feudal considerations. A reservation allows a\ngrantor\xe2\x80\x99s whole interest in the property to pass to the grantee, but revests\na newly created interest in the grantor. While a reservation could\ntheoretically vest an interest in a third party, the early common law courts\nvigorously rejected this possibility, apparently because they mistrusted\nand wished to limit conveyance by deed as a substitute for livery by\n\nMoreover, the Third Restatement is somewhat notorious for the extent to which it seeks not only to \xe2\x80\x9crestate\xe2\x80\x9d\nthe common law, but to push it in a particular direction. While the Third Restatement does tend to provide the\nmodern approach to most servitudes issues, it has a tendency to advocate against traditional, formalist rules that\nare often still good law in many American jurisdictions. We will not thoroughly explore these distinctions here;\nyou should however be aware of the importance of thoroughly investigating the applicable law in your jurisdiction\nif you ever encounter servitudes in practice.\n\n*\n\n\x0c372\n\nProperty\nseisin. Insofar as this mistrust was the foundation of the rule, it is clearly\nan inapposite feudal shackle today. Consequently, several commentators\nhave attacked the rule as groundless and have called for its abolition.\nCalifornia early adhered to this common law rule. In considering our\ncontinued adherence to it, we must realize that our courts no longer feel\nconstricted by feudal forms of conveyancing. Rather, our primary\nobjective in construing a conveyance is to try to give effect to the intent\nof the grantor. In general, therefore, grants are to be interested in the\nsame way as other contracts and not according to rigid feudal standards.\nThe common law rule conflicts with the modern approach to construing\ndeeds because it can frustrate the grantor\xe2\x80\x99s intent. Moreover, it produces\nan inequitable result because the original grantee has presumably paid a\nreduced price for title to the encumbered property.\n\nWillard v. First Church of Christ, Scientist, 7 Cal. 3d 473, 476-77 (1972) (citations\nomitted). The modern Restatement likewise dispenses with the traditional approach,\nallowing the direct creation of easements on behalf of third parties. RESTATEMENT\n\xc2\xa7 2.6. Some jurisdictions nonetheless retain the bar, citing reliance interests and the\nprospect that such easements create instability in title records. Estate of Thomson v.\nWade, 509 N.E.2d 309, 310 (N.Y. 1987) (\xe2\x80\x9cThe overriding considerations of the public\npolicy favoring certainty in title to real property, both to protect bona fide purchasers\nand to avoid conflicts of ownership, which may engender needless litigation, persuade\nus to decline to depart from our settled rule.\xe2\x80\x9d (internal citation and quotation omitted)).\nThere is an argument that the extra transactions required by the traditional rule\npromote better title indexing. The Restatement observes:\nTo avoid the prohibition, two conveyances must be used: the first\nconveys the easement to the intended beneficiary; the second conveys\nthe servient estate to the intended transferee. The only virtue of the rule\nis that it tends to ensure that a recorded easement will be properly\nindexed in the land-records system, but there are so many exceptions to\nthe rule, where it is still in force, that it does not fill that function very\nwell.\n\n\x0cEasements\n\n373\n\nRESTATEMENT (THIRD) OF PROPERTY (SERVITUDES) \xc2\xa7 2.6 cmt. a (2000). In light of\nHartig v. Stratman, from our chapter on Recording Acts, are you persuaded that the\nbenefits of a separate transaction for recording purposes outweigh the costs?\n\n2. Implied Easements\nEasements may come into being without explicit agreements. They may arise from\nequitable enforcement of implied agreements or references to maps or boundary\nreferences in conveyances. RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES)\n\xc2\xa7 2.13. In this section, we focus on two forms of implied easements: An easement\nimplied by existing use and an easement by necessity. Both such easements\ncommonly arise as a byproduct of land transactions.\na. Easement implied by existing use\nAn easement implied by existing use may arise when a parcel of land is divided and\namenities once enjoyed by the whole parcel are now split up, such that in order to enjoy\nthe amenity (a utility line, or a driveway, for example), one of the divided lots requires\naccess to the other. Imagine, for example, a home connected to a city sewer line via a\nprivately owned drainpipe, on a parcel that is later divided by carving out a portion of\nthe lot between the original house and the sewer line connection:\n\nIn such a situation, courts will frequently find an easement implied by prior existing\nuse, allowing the owner of the house to continue using the drainpipe even though it is\n\n\x0c374\n\nProperty\n\nnow under someone else\xe2\x80\x99s land. See, e.g., Van Sandt v. Royster, 83 P.2d 698 (Kan. 1938).\nThere are, however, some limits to the circumstances that will justify the implication\nof such an easement:\n[T]he easement implied from a preexisting use, [is] also characterized as a quasieasement. Such an easement arises where, during the unity of title, an apparently\npermanent and obvious servitude is imposed on one part of an estate in favor\nof another part. The servitude must be in use at the time of severance and\nnecessary for the reasonable enjoyment of the severed part. A grant of a right\nto continue such use arises by implication of law. An implied easement from a\npreexisting use is established by proof of three elements: (1) common\nownership of the claimed dominant and servient parcels and a subsequent\nconveyance or transfer separating that ownership; (2) before severance, the\ncommon owner used part of the united parcel for the benefit of another part,\nand this use was apparent and obvious, continuous, and permanent; and (3) the\nclaimed easement is necessary and beneficial to the enjoyment of the parcel\nconveyed or retained by the grantor or transferrer.\nDudley v. Neteler, 924 N.E.2d 1023, 1027-28 (Ill. App. 2009) (internal citations and\nquotations omitted). The following notes consider each of these elements.\nNotes and Questions\n1. Common Ownership. Are easements implied by prior existing use fair to\nowners of subdivided land? Why shouldn\xe2\x80\x99t we require purchasers of subdivided\nlots to \xe2\x80\x9cget it in writing\xe2\x80\x9d\xe2\x80\x94that is, to bargain for easements to obvious and\nnecessary amenities when accepting a parcel carved out from a larger plot of\nland? For that matter, why don\xe2\x80\x99t we require the original owner to bargain for\nthe right to continue to use land that they are purporting to sell? Who do we\nthink is in a better position to identify the need for such an easement, the prior\nowner of the undivided parcel, or the purchaser of the carved-out portion of\nthat parcel? Should the answer matter in determining whether to imply an\neasement or not?\nThe common law did draw distinctions between implied reservation of an\neasement (to the owner of the original undivided lot) and implied grant of an\n\n\x0cEasements\n\n375\n\neasement (to the first purchaser of the separated parcel). The latter required a\nlesser showing of necessity than the former, which would only be recognized\nupon a showing of strict necessity. The theory was that the deed that first severed\nthe parcels from one another should be construed against its grantor, who was\nin a better position to know of the need for an easement to property she already\nowned, and to write such an easement into the deed she was delivering. Indeed,\na minority of jurisdictions still follow this rule.\nThe modern Restatement, in contrast, makes no distinction as to whether the\neasement is sought by the grantor or the grantee, providing simply that the use\nwill continue if the parties had reasonable grounds to so expect. Factors tending\nto show that expectation are that: \xe2\x80\x9c(1) the prior use was not merely temporary\nor casual, and (2) continuance of the prior use was reasonably necessary to\nenjoyment of the parcel, estate, or interest previously benefited by the use, and\n(3) existence of the prior use was apparent or known to the parties, or (4) the\nprior use was for underground utilities serving either parcel.\xe2\x80\x9d RESTATEMENT\n(THIRD) OF PROPERTY (SERVITUDES) \xc2\xa7 2.12 (2000). The commentary allows\nfor the possibility that the balance of hardships and grantor knowledge might\njustify a court\xe2\x80\x99s refusing to imply a servitude in favor of the grantor when it\nwould have for the grantee. Id. cmt. a. But the general approach is to accept and\naccommodate the fact that grantors do not always protect themselves as well as\nthey perhaps should. Id. (\xe2\x80\x9cAlthough grantors might be expected to know that\nthey should expressly reserve any use rights they intend to retain after severance,\nexperience has shown that too often they do not.\xe2\x80\x9d).\n2. Reasonable necessity. Reasonable necessity is something less than absolute\nnecessity. See, e.g., Rinderer v. Keeven, 412 N.E.2d 1015, 1026 (Ill. App. 1980)\n(\xe2\x80\x9cIt is well established that one who claims an easement by implication need not\nshow absolute necessity in order to prevail; it is sufficient that such an easement\nbe reasonable, highly convenient and beneficial to the dominant estate.\xe2\x80\x9d\n(internal quotation and citation omitted)). Does this leave courts with too much\ndiscretion to impose easements? A minority of jurisdictions make a formal\ndistinction between implied easements in favor of grantees and grantors,\nrequiring strict necessity in the case of the latter. RESTATEMENT \xc2\xa7 2.12.\n\n\x0c376\n\nProperty\nBut see Tortoise Island Communities, Inc. v. Moorings Ass\xe2\x80\x99n, Inc., 489 So. 2d\n22, 22 (Fla. 1986) (concluding that an absolute necessity is required in all cases).\n\n3. What is apparent? Should home purchasers be expected to investigate the state\nof utility lines upon making a purchase? The Restatement reports that most\ncases to consider the question imply the easement when underground utilities\nare at issue. RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES) \xc2\xa7 2.12\n(Reporter\xe2\x80\x99s Note) (such easements \xe2\x80\x9cwill be implied without regard to their\nvisibility or the parties\xe2\x80\x99 knowledge of their existence if the utilities serve either\nparcel\xe2\x80\x9d). Are such uses plausibly apparent? Or is this simply a case of the law\nimplying terms that the parties likely would have bargained for had they thought\nto consider the matter?\nb. Easement by necessity\nAn easement by necessity (or sometimes way by necessity) arises when land\nbecomes landlocked or incapable of reasonable use absent an easement. For example,\nif A owns a rectangular parcel bordered on the north, east, and west by privately owned\nland and on the south by a public street, and conveys to B a strip of her land on the\nnorthern boundary, B will acquire an easement by necessity across the southern portion\nof the parcel retained by A:\n\n\x0cEasements\n\n377\n\nThere are two traditional rationales for easements by necessity. The first considers it\nan implied term of a conveyance, assuming that the parties would not intend for land\nto be conveyed without a means for access. The second simply treats the issue as one\nof public policy favoring land use. See RESTATEMENT (THIRD) OF PROPERTY\n(SERVITUDES) \xc2\xa7 2.15 cmt. a (2000).\nThe traditional view is that the necessity giving rise to an easement by necessity must\nexist at the time the property is severed. RESTATEMENT (THIRD) OF PROPERTY\n(SERVITUDES) \xc2\xa7 2.15 (2000) (\xe2\x80\x9cServitudes by necessity arise only on severance of rights\nheld in a unity of ownership.\xe2\x80\x9d); Roy v. Euro-Holland Vastgoed, B. V., 404 So. 2d 410,\n412 (Fla. Dist. Ct. App. 1981) (\xe2\x80\x9c[I]n order for the owner of a dominant tenement to be\nentitled to a way of necessity over the servient tenement both properties must at one\ntime have been owned by the same party .\xe2\x80\xa6 In addition, the common source of title\nmust have created the situation causing the dominant tenement to become landlocked.\nA further requirement is that at the time the common source of title created the\nproblem the servient tenement must have had access to a public road.\xe2\x80\x9d).\nEasements by necessity are typically about access, but other kinds of uses may be\nnecessary to the reasonable enjoyment of property. For example, suppose O conveys\nmineral rights to Blackacre to A. A would have both an easement of access to Blackacre\nand the right to engage in the mining necessary to reach the minerals. Likewise, an\nexpress easement of way may require rights to maintain and improve the easement.\nAccess for utilities may also give rise to an easement by necessity, creating litigation\nover which utilities are \xe2\x80\x9cnecessary\xe2\x80\x9d:\nWhen questioned by defendants as to why he could not use a cellular\nphone on his property, plaintiff testified he ran a home business and a\ncellular phone was not adequate to handle his business needs; for\nexample, a computer cannot access the Internet over a cellular phone.\nPlaintiff also testified solar power and gas generators were unable to\nproduce enough electricity to make his home habitable.\nSmith v. Heissinger, 745 N.E.2d 666, 672 (Ill. App. 2001) (affirming finding of\nnecessity of easement for underground utilities).\n\n\x0c378\n\nProperty\n\nCourts often describe the degree of necessity required to find an easement by necessity\nas being \xe2\x80\x9cstrict.\xe2\x80\x9d See, e.g., Ashby v. Maechling, 229 P.3d 1210, 1214 (Mont. 2010) \xe2\x80\x9cTwo\nessential elements of an easement by necessity are unity of ownership and strict\nnecessity.\xe2\x80\x9d). It is certainly higher than that needed for an easement implied by existing\nuse. That said, considerable precedent indicates that the necessity need not be absolute.\nSee, e.g., Cale v. Wanamaker, 121 N.J. Super. 142, 148, 296 A.2d 329, 333 (Ch. Div.\n1972) (\xe2\x80\x9cAlthough some courts have held that access to a piece of property by navigable\nwaters negates the \xe2\x80\x98necessity\xe2\x80\x99 required for a way of necessity, the trend since the 1920\xe2\x80\x99s\nhas been toward a more liberal attitude in allowing easements despite access by water,\nreflecting a recognition that most people today think in terms of \xe2\x80\x98driving\xe2\x80\x99 rather than\n\xe2\x80\x98rowing\xe2\x80\x99 to work or home.\xe2\x80\x9d).\nSeveral states provide owners of landlocked property a statutory right to obtain access\nthrough neighboring land by means of a private condemnation action. Some courts\nhave held that the availability of private condemnation actions negate the necessity\nprong of a common law easement by necessity claim. See, e.g., Ferguson Ranch, Inc. v.\nMurray, 811 P.2d 287, 290 (Wyo. 1991) (\xe2\x80\x9c[A] civil action for a common law way of\nnecessity is not available because of the existence of W.S. 24\xe2\x80\x939\xe2\x80\x93101.\xe2\x80\x9d). Private\ncondemnation actions may also extend to contexts beyond those covered by the\ncommon law easement by necessity. See, e.g., CAL. CIV. CODE \xc2\xa7 1001 (utilities).\n\n3. Prescriptive Easements\nEasements may also arise from prescription. An easement by prescription is acquired\nin a manner similar to adverse possession, as it is a non-permissive use that ultimately\nripens into a property interest. Recall the five elements of adverse possession: Entry\nand possession that is (1) actual, (2) exclusive, (3) hostile or under claim of right, (4)\nopen and notorious, and (5) continuous for the statutory limitations period. Which (if\nany) of these elements might have to be modified where the right being acquired is not\na right of possession, but a right of use?\n\n\x0cEasements\n\n379\nFelgenhauer v. Soni\n17 Cal.Rptr.3d 135 (Cal. App. 2004).\n\nGILBERT, P.J.\nHere we hold that to establish a claim of right to a prescriptive easement, the claimant\nneed not believe he or she is legally entitled to use of the easement. Jerry and Kim\nFelgenhauer brought this action to quiet title to prescriptive easements over\nneighboring property owned by Ken and Jennifer Soni. A jury made special findings\nthat established a prescriptive easement for deliveries. We affirm.\nFACTS\nIn November of 1971, the Felgenhauers purchased a parcel of property consisting of\nthe front portion of two contiguous lots on Spring Street in Paso Robles. The parcel is\nimproved with a restaurant that faces Spring Street. The back portion of the lots is a\nparking lot that was owned by a bank. The parking lot is between a public alley and the\nback of the Felgenhauers\xe2\x80\x99 restaurant.\nFrom the time the Felgenhauers opened their restaurant in 1974, deliveries were made\nthrough the alley by crossing over the parking lot to the restaurant\xe2\x80\x99s back door. The\nFelgenhauers never asked permission of the bank to have deliveries made over its\nparking lot. The Felgenhauers operated the restaurant until the spring of 1978.\nThereafter, until 1982, the Felgenhauers leased their property to various businesses.\nThe Felgenhauers reopened their restaurant in June of 1982. Deliveries resumed over\nthe bank\xe2\x80\x99s parking lot to the restaurant\xe2\x80\x99s back door. In November of 1984, the\nFelgenhauers sold their restaurant business, but not the real property, to James and\nAnn Enloe. The Enloes leased the property from the Felgenhauers. Deliveries\ncontinued over the bank\xe2\x80\x99s parking lot.\nJames Enloe testified he did not believe he had the right to use the bank\xe2\x80\x99s property and\nnever claimed the right. Enloe said that during his tenancy, he saw the bank manager\nin the parking lot. The manager told him the bank planned to construct a fence to\ndefine the boundary between the bank\xe2\x80\x99s property and the Felgenhauers\xe2\x80\x99 property.\nEnloe asked the manager to put in a gate so that he could continue to receive deliveries\nand have access to a trash dumpster. The manager agreed. Enloe \xe2\x80\x9cguess[ed]\xe2\x80\x9d the fence\n\n\x0c380\n\nProperty\n\nand gate were constructed about three years into his term. He said, \xe2\x80\x9c[Three years] could\nbe right, but it\xe2\x80\x99s a guess.\xe2\x80\x9d In argument to the jury, the Sonis\xe2\x80\x99 counsel said the fence and\ngate were constructed in January of 1988.\nThe Enloes sold the restaurant to Brett Butterfield in 1993. Butterfield sold it to\nWilliam DaCossee in March of 1998. DaCossee was still operating the restaurant at the\ntime of trial. During all this time, deliveries continued across the bank\xe2\x80\x99s parking lot.\nThe Sonis purchased the bank property, including the parking lot in dispute in 1998.\nIn 1999, the Sonis told the Felgenhauers\xe2\x80\x99 tenant, DaCossee, that they were planning to\ncut off access to the restaurant from their parking lot.\nThe jury found the prescriptive period was from June of 1982 to January of 1988.\nDISCUSSION\n\xe2\x80\xa6The Sonis contend there is no substantial evidence to support a prescriptive\neasement for deliveries across their property. They claim the uncontroverted evidence\nis that the use of their property was not under \xe2\x80\x9ca claim of right.\xe2\x80\x9d\xe2\x80\xa6\nAt common law, a prescriptive easement was based on the fiction that a person who\nopenly and continuously used the land of another without the owner\xe2\x80\x99s consent, had a\nlost grant. California courts have rejected the fiction of the lost grant. Instead, the\ncourts have adopted language from adverse possession in stating the elements of a\nprescriptive easement. The two are like twins, but not identical. Those elements are\nopen and notorious use that is hostile and adverse, continuous and uninterrupted for\nthe five-year statutory period under a claim of right. Unfortunately, the language used\nto state the elements of a prescriptive easement or adverse possession invites\nmisinterpretation. This is a case in point.\nThe Sonis argue the uncontroverted evidence is that the use of their property was not\nunder a claim of right. They rely on the testimony of James Enloe that he never claimed\nhe had a right to use the bank property for any purpose.\nClaim of right does not require a belief or claim that the use is legally justified. It simply\nmeans that the property was used without permission of the owner of the land. As the\nAmerican Law of Property states in the context of adverse possession: \xe2\x80\x9cIn most of the\n\n\x0cEasements\n\n381\n\ncases asserting [the requirement of a claim of right], it means no more than that\npossession must be hostile, which in turn means only that the owner has not expressly\nconsented to it by lease or license or has not been led into acquiescing in it by the denial\nof adverse claim on the part of the possessor.\xe2\x80\x9d (3 Casner, American Law of Property\n(1952) Title by Adverse Possession, \xc2\xa7 5.4, p. 776.)\xe2\x80\xa6 Enloe testified that he had no\ndiscussion with the bank about deliveries being made over its property. The jury could\nreasonably conclude the Enloes used the bank\xe2\x80\x99s property without its permission. Thus\nthey used it under a claim of right.\nThe Sonis attempt to make much of the fence the bank constructed between the\nproperties and Enloe\xe2\x80\x99s request to put in a gate. But Enloe was uncertain when the fence\nand gate were constructed. The Sonis\xe2\x80\x99 attorney argued it was constructed in January of\n1988. The jury could reasonably conclude that by then the prescriptive easement had\nbeen established.\nThe Sonis argue the gate shows the use of their property was not hostile. They cite\nMyran v. Smith (1931) 117 Cal.App. 355, 362, 4 P.2d 219, for the proposition that to\neffect a prescriptive easement the adverse user \xe2\x80\x9c... must unfurl his flag on the land, and\nkeep it flying, so that the owner may see, if he will, that an enemy has invaded his\ndomains, and planted the standard of conquest.\xe2\x80\x9d\nBut Myran made the statement in the context of what is necessary to create a\nprescriptive easement. Here, as we have said, the jury could reasonably conclude the\nprescriptive easement was established prior to the erection of the fence and gate. The\nSonis cite no authority for the proposition that even after the easement is created, the\nuser must keep the flag of hostility flying. To the contrary, once the easement is created,\nthe use continues as a matter of legal right, and it is irrelevant whether the owner of\nthe servient estate purports to grant permission for its continuance.\xe2\x80\xa6\nNotes\n1. Fiction of the lost grant. Felgenhauer refers to the fiction of the lost grant. The\nprinciple traces back to English law. 4-34 POWELL ON REAL PROPERTY \xc2\xa7 34.10\n(\xe2\x80\x9cIn early England the enjoyment had to have been \xe2\x80\x98from time immemorial,\xe2\x80\x99\nand this date came to be fixed by statute as the year 1189. Towards the close of\nthe medieval period, this theory was rephrased and an easement of this type was\n\n\x0c382\n\nProperty\nsaid to arise from a grant, presumably made in favor of the claimant before the\ntime of legal memory, but since lost.\xe2\x80\x9d). The usual American approach is to\nignore the fiction and simply apply rules of prescription that largely track those\nof adverse possession. See id.\n\n2. How do the elements of a prescriptive easement differ from the elements of\nadverse possession? Why do you think they differ in this way? How do the\nresulting interests differ?\n3. Easements acquired by the public. What happens if city pedestrians\nroutinely cut across a private parking lot? May an easement by prescription be\nclaimed by the public at large? Does it matter that the right asserted is not in\nthe hands of any one person? Here, too, the fiction of the lost grant may play a\nrole in the willingness of courts to entertain the possibility.\nThere is a split of authority as to whether a public highway may\nbe created by prescription. A number of older cases hold that the\npublic cannot acquire a road by prescription because the doctrine\nof prescription is based on the theory of a lost grant, and such a\ngrant cannot be made to a large and indefinite body such as the\npublic. See II American Law of Property \xc2\xa7 9.50 (J. Casner\ned.1952). The lost grant theory, however, has been discarded. W.\nBurby, Real Property \xc2\xa7 31, at 77 (1965). In its place, courts have\nresorted to the justifications that underlie statutes of limitations:\n\xe2\x80\x9c[The] functional utility in helping to cause prompt termination\nof controversies before the possible loss of evidence and in\nstabilizing long continued property uses.\xe2\x80\x9d 3 R. Powell, supra note\n5, \xc2\xb6 413, at 34\xe2\x80\x93103\xe2\x80\x9304; W. Burby, supra, \xc2\xa7 31, at 77; Restatement\nof Property ch. 38, Introductory Note, at 2923 (1944). These\nreasons apply equally to the acquisition of prescriptive easements\nby public use. The majority view now is that a public easement\nmay be acquired by prescription. 2 J. Grimes, Thompson on Real\nProperty \xc2\xa7 342, at 209 (1980).\nDillingham Commercial Co. v. City of Dillingham, 705 P.2d 410, 416 (Alaska\n1985).\n\n\x0cEasements\n\n383\n\nWhat then should the owner of a publicly accessible location do? The owners\nof Rockefeller Center reportedly block off its streets one day per year in order\nto prevent the loss of any rights to exclude. David W. Dunlap, \xe2\x80\x9cClosing for a\nSpell, Just to Prove It\xe2\x80\x99s Ours,\xe2\x80\x9d New York Times (Oct. 28, 2011), available at\nhttp://www.nytimes.com/2011/10/30/nyregion/lever-house-closes-once-ayear-to-maintain-its-ownership-rights.html?_r=0 (\xe2\x80\x9cBut there is another\nsignificant hybrid: purely private space to which the public is customarily\nwelcome, at the owners\xe2\x80\x99 implicit discretion. These spaces include Lever House,\nRockefeller Plaza and College Walk at Columbia University, which close for\npart of one day every year.\xe2\x80\x9d). Another option is to post a sign granting\npermission to enter (thus negating any element of adversity). Some states\napprove this approach by statute. Cal. Civ. Code \xc2\xa7 1008 (\xe2\x80\x9cNo use by any person\nor persons, no matter how long continued, of any land, shall ever ripen into an\neasement by prescription, if the owner of such property posts at each entrance\nto the property or at intervals of not more than 200 feet along the boundary a\nsign reading substantially as follows: \xe2\x80\x98Right to pass by permission, and subject\nto control, of owner: Section 1008, Civil Code.\xe2\x80\x99\xe2\x80\x9d).\n\nImage by Bryan Costales, used under a Creative Commons Attribution 4.0 International license.\n\n4. Irrevocable Licenses\nAn easement is distinct from a license. A license is permission from the owner to enter\nthe land. Because it is permissive, it is revocable. Many difficulties with distinguishing\neasements from licenses arise when parties fail to clearly bargain over the right to use\n\n\x0c384\n\nProperty\n\nland. See, e.g., Willow Tex, Inc. v. Dimacopoulos, 503 N.E.2d 99, 100 (N.Y. 1986) (\xe2\x80\x9cThe\nwriting must establish unequivocally the grantor\xe2\x80\x99s intent to give for all time to come a\nuse of the servient estate to the dominant estate. The policy of the law favoring\nunrestricted use of realty requires that where there is any ambiguity as to the\npermanence of the restriction to be imposed on the servient estate, the right of use\nshould be deemed a license, revocable at will by the grantor, rather than an easement.\xe2\x80\x9d).\nUnder the right circumstances, a license may become irrevocable.\nRichardson v. Franc\n182 Cal.Rptr.3d 853 (Cal. App. 2015)\nRUVOLO, P.J.\nIn order to access their home in Novato, California, James Scott Richardson and Lisa\nDonetti (respondents) had to traverse land belonging to their neighbors, Greg and\nTerrie Franc (appellants) on a 150\xe2\x80\x93foot long road which was authorized by an easement\nfor \xe2\x80\x9caccess and public utility purposes.\xe2\x80\x9d Over a 20\xe2\x80\x93year period, both respondents and\ntheir predecessors-in-interest maintained landscaping, irrigation, and lighting\nappurtenant to both sides of the road within the easement area without any objection.\nSix years after purchasing the property burdened by the easement, appellants demanded\nthat respondents remove the landscaping, irrigation, and lighting on the ground that\nrespondents\xe2\x80\x99 rights in the easement area were expressly limited to access and utility\npurposes, and the landscaping and other improvements exceeded the purpose for\nwhich the easement was granted. Respondents brought this lawsuit seeking, among\nother things, to establish their right to an irrevocable license which would grant them\nan uninterrupted right to continue to maintain the landscaping and other\nimprovements.\xe2\x80\xa6\n\xe2\x80\xa6. In 1989, Karen and Tom Poksay began building their home on undeveloped\nproperty at 2513 Laguna Vista Drive in Novato, California. The project included\nconstructing and landscaping a 150\xe2\x80\x93foot long driveway within the 30\xe2\x80\x93foot wide\neasement running down to the site of their new home, which was hidden from the\nstreet. The driveway was constructed pursuant to an easement over 2515 Laguna Vista\nDrive, which was then owned by [appellants\xe2\x80\x99 predecessors in interest]. The easement\nwas for access and utility purposes only.\n\n\x0cEasements\n\n385\n\nLandscaping along the driveway was important to the Poksays.\xe2\x80\xa6 They hired a\nlandscaper, who dug holes for plants and trees. Ms. Poksay then added plants and trees\nalong both sides of the driveway in the easement area\xe2\x80\x94hawthorn trees, Australian tea\ntrees, daylilies, Mexican sage, breath of heaven, flowering pear trees, and evergreen\nshrubs.\nThe landscaper installed a drip irrigation system.\xe2\x80\xa6 Water fixtures were also installed\nalong the driveway for fire safety. The Poksays also added electrical lighting along the\ndriveway, later replacing the electrical lighting with solar lighting.\nDuring the decade that the Poksays resided at the property Ms. Poksay regularly tended\nto the landscaped area, including trimming and weeding, ensuring the irrigation system\nwas working properly, and replacing plants and trees as necessary. In addition to Ms.\nPoskay\xe2\x80\x99s own labor, the Poksays paid their landscaper to perform general maintenance\n\xe2\x80\xa6.\nRespondents purchased the property in late 2000.\xe2\x80\xa6 Over the years, respondents added\nnew plants and trees, including oleanders, an evergreen tree, another tea tree, Mexican\nsage, lavender, rosemary, and a potato bush. Respondent Donetti testified that\nlandscapers came weekly or every other week, and the landscapers spent 40 to 50\npercent of their time in the easement area.\xe2\x80\xa6 During her testimony, respondent\nDonetti explained, \xe2\x80\x9cwe\xe2\x80\x99ve paid a lot of money to nurture it and grow it. It\xe2\x80\x99s beautiful.\nIt has privacy. It\xe2\x80\x99s absolutely tied to our house value. It\xe2\x80\x99s our curb appeal.\xe2\x80\x9d\nAppellants purchased 2515 Laguna Vista Drive in 2004. [Appellant Greg Franc\nadmitted he knew about the landscaping in the easement area, as well as the hiring of\nlandscapers.] He even admitted that the trees were \xe2\x80\x9cbeautiful and provide a lot of color\nand [were] just all-around attractive.\xe2\x80\x9d From 2004 to August 2010, appellants and\nrespondents lived in relative harmony \xe2\x80\xa6. It was not until late 2010\xe2\x80\x94approximately six\nyears after appellants bought the property and two decades after the landscaping and\nother improvements began\xe2\x80\x94that appellants first raised a concern about the\nlandscaping and other improvements. Prior to that date, no one had ever objected.\nIn late September or early October 2010, without any notice, appellant Greg Franc cut\nthe irrigation and electrical lines on both sides of the driveway. He cut not only the\nlines irrigating the landscaping on the easement, but also those irrigating respondents\xe2\x80\x99\n\n\x0c386\n\nProperty\n\nown property. The water valve pumps leading to the irrigation lines were disassembled\nas well. As part of these proceedings, the trial court granted respondents\xe2\x80\x99 motion for\npreliminary injunction and the irrigation system was restored.\xe2\x80\xa6 Following a bench trial\nand an on-site visit to the property, the court .\xe2\x80\xa6 granted respondents\xe2\x80\x99 request for an\nirrevocable license . \xe2\x80\xa6\n.\xe2\x80\xa6 [A]s appellants acknowledge, the grant of an irrevocable license is \xe2\x80\x9cbased in equity.\xe2\x80\x9d\nAfter the trial court has exercised its equitable powers, the appellate court reviews the\njudgment under the abuse of discretion standard.\xe2\x80\xa6\nBefore we address the specific issues appellants raise on appeal, it is helpful to review\nthe law governing the grant of an irrevocable license. \xe2\x80\x9cA license gives authority to a\nlicensee to perform an act or acts on the property of another pursuant to the express\nor implied permission of the owner.\xe2\x80\x9d (6 Miller & Starr, Cal. Real Estate (3d ed. 2000)\nEasements, \xc2\xa7 15:2, p. 15\xe2\x80\x9310.) \xe2\x80\x9cA licensor generally can revoke a license at any time\nwithout excuse or without consideration to the licensee. In addition, a conveyance of\nthe property burdened with a license revokes the license....\xe2\x80\x9d (Id. at pp 15\xe2\x80\x9310\xe2\x80\x9315\xe2\x80\x9311,\nfns. omitted.)\nHowever, a license may become irrevocable when a landowner knowingly permits\nanother to repeatedly perform acts on his or her land, and the licensee, in reasonable\nreliance on the continuation of the license, has expended time and a substantial amount\nof money on improvements with the licensor\xe2\x80\x99s knowledge. Under such circumstances,\nit would be inequitable to terminate the license. In that case, the licensor is said to be\nestopped from revoking the license, and the license becomes the equivalent of an\neasement, commensurate in its extent and duration with the right to be enjoyed. A trial\ncourt\xe2\x80\x99s factual finding that a license is irrevocable is reviewed for substantial evidence.\nIn the paradigmatic case, a landowner allows his neighbor the right to use some portion\nof his property\xe2\x80\x94often a right of way or water from a creek\xe2\x80\x94knowing that the\nneighbor needs the right to develop his property. The neighbor then builds a house,\ndigs an irrigation ditch, paves the right of way, plants an orchard, or farms the land in\nreliance on the landowner\xe2\x80\x99s acquiescence. Later, after failing to make a timely objection,\nthe landowner or his successor suddenly raises legal objections and seeks to revoke the\nneighbor\xe2\x80\x99s permissive usage.\xe2\x80\xa6\n\n\x0cEasements\n\n387\n\nIn the instant case \xe2\x80\xa6. the statement of decision states: \xe2\x80\x9cBecause [respondents] adduced\nsufficient evidence at trial concerning their substantial expenditures in the easement\narea for landscaping, maintenance, care, and physical labor, and because sufficient\nevidence was presented at trial to support that [respondents\xe2\x80\x99] predecessor-in-interest,\nMs. Poksay, also expended substantial sums in the easement area for landscaping,\nmaintenance, care, and physical labor, and because, as the evidence and testimony at\ntrial showed, that no objection was made to any of this by either [appellants] or\n[appellants\xe2\x80\x99] predecessor-in-interest, Mr. Schaefer, over the course of more than 20\nyears, [respondents] have sufficiently met the requirements for an irrevocable parol\nlicense for both [respondents], and [respondents\xe2\x80\x99] successors-in-interest. Both law and\nequity dictate this result.\xe2\x80\x9d\n.\xe2\x80\xa6[Appellants] contend the trial court erred in finding the evidence supported the\ncreation of an irrevocable license because respondents\xe2\x80\x99 reliance on continued\npermission to landscape and make other improvements in the easement area was not\nreasonable as a matter of law. Appellants point out the evidence at trial revealed that\nthroughout the history of the ownership of the property, there was never an actual\nrequest for permission to make and maintain these improvements and express consent\nwas never given. In essence, appellants contend that tacit permission by silence is\ninsufficient to create an irrevocable license and that respondents were required to show\nan express grant of permission induced them into undertaking the improvements\nwithin the easement area.\nPermission sufficient to establish a license can be express or implied.\xe2\x80\xa6 A license may\nalso arise by implication from the acts of the parties, from their relations, or from\ncustom. When a landowner knowingly permits another to perform acts on his land, a\nlicense may be implied from his failure to object.\xe2\x80\xa6\n.\xe2\x80\xa6 Here, the undisputed evidence revealed appellants failed to object to the\nlandscaping and other improvements for 6 years before appellants first made their\ndemand that the landscaping and other improvements be removed. Thus, with full\nknowledge that the road providing ingress and egress to respondents\xe2\x80\x99 property was\nlandscaped, irrigated, and lit, and with full knowledge that respondents were\nmaintaining these improvements on an ongoing basis, appellants said nothing to\nrespondents. When coupled with the previous 14 years appellants\xe2\x80\x99 predecessors-in-\n\n\x0c388\n\nProperty\n\ninterest acquiesced in these improvements, this constituted a total of 20 years of\nuninterrupted permissive use of the easement area for the landscaping and other\nimprovements. Therefore, we find the court had ample evidence to conclude that\nadequate and sufficient permission was granted to respondents by appellants to\nmaintain the extensive landscaping improvements on either side of the roadway.\nAppellants next stress that for the license to be irrevocable, there must be substantial\nexpenditures in reliance on the license. In this regard, the trial court made the necessary\nfindings that respondents \xe2\x80\x9chave expended substantial monetary sums to improve,\nmaintain, landscape, and care for the easement area, including the retention of\nprofessional landscapers on a regular basis....\xe2\x80\x9d\nAppellants next challenge \xe2\x80\x9cthe unlimited physical scope and duration of the license\xe2\x80\x9d\ngranted by the trial court. They claim \xe2\x80\x9cthe trial court, in derogation of equity and the\nlaw, decided that [r]espondents ... should have sole and absolute discretion to decide\nwhat will happen on property that is owned by [appellants].\xe2\x80\x9d In making this argument,\nappellants ignore the fact that the trial court was vested with broad discretion in\nframing an equitable result under the facts of this case.\xe2\x80\xa6 As it was empowered to do,\nthe trial court exercised its broad equitable discretion and fashioned relief to fit the\nspecific facts of this case. The court found \xe2\x80\x9cby a preponderance of the evidence that\n[respondents] hold an irrevocable parol license for themselves and their successors-ininterest to maintain and improve landscaping, irrigation, and lighting within the 30\xe2\x80\x99\nwide and 150\xe2\x80\x99 long easement.\xe2\x80\x9d\nAppellants assert \xe2\x80\x9cit is wholly erroneous and grossly unfair to make the license irrevocable\nin perpetuity.\xe2\x80\x9d (Original italics.) Appellants argue that a proper ruling in this case would\nbe to grant respondents an irrevocable license but \xe2\x80\x9cwith the license to landscape and\ngarden limited in duration until [respondents] transfer title to anyone else or no longer\nreside on the property....\xe2\x80\x9d\nThe principles relating to the duration of an irrevocable license were stated by our\nSupreme Court over a century ago, and these principles are still valid today. An\notherwise revocable license becomes irrevocable when the licensee, acting in\nreasonable reliance either on the licensor\xe2\x80\x99s representations or on the terms of the\nlicense, makes substantial expenditures of money or labor in the execution of the\nlicense; and the license will continue \xe2\x80\x9cfor so long a time as the nature of it calls for.\xe2\x80\x9d\n\n\x0cEasements\n\n389\n\nAs explained in a leading treatise, \xe2\x80\x9cA license remains irrevocable for a period sufficient\nto enable the licensee to capitalize on his or her investment. He can continue to use it\nonly as long as justice and equity require its use.\xe2\x80\x9d (6 Miller & Starr, supra, \xc2\xa7 15:2, p. 15\xe2\x80\x93\n15.)\nThe evidence adduced at trial indicates respondents and their predecessors in interest\nexpended significant money and labor when they planted and nurtured the landscaping\nabutting the roadway, installed sophisticated irrigation equipment throughout the\neasement area, and constructed lighting along the roadway. Under such circumstances\nthe trial court did not abuse its discretion in concluding it would be inequitable to\nrequire respondents to remove these improvements when the property is transferred,\ngiven the substantial investment in time and money and the permanent nature of these\nimprovements.\xe2\x80\xa6\nLastly, we reject appellants\xe2\x80\x99 hyperbolic claim that in fashioning the scope and duration\nof the irrevocable license granted in this case, \xe2\x80\x9cthe trial court, without exercising\ncaution, took property that rightfully belonged to [appellants] and ceded it to\n[r]espondents\xe2\x80\x94and their successors\xe2\x80\x94forever.\xe2\x80\x9d\nThis argument ignores that a license does not create or convey any interest in the real\nproperty; it merely makes lawful an act that otherwise would constitute a trespass.\xe2\x80\xa6\nFar from granting respondents \xe2\x80\x9can exclusive easement amounting to fee title\xe2\x80\x9d as\nappellants\xe2\x80\x99 claim, the court\xe2\x80\x99s decision simply maintains the status quo that has existed\nfor over 20 years and was obvious to appellants when they purchased the property a\ndecade ago.\nNotes and Questions\n1. The Restatement characterizes irrevocable license situations as a servitude\ncreated by estoppel. RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES)\n\xc2\xa7 2.10. Is there any difference, then, between an irrevocable license and an\neasement by prescription? Is there any reason to treat them differently?\n2. Is landscaping important enough to justify the intrusion into property\nownership interests? What do you think would have happened had the\nappellants won?\n\n\x0c390\n\nProperty\n\n3. How well does Richardson track your intuitions about everyday behavior? Would\nyou ask permission before engaging in the landscaping at issue here? Would you\nadvise a client to? Suppose you asked your neighbor for an easement of way to\nenable you to build on an adjoining property? You\xe2\x80\x99re friends, and he says yes.\nBut you know a thing or two about the law, so you know that if your relations\nturn sour you would have to rely on an irrevocable license claim. Would you\npush for a formal grant in writing? Is that a neighborly thing to do? For one\nview, see Shepard v. Purvine, 248 P.2d 352, 361-62 (Or. 1952) (\xe2\x80\x9cUnder the\ncircumstances, for plaintiffs to have insisted upon a deed would have been\nembarrassing; in effect, it would have been expressing a doubt as to their\nfriend\xe2\x80\x99s integrity.\xe2\x80\x9d). Does it make a difference that you know to ask? What about\nthose without legal training? Should the law accommodate private ordering or\nfunnel property holders into formal arrangements? Do the interests of third\nparties, including possible future purchasers of each of the affected properties,\nmatter to your analysis?\n\nC. Transferring Easements\nEasements appurtenant. Transferring easements appurtenant is simple; when the\ndominant estate is conveyed, the rights of the easement come along. This is a natural\nconsequence of the principle that servitudes (such as easements) run with the land. A\nmore complicated problem concerns the division of the dominant estate into smaller\nparcels. The default approach is to allow each parcel to enjoy the benefit of the\neasement. Restatement (First) of Property \xc2\xa7 488 (1944) (\xe2\x80\x9cExcept as limited by the terms\nof its transfer, or by the manner or terms of the creation of the easement appurtenant,\nthose who succeed to the possession of each of the parts into which a dominant\ntenement may be subdivided thereby succeed to the privileges of use of the servient\ntenement authorized by the easement.\xe2\x80\x9d). Here, however, foreseeability and the extent\nof the added burden matters. See generally R. W. Gascoyne, Right of owners of parcels into\nwhich dominant tenement is or will be divided to use right of way, 10 A.L.R.3d 960 (Originally\npublished in 1966) (collecting cases).\nEasements in gross. The modern view is that easements in gross are transferable,\nassuming no contrary intent in their creation (e.g., that the benefit was intended to be\npersonal to the recipient). RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES) \xc2\xa7 4.6\n\n\x0cEasements\n\n391\n\ncmt. (2000) (\xe2\x80\x9cAlthough historically courts have often stated that benefits in gross are\nnot transferable, American courts have long carved out an exception for profits and\neasements in gross that serve commercial purposes. Under the rule stated in this\nsection, the exception has now become the rule.\xe2\x80\x9d); RESTATEMENT (FIRST) OF\nPROPERTY \xc2\xa7 489 (1944) (commercial easements in gross, as distinct from easements\nfor personal satisfaction, are transferable); \xc2\xa7 491 (noncommercial easements in gross\n\xe2\x80\x9cdetermined by the manner or the terms of their creation\xe2\x80\x9d).\nAnother issue concerns the divisibility of an easement in gross. Here, too, the danger\nis that divisibility may lead to excessive burdens on the servient estate. Section 493 of\nthe First Restatement of Property provides that whether divisibility is permitted\ndepends on the circumstances surrounding the easement\xe2\x80\x99s creation. The facts giving\nrise to a prescriptive easement, for example, may give a landowner fair notice that a\nsingle trespasser may acquire an easement, but not that the easement may then be\nshared by many others once the prescription period passes. In contrast, an exclusive\neasement might lead to a presumption of divisibilty, for \xe2\x80\x9cthe fact that [the owner of\nthe servient tenement] is excluded from making the use authorized by the easement,\nplus the fact that apportionability increases the value of the easement to its owner,\ntends to the inference in the usual case that the easement was intended in its creation\nto be apportionable.\xe2\x80\x9d Id. cmt. c. Where the grant is non-exclusive a clearer indication\nof intended divisibility may be required. Id. cmt. d. Section 5.9 of the modern\nRestatement goes further by making divisibility the default assumption unless contrary\nto the parties intent or where divisibility would place unreasonable burdens on the\nservient estate.\n\nD. Terminating Easements\nEasements can be terminated in a variety of ways.\n1. Unity of ownership. When the dominant and servient estates of an easement\nappurtenant unite under one owner, the easement ends. Likewise an easement\nin gross ends if the owner acquires an interest in the servient tenement that\nwould have provided independent authority to exercise the rights of the\neasement.\n\n\x0c392\n\nProperty\n\n2. Release by the easement holder. The First Restatement would require a\nwritten instrument under seal for an inter vivos release, while the modern\nRestatement simply requires compliance with the Statute of Frauds.\n3. Abandonment. Abandonment resembles a release. The First Restatement\ntreats them separately, however, and distinguishes the two by describing\nabandonment as intent by the easement holder to give up the easement, while\na release is an act done on behalf of the owner of the burdened property.\nAbandonment may be inferred by actions. RESTATEMENT (FIRST) OF\nPROPERTY \xc2\xa7 504 (1944).\n4. Estoppel. Estoppel may terminate an easement when 1) the owner of the\nservient tenement acts in a manner that is inconsistent with the easement\xe2\x80\x99s\ncontinuation; 2) the acts are in foreseeable reasonable reliance on conduct by\nthe easement holder; and 3) allowing the easement to continue would work an\nunreasonable harm to the owner of the servient property. Id. \xc2\xa7 505.\n5. Prescription. Just as an easement may be gained by prescription, so too may it\nbe lost by open and notorious adverse acts by the owner of the servient\ntenement that interrupt the exercise of the easement for the prescription period.\n6. Condemnation. The exercise of the eminent domain power to take the servient\nestate creates the possibility of compensation for the easement owner.\n7. A tax deed. A tax deed is an instrument transferring title to property on which\ntaxes have gone unpaid following foreclosure of the resulting tax lien.\nSometimes the property transferred by tax deed will be encumbered by an\neasement. Section 509 of the First Restatement provides that a tax deed will\nextinguish an easement in gross encumbering the deeded property, but not an\neasement appurtenant encumbering the deeded property.\n8. Expiration, if the interest was for a particular time.\n9. Recording Acts. Being property interests, easements are subject to the\nrecording acts, and unrecorded interests may be defeated by transferees without\nnotice. The modern restatement provides for exceptions for certain easements\nnot subject to the Statute of Frauds and generally for servitudes that \xe2\x80\x9cwould be\n\n\x0cEasements\n\n393\n\ndiscovered by reasonable inspection or inquiry.\xe2\x80\x9d RESTATEMENT (THIRD) OF\nPROPERTY (SERVITUDES) \xc2\xa7 7.14 (2000).\n\nE. Negative Easements/Conservation Easements\nIn the United States, most of the work that could have been done by negative\neasements is largely performed by real covenants or equitable servitudes, which we take\nup in a future reading. See RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES) \xc2\xa7 1.2\n(\xe2\x80\x9cA \xe2\x80\x98negative\xe2\x80\x99 easement, the obligation not to use land in one\xe2\x80\x99s possession in specified\nways, has become indistinguishable from a restrictive covenant, and is treated as such\nin this Restatement.\xe2\x80\x9d). Nineteenth century English law gave negative easements a\nnarrow domain. They were available only to prevent the servient estate from restricting\nlight, air, support, or the flow of water of an artificial stream to the dominant estate. Id.\n\xc2\xa7 1.2 cmt. h. Such easements were likewise not widely embraced in the United States,\nwhere equitably enforced negative covenants held in gross were disfavored.\nFor the most part, negative easements only arise by agreement or grant. U.S. courts\ntherefore consistently reject the English \xe2\x80\x9cdoctrine of ancient lights,\xe2\x80\x9d which recognizes\na right to light from a neighbor\xe2\x80\x99s land after the passage of time under certain\ncircumstances. 4-34 POWELL ON REAL PROPERTY \xc2\xa7 34.11.\nThe limitations of negative easements complicated efforts to create conservation and\npreservation easements. Such easements tend to be held in gross (e.g., by a\nconservation organization), and the common law prohibited equitable enforcement of\nnegative covenants held in gross. The law likewise was skeptical about expanding the\ncategories for which negative easements were available. RESTATEMENT (THIRD) OF\nPROPERTY (SERVITUDES) \xc2\xa7 1.6 cmt. a (2000). The problem was addressed by the\nUniform Conservation Easement Act, which has now been adopted by every state.\n4 POWELL ON REAL PROPERTY \xc2\xa7 34A.01.\n\nF. Public Use Rights\nPublic prescriptive easements are not the only way to grant members of the public\naccess rights to land. The public trust doctrine addresses the public\xe2\x80\x99s right to access\ncertain natural resources.\n\n\x0c394\n\nProperty\nLawrence v. Clark Cnty.\n254 P.3d 606, 608-09 (Nev. 2011)\n\nThe public trust doctrine is an ancient principle thought to be traceable to Roman law\nand the works of Emperor Justinian. See State v. Sorensen, 436 N.W.2d 358, 361 (Iowa\n1989). Justinian derived the doctrine from the principle that the public possesses\ninviolable rights to certain natural resources, noting that \xe2\x80\x9c[b]y the law of nature these\nthings are common to mankind\xe2\x80\x94the air, running water, the sea, and consequently the\nshores of the sea.\xe2\x80\x9d THE INSTITUTES OF JUSTINIAN, Lib. II, Tit. I, \xc2\xa7 1 (Thomas Collett\nSandars trans. 5th London ed. 1876). He also stated that \xe2\x80\x9crivers and ports are public;\nhence the right of fishing in a port, or in rivers, is common to all men.\xe2\x80\x9d Id. \xc2\xa7 2.\nThe doctrine was thereafter adopted by the common law courts of England, which\nespoused the similar principle that \xe2\x80\x9ctitle in the soil of the sea, or of arms of the sea,\nbelow ordinary high-water mark, is in the King\xe2\x80\x9d and that such title \xe2\x80\x9cis held subject to\nthe public right.\xe2\x80\x9d Shively v. Bowlby, 152 U.S. 1, 13, 14 S.Ct. 548, 38 L.Ed. 331 (1894).\xe2\x80\xa6\nCourts in this country have readily embraced the public trust doctrine. In 1821, in the\nfirst notable American case to express public trust principles, the Supreme Court of\nNew Jersey observed that citizens have a common right to sovereign-controlled\nwaterways:\nThe sovereign power itself ... cannot, consistently with the principles of\nthe law of nature and the constitution of a well ordered society, make a\ndirect and absolute grant of the waters of the state, divesting all the\ncitizens of their common right. It would be a grievance which never\ncould be long borne by a free people.\nArnold v. Mundy, 6 N.J.L. 1, 78 (N.J.1821).\nThereafter, the United States Supreme Court similarly recognized that \xe2\x80\x9cwhen the\nRevolution took place, the people of each state became themselves sovereign; and in\nthat character hold the absolute right to all their navigable waters and the soils under\nthem for their own common use.\xe2\x80\x9d Martin et al. v. Waddell, 41 U.S. 367, 410, 16 Pet.\n367, 10 L.Ed. 997 (1842).\n\n\x0cEasements\n\n395\n\nFifty years later, in what has become the seminal public trust doctrine case, the Supreme\nCourt decided Illinois Central Railroad v. Illinois, 146 U.S. 387 (1892). In Illinois Central the\nCourt noted that because the State of Illinois was admitted to the United States on\n\xe2\x80\x9cequal footing\xe2\x80\x9d with the original 13 colonies, it, like the colonies, was granted title to\nthe navigable waters and the lands underneath them. For Illinois, that meant that upon\nits admission, it held title to its portion of the waters of and lands beneath Lake\nMichigan. However, the waters and lands underneath Lake Michigan were not freely\nalienable by the State of Illinois\xe2\x80\x94its title to those areas was \xe2\x80\x9cdifferent in character from\nthat which the State holds in lands intended for sale.\xe2\x80\x9d More specifically, it possessed\nonly \xe2\x80\x9ctitle held in trust for the people of the State that they may enjoy the navigation\nof the waters, carry on commerce over them, and have liberty of fishing therein freed\nfrom the obstruction or interference of private parties.\xe2\x80\x9d As a result, the Court\nconcluded that the Illinois Legislature\xe2\x80\x99s attempted relinquishment of such trust\nproperty to the Illinois Central Railroad\nis not consistent with the exercise of that trust which requires the\ngovernment of the State to preserve such waters for the use of the\npublic.... The State can no more abdicate its trust over property in which\nthe whole people are interested than it can abdicate its police powers in\nthe administration of government and the preservation of the peace.\nWhile the Court noted that such lands need not, under all circumstances, be perpetually\nheld in trust, it recognized that in effecting transfers, the public interest is always\nparamount, providing that \xe2\x80\x9c[t]he control of the State for the purposes of the trust can\nnever be lost, except as to such parcels as are used in promoting the interests of the\npublic therein, or can be disposed of without any substantial impairment of the public\ninterest in the lands and waters remaining.\xe2\x80\x9d Id.\nAs public uses of waters expanded, so too did the public trust doctrine. In New Jersey,\nthe courts extended the public trust doctrine to protect recreational uses. It then\nextended the public\xe2\x80\x99s right to access the \xe2\x80\x9cwet sands,\xe2\x80\x9d which is land extending from the\nocean to the average high tide water mark, to include access via certain \xe2\x80\x9cdry sands.\xe2\x80\x9d\n\n\x0c396\n\nProperty\nMatthews v. Bay Head Imp. Ass\xe2\x80\x99n\n471 A.2d 355 (N.J. 1984)\n\n\xe2\x80\xa6.In order to exercise these rights guaranteed by the public trust doctrine, the public\nmust have access to municipally-owned dry sand areas as well as the foreshore. The\nextension of the public trust doctrine to include municipally-owned dry sand areas was\nnecessitated by our conclusion that enjoyment of rights in the foreshore is inseparable\nfrom use of dry sand beaches.\xe2\x80\xa6 We [previously] held that where a municipal beach is\ndedicated to public use, the public trust doctrine \xe2\x80\x9cdictates that the beach and the ocean\nwaters must be open to all on equal terms and without preference and that any contrary\nstate or municipal action is impermissible.\xe2\x80\x9d 61 N.J. at 309, 294 A.2d 47.\xe2\x80\xa6\nWe now address the extent of the public\xe2\x80\x99s interest in privately-owned dry sand beaches.\nThis interest may take one of two forms. First, the public may have a right to cross\nprivately owned dry sand beaches in order to gain access to the foreshore. Second, this\ninterest may be of the sort enjoyed by the public in municipal beaches \xe2\x80\xa6 namely, the\nright to sunbathe and generally enjoy recreational activities.\nBeaches are a unique resource and are irreplaceable. The public demand for beaches\nhas increased with the growth of population and improvement of transportation\nfacilities.\xe2\x80\xa6\nExercise of the public\xe2\x80\x99s right to swim and bathe below the mean high water mark may\ndepend upon a right to pass across the upland beach. Without some means of access\nthe public right to use the foreshore would be meaningless. To say that the public trust\ndoctrine entitles the public to swim in the ocean and to use the foreshore in connection\ntherewith without assuring the public of a feasible access route would seriously impinge\non, if not effectively eliminate, the rights of the public trust doctrine. This does not\nmean the public has an unrestricted right to cross at will over any and all property\nbordering on the common property. The public interest is satisfied so long as there is\nreasonable access to the sea.\xe2\x80\xa6\nThe bather\xe2\x80\x99s right in the upland sands is not limited to passage. Reasonable enjoyment\nof the foreshore and the sea cannot be realized unless some enjoyment of the dry sand\narea is also allowed. The complete pleasure of swimming must be accompanied by\nintermittent periods of rest and relaxation beyond the water\xe2\x80\x99s edge. The unavailability\n\n\x0cEasements\n\n397\n\nof the physical situs for such rest and relaxation would seriously curtail and in many\nsituations eliminate the right to the recreational use of the ocean. This was a principal\nreason why in [earlier cases] we held that municipally-owned dry sand beaches \xe2\x80\x9cmust\nbe open to all on equal terms ....\xe2\x80\x9d We see no reason why rights under the public trust\ndoctrine to use of the upland dry sand area should be limited to municipally-owned\nproperty. It is true that the private owner\xe2\x80\x99s interest in the upland dry sand area is not\nidentical to that of a municipality. Nonetheless, where use of dry sand is essential or\nreasonably necessary for enjoyment of the ocean, the doctrine warrants the public\xe2\x80\x99s use\nof the upland dry sand area subject to an accommodation of the interests of the owner.\nWe perceive no need to attempt to apply notions of prescription, City of Daytona Beach\nv. Tona-Rama, Inc., 294 So.2d 73 (Fla.1974), dedication, Gion v. City of Santa Cruz, 2 Cal.3d\n29, 465 P.2d 50, 84 Cal.Rptr. 162 (1970), or custom, State ex rel. Thornton v. Hay, 254 Or.\n584, 462 P.2d 671 (1969), as an alternative to application of the public trust doctrine.\nArchaic judicial responses are not an answer to a modern social problem. Rather, we\nperceive the public trust doctrine not to be \xe2\x80\x9cfixed or static,\xe2\x80\x9d but one to \xe2\x80\x9cbe molded\nand extended to meet changing conditions and needs of the public it was created to\nbenefit.\xe2\x80\x9d Avon, 61 N.J. at 309, 294 A.2d 47.\nPrecisely what privately-owned upland sand area will be available and required to satisfy\nthe public\xe2\x80\x99s rights under the public trust doctrine will depend on the circumstances.\nLocation of the dry sand area in relation to the foreshore, extent and availability of\npublicly-owned upland sand area, nature and extent of the public demand, and usage\nof the upland sand land by the owner are all factors to be weighed and considered in\nfixing the contours of the usage of the upper sand.\nToday, recognizing the increasing demand for our State\xe2\x80\x99s beaches and the dynamic\nnature of the public trust doctrine, we find that the public must be given both access\nto and use of privately-owned dry sand areas as reasonably necessary. While the public\xe2\x80\x99s\nrights in private beaches are not co-extensive with the rights enjoyed in municipal\nbeaches, private landowners may not in all instances prevent the public from exercising\nits rights under the public trust doctrine. The public must be afforded reasonable access\nto the foreshore as well as a suitable area for recreation on the dry sand.\n\n\x0c398\n\nProperty\nNotes and Questions\n\n1. Do the rights covered by the public trust doctrine preexist the state, or are they\npure creatures of law? When may courts change public trust rules? When they\ndo so, are the rules changing or is the court explaining that the rule \xe2\x80\x9calways\xe2\x80\x9d\nthus, but is only now being announced? Does anything turn on this distinction?\nAs we will see, how we define such changes has implications on whether a\nproperty owner may claim that the state is committing a constitutional violation\nby \xe2\x80\x9ctaking\xe2\x80\x9d land without just compensation.\n2. When a court alters preexisting conceptions of the right to exclude should\nanything be due to the property owner? Does your conception of what the\npublic trust doctrine is help determine your answer to this question?\n3. Other theories of expanding public access rights. Courts have used other\ndoctrines to expand public access to private lands, including theories of\nprescriptive easements, \xe2\x80\x9cimplied dedication,\xe2\x80\x9d and customary uses. See generally\n4 POWELL ON REAL PROPERTY \xc2\xa7 34.11. As an example of implied dedication,\nthe California Supreme Court declared:\nAlthough \xe2\x80\x98No Trespassing\xe2\x80\x99 signs may be sufficient when only an\noccasional hiker traverses an isolated property, the same action\ncannot reasonably be expected to halt a continuous influx of\nbeach users to an attractive seashore property. If the fee owner\nproves that he has made more than minimal and ineffectual\nefforts to exclude the public, then the trier of fact must decide\nwhether the owner\xe2\x80\x99s activities have been adequate. If the owner\nhas not attempted to halt public use in any significant way,\nhowever, it will be held as a matter of law that he intended to\ndedicate the property or an easement therein to the public, and\nevidence that the public used the property for the prescriptive\nperiod is sufficient to establish dedication.\nGion v. City of Santa Cruz, 2 Cal. 3d 29, 41, 465 P.2d 50, 58 (1970). On custom,\nsee, e.g., City of Daytona Beach v. Tona-Rama, Inc., 294 So. 2d 73, 78 (Fla. 1974)\n(\xe2\x80\x9cThe general public may continue to use the dry sand area for their usual\n\n\x0cEasements\n\n399\n\nrecreational activities, not because the public has any interest in the land itself,\nbut because of a right gained through custom to use this particular area of the\nbeach as they have without dispute and without interruption for many years.\xe2\x80\x9d).\n4. Politics! Do not overlook the role of the political process in questions of beach\naccess. Following the Gion ruling noted above, the California legislature enacted\nCAL. CIV. CODE \xc2\xa7 1009, which finds that \xe2\x80\x9c[o]wners of private real property are\nconfronted with the threat of loss of rights in their property if they allow or\ncontinue to allow members of the public to use, enjoy or pass over their\nproperty for recreational purposes\xe2\x80\x9d and that the \xe2\x80\x9cstability and marketability of\nrecord titles is clouded by such public use, thereby compelling the owner to\nexclude the public from his property.\xe2\x80\x9d It therefore provides that \xe2\x80\x9cno use of\nsuch property by the public after the effective date of this section shall ever\nripen to confer upon the public or any governmental body or unit a vested right\nto continue to make such use permanently, in the absence of an express written\nirrevocable offer of dedication of such property to such use.\xe2\x80\x9d Does the\navailability of a legislative remedy if landowners organize and convince the\nlegislature to act suffice to address the concerns about cases like Matthews?\n5. Conflicting uses. Once the public has the right of access to private land, what\nother limits on private ownership follow? See, e.g., City of Daytona Beach v.\nTona-Rama, Inc., 294 So. 2d 73, 78 (Fla. 1974) (private landowner\xe2\x80\x99s\nconstruction of tower on beach did not interfere with customary public rights).\n6. Public Policy. Are expansions of public access rights by the courts beneficial?\nWhat kinds of incentives do they create? Consider the following criticism:\nCommentators were severe in their criticism of Gion-Dietz, noting\nnot only departure from precedent, the failure to consider total\nloss to the owner, and the prohibition of taking property without\ncompensation, but also that the case created an obvious inequity\nand would prove counterproductive to the public policy\nespoused. [Citations of critical commentary omitted.]\nThe inequity addressed by commentators appears when weighing\npenalties against rewards to landowners having no immediate use\n\n\x0c400\n\nProperty\nfor their property so that permitting public use poses no\ninterference or impairment. Those landowners who were\nneighborly and hospitable in permitting public use were penalized\nby Gion-Dietz by loss of their land, while those excluding the\npublic by fencing or other means were rewarded by retention of\ntheir exclusive use. While virtue is usually its own reward, the law\ndoes not usually penalize the virtuous. The decision was asserted\nto be counterproductive because landowners to avoid\nprescriptive dedication would now exclude the public from using\nopen and unimproved property for recreation purposes. Thus the\nvery policy sought to be furthered would be defeated. (County of\nOrange v. Chandler-Sherman Corp. (1976) 54 Cal.App.3d 561,\n564, 126 Cal.Rptr. 765, 767, points out that one of the reactions\nto Gion-Dietz was \xe2\x80\x9csoaring sales of chain link fences.\xe2\x80\x9d)\nCnty. of Los Angeles v. Berk, 26 Cal. 3d 201, 228-31, 605 P.2d 381, 398-401\n(1980) (Clark, J., dissenting). But expanding access offers benefits of its own:\nThe law of beach access in Hawaii has an enormous, incalculable\nimpact on social life. Though the law limits the property rights of\nbeachfront owners as they are defined elsewhere, it increases the\nwealth of every single person in the state by giving them a right\nto go to the beach anywhere in the state. Everyone, no matter\nhow poor, has a backyard on the beach. Individuals and families\ngo the shore in the morning to swim or surf before work.\nFamilies gather to watch the sun go down in the evening. Even\nif they only have a small apartment inland, they have a right to sit\noutside on the beach wherever they please. It affects the range of\noptions people have, their daily routine, and the sense of\nsatisfaction of almost everyone.\nJoseph William Singer, Property as the Law of Democracy, 63 DUKE L.J. 1287, 1329\n(2014).\n\n7. Many European nations recognize (either by tradition or statute) a \xe2\x80\x9cright to\nroam\xe2\x80\x9d on private lands (excluding homestead or cultivated areas). Heidi\n\n\x0cEasements\n\n401\n\nGorovitz Robertson, Public Access to Private Land for Walking: Environmental and\nIndividual Responsibility As Rationale for Limiting the Right to Exclude, 23 GEO. INT\xe2\x80\x99L\nENVTL. L. REV. 211 (2011). The right to roam often encompasses the picking\nof berries, mushrooms, and the like. Open access used to be the norm for\nunenclosed land in the United States until the late 1800s; open range laws\nallowed cattle grazing on unimproved lands. Brian Sawers, The Right to Exclude\nfrom Unimproved Land, 83 TEMP. L. REV. 665, 674 (2011); Nashville & C.R. Co.\nv. Peacock, 25 Ala. 229, 232 (1854) (\xe2\x80\x9cOur present Code contains similar\nprovisions, which show conclusively that the unenclosed lands of this State are\nto be treated as common pasture for the cattle and stock of every citizen.\xe2\x80\x9d).\nPressure to close the range and forbid the crossing of uncultivated or\nunenclosed land came from three sources: farmers, who were relying less on\nfree range livestock; railroads, who wished to avoid liability for cattle collisions;\nand southern planters, who viewed closed range laws as a mechanism for\nlimiting the independence of newly emancipated African-American farmers.\nSawers, supra, at 681-84; R. Ben Brown, Free Men and Free Pigs: Closing the Southern\nRange and the American Property Tradition, 108 RADICAL HISTORY REVIEW 117,\n119 (Fall 2010) (\xe2\x80\x9cWhen the most important political and economic project of\nthe post-Reconstruction era became recapturing the labor of African Americans\nto produce staple crops, restricting African American access to open range\nresources became a priority.\xe2\x80\x9d).\n\n\x0cTrusts and Corporations\nThis section considers the two dominant forms of artificial entities that own and\nmanage property, and often serve as substitutes for the more rigid system of estates:\ntrusts and corporations.\n\nA. Trusts\nNote on Trusts\nThe origin of the trust lies in medieval estate planning and tax evasion. (Arguably,\nnothing has changed in the last six hundred years.) Imagine Osbert, a minor lord in the\n15th century, who holds Blackacre as a tenant of Leonard, a slightly less minor lord.\nOsbert is getting on in years and has started to worry about the future of his family.\nHis elder son, Aylwin, is not showing promising signs of maturity, and Osbert has come\nto think that Aylwin may be better suited to religious orders than the duties of managing\na great estate. But Osbert\xe2\x80\x99s younger son Bartholomew appears to be a fine young\ngentleman: athletic, patient, and wise in the ways of men. Osbert would like to provide\nfor Aylwin, but would prefer to have Blackacre go to Bartholomew. Osbert\xe2\x80\x99s problem\nis that the available conveyancing devices don\xe2\x80\x99t work for him. If he does nothing, then\nBlackacre goes to Alywin at Osbert\xe2\x80\x99s death under the rule of primogeniture in effect in\nEngland at the time, according to which the eldest son receives any land his father\nowned at his death (was \xe2\x80\x9cseised of,\xe2\x80\x9d in contemporary terminology). A will leaving\nBlackacre to Bartholomew doesn\xe2\x80\x99t work because land could not be devised by will until\nthe Statute of Wills in 1540. And Osbert doesn\xe2\x80\x99t want to convey Blackacre (or a future\ninterest in Blackacre) to Bartholomew now, because Bartholomew might die before\nhim, or Aylwin might get his act together, or something else could come along to force\na change in plan.\nThe solution hit on by contemporary lawyers was the \xe2\x80\x9cuse.\xe2\x80\x9d Osbert conveys Blackacre\nto his friend Theobald \xe2\x80\x9cto the use of Osbert and his heirs.\xe2\x80\x9d Then he writes a letter to\nTheobald, instructing Theobald to convey Blackacre to Bartholomew at Osbert\xe2\x80\x99s death.\nThis works. When Osbert dies, Theobald owns Blackacre, so primogeniture never kicks\nin. Then Theobald conveys to Bartholomew while they are both alive, so again the\n402\n\n\x0cTrusts and Corporations\n\n403\n\nconveyance is perfectly good. What\xe2\x80\x99s more, Osbert can change his instructions to\nTheobald at any time by writing a new letter. And as an added bonus, because the land\nnever passes by intestacy, the \xe2\x80\x9cfeudal incidents\xe2\x80\x9d\xe2\x80\x93 effectively taxes payable to Leonard\nwhen a new tenant inherits\xe2\x80\x94never become due. Uses became highly popular for\nsolving numerous similar problems created by the inflexibility of the medieval system\nof interests in land.\nBut there was a fly in the ointment. As far as the law courts could see\xe2\x80\x94or rather, as\nfar as they were willing to look\xe2\x80\x94the \xe2\x80\x9cto the use of\xe2\x80\x9d language was a superfluous,\nmeaningless, and ineffective addition to an otherwise valid conveyance. On their view\nof the situation, Theobald owns Blackacre in fee simple once Osbert conveys to him.\nOsbert\xe2\x80\x99s subsequent letter is a worthless piece of paper; much as if you wrote to Bill\nGates telling him to convey to you some lakefront property in Washington. So if\nTheobald turned out to be untrustworthy and held on to Blackacre for himself or\nconveyed it to Aylwin contrary to Osbert\xe2\x80\x99s instructions, Osbert\xe2\x80\x99s plan would come to\nruin. In such cases, Osbert and Bartholomew could obtain relief from the Chancellor,\nwho would hold that Theobald was under a duty in equity and good conscience to\nfollow Osbert\xe2\x80\x99s instructions.\nThe use thus created what we would today call an \xe2\x80\x9cequitable interest\xe2\x80\x9d in land. Theobald\nremained the legal owner of Blackacre while he held it to the use of Osbert and his heirs,\nbut Osbert was the equitable owner, since he could enforce his claims and instructions\nin a court of equity. Over time a variety of similar situations, in which Chancery would\nenforce interests in land legally owned by another, gave rise to a reasonably coherent\nbody of equitable jurisdiction, equitable doctrine, and equitable interests in property.\nThe use is long gone, along with the medieval doctrines that necessitated it, but the\nmodern trust shares its essential characteristics. A trust requires three people and one\nthing. The people are the settlor, who creates the trust; the trustee, who holds legal title\nto the trust property and is responsible for following the settlor\xe2\x80\x99s instructions, and the\nbeneficiary, who is entitled to receive distributions from the trust in accordance with the\nsettlor\xe2\x80\x99s instructions but does not directly control it. The thing is the trust property (or\nsometimes res, Latin for \xe2\x80\x9cthing,\xe2\x80\x9d or corpus, Latin for \xe2\x80\x9cbody\xe2\x80\x9d), whose ownership is split\nbetween the trustee (with legal title) and the beneficiary (with equitable title).\n\n\x0c404\n\nProperty\nRothko v. Reis (In re Estate of Rothko)\n372 N.E.2d 291 (N.Y. 1977)\n\nCOOKE, Judge.\nMark Rothko, an abstract expressionist painter whose works through the years gained\nfor him an international reputation of greatness, died testate on February 25, 1970. The\nprincipal asset of his estate consisted of 798 paintings of tremendous value, and the\ndispute underlying this appeal involves the conduct of his three executors in their\ndisposition of these works of art. In sum, that conduct as portrayed in the record and\nsketched in the opinions was manifestly wrongful and indeed shocking.\nRothko\xe2\x80\x99s will was admitted to probate on April 27, 1970 and letters testamentary were\nissued to Bernard J. Reis, Theodoros Stamos and Morton Levine. Hastily and within a\nperiod of only about three weeks and by virtue of two contracts each dated May 21,\n1970, the executors dealt with all 798 paintings.\nBy a contract of sale, the estate executors agreed to sell to Marlborough A.G., a\nLiechtenstein corporation (hereinafter MAG), 100 Rothko paintings as listed for\n$1,800,000, $200,000 to be paid on execution of the agreement and the balance of\n$1,600,000 in 12 equal interest-free installments over a 12-year period. Under the\nsecond agreement, the executors consigned to Marlborough Gallery, Inc., a domestic\ncorporation (hereinafter MNY), \xe2\x80\x9capproximately 700 paintings listed on a Schedule to\nbe prepared\xe2\x80\x9d, the consignee to be responsible for costs covering items such as\ninsurance, storage restoration and promotion. By its provisos, MNY could sell up to\n35 paintings a year from each of two groups, pre-1947 and post-1947, for 12 years at\nthe best price obtainable but not less than the appraised estate value, and it would\nreceive a 50% commission on each painting sold, except for a commission of 40% on\nthose sold to or through other dealers.\nPetitioner Kate Rothko, decedent\xe2\x80\x99s daughter and a person entitled to share in his estate\nby virtue of an election under EPTL 5-3.3, instituted this proceeding to remove the\nexecutors, to enjoin MNY and MAG from disposing of the paintings, to rescind the\naforesaid agreements between the executors and said corporations, for a return of the\npaintings still in possession of those corporations, and for damages. She was joined by\nthe guardian of her brother Christopher Rothko, likewise interested in the estate, who\nanswered by adopting the allegations of his sister\xe2\x80\x99s petition and by demanding the same\n\n\x0cTrusts and Corporations\n\n405\n\nrelief. The Attorney-General of the State, as the representative of the ultimate\nbeneficiaries of the Mark Rothko Foundation, Inc., a charitable corporation and the\nresiduary legatee under decedent\xe2\x80\x99s will, joined in requesting relief substantially similar\nto that prayed for by petitioner. \xe2\x80\xa6\nFollowing a nonjury trial covering 89 days and in a thorough opinion, the Surrogate\nfound: that Reis was a director, secretary and treasurer of MNY, the consignee art\ngallery, in addition to being a coexecutor of the estate; that the testator had a 1969 inter\nvivos contract with MNY to sell Rothko\xe2\x80\x99s work at a commission of only 10% and\nwhether that agreement survived testator\xe2\x80\x99s death was a problem that a fiduciary in a\ndual position could not have impartially faced; that Reis was in a position of serious\nconflict of interest with respect to the contracts of May 21, 1970 and that his dual role\nand planned purpose benefited the Marlborough interests to the detriment of the\nestate; that it was to the advantage of coexecutor Stamos as a \xe2\x80\x9cnot-too-successful artist,\nfinancially\xe2\x80\x9d, to curry favor with Marlborough and that the contract made by him with\nMNY within months after signing the estate contracts placed him in a position where\nhis personal interests conflicted with those of the estate, especially leading to lax\ncontract enforcement efforts by Stamos; that Stamos acted negligently and\nimprovidently in view of his own knowledge of the conflict of interest of Reis; that the\nthird coexecutor, Levine, while not acting in self-interest or with bad faith, nonetheless\nfailed to exercise ordinary prudence in the performance of his assumed fiduciary\nobligations since he was aware of Reis\xe2\x80\x99 divided loyalty, believed that Stamos was also\nseeking personal advantage, possessed personal opinions as to the value of the\npaintings and yet followed the leadership of his coexecutors without investigation of\nessential facts or consultation with competent and disinterested appraisers, and that the\nbusiness transactions of the two Marlborough corporations were admittedly controlled\nand directed by Francis K. Lloyd. It was concluded that the acts and failures of the\nthree executors were clearly improper to such a substantial extent as to mandate their\nremoval under SCPA 711 as estate fiduciaries. The Surrogate also found that MNY,\nMAG and Lloyd were guilty of contempt in shipping, disposing of and selling 57\npaintings in violation of the temporary restraining order dated June 26, 1972 and of the\ninjunction dated September 26, 1972; that the contracts for sale and consignment of\npaintings between the executors and MNY and MAG provided inadequate value to the\nestate, amounting to a lack of mutuality and fairness resulting from conflicts on the\npart of Reis and Stamos and improvidence on the part of all executors; that said\n\n\x0c406\n\nProperty\n\ncontracts were voidable and were set aside by reason of violation of the duty of loyalty\nand improvidence of the executors, knowingly participated in and induced by MNY\nand MAG; that the fact that these agreements were voidable did not revive the 1969\ninter vivos agreements since the parties by their conduct evinced an intent to abandon\nand abrogate these compacts. The Surrogate held that the present value at the time of\ntrial of the paintings sold is the proper measure of damages as to MNY, MAG, Lloyd,\nReis and Stamos. He imposed a civil fine of $3,332,000 upon MNY, MAG and Lloyd,\nsame being the appreciated value at the time of trial of the 57 paintings sold in violation\nof the temporary restraining order and injunction. It was held that Levine was liable\nfor $6,464,880 in damages, as he was not in a dual position acting for his own interest\nand was thus liable only for the actual value of paintings sold MNY and MAG as of\nthe dates of sale, and that Reis, Stamos, MNY and MAG, apart from being jointly and\nseverally liable for the same damages as Levine for negligence, were liable for the\ngreater sum of $9,252,000 \xe2\x80\x9cas appreciation damages less amounts previously paid to\nthe estate with regard to sales of paintings.\xe2\x80\x9d The cross petition of the Attorney-General\nto reopen the record for submission of newly discovered documentary evidence was\ndenied. The liabilities were held to be congruent so that payment of the highest sum\nwould satisfy all lesser liabilities including the civil fines and the liabilities for damages\nwere to be reduced by payment of the fine levied or by return of any of the 57 paintings\ndisposed of, the new fiduciary to have the option in the first instance to specify which\npaintings the fiduciary would accept. [The Appellate Division affirmed.]\nIn seeking a reversal, it is urged that an improper legal standard was applied in voiding\nthe estate contracts of May, 1970, that the \xe2\x80\x9cno further inquiry\xe2\x80\x9d rule applies only to selfdealing and that in case of a conflict of interest, absent self-dealing, a challenged\ntransaction must be shown to be unfair. The subject of fairness of the contracts is\nintertwined with the issue of whether Reis and Stamos were guilty of conflicts of\ninterest. 2 [Austin W. Scott Jr., Scott on Trusts] is quoted to the effect that \xe2\x80\x9c(a) trustee\n\nIn New York, an executor, as such, takes a qualified legal title to all personalty specifically bequeathed and an\nunqualified legal title to that not so bequeathed; he holds not in his own right but as a trustee for the benefit of\ncreditors, those entitled to receive under the will and, if all is not bequeathed, those entitled to distribution under\nthe EPTL.\n\n2\n\n\x0cTrusts and Corporations\n\n407\n\ndoes not necessarily incur liability merely because he has an individual interest in the\ntransaction \xe2\x80\xa6 .\xe2\x80\x9d\nThese contentions should be rejected. First, a review of the opinions of the Surrogate\nand the Appellate Division manifests that they did not rely solely on a \xe2\x80\x9cno further\ninquiry rule\xe2\x80\x9d, and secondly, there is more than an adequate basis to conclude that the\nagreements between the Marlborough corporations and the estate were neither fair nor\nin the best interests of the estate. This is demonstrated, for example, by the comments\nof the Surrogate concerning the commissions on the consignment of the 698 paintings\nand those of the Appellate Division concerning the sale of the 100 paintings. The\nopinions under review demonstrate that neither the Surrogate nor the Appellate\nDivision set aside the contracts by merely applying the no further inquiry rule without\nregard to fairness. Rather they determined, quite properly indeed, that these agreements\nwere neither fair nor in the best interests of the estate.\nTo be sure, the assertions that there were no conflicts of interest on the part of Reis or\nStamos indulge in sheer fantasy. Besides being a director and officer of MNY, for which\nthere was financial remuneration, however slight, Reis, as noted by the Surrogate, had\ndifferent inducements to favor the Marlborough interests, including his own\naggrandizement of status and financial advantage through sales of almost one million\ndollars for items from his own and his family\xe2\x80\x99s extensive private art collection by the\nMarlborough interests. Similarly, Stamos benefited as an artist under contract with\nMarlborough and, interestingly, Marlborough purchased a Stamos painting from a third\nparty for $4,000 during the week in May, 1970 when the estate contract negotiations\nwere pending. The conflicts are manifest. Further, as noted in Bogert, Trusts and\nTrustees (2d ed.), \xe2\x80\x9cThe duty of loyalty imposed on the fiduciary prevents him from\naccepting employment from a third party who is entering into a business transaction\nwith the trust\xe2\x80\x9d (s 543, subd. (S), p. 573). \xe2\x80\x9cWhile he (a trustee) is administering the trust\nhe must refrain from placing himself in a position where his personal interest or that\nof a third person does or may conflict with the interest of the beneficiaries\xe2\x80\x9d (Bogert,\nTrusts (Hornbook Series 5th ed.), p. 343). Here, Reis was employed and Stamos\nbenefited in a manner contemplated by Bogert. In short, one must strain the law rather\nthan follow it to reach the result suggested on behalf of Reis and Stamos.\n\n\x0c408\n\nProperty\n\nLevine contends that, having acted prudently and upon the advice of counsel, a\ncomplete defense was established. Suffice it to say, an executor who knows that his\ncoexecutor is committing breaches of trust and not only fails to exert efforts directed\ntowards prevention but accedes to them is legally accountable even though he was\nacting on the advice of counsel. When confronted with the question of whether to\nenter into the Marlborough contracts, Levine was acting in a business capacity, not a\nlegal one, in which he was required as an executor primarily to employ such diligence\nand prudence to the care and management of the estate assets and affairs as would\nprudent persons of discretion and intelligence, accented by \xe2\x80\x9c(n)ot honesty alone, but\nthe punctilio of an honor the most sensitive\xe2\x80\x9d (Meinhard v. Salmon, 164 N.E. 545, 546\n(N.Y. 1928). Alleged good faith on the part of a fiduciary forgetful of his duty is not\nenough. He could not close his eyes, remain passive or move with unconcern in the\nface of the obvious loss to be visited upon the estate by participation in those business\narrangements and then shelter himself behind the claimed counsel of an attorney.\nFurther, there is no merit to the argument that MNY and MAG lacked notice of the\nbreach of trust. The record amply supports the determination that they are chargeable\nwith notice of the executors\xe2\x80\x99 breach of duty.\n\n\x0cTrusts and Corporations\n\n409\nNotes and Questions\n\n1. DAR WILLIAMS, MARK ROTHKO SONG (Razor & Tie 1993):\nThe blue it speaks so full\nIt\xe2\x80\x99s like the beauty, one can barely stand\nOr too much things dropped in your hand\nAnd there\xe2\x80\x99s a green like the peace in your heart sometimes \xe2\x80\xa6\nI met her at the funeral\nShe said, \xe2\x80\x9cI don\xe2\x80\x99t know what he meant to me\nI just know he affected me\nAn effect not unlike his art, I believe\xe2\x80\x9d\n2. As Rothko illustrates, trusts can arise in a variety of settings. The executor of a\nwill and the administrator of an estate in intestacy act as trustees for the parties\nwho are to receive the decedent\xe2\x80\x99s property. The estate of a bankrupt firm or\nindividual is also managed by a trustee, who acts to maximize its value for the\ncreditors.\nThere are many kinds of trusts. Private trusts have identifiable individual\nbeneficiaries. There are also charitable trusts, which can serve broader social\npurposes and large classes of unidentified beneficiaries, and business trusts, in\nwhich trustees manage financial assets for specific purposes. Many retirement\nfunds, for example, are organized as trusts with the employees who are entitled\nto pensions as beneficiaries. Another common distinction is between revocable\ntrusts, which the settlor can terminate, and irrevocable trusts, which she cannot.\nTrusts can also be inter vivos, i.e. established by the settlor during her lifetime, or\ntestamentary, i.e. created in the settlor\xe2\x80\x99s will.\n3. The basic duties of a trustee are obedience to the instructions given by the settlor,\nloyalty to the interests of the beneficiaries (rather than the trustee\xe2\x80\x99s own interests),\nand prudence in managing the trust assets appropriately. Various subsidiary duties,\nsuch as the duty to account for the trust assets and how they have been used,\nensure that the basic duties are carried out faithfully. Which of these duties did\nthe different trustees in Rothko violate? Observe the different standards of care\nrequired for the trustees: why is the standard of loyalty so much more stringent\nthan the standard of prudence? Which of these duties should the settlor be able\n\n\x0c410\n\nProperty\nto waive when he or she sets up the trust? Which of them should the\nbeneficiaries be able to waive? To make this more concrete, do you think that\nMark Rothko wanted his executors to sell off his paintings quickly to\nMarlborough? If so, should he have been allowed to specify so, and how? On\nthe other side, could Kate Rothko and the other heirs have given permission\nfor the sale, and if so, what form of notice and consent would the trustees have\nneeded to get?\n4. In an omitted part of the opinion, the Rothko court discussed the proper\nmeasure of damages. It upheld the Surrogate\xe2\x80\x99s decision to award appreciation\ndamages, i.e. the value of the wrongfully sold paintings as of the time of the\nSurrogate\xe2\x80\x99s decree. This ended up being an especially large sum because the\nprice of Rothko works rose rapidly after his death (and continued rising well\nafter Rothko). Although sometimes justified in deterrence terms, it is a bit of an\nanomalous remedy in trust law and has been criticized by trusts scholars:\nholding trustees accountable for increases in value after they sell off trust assets\nis unusual. Two other damage measures are more common. One is the familiar\nmake-whole remedy of tort law: if the trustees\xe2\x80\x99 breach of trust has reduced the\nvalue of the trust corpus, they are liable for the difference between the trust\xe2\x80\x99s\nactual value and what it would have been if not for the breach. This damage\nmeasure makes evident sense against the trustee who imprudently sells a trust\nasset too cheaply, or who holds on to an asset after a prudent trustee would\nhave sold it, or who imprudently fails to diversify a trust corpus that is\nconcentrated in a single risky asset. But breach of the duty of loyalty often calls\nfor something more. Take the trustee who withdraws $50,000 from a trust then\ngoes on a gambling spree in Las Vegas and wins an additional $100,000. Letting\nthe trustee deposit the original $50,000 back in the trust and walk away with the\n$100,000 in gambling winnings would make the trust whole, but it would also\nleave trustees with a temptation to gamble\xe2\x80\x94literally and figuratively\xe2\x80\x94with trust\nassets for their own gain. In these circumstances, the usual remedy is restitution:\nthe trustee must disgorge her ill-gotten gains back to the trust. Even if this gives\nthe beneficiaries a windfall, the trustee would be unjustly enriched were she\nallowed to keep the gains. (Do you see how appreciation damages go even\nfurther than either of these measures?)\n\n\x0cTrusts and Corporations\n\n411\n\nObserve that the restitutionary remedy involves a kind of tracing: the\nbeneficiaries are regarded as having a right to the property in the trust corpus,\nand they can reclaim that property even as the trustee modifies it or changes its\nform. So if the trustee buys a Picasso with the trust corpus, and the Picasso\nincreases in value, and the trustee then sells it, she will be required to pay back\nthe full amount she received for the Picasso. Query: just the trustee? Why can\xe2\x80\x99t\nKate Rothko et al. recover her father\xe2\x80\x99s paintings from the people Marlborough\nsold them to? What about the paintings sold to Marlborough but not yet resold\nby it?\n5. A trust beneficiary has equitable title to trust assets. Equitable title is not legal\ntitle, as illustrated by spendthrift trusts. Suppose that the fabulously wealthy\nparents of Rick von Slonecker, currently 28 and never employed, decide that\nthey want their son to enjoy a luxurious lifestyle, so they create in their wills a\ntrust to pay Rick $1 million a year for life, with the remainder to go either to his\nchildren, or if there are none, to various charitable causes. (Side note: observe\nthe great flexibility provided by the trust form; equitable interests are almost\nalways better alternatives to legal ones in any complicated property settlement,\ngiven the notorious inflexibility and troublesome traps of the system of estates\nin land.) They fear, not without reason, that Rick will run up gambling debts\nand want to pay off large legal settlements quietly. So they put a clause in the\ntrust instrument making abundantly clear that the monthly payments are to go\ndirectly to Rick and no one else, and that Rick shall have no power to encumber\nthe trust corpus. Now, in many states, when the casino comes calling and\nwaving its bill, it must pursue Rick directly, even though he is penniless except\nfor a few days immediately after each check arrives from the trust. It would be\nmore convenient for the casino either to collect its debts from the trust corpus,\nor to obtain an order directing the trustee to pay it instead, but the casino has\nno more rights to the trust than Rick does, and Rick holds only an equitable interest\nin the trust.\nIs it fair and just for Rick\xe2\x80\x99s parents to help Rick escape his debts in this way?\nOne might think that there would be an obvious motivation for states to protect\nlegitimate creditors against the various asset-shielding uses and abuses of trusts,\nbut the trend has been in the other direction. Competition for trust business has\n\n\x0c412\n\nProperty\ninduced numerous jurisdictions to adopt highly settlor-friendly trust law, such\nas validating spendthrift trusts like Rick\xe2\x80\x99s or weakening the Rule Against\nPerpetuities to attract long-lived dynastic trusts with beneficiaries spread out\nover many generations in a family. There are even asset-protection trusts, in\nwhich the settlor is also the principal beneficiary; the goal is that she can draw\non the trust but her creditors cannot. These legal concessions to settlors can\nbenefit state economies because trustees are entitled to compensation for\nmanaging trust assets, and many financial and legal service providers offer\nprofessional trust management services. But these benefits come at the expense\nof frustrated creditors and current generations bound by the dead-hand control\nof long-gone settlors. Is this a worthwhile trade for state legislatures to make?\n\nAd for Bessemer Trust, June 2014, New York Times Magazine: \xe2\x80\x9cAt Bessemer Trust, we believe maintaining wealth\nfrom generation to generation is the true art of wealth management\xe2\x80\xa6. History is littered with family names once\nassociated with great wealth that are now mere footnotes. Everything we do is designed to keep you from becoming\none of them.\xe2\x80\x9d\n\n6. There is at least one way in which courts do not pursue the legal fiction that the\ntrustee has legal title to trust assets through to its logical conclusion. Suppose\nthe trustee (rather than the beneficiary) has a gambling problem and racks up\n$500,000 in personal gambling debts. Can the casino collect out of the trust\n\n\x0cTrusts and Corporations\n\n413\n\ncorpus? Strict logic would say yes; they are the trustee\xe2\x80\x99s property. But Section\n507 of the Uniform Trust Code flatly says no: \xe2\x80\x9cTrust property is not subject to\npersonal obligations of the trustee, even if the trustee becomes insolvent or\nbankrupt.\xe2\x80\x9d See also 11 U.S.C. \xc2\xa7 541(d) (exempting from a debtor\xe2\x80\x99s estate in\nbankruptcy \xe2\x80\x9c[p]roperty in which the debtor holds, as of the commencement of\nthe case, only legal title and not an equitable interest.\xe2\x80\x9d) Note that this rule cannot\nbe justified using the usual principle that one is not bound by prior equitable\ninterests of which one has no notice, since it affects even creditors who have\nno notice of the trust. Only if the trustee affirmatively commits breach of trust\nby withdrawing trust assets can she possibly be subjected to third-party claims.\n(Incidentally, what about the settlor\xe2\x80\x99s creditors? Should they be able to reach trust\nassets?)\n\nB. Corporations\nWalkovszky v. Carlton\n18 N.Y.2d 414 (1966)\nFULD, Justice:\nThis case involves what appears to be a rather common practice in the taxicab industry\nof vesting the ownership of a taxi fleet in many corporations, each owning only one or\ntwo cabs.\nThe complaint alleges that the plaintiff was severely injured four years ago in New York\nCity when he was run down by a taxicab owned by the defendant Seon Cab\nCorporation and negligently operated at the time by the defendant Marchese. The\nindividual defendant, Carlton, is claimed to be a stockholder of 10 corporations,\nincluding Seon, each of which has but two cabs registered in its name, and it is implied\nthat only the minimum automobile liability insurance required by law (in the amount\nof $10,000) is carried on any one cab. Although seemingly independent of one another,\nthese corporations are alleged to be \xe2\x80\x9coperated \xe2\x80\xa6 as a single entity, unit and enterprise\xe2\x80\x9d\nwith regard to financing, supplies, repairs, employees and garaging, and all are named\nas defendants. The plaintiff asserts that he is also entitled to hold their stockholders\npersonally liable for the damages sought because the multiple corporate structure\nconstitutes an unlawful attempt \xe2\x80\x9cto defraud members of the general public\xe2\x80\x9d who might\nbe injured by the cabs. ...\n\n\x0c414\n\nProperty\n\nThe law permits the incorporation of a business for the very purpose of enabling its\nproprietors to escape personal liability but, manifestly, the privilege is not without its\nlimits. Broadly speaking, the courts will disregard the corporate form, or, to use\naccepted terminology, \xe2\x80\x9cpierce the corporate veil\xe2\x80\x9d, whenever necessary \xe2\x80\x9cto prevent\nfraud or to achieve equity\xe2\x80\x9d. In determining whether liability should be extended to\nreach assets beyond those belonging to the corporation, we are guided, as Judge\nCardozo noted, by \xe2\x80\x9cgeneral rules of agency\xe2\x80\x9d. In other words, whenever anyone uses\ncontrol of the corporation to further his own rather than the corporation\xe2\x80\x99s business,\nhe will be liable for the corporation\xe2\x80\x99s acts \xe2\x80\x9cupon the principle of respondeat superior\napplicable even where the agent is a natural person\xe2\x80\x9d. Such liability, moreover, extends\nnot only to the corporation\xe2\x80\x99s commercial dealings but to its negligent acts as well.\nIn the Mangan case, the plaintiff was injured as a result of the negligent operation of a\ncab owned and operated by one of four corporations affiliated with the defendant\nTerminal. Although the defendant was not a stockholder of any of the operating\ncompanies, both the defendant and the operating companies were owned, for the most\npart, by the same parties. The defendant\xe2\x80\x99s name (Terminal) was conspicuously\ndisplayed on the sides of all of the taxis used in the enterprise and, in point of fact, the\ndefendant actually serviced, inspected, repaired and dispatched them. These facts were\ndeemed to provide sufficient cause for piercing the corporate veil of the operating\ncompany \xe2\x80\x94 the nominal owner of the cab which injured the plaintiff \xe2\x80\x94 and holding\nthe defendant liable. The operating companies were simply instrumentalities for\ncarrying on the business of the defendant without imposing upon it financial and other\nliabilities incident to the actual ownership and operation of the cabs. \xe2\x80\xa6\nThe individual defendant is charged with having \xe2\x80\x9corganized, managed, dominated and\ncontrolled\xe2\x80\x9d a fragmented corporate entity but there are no allegations that he was\nconducting business in his individual capacity. Had the taxicab fleet been owned by a\nsingle corporation, it would be readily apparent that the plaintiff would face formidable\nbarriers in attempting to establish personal liability on the part of the corporation\xe2\x80\x99s\nstockholders. The fact that the fleet ownership has been deliberately split up among\nmany corporations does not ease the plaintiff\xe2\x80\x99s burden in that respect. The corporate\nform may not be disregarded merely because the assets of the corporation, together\nwith the mandatory insurance coverage of the vehicle which struck the plaintiff, are\ninsufficient to assure him the recovery sought. If Carlton were to be held individually\n\n\x0cTrusts and Corporations\n\n415\n\nliable on those facts alone, the decision would apply equally to the thousands of cabs\nwhich are owned by their individual drivers who conduct their businesses through\ncorporations organized pursuant to section 401 of the Business Corporation Law and\ncarry the minimum insurance required by subdivision 1 (par. [a]) of section 370 of the\nVehicle and Traffic Law. These taxi owner-operators are entitled to form such\ncorporations, and we agree with the court at Special Term that, if the insurance\ncoverage required by statute \xe2\x80\x9cis inadequate for the protection of the public, the remedy\nlies not with the courts but with the Legislature.\xe2\x80\x9d It may very well be sound policy to\nrequire that certain corporations must take out liability insurance which will afford\nadequate compensation to their potential tort victims. However, the responsibility for\nimposing conditions on the privilege of incorporation has been committed by the\nConstitution to the Legislature and it may not be fairly implied, from any statute, that\nthe Legislature intended, without the slightest discussion or debate, to require of taxi\ncorporations that they carry automobile liability insurance over and above that\nmandated by the Vehicle and Traffic Law.\nThis is not to say that it is impossible for the plaintiff to state a valid cause of action\nagainst the defendant Carlton. However, the simple fact is that the plaintiff has just not\ndone so here. While the complaint alleges that the separate corporations were\nundercapitalized and that their assets have been intermingled, it is barren of any\n\xe2\x80\x9csufficiently particular[ized] statements\xe2\x80\x9d that the defendant Carlton and his associates\nare actually doing business in their individual capacities, shuttling their personal funds\nin and out of the corporations \xe2\x80\x9cwithout regard to formality and to suit their immediate\nconvenience.\xe2\x80\x9d Such a \xe2\x80\x9cperversion of the privilege to do business in a corporate form\xe2\x80\x9d\nwould justify imposing personal liability on the individual stockholders. Nothing of the\nsort has in fact been charged, and it cannot reasonably or logically be inferred from the\nhappenstance that the business of Seon Cab Corporation may actually be carried on by\na larger corporate entity composed of many corporations which, under general\nprinciples of agency, would be liable to each other\xe2\x80\x99s creditors in contract and in tort.\nIn point of fact, the principle relied upon in the complaint to sustain the imposition of\npersonal liability is not agency but fraud. Such a cause of action cannot withstand\nanalysis. If it is not fraudulent for the owner-operator of a single cab corporation to\ntake out only the minimum required liability insurance, the enterprise does not become\neither illicit or fraudulent merely because it consists of many such corporations. The\n\n\x0c416\n\nProperty\n\nplaintiff\xe2\x80\x99s injuries are the same regardless of whether the cab which strikes him is\nowned by a single corporation or part of a fleet with ownership fragmented among\nmany corporations. Whatever rights he may be able to assert against parties other than\nthe registered owner of the vehicle come into being not because he has been defrauded\nbut because, under the principle of respondeat superior, he is entitled to hold the whole\nenterprise responsible for the acts of its agents.\nIn sum, then, the complaint falls short of adequately stating a cause of action against\nthe defendant Carlton in his individual capacity. \xe2\x80\xa6\nNotes and Questions\n1. Corporate structure sharply distinguishes between two kinds of property.\nCorporate assets, like the cabs in Walkovszky, belong to the corporation. Corporate\nshares belong to the corporation\xe2\x80\x99s shareholders; they give the holders rights to\nshare in the corporation\xe2\x80\x99s profits and to control the corporation\xe2\x80\x99s activities. So\nthe shareholders own the corporation, which owns its assets\xe2\x80\x94but the\nshareholders do not directly own or control the assets. Instead, in a business\ncorporation (there are also nonprofit corporations, municipal corporations, and\nmore), the shareholders elect a board of directors, which is responsible for\noperating the company. The board typically hires corporate officers and\ndelegates day-to-day operations to them, but in theory it can take the reins when\nneeded\xe2\x80\x94and must do so for major corporate activities like mergers. If\nshareholders do not like how the board of directors are running the corporation,\ntheir two options are to sell their shares (if they can) or to elect new directors\n(if they can). Understanding this structure is crucial for understanding corporate\nlaw and the treatment of corporate property.\n2. What purpose can possibly be served by allowing Carlton to escape liability for\nthe injuries tortiously caused by the taxicab companies he owns and controls?\nIsn\xe2\x80\x99t limited liability an open invitation to pillage and lay waste? Should there\nperhaps be a distinction between (typically voluntary) contract creditors and\n(typically involuntary) tort creditors? Or between closely held corporations with\none or a few shareholders and public corporations whose shares are traded on\nmajor stock markets and held by thousands or millions of shareholders?\n\n\x0cTrusts and Corporations\n\n417\n\n3. The reverse of limited liability is asset partitioning: just as Seon\xe2\x80\x99s creditors can\xe2\x80\x99t\nreach outside the corporation to Carlton\xe2\x80\x99s personal assets, Carlton\xe2\x80\x99s personal\ncreditors can\xe2\x80\x99t reach inside the corporation to Seon\xe2\x80\x99s corporate assets. Is there\nanything his creditors can do to get at the wealth sitting inside Seon and its\ncorporate siblings?\n4. In the aftermath of Walkovsky, the New York legislature increased the required\ninsurance coverage for taxicab operators, but it left alone the state\xe2\x80\x99s law of veilpiercing. Does this suggest that the case was rightly or wrongly decided?\n5. How does Walkovsky encourage taxicab companies to structure their\nbusinesses? This is a recurring problem in corporate and commercial law (which\nwill become apparent in the mortgage crisis section): parties will arrange a\ncorporate or transactional form to gain specific advantages while isolating\nthemselves from the associated legal risks. In securitization, for example, a\ngroup of assets is pushed into a separate legal entity, isolating them from claims\nagainst their corporate parent, and vice-versa. If the new entity defaults on its\nobligations, the company that loaded it up with toxic junk will avoid liability\xe2\x80\x94\nor such is the plan, anyway.\n6. In an earlier era, corporations were charted by state legislatures for specific\npurposes: e.g., building a bridge. Today, incorporation is generally a matter of\nstatutory right and a business corporation can be created for any lawful purpose.\nWhat are the purposes of business corporation\xe2\x80\x94or put another way, to whom\nis it responsible and for what? Is the board under a legal or moral duty to\nmaximize profits to the shareholders above all else? Compare, e.g., Milton\nFreedman, The Social Responsibility of Business is to Increase its Profits, N.Y. TIMES,\nSept. 30, 1970, at SM17 (yes), with, e.g., LYNN STOUT, THE MYTH OF\nSHAREHOLDER VALUE, HOW PUTTING SHAREHOLDERS FIRST HARMS\nINVESTORS, CORPORATIONS, AND THE PUBLIC (2012) (no). If so, how much of\na duty is it, given the extreme latitude of the business judgment rule? Some\ncourts, while strongly deferential to board decisions most of the time, apply a\nhigher level of scrutiny in cases involving corporate mergers, when the only\nquestion the board faces is how much money shareholders will receive for their\n\n\x0c418\n\nProperty\nshares from someone trying to buy up the corporation. See, e.g., Revlon, Inc. v.\nMacAndrews & Forbes Holdings, 506 A.2d 173 (Del. 1986).\n\n\x0cCo-ownership and Marital Property\nMore than one person can \xe2\x80\x9cown\xe2\x80\x9d a thing at any given time. Their rights will be\nexclusive as against the world, but not exclusive as against each other. When conflicts\nbetween them develop, or when the outside world seeks to regulate their behavior, we\nneed to understand the nature and limits of their rights.\nIn this section, we will not address the form of concurrent ownership known as\npartnership, which we cover separately, though you will see some comparative\nreferences to it in the case that follows. Nor will we address corporations (in which\nownership can be nearly infinitely divided and is separated from control; see the Trusts\nand Corporations chapter). These topics are dealt with in detail in business associations\nand similar courses. We will also not consider forms of concurrent ownership that are\nof purely historical interest, such as coparceny. * The main types of co-ownership we\nwill consider are (1) tenancy in common, (2) joint tenancy, and (3) tenancy by the\nentireties, along with a brief look at (4) community property, a particular kind of coownership available in some states.\nIn the late 1980s, a sample of real estate records showed that about two-thirds of\nresidential properties were held in some form of co-ownership. \xe2\x80\xa0 Given that many\njustifications for the institution of private property rely on the idea that competing\ninterests in property lead to inefficiency, waste, and conflict, it is perhaps surprising\nthat so much private property is, in practice, owned by more than one person. If\n\n*\n\nA form of ownership only available to female heirs, when there were no male heirs.\n\nEvelyn Alicia Lewis, Struggling with Quicksand: The Ins and Outs of Cotenant Possession Value Liability and a Call for\nDefault Rule Reform, 1994 WIS. L. REV. 331; see also CAROLE SHAMMAS ET AL., INHERITANCE IN AMERICA FROM\nCOLONIAL TIMES TO THE PRESENT 171-72 (1987) (showing percentage of land held in joint tenancies rising from\nunder 1% in 1890 to nearly 80% in 1960, then dropping to 63% in 1980); N. William Hines, Real Property Joint\nTenancies: Law, Fact, and Fancy, 51 IOWA L. REV. 582 (1966) (finding that joint tenancies in Iowa rose from under\n1% of acquisitions in 1933 to over a third of farm acquisitions and over half of urban acquisitions in 1964, almost\nexclusively by married couples); Yale B. Griffith, Community Property in Joint Tenancy Form, 14 STAN. L. REV. 87\n(1961) (study of California counties in 1959 and 1960 finding that married couples held over two-thirds of\nproperty as cotenants, 85% of which was as joint tenants).\n\xe2\x80\xa0\n\n419\n\n\x0c420\n\nProperty\n\ncommunal ownership is so inefficient, why do we recognize so many kinds of coownership?\n\nA. Types of Co-Ownership: Introduction\nU.S. v. Craft\n535 U.S. 274 (2002)\nJustice O\xe2\x80\x99CONNOR delivered the opinion of the Court.\n\xe2\x80\xa6 English common law provided three legal structures for the concurrent ownership\nof property that have survived into modern times: tenancy in common, joint tenancy,\nand tenancy by the entirety. The tenancy in common is now the most common form\nof concurrent ownership. The common law characterized tenants in common as each\nowning a separate fractional share in undivided property. Tenants in common may each\nunilaterally alienate their shares through sale or gift or place encumbrances upon these\nshares. They also have the power to pass these shares to their heirs upon death. Tenants\nin common have many other rights in the property, including the right to use the\nproperty, to exclude third parties from it, and to receive a portion of any income\nproduced from it.\nJoint tenancies were the predominant form of concurrent ownership at common law,\nand still persist in some States today. The common law characterized each joint tenant\nas possessing the entire estate, rather than a fractional share: \xe2\x80\x9c[J]oint-tenants have one\nand the same interest \xe2\x80\xa6 held by one and the same undivided possession.\xe2\x80\x9d Joint tenants\npossess many of the rights enjoyed by tenants in common: the right to use, to exclude,\nand to enjoy a share of the property\xe2\x80\x99s income. The main difference between a joint\ntenancy and a tenancy in common is that a joint tenant also has a right of automatic\ninheritance known as \xe2\x80\x9csurvivorship.\xe2\x80\x9d Upon the death of one joint tenant, that tenant\xe2\x80\x99s\nshare in the property does not pass through will or the rules of intestate succession;\nrather, the remaining tenant or tenants automatically inherit it. Joint tenants\xe2\x80\x99 right to\nalienate their individual shares is also somewhat different. In order for one tenant to\nalienate his or her individual interest in the tenancy, the estate must first be severed\xe2\x80\x94\nthat is, converted to a tenancy in common with each tenant possessing an equal\nfractional share. Most States allowing joint tenancies facilitate alienation, however, by\n\n\x0cCo-ownership and Marital Property\n\n421\n\nallowing severance to automatically accompany a conveyance of that interest or any\nother overt act indicating an intent to sever.\nA tenancy by the entirety is a unique sort of concurrent ownership that can only exist\nbetween married persons. Because of the common-law fiction that the husband and\nwife were one person at law (that person, practically speaking, was the husband),\nBlackstone did not characterize the tenancy by the entirety as a form of concurrent\nownership at all. Instead, he thought that entireties property was a form of single\nownership by the marital unity. Neither spouse was considered to own any individual\ninterest in the estate; rather, it belonged to the couple.\nLike joint tenants, tenants by the entirety enjoy the right of survivorship. Also like a\njoint tenancy, unilateral alienation of a spouse\xe2\x80\x99s interest in entireties property is typically\nnot possible without severance. Unlike joint tenancies, however, tenancies by the\nentirety cannot easily be severed unilaterally. Typically, severance requires the consent\nof both spouses, or the ending of the marriage in divorce. At common law, all of the\nother rights associated with the entireties property belonged to the husband: as the\nhead of the household, he could control the use of the property and the exclusion of\nothers from it and enjoy all of the income produced from it. The husband\xe2\x80\x99s control of\nthe property was so extensive that, despite the rules on alienation, the common law\neventually provided that he could unilaterally alienate entireties property without\nseverance subject only to the wife\xe2\x80\x99s survivorship interest.\nWith the passage of the Married Women\xe2\x80\x99s Property Acts in the late 19th century\ngranting women distinct rights with respect to marital property, most States either\nabolished the tenancy by the entirety or altered it significantly. Michigan\xe2\x80\x99s version of\nthe estate is typical of the modern tenancy by the entirety. Following Blackstone,\nMichigan characterizes its tenancy by the entirety as creating no individual rights\nwhatsoever: \xe2\x80\x9cIt is well settled under the law of this State that one tenant by the entirety\nhas no interest separable from that of the other \xe2\x80\xa6. Each is vested with an entire title.\xe2\x80\x9d\nAnd yet, in Michigan, each tenant by the entirety possesses the right of survivorship.\nEach spouse\xe2\x80\x94the wife as well as the husband\xe2\x80\x94may also use the property, exclude\nthird parties from it, and receive an equal share of the income produced by it. Neither\nspouse may unilaterally alienate or encumber the property, although this may be\naccomplished with mutual consent. Divorce ends the tenancy by the entirety, generally\n\n\x0c422\n\nProperty\n\ngiving each spouse an equal interest in the property as a tenant in common, unless the\ndivorce decree specifies otherwise.\xe2\x80\xa6\n\nB. Tenancy in Common\nTenancy in common is the modern default form of co-ownership, unless a contrary\nintent is expressed; usually that intent must be in writing. All tenants in common are\nentitled to possession and use of the property. Only partition, discussed below, results\nin separate and divided interests.\nTenants in common need not own equal shares. If there is no document or legal rule\nof inheritance specifying their shares, courts will often look to the contribution of the\ncotenants to the purchase in order to determine appropriate shares.\n\n1. Rights and Duties of Tenants in Common\nConcurrent owners can generally contract among themselves to allocate the various\nbenefits and burdens of ownership as they see fit. But in the absence of such agreement,\nthere are several default rules regarding the rights and obligations that arise between\ncotenants of property.\nThis system of default rules begins with the premise that each cotenant is entitled to all\nthe rights of ownership in the entire co-owned parcel. Thus, for example, cotenants do\nnot necessarily have the right to compromise other cotenants\xe2\x80\x99 right to exclude. If one\ncotenant objects to a police search and the other would allow it, the objecting cotenant\nprevails. A warrantless search is not allowed unless an exception to the warrant\nrequirement applies. Georgia v. Randolph, 547 U.S. 103 (2006).\nThe implications of multiple equal and undivided interests in a co-owned parcel\nbecome far more complicated with respect to other rights of ownership\xe2\x80\x94particularly\nthe rights of possession and use. If all co-owners are equally entitled to possession and\nuse of the whole parcel, what happens when more than one cotenant decides to assert\nthose rights at the same time? Is it physically possible to put co-equal rights of all\nconcurrent owners into practice? And if not, what if any obligation does a cotenant in\npossession owe to cotenants out of possession? Consider the following case:\n\n\x0cCo-ownership and Marital Property\n\n423\n\nMartin v. Martin\n878 S.W. 2d 30 (Ky. Ct. App. 1994)\n\xe2\x80\xa6 Garis and Peggy own an undivided one-eighth interest in a tract of land in Pike\nCounty. This interest was conveyed to Garis by his father, Charles Martin, in 1971.\nAppellees, Charles and Mary Martin, own a life estate in the undivided seven-eighths\nof the property for their joint lives, with remainder to appellants.\nIn 1982, Charles Martin improved a portion of the property and developed a four lot\nmobile home park which he and Mary rented. In July of 1990, Garis and Peggy moved\ntheir mobile home onto one of the lots. It is undisputed that Garis and Peggy expended\nno funds for the improvement or maintenance of the mobile home park, nor did they\npay rent for the lot that they occupied.\nIn 1990, Garis and Peggy filed an action which sought an accounting of their claimed\none-eighth portion of the net rent received by Charles and Mary from the lots. The\naccounting was granted, however, the judgment of the trial court required appellants\nto pay \xe2\x80\x9creasonable rent\xe2\x80\x9d for their occupied lot. It is that portion of the judgment from\nwhich this appeal arises.\nThe sole issue presented is whether one cotenant is required to pay rent to another\ncotenant. Appellants argue that absent an agreement between cotenants, one cotenant\noccupying premises is not liable to pay rent to a co-owner. Appellees respond that a\ncotenant is obligated to pay rent when that cotenant occupies the jointly owned\nproperty to the exclusion of his co-owner.\nAppellants and appellees own the subject property as tenants in common. The primary\ncharacteristic of a tenancy in common is unity of possession by two or more owners.\nEach cotenant, regardless of the size of his fractional share of the property, has a right\nto possess the whole.\nThe prevailing view is that an occupying cotenant must account for outside rental\nincome received for use of the land, offset by credits for maintenance and other\nappropriate expenses. The trial judge correctly ordered an accounting and recovery of\nrent in the case sub judice.\n\n\x0c424\n\nProperty\n\nHowever, the majority rule on the issue of whether one cotenant owes rent to another\nis that a cotenant is not liable to pay rent, or to account to other cotenants respecting\nthe reasonable value of the occupancy, absent an ouster or agreement to pay.\nThe trial court relied erroneously on Smither v. Betts, Ky., 264 S.W.2d 255 (1954), for\nits conclusion that appellants were \xe2\x80\x9cobligated to pay seven-eighths of the reasonable\nrental for the use of the lot they occupy.\xe2\x80\x9d In Smither, one cotenant had exclusive\npossession of jointly owned property by virtue of a lease with a court-appointed\nreceiver and there was an agreement to pay rent. That clearly is not the case before us.\nThere was no lease or any other agreement between the parties.\nThe appellees reason that the award of rent was proper upon the premise that Garis\nand [Peggy] ousted their cotenants. While the proposition that a cotenant who has been\nousted or excluded from property held jointly is entitled to rent is a valid one, we are\nconvinced that such ouster must amount to exclusive possession of the entire jointly\nheld property. We find support for this holding in Taylor, supra, in which the Court\nstated at 807-08:\nBut, however this may be, running throughout all the books will be\nfound two essential elements which must exist before the tenant sought\nto be charged is liable. These are: (a) That the tenant sought to be\ncharged and who is claimed to be guilty of an ouster must assert\nexclusive claim to the property in himself, thereby necessarily including\na denial of any interest or any right or title in the supposed ousted tenant;\n(b) he must give notice to this effect to the ousted tenant, or his acts\nmust be so open and notorious, positive and assertive, as to place it\nbeyond doubt that he is claiming the entire interest in the property.\nWe conclude that appellants\xe2\x80\x99 occupancy of one of the four lots did not amount to an\nouster. To hold otherwise is to repudiate the basic characteristic of a tenancy in\ncommon that each cotenant shares a single right to possession of the entire property\nand each has a separate claim to a fractional share.\nAccordingly, the judgment of the Pike Circuit Court is reversed as to the award of rent\nto the appellees.\n\n\x0cCo-ownership and Marital Property\n\n425\n\nNotes and Questions\n1. Recurring conflicts between cotenants. Rules for cotenant liability are\nincoherent and unsatisfactory despite centuries of litigated cases. Evelyn Lewis\nspeculates that \xe2\x80\x9ccotenant conflicts receive little attention from property law\nreformers\xe2\x80\x9d because they involve \xe2\x80\x9c\xe2\x80\x98one-shotters\xe2\x80\x99\xe2\x80\x94parties who rarely litigate,\nwho are predominantly members of the obedient middle-class and who suffer\nquietly the rules of law they were too unsophisticated to know or consider in\nadvance of the conflict.\xe2\x80\x9d Evelyn Lewis, Struggling with Quicksand: The Ins and Outs\nof Cotenant Possession Value Liability, 1994 WIS. L. REV. 331.\nManagement conflicts can arise easily because, unlike in a trust or a corporation\n(both forms of joint ownership) there is no one with the legal right to manage\nthe property on behalf of the other owners, and a cotenant who takes on the\nburden of management is not entitled to be paid for her services to the others.\nSee Combs v. Ritter, 223 P.2d 505 (Cal. Ct. App. 1950). Although each cotenant\nhas the right to possess and benefit from the property, and the duty to pay her\nshare of necessary expenses such as taxes, there is no mechanism for group\ndecision-making. If co-owners can\xe2\x80\x99t agree, they may simply have to split\xe2\x80\x94by\ndivorce followed by a transfer to one party or sale in the case of tenancy by the\nentirety and community property; by severance and partition for joint tenants;\nand by partition for tenants in common. Short of partition, which involves\nselling or physically dividing the property, the only assistance the courts offer\ncotenants is a claim for accounting for rents or profits received by another\ncotenant, or a claim for contribution for payments of another cotenant\xe2\x80\x99s share\nof taxes, mortgage payments, and necessary maintenance expenses.\n2. Ouster. Denial of a right to possession constitutes ouster, and the damages are\nthe non-possessing cotenant\xe2\x80\x99s share of the rental value of the property. Harlan\nv. Harlan, 168 P.2d 985 (Cal. Ct. App. 1946) (damages for ouster are rental\nvalue).\nEvelyn Lewis concludes that, as with adverse possession, the standard for what\nconstitutes an ouster is so manipulable that courts can reach almost any result\non any given set of facts. See, e.g., Cox v. Cox, 71 P.3d 1028 (Idaho 2003) (tenant\nin common was ousted and was entitled to \xc2\xbd of the fair rental value of the\n\n\x0c426\n\nProperty\nhouse occupied by her brother when he told her he was selling the house and\nthat she \xe2\x80\x9chad better find a place to live\xe2\x80\x9d); Mauch v. Mauch, 418 P.2d 941 (Okla.\n1966) (cotenants in possession of family farm ousted widowed sister-in-law by\ntelling her they \xe2\x80\x9cdidn\xe2\x80\x99t want to have her on the place\xe2\x80\x9d and that she \xe2\x80\x9cwas not to\ncome back\xe2\x80\x9d); but see Fitzgerald v. Fitzgerald, 558 So.2d 122 (Fla. Dist. Ct. App.\n1990) (ex-wife didn\xe2\x80\x99t oust ex-husband by telling him to leave the family home\nand that otherwise \xe2\x80\x9cshe\xe2\x80\x99d call the law\xe2\x80\x9d).\nWhat if one cotenant denies that the other has any title to the property? See\nEstate of Duran, 66 P.3d 326 (N.M. 2003) (cotenant lived on the property kept\nsilent or gave evasive answers to questions about his use of the property; this\nwas not ouster where he \xe2\x80\x9cnever expressly told [the other cotenants] that he\nclaimed to own their portions of the property\xe2\x80\x9d). Purporting to convey full title\nto the property is an ouster, since it sets up a claim for adverse possession by\nthe grantee. Whittington v. Cameron, 52 N.E.2d 134 (Ill. 1943).\nWhat if one cotenant seeks to use a portion of the land, and the other prevents\nher from doing so, perhaps by building a structure on it?\n\n3. Constructive Ouster. What if the property is a single-family home and the cotenants are recently divorced or separated? See Hertz v. Hertz, 657 P. 2d 1169\n(N.M. 1983) (applying theory of \xe2\x80\x9cconstructive ouster\xe2\x80\x9d to require payment of\nhalf of fair rental value); Stylianopoulos v. Stylianopoulos, 455 N.E.2d 477\n(Mass. Ct. App. 1983) (divorce constituted ouster, so ex-wife had to pay fair\nrental value to ex-husband); In re Marriage of Watts, 217 Cal. Rptr. 301 (Ct.\nApp. 1985) (separated spouse must reimburse community for exclusive use of\nhouse); Palmer v. Protrka, 476 P.2d 185 (Or. 1970) (if, as a practical matter, the\ncouple can\xe2\x80\x99t live together, requiring the cotenant in possession to pay half of\nfair rental value most closely matches parties\xe2\x80\x99 intentions).\nSuppose a woman moves out of her family home after being physically assaulted\nby her husband. The husband begs her to come back, but she refuses. After\ntwo years, when their divorce becomes final, the ex-wife sues for half the fair\nrental value of the house during the two-year period she was out of possession.\nShould she win? What if, instead of the wife leaving, she ejects the husband\nand tells him not to come back, and two years later, after she\xe2\x80\x99s awarded the\n\n\x0cCo-ownership and Marital Property\n\n427\n\nhouse in the divorce, he sues for half the fair rental value of the house during\nthe two-year period he was out of possession? See Cohen v. Cohen, 746\nN.Y.S2d 22 (App. Div. 2002) (no right to rent for period during which a court\nprotective order barred cotenant from the property due to his assaultive\nconduct).\nThe majority rule is against constructive ouster, in the absence of physical\nexclusion. See, e.g., Reitmeier v. Kalinoski, 631 F. Supp. 565 (D.N.J. 1986)\n(\xe2\x80\x9c[T]he mere fact that defendant does not wish to live with plaintiff on the\npremises is of no import. What counts is that she could physically live on the\npremises.\xe2\x80\x9d).\nWhich rule is better? If you were advising a client in a divorce, how would you\ndeal with co-owned property?\nWhat if the property is so small that physical occupation by all cotenants is\nimpracticable? Some courts will also call this a \xe2\x80\x9cconstructive ouster\xe2\x80\x9d of the\ncotenants out of possession. Capital Fin. Co. Delaware Valley, Inc. v. Asterbadi,\n942 A.2d 21 (N.J. Super. Ct. App. Div. 2008) (finding that a bank that was a\ncotenant through foreclosure with the wife of the defaulting mortgagor was\nconstructively ousted from a single-family home).\n4. Contribution: sharing the costs. \xe2\x80\x9c[T]he protection of the interest of each\ncotenant from extinction by a tax or foreclosure sale imposes on each the duty\nto contribute to the extent of his proportionate share the money required to\nmake such payments.\xe2\x80\x9d 2 AMERICAN LAW OF PROPERTY \xc2\xa76.17. Because failure\nto pay carrying costs increases the risk that the asset will be lost to all cotenants,\nevery concurrent owner has an obligation to pay her share. See also Beshear v.\nAhrens, 709 S.W.2d 60 (Ark. 1986) (allowing contribution for mortgage\npayments and property taxes as \xe2\x80\x9cexpenditures necessarily made for the\nprotection of the common property\xe2\x80\x9d).\nThe majority rule is that cotenants out of possession need not share in the costs\nof repairs in the absence of an agreement to do so. The idea is that questions\n\xe2\x80\x9cof how much should be expended on repairs, their character and extent, and\nwhether as a matter of business judgment such expenditures are justified,\xe2\x80\x9d are\n\n\x0c428\n\nProperty\ntoo uncertain for judicial resolution. 2 AMERICAN LAW OF PROPERTY \xc2\xa76.18.\nBut then, in a partition action, cotenants who pay for repairs will get credit for\nthem\xe2\x80\x94does that make sense? Further, some courts will allow contribution for\n\xe2\x80\x9cnecessary\xe2\x80\x9d repairs. Palanza v. Lufkin, 804 A.2d 1141 (Me. 2002) (finding\ncontribution towards necessary repairs justified, even though some of the\nrepairs had cosmetic effects). Some jurisdictions require a cotenant to provide\nher fellow cotenants with notice and opportunity to object to the repairs in\norder to be entitled to contribution. Anderson v. Joseph, 26 A.3d 1050 (Md.\nCt. Spec. App. 2011) (denying contribution for repairs that resulted from\n\xe2\x80\x9cmassive flooding\xe2\x80\x9d for failure to provide notice).\n\n5. Accounting: the right to share in profits. Cotenants who allow others to use\nthe land, whether to exploit resources or to rent, must give other cotenants their\nshares of any consideration received from the third-party users.\nRecall that in at least some contexts one cotenant cannot unilaterally exercise\nthe right to exclude of the other cotenants. But that isn\xe2\x80\x99t always true with respect\nto productive uses of land by third parties with permission of one cotenant. To\nbe sure, in some states, a lease from only one co-owner is void and the lessee\ncan be ejected. But in other states, one cotenant can lease his interest, subject\nonly to a duty to account to the non-leasing cotenants for net profits.\nSwartzbaugh v. Sampson, 54 P.2d 73 (Cal. Ct. App. 1936). Where there is such\na duty, to whom does the lessee owe rent? The answer is that she only owes\nrent to the leasing cotenant, unless she ousts the other cotenants. Those other\ncotenants must look to a contribution action against the leasing cotenant.\nThe usual rule is that cotenants must account for the raw value of resources\nthey extract themselves, but particularly bad misbehavior by a cotenant may lead\nto an award of the processed value. Kirby Lumber Co. v. Temple Lumber Co.,\n83 S.W.2d 638 (Tex. 1935) (raw value of timber where timber was taken in good\nfaith); cf. White v. Smyth, 214 S.W.2d 967 (Tex. 1948) (cotenant who mined\nasphalt without consent from other cotenants had to account for net profits,\nalthough he took no more than his one-ninth interest\xe2\x80\x94resource could not be\npartitioned in kind because the quality and quantity of asphalt varied sharply\n\n\x0cCo-ownership and Marital Property\n\n429\n\nacross the parcel in ways that could not be easily determined; cotenant couldn\xe2\x80\x99t\ntake the most easily mined resources for himself and make his own partition).\nAbsent an ouster, an accounting usually just requires the cotenant to share the\nactual value received, not the fair market value. Suppose a lease claims to be\nnonexclusive and to only lease one cotenant\xe2\x80\x99s share, and is for half of the fair\nmarket rental value of the property. What should happen when the other\ncotenant seeks an accounting? See Annot., 51 A.L.R.2d 388 (1957). Suppose\nthe lease is made by one cotenant to spite or harm another? Cf. George v.\nGeorge, 591 S.W.2d 655 (Ark. Ct. App. 1979) (where 99-year lease carried\nnominal rent and the court found an intent to defraud the cotenant, the lease\nwas set aside).\n6. Tenants in possession; tenants out of possession. Martin applies the\nmajority rule that\xe2\x80\x94absent ouster\xe2\x80\x94a cotenant in possession need not pay\nanything to cotenants out of possession if she lives on and farms the land,\nabsent an ouster. DesRoches v. McCrary, 24 N.W.2d 511 (Mich. 1946) (no duty\nof cotenant in possession to pay rent to other cotenants). Reciprocally, there is\ngenerally no ouster if one cotenant requests her share of the fair rental value of\nthe land from the occupying cotenant, and the occupying cotenant denies the\nrequest. Von Drake v. Rogers, 996 So. 2d 608 (La. Ct. App. 2008) (\xe2\x80\x9cA co-owner\nin exclusive possession may be liable for rent, but only beginning on the date\nanother co-owner has demanded occupancy and been refused.\xe2\x80\x9d) (emphasis added).\nBut a few cases hold that denying a request for rent constitutes an ouster.\nEldridge v. Wolfe, 221 N.Y.S. 508 (1927).\nWhy might courts have developed a practice of requiring cotenants to account\nfor profits from mining and cutting lumber, but not for profits from their own\nfarming or residential uses of co-owned property? Logically, the cotenant in\npossession should have to pay\xe2\x80\x94she is receiving a benefit from using the land,\nthe fair market rental value of the property, and the other cotenants are not. As\nMartin itself proves, if she did rent the land to a third party, she would be\nrequired to share that benefit with the other co-owners. This rule creates an\nincentive for the cotenant to stay in possession rather than renting the land out,\neven if renting to a third party would be more efficient overall.\n\n\x0c430\n\nProperty\n\n7. The relationship between contribution and accounting. If one cotenant\noccupies the property, with no ouster, and seeks contribution from the nonoccupant for his share of the taxes and insurance, can the non-occupant offset\nthe amounts due by the value of living on the property to the occupant? Many\ncourts say yes. See, e.g., Barrow v. Barrow, 527 So. 2d 1373 (Fla. 1988) (occupant\ncan only recover contribution if non-occupant\xe2\x80\x99s proportionate share of\nexpenses is greater than the value of occupying the property); Esteves v. Esteves,\n775 A.2d 163 (N.J. Super. Ct. App. Div. 2001) (parents who occupied house for\n18 years were entitled to be reimbursed by their son for half of the expenses of\nmortgage and maintenance, but the son was allowed to set off the amount equal\nto the reasonable value of the parents\xe2\x80\x99 sole occupancy). This view is not strictly\nconsistent with the majority rule that non-ousting tenants are not liable to nonpossessing cotenants for rent, because it means that the occupant is essentially\npaying the non-occupant for being able to live on the land. Is this rule, which\nwill often keep much actual cash from changing hands nonetheless fair?\nThe minority view is that no defensive offset is available against a cotenant in\npossession, absent ouster. Yakavonis v. Tilton, 968 P.2d 908 (Wash. Ct. App.\n1998); Baird v. Moore, 141 A.2d 324 (N.J. App. Div. 1958) (cotenant out of\npossession may not offset value of occupation if cotenant\xe2\x80\x99s possession is not\nadverse). Which rule makes more logical sense? More practical sense?\nBasically, courts often have enough flexibility to rule in the direction the equities\npoint\xe2\x80\x94finding that contribution is or isn\xe2\x80\x99t available. The need to balance the\nharms from imposition of unexpected costs on cotenants out of possession with\nthe harms to the property\xe2\x80\x99s value from negligent co-owners also gives courts\nflexibility. Ultimately, because partition is always available to cotenants who\ntruly can\xe2\x80\x99t agree, it makes sense for courts to point them towards partition if\nthey\xe2\x80\x99re fighting over maintenance and repairs.\nIn Martin, when calculating Garis and Peggy\xe2\x80\x99s 1/8th share of the \xe2\x80\x9cnet rent,\xe2\x80\x9d what\nexpenses should be deducted? Can they be required to pay a share of the costs\nof developing the mobile home park, such as putting in sewage lines and\nelectrical connections? Note that a cotenant is generally not entitled to\ncontribution from other cotenants for the costs of improving the property (see\n\n\x0cCo-ownership and Marital Property\n\n431\n\nnote 9 below). But, on partition, the improver is entitled to the part of the\nproperty that\xe2\x80\x99s been improved, or in case of sale to the lesser of (1) the increase\nin value due to the improvement or (2) the cost of the improvement. Should\nthat rule be applied in an accounting as well?\nLewis suggests that courts use ouster to enagage in the \xe2\x80\x9cequitable secondguessing that so often blurs crystalline rules.\xe2\x80\x9d Compare Spiller v. Mackereth, 334\nSo. 2d 859 (Ala. 1976) (lock change wasn\xe2\x80\x99t ouster), with Morga v. Friedlander,\n680 P.2d 1267 (Ariz. Ct. App. 1984) (lock change was ouster). In effect, courts\nuse ouster, plus the majority rule allowing offset of the value of an occupying\ncotenant\xe2\x80\x99s possession in an action for contribution, to nullify the formal rule\nthat any cotenant can occupy the land rent-free, regardless of the size of his or\nher share, and still seek contribution for necessary expenses.\n8. Quasi-fiduciary duties of good faith. Cotenants are fiduciaries for each other,\nat least if they receive their interests in the same will or grant, or through the\nsame inheritance. Poka v. Holi, 357 P.2d 100 (Haw. 1960) (cotenants have\nfiduciary obligation to give other cotenants adequate notice of adverse claims\nto the property); but see Wilson v. S.L. Rey, Inc., 21 Cal. Rptr. 2d 552 (Ct. App.\n1993) (cotenants who acquire interests at different times by different\ninstruments have no fiduciary relationship).\nIf one co-tenant buys the property at a tax sale or a foreclosure sale, the title is\nshared with the other co-tenants: for these purposes, the co-tenant is a fiduciary\nfor the other co-tenants. Johnson v. Johnson, 465 S.W.2d 309 (Ark. 1971); but\nsee Stevenson v. Boyd, 96 P. 284 (Cal. 1908) (finding assertion of cotenant\xe2\x80\x99s\nclaim barred by laches after four-year delay). However, the purchasing cotenant can seek contribution from the others, so that they bear their fair share\nof the cost of removing the lien or mortgage. Why would the courts create such\na fiduciary duty? What is the abusive practice that they fear?\n9. Improvements. Any cotenant has the right to make improvements to the\nproperty, but other cotenants are not required to contribute. See Knight v.\nMitchell, 240 N.E.2d 16 (Ill. Ct. App. 1968) (cotenant couldn\xe2\x80\x99t seek\ncontribution for developing and running oil wells, though he could set off\nnecessary operating expenses in other cotentant\xe2\x80\x99s action for accounting of his\n\n\x0c432\n\nProperty\nprofits); Johnie L. Price, The Right of a Cotenant to Reimbursement for Improvements to\nthe Common Property, 18 BAYLOR L. REV. 111 (1966).\nIn most states, the interests of the improver will be protected if that won\xe2\x80\x99t harm\nthe interests of the other cotenants. This usually allows the improver to recoup\nthe added value, if any, resulting from his improvements on partition, or in\naccounting for rents and profits. Graham v. Inlow, 790 S.W.2d 428 (Ark. 1990).\nBut if improvements fail to pay off, the improver is not compensated\xe2\x80\x94he bears\nall the risk. A few cases limit recovery to the smaller of the amount of value\nadded by an improvement or its costs. The risk is borne by the improver, but\nthe rewards are shared. Which rule makes more sense?\n\n10. Waste. If one cotenant damages the property or harms its value, other\ncotenants may have claims for waste. While the ordinary remedy for waste is\ntreble damages, courts will normally just hold the tenant in possession\naccountable for net profits from exploiting the property, as explained above in\nthe discussion of removing timber and similar resources. CASNER, AMERICAN\nLAW OF PROPERTY, \xc2\xa76.15. What effects does that rule have on the use of land?\nWaste claims are correspondingly difficult to win. Davis v. Byrd, 185 S.W.2d\n866 (Mo. 1945) (mining by one cotenant isn\xe2\x80\x99t waste as long as the other\ncotenants aren\xe2\x80\x99t excluded and the miner doesn\xe2\x80\x99t willfully or negligently injure\nthe land); Hihn v. Peck, 18 Cal. 640 (1861) (cotenant may remove valuable\ntimber \xe2\x80\x9cto an extent corresponding to [his] share of the estate\xe2\x80\x9d without\ncommiting waste); Prairie Oil & Gas Co. v. Allen, 2 F.2d 566 (9th Cir. 1924)\n(cotenant can produce oil without other cotenants\xe2\x80\x99 consent, but cannot exclude\nother cotenants from exercising the same right). Consider whether time\nmatters: should the standard for what constitutes waste vary depending on\nwhether the other interest-holders have present interests (and could act now to\nreap their own benefits, albeit at greater cost than waiting) or future interests\n(and thus can only wait for their ownership interests to attach)?\n11. Adverse possession by cotenants against other cotenants. Because each\ncotenant has the right to possession, it can be difficult for one cotenant to\npossess adversely to another. Under New York law, a cotenant must have\nexclusive possession for ten years before the statutory adverse possession can\n\n\x0cCo-ownership and Marital Property\n\n433\n\neven begin to run against other cotenants. Myers v. Bartholomew, 697 N.E.2d\n160 (N.Y. 1998). After all, the fact that someone else is living on and using the\nland lacks its ordinary significance to cotenants. Ex parte Walker, 739 So. 2d 3\n(Ala. 1999) (cotenant\xe2\x80\x99s redemption of property at tax sale in 1934, payment of\nall property taxes, exclusive possession for over 50 years, demolition of old\nbuildings, and harvesting of timber did not show adverse possession against\nother cotenants); Tremayne v. Taylor, 621 P.2d 408 (Idaho 1980) (\xe2\x80\x9cA cotenant\nwho claims to have adversely possessed the interest of his cotenants must prove\nthat the fact of adverse possession was \xe2\x80\x98brought home\xe2\x80\x99 to the cotenants.\xe2\x80\x9d); Hare\nv. Chisman, 101 N.E.2d 268 (Ind. 1951) (husband\xe2\x80\x99s sole possession of house\nafter wife died was not adverse to his cotenants, her heirs, since it \xe2\x80\x9cwas not an\nunnatrual act of them to permit their father to occupy this property, collect the\nincome, pay the expense, and enjoy the surplus\xe2\x80\x9d); West v. Evans, 175 P.2d 219\n(Cal. 1946) (cotenant out of possession must have either actual or constructive\nnotice of hostility; recordation of a deed isn\xe2\x80\x99t sufficient notice); GA. CODE ANN.\n\xc2\xa744-6-123 (allowing cotenant to gain title by adverse possession if she \xe2\x80\x9ceffects\nan actual ouster, retains exclusive possession after demand, or gives [her]\ncotenant express notice of adverse possession\xe2\x80\x9d).\nAdverse possession is, however, not entirely impossible in these circumstances.\nSee Johnson v. James, 377 S.W.2d 44 (Ark. 1964) (presumption against adversity\nis even stronger when cotenants are related, though presumption was overcome\nthrough sole possession for 36 years, where cotenants knew of a will\npurportedly granting occupant sole possession and said nothing); McCree v.\nJones, 430 N.E.2d 676 (Ill. Ct. App. 1981) (finding in favor of claimant who\xe2\x80\x99d\nbeen in possession for thirty years under a quitclaim deed purporting to give\ntitle to the entire property).\n12. Intangible assets. In the U.S., \xe2\x80\x9cjoint authorship\xe2\x80\x9d occurs when two or more\nauthors contribute to the creation of a unitary work of authorship, such as a\nsong with music written by one author and lyrics written by another. (Here,\n\xe2\x80\x9cjoint\xe2\x80\x9d doesn\xe2\x80\x99t mean what it means in real property. There is no right of\nsurvivorship, so the ownership rights behave more like what you know as\ntenancy in common.) Courts have interpreted copyright law to impose a default\nrule, absent explicit agreement, that each joint author owns an equal share of\n\n\x0c434\n\nProperty\nthe resulting work, even if her contribution was substantially less than that of\nother authors. This rule, which is not mandated by the statute, has led courts\nto be extremely reluctant to find joint authorship when there is one clear\n\xe2\x80\x9cdominant\xe2\x80\x9d author and someone else seeks to be recognized as a co-author.\nBecause copyrights are intangible, they cannot be partitioned, nor can there be\nan ouster of one co-author by another. Instead, each co-owner can grant a\nnonexclusive license to other people to use the work\xe2\x80\x94whether that means\nputting a song on a record, using a sample of it in a new song, or using it in a\ntelevision show. This right to license is subject only to a duty to account to the\nother co-owners for their shares of the resulting profits. An exclusive license\nrequires the agreement of all the co-owners acting together.\nSuppose one co-author, angry at her co-author, grants Quentin Tarantino a\nnonexclusive license to turn their book into a movie for $1, and duly gives her\nco-author fifty cents. Because of this license, no other moviemaker will buy the\nrights, fearing competition from Tarantino\xe2\x80\x99s movie. Has the licensor\ncommitted waste? Would it matter if, instead of acting out of malice, the coauthor granted the $1 license because she believed in Tarantino\xe2\x80\x99s vision for the\nfilm and only a low price would induce him to take on the book as his next\nproject? Do tenancy in common rules work for property that can\xe2\x80\x99t be\nexclusively possessed?\n\n13. Concluding thoughts: crystals and mud. Transaction costs\xe2\x80\x94the costs of\nmanaging the property and getting cotenants to agree\xe2\x80\x94can be very high among\ncotenants, as compared to the costs of having a manager with authority to make\ndecisions for the group. (For example, consider the issue of approving a\nparticular tenant who wishes to rent the property and have exclusive\npossession.) The actively engaged cotenant who rents to a third party gets only\nsome of the gain, but takes most of the risk. After all, if the renter turns into a\nnightmare who trashes the place, the cotenant who rented the property will be\nliable for any harm; but the other cotenants might sue to share in any gains that\nmaterialize. Professor Carol Rose argues that courts sometimes impose\nequitable duties\xe2\x80\x94muddy rules\xe2\x80\x94on parties in order to replicate the results that\nwould have occurred had they trusted each other and behaved fairly and\ndecently towards one another. Thus, our rules about co-ownership are not just\n\n\x0cCo-ownership and Marital Property\n\n435\n\nrules about economic efficiency, but about how people should behave. See\ngenerally Carol Rose, Crystals and Mud in Property Law, 40 STAN. L. REV. 577 (1988).\nDoes this help you make any sense of the co-ownership rules?\n\n2. Partition\nDelfino v. Vealencis\n436 A.2d 27 (Conn. 1980)\nARTHUR H. HEALEY, Associate Justice.\nThe central issue in this appeal is whether the Superior Court properly ordered the sale,\npursuant to General Statutes s 52-500, 1 of property owned by the plaintiffs and the\ndefendant as tenants in common.\nThe plaintiffs, Angelo and William Delfino, and the defendant, Helen C. Vealencis,\nown, as tenants in common, real property located in Bristol, Connecticut. The property\nconsists of an approximately 20.5 acre parcel of land and the dwelling of the defendant\nthereon. The plaintiffs own an undivided 99/144 interest in the property, and the\ndefendant owns a 45/144 interest. The defendant occupies the dwelling and a portion\nof the land, from which she operates a rubbish and garbage removal business. 3\nApparently, none of the parties is in actual possession of the remainder of the property.\nThe plaintiffs, one of whom is a residential developer, propose to develop the property,\nupon partition, into forty-five residential building lots.\n\nGeneral Statutes s 52-500 states: \xe2\x80\x9cSale of Real or Personal Property Owned by Two or More. Any court of\nequitable jurisdiction may, upon the complaint of any person interested, order the sale of any estate, real or\npersonal, owned by two or more persons, when, in the opinion of the court, a sale will better promote the\ninterests of the owners.\xe2\x80\xa6 A conveyance made in pursuance of a decree ordering a sale of such land shall vest\nthe title in the purchaser thereof, and shall bind the person entitled to the life estate and his legal heirs and any\nother person having a remainder interest in the lands; but the court passing such decree shall make such order in\nrelation to the investment of the avails of such sale as it deems necessary for the security of all persons having\nany interest in such land.\xe2\x80\x9d\n1\n\nThe defendant\xe2\x80\x99s business functions on the property consist of the overnight parking, repair and storage of\ntrucks, including refuse trucks, the repair, storage and cleaning of dumpsters, the storage of tools, and general\noffice work. No refuse is actually deposited on the property.\n3\n\n\x0c436\n\nProperty\n\nIn 1978, the plaintiffs brought an action in the trial court seeking a partition of the\nproperty by sale with a division of the proceeds according to the parties\xe2\x80\x99 respective\ninterests. The defendant moved for a judgment of in-kind partition and the\nappointment of a committee to conduct said partition. The trial court, after a hearing,\nconcluded that a partition in kind could not be had without \xe2\x80\x9cmaterial injury\xe2\x80\x9d to the\nrespective rights of the parties, and therefore ordered that the property be sold at\nauction by a committee and that the proceeds be paid into the court for distribution to\nthe parties.\nOn appeal, the defendant claims essentially that the trial court\xe2\x80\x99s conclusion that the\nparties\xe2\x80\x99 interests would best be served by a partition by sale is not supported by the\nfindings of subordinate facts, and that the court improperly considered certain factors\nin arriving at that conclusion. In addition, the defendant directs a claim of error to the\ncourt\xe2\x80\x99s failure to include in its findings of fact a paragraph of her draft findings.\nGeneral Statutes s 52-495 authorizes courts of equitable jurisdiction to order, upon the\ncomplaint of any interested person, the physical partition of any real estate held by\ntenants in common, and to appoint a committee for that purpose. 7 When, however,\nin the opinion of the court a sale of the jointly owned property \xe2\x80\x9cwill better promote\nthe interests of the owners,\xe2\x80\x9d the court may order such a sale under s 52-500.\nIt has long been the policy of this court, as well as other courts, to favor a partition in\nkind over a partition by sale. \xe2\x80\xa6 Due to the possible impracticality of actual division,\nthis state, like others, expanded the right to partition to allow a partition by sale under\ncertain circumstances. The early decisions of this court that considered the partitionby-sale statute emphasized that \xe2\x80\x9c(t)he statute giving the power of sale introduces \xe2\x80\xa6 no\nnew principles; it provides only for an emergency, when a division cannot be well made,\nin any other way. The court later expressed its reason for preferring partition in kind\nwhen it stated: \xe2\x80\x9c(A) sale of one\xe2\x80\x99s property without his consent is an extreme exercise\nof power warranted only in clear cases.\xe2\x80\x9d Ford v. Kirk, 41 Conn. 9, 12 (1874). Although\nunder General Statutes s 52-500 a court is no longer required to order a partition in\nkind even in cases of extreme difficulty or hardship; it is clear that a partition by sale\n\nIf the physical partition results in unequal shares, a money award can be made from one tenant to another to\nequalize the shares.\n\n7\n\n\x0cCo-ownership and Marital Property\n\n437\n\nshould be ordered only when two conditions are satisfied: (1) the physical attributes of\nthe land are such that a partition in kind is impracticable or inequitable; and (2) the\ninterests of the owners would better be promoted by a partition by sale. Since our law\nhas for many years presumed that a partition in kind would be in the best interests of\nthe owners, the burden is on the party requesting a partition by sale to demonstrate\nthat such a sale would better promote the owners\xe2\x80\x99 interests.\nThe defendant claims in effect that the trial court\xe2\x80\x99s conclusion that the rights of the\nparties would best be promoted by a judicial sale is not supported by the findings of\nsubordinate facts. We agree.\nUnder the test set out above, the court must first consider the practicability of\nphysically partitioning the property in question. The trial court concluded that due to\nthe situation and location of the parcel of land, the size and area of the property, the\nphysical structure and appurtenances on the property, and other factors, a physical\npartition of the property would not be feasible. An examination of the subordinate\nfindings of facts and the exhibits, however, demonstrates that the court erred in this\nrespect.\nIt is undisputed that the property in question consists of one 20.5 acre parcel, basically\nrectangular in shape, and one dwelling, located at the extreme western end of the\nproperty. Two roads, Dino Road and Lucien Court, abut the property and another,\nBirch Street, provides access through use of a right-of-way. Unlike cases where there\nare numerous fractional owners of the property to be partitioned, and the practicability\nof a physical division is therefore drastically reduced; in this case there are only two\ncompeting ownership interests: the plaintiffs\xe2\x80\x99 undivided 99/144 interest and the\ndefendant\xe2\x80\x99s 45/144 interest. These facts, taken together, do not support the trial court\xe2\x80\x99s\nconclusion that a physical partition of the property would not be \xe2\x80\x9cfeasible\xe2\x80\x9d in this case.\nInstead, the above facts demonstrate that the opposite is true: a partition in kind clearly\nwould be practicable under the circumstances of this case.\nAlthough a partition in kind is physically practicable, it remains to be considered\nwhether a partition in kind would also promote the best interests of the parties. In\norder to resolve this issue, the consequences of a partition in kind must be compared\nwith those of a partition by sale.\n\n\x0c438\n\nProperty\n\nThe trial court concluded that a partition in kind could not be had without great\nprejudice to the parties since the continuation of the defendant\xe2\x80\x99s business would hinder\nor preclude the development of the plaintiffs\xe2\x80\x99 parcel for residential purposes, which\nthe trial court concluded was the highest and best use of the property. The court\xe2\x80\x99s\nconcern over the possible adverse economic effect upon the plaintiffs\xe2\x80\x99 interest in the\nevent of a partition in kind was based essentially on four findings: (1) approval by the\ncity planning commission for subdivision of the parcel would be difficult to obtain if\nthe defendant continued her garbage hauling business; (2) lots in a residential\nsubdivision might not sell, or might sell at a lower price, if the defendant\xe2\x80\x99s business\ncontinued; (3) if the defendant were granted the one-acre parcel, on which her\nresidence is situated and on which her business now operates, three of the lots\nproposed in the plaintiffs\xe2\x80\x99 plan to subdivide the property would have to be consolidated\nand would be lost; and (4) the proposed extension of one of the neighboring roads\nwould have to be rerouted through one of the proposed building lots if a partition in\nkind were ordered. The trial court also found that the defendant\xe2\x80\x99s use of the portion\nof the property that she occupies is in violation of existing zoning regulations. The\ncourt presumably inferred from this finding that it is not likely that the defendant will\nbe able to continue her rubbish hauling operations from this property in the future.\nThe court also premised its forecast that the planning commission would reject the\nplaintiffs\xe2\x80\x99 subdivision plan for the remainder of the property on the finding that the\ndefendant\xe2\x80\x99s use was invalid. These factors basically led the trial court to conclude that\nthe interests of the parties would best be protected if the land were sold as a unified\nunit for residential subdivision development and the proceeds of such a sale were\ndistributed to the parties.\n\xe2\x80\xa6 The defendant claims that the trial court erred in finding that the defendant\xe2\x80\x99s use of\na portion of the property is in violation of the existing zoning regulations, and in\nrefusing to find that such use is a valid nonconforming use. \xe2\x80\xa6 [T]he court\xe2\x80\x99s finding in\nthis regard must be stricken as unsupported by sufficient competent evidence. We are\nleft, then, with an unassailed finding that the defendant\xe2\x80\x99s family has operated a \xe2\x80\x9cgarbage\nbusiness\xe2\x80\x9d on the premises since the 1920s and that the city of Bristol has granted the\ndefendant the appropriate permits and licenses each year to operate her business. There\nis no indication that this practice will not continue in the future.\n\n\x0cCo-ownership and Marital Property\n\n439\n\nOur resolution of this issue makes it clear that any inference that the defendant would\nprobably be unable to continue her rubbish hauling activity on the property in the\nfuture is unfounded. We also conclude that the court erred in concluding that the city\xe2\x80\x99s\nplanning commission would probably not approve a subdivision plan relating to the\nremainder of the property. Any such forecast must be carefully scrutinized as it is\ndifficult to project what a public body will decide in any given matter. \xe2\x80\xa6 The court\xe2\x80\x99s\nfinding indicates that only garbage trucks and dumpsters are stored on the property;\nthat no garbage is brought there; and that the defendant\xe2\x80\x99s business operations involve\n\xe2\x80\x9cmostly containerized \xe2\x80\xa6 dumpsters, a contemporary development in technology\nwhich has substantially reduced the odors previously associated with the rubbish and\ngarbage hauling industry.\xe2\x80\x9d These facts do not support the court\xe2\x80\x99s speculation that the\ncity\xe2\x80\x99s planning commission would not approve a subdivision permit for the\nundeveloped portion of the parties\xe2\x80\x99 property.\nThe court\xe2\x80\x99s remaining observations relating to the effect of the defendant\xe2\x80\x99s business\non the probable fair market value of the proposed residential lots, the possible loss of\nbuilding lots to accommodate the defendant\xe2\x80\x99s business 13 and the rerouting of a\nproposed subdivision road, which may have some validity, are not dispositive of the\nissue. It is the interests of all of the tenants in common that the court must consider;\nand not merely the economic gain of one tenant, or a group of tenants. The trial court\nfailed to give due consideration to the fact that one of the tenants in common has been\nin actual and exclusive possession of a portion of the property for a substantial period\nof time; that the tenant has made her home on the property; and that she derives her\nlivelihood from the operation of a business on this portion of the property, as her\nfamily before her has for many years. A partition by sale would force the defendant to\nsurrender her home and, perhaps, would jeopardize her livelihood. It is under just such\ncircumstances, which include the demonstrated practicability of a physical division of\nthe property, that the wisdom of the law\xe2\x80\x99s preference for partition in kind is evident.\n\xe2\x80\xa6Since the property in this case may practicably be physically divided, and since the\ninterests of all owners will better be promoted if a partition in kind is ordered, we\n\nIt should be noted in this regard that a partition in kind would result in a physical division of the land according\nto the parties\xe2\x80\x99 respective interests. The defendant would, therefore, not obtain any property in excess of her\nbeneficial share of the parties\xe2\x80\x99 concurrent estates.\n\n13\n\n\x0c440\n\nProperty\n\nconclude that the trial court erred in ordering a partition by sale, and that, under the\nfacts as found, the defendant is entitled to a partition of the property in kind.\n\nSubdivision plot plan for the 20.5 acre parcel\n\nNotes and Questions\n1. Owelty. * Courts have the equitable power to order owelty payments when it is\nimpractical to partition in kind according to exact shares, but when monetary\npayments can adjust for the variance in the value of the parcels from the\ninterests held by the respective cotenants. See Dewrell v. Lawrence, 58 P.3d 223,\n\nThis charming term is followed in Black\xe2\x80\x99s Legal Dictionary by another winner: To quote Blackstone, \xe2\x80\x9cOwling, so\ncalled from its being usually carried on in the night, \xe2\x80\xa6 is the offense of transporting sheep or wool out of this\nkingdom.\xe2\x80\x9d\n*\n\n\x0cCo-ownership and Marital Property\n\n441\n\n227 (Okla. Civ. App. 2002); ALA. CODE \xc2\xa7 35-6-24 (2010); CAL. CIV. PROC.\nCODE \xc2\xa7 873.250 (West 2009).\n2. Denouement. Thomas Merrill and Henry Smith did some digging for their\nproperty casebook, Property: Principles and Policies. Apparently, Vealencis was a\ndifficult client and antagonized the trial judge, which meant that her victory on\nthe law did not translate to victory in the real world. In Delfino, Vealencis was\nawarded three lots, including her homestead, a total of about one acre worth\n$72,000. (See lot 135-1 on far left of image.) She was also required to pay\n$26,000 in owelty to the Delfinos to compensate them for the harm her garbage\noperation imposed on the proposed subdivision.\nWhile Vealencis had a 5/16 interest in the land, her net benefit was only $46,000,\nor less than one-fourth of what she was due. Three years later, the Delfinos\nsold their roughly 19 acres to a developer for $725,000. The developer\nseparated Vealencis\xe2\x80\x99 lot from the rest of the subdivision by a two-foot-wide\nstrip of land (see lots 39 and 40). This deprived her of access to Dino Road and\nits sewer and water connections, as well as preventing her trucks from entering\nthe subdivision (even though she\xe2\x80\x99d already paid for diminishing the value of the\nhomes in the subdivision). Vealencis\xe2\x80\x99 only access to the land was a 16.5 foot\neasement over lot 9C. She was required to use an artesian well and a septic tank.\nSee Manel Baucells & Steven A. Lippman, Justice Delayed Is Justice Denied: A\nCooperative Game Theoretic Analysis to Hold-up in Coownership, 22 CARDOZO L. REV.\n1191 (2001). Vealencis died in 1990, still running the garbage business.\nWhy was she required to pay owelty up-front rather than waiting to see if the\nharm materialized and allowing the Delfinos to recover in an action for nuisance\nlater? Is there anything the court could have done in its division to avoid the\nunfairness to Vealencis? And what does this result suggest about the\nappropriate choice of remedies\xe2\x80\x94injunction or damages\xe2\x80\x94in nuisance cases?\n3. Implementing partition in kind. In a partition in kind, how should the court\ndetermine who gets what land? See Anderson v. Anderson, 560 N.W.2d 729\n(Minn. Ct. App. 1997) (cotenants awarded parcel on which they had a\nresidence); Barth v. Barth, 901 P.2d 232 (Okla. Ct. App. 1995) (considering\ncotenant\xe2\x80\x99s ownership of adjacent land). In Louisiana, partition in kind is not\n\n\x0c442\n\nProperty\nallowed unless parcels of equal value can be created, and parcels must be drawn\nby lot. See McNeal v. McNeal, 732 So. 2d 663 (La. Ct. App. 1999). Is this a\ngood idea? What about \xe2\x80\x9cI cut, you choose\xe2\x80\x9d as a way of implementing partition\nin kind? There\xe2\x80\x99s a large literature in game theory, mathematics, and computer\nscience on these problems, dealing with more than two parties, heterogenous\nresources, etc. Very little of this seems to have made its way into law. But see\nNote, Cutting the Baby in Half, 77 BROOK. L. REV. 263 (2011) (surveying some\nof the literature).\nSome state laws also provide for allotment, in which the court allocates part of\nthe property to a cotenant\xe2\x80\x94which can include an owelty payment if the\nallocated portion is more than the cotenant\xe2\x80\x99s share\xe2\x80\x94and then sells the\nremainder. E.g., 25 DEL. CODE \xc2\xa7730; S.C. CODE ANN. \xc2\xa715-61-50; VA. CODE\nANN. \xc2\xa78.01-83. Sometimes a cotenant must show an equitable claim to\nallotment in order to get it. HAW. REV. STAT. \xc2\xa7\xc2\xa7668-7(5)-(6).\n\n4. Partition by sale as the default? Consider the court\xe2\x80\x99s claims about the\npreference for partition in kind. Partition in kind will essentially always diminish\nthe market value of the land compared to partition by sale. Do other, intangible\ninterests nonetheless adequately justify a preference for partition in kind?\nArk Land Co. v. Harper, 599 S.E.2d 754 (W. Va. 2004), suggests that a rule\nfavoring maximization of market value \xe2\x80\x9cwould permit commercial entities to\nalways \xe2\x80\x98evict\xe2\x80\x99 pre-existing co-owners, because a commercial entity\xe2\x80\x99s interest in\nproperty will invariably increase its value.\xe2\x80\x9d\nThough partition in kind is supposedly favored by the law on the books,\ngoverning legal practice is different, as the Uniform Law Commission has\nwritten:\nDespite the overwhelming statutory preference for partition in\nkind, courts in a large number of states typically resolve partition\nactions by ordering partition by sale which usually results in\nforcing property owners off their land without their consent. This\noccurs even in cases in which the property could easily have been\ndivided in kind or an overwhelming majority of the cotenants had\n\n\x0cCo-ownership and Marital Property\n\n443\n\nopposed partition by sale or even in some cases when the only\nremedy any cotenant petitioned the court to order was partition\nin kind and not partition by sale.\nUNIFORM PARTITION OF HEIRS PROPERTY ACT, Prefatory Note.\n5. Heirs Property. \xe2\x80\x9cHeirs\xe2\x80\x99 property,\xe2\x80\x9d that is, property whose ownership is\ndivided by intestate succession over several generations, has resulted in highly\nfractionated ownership of land in many African-American families. The ULC\nexplains that \xe2\x80\x9cmany of these owners [in possession] believe that their property\nownership is secure because they pay property taxes, they live on the land, and\nthey make productive use of the land. They also believe that their property may\nonly be sold against their will if a majority or more of their cotenants agree,\nwhich gives some of these families with a large number of members with an\ninterest in the property false confidence that their ownership is extremely\nsecure.\xe2\x80\x9d Id. But their rights are, in fact, highly insecure. \xe2\x80\x9cUnfortunately, the\nfirst time that many of these owners are informed about the actual legal rules\ngoverning partition is after a partition action has been filed, and often after\ncritical, early court rulings have been made against them.\xe2\x80\x9d Id.\nWhen heirs\xe2\x80\x99 property became valuable for development, third parties would\noften acquire the interest of a distant relative who has a fractional share and\npetition for partition. Given the often hundreds of people who own interests\nin a piece of heirs\xe2\x80\x99 property, courts generally hold that partition in kind is\nimpossible. The resulting sale can dispossess people who have lived on or used\nthe land for decades; family members who would like to keep the land are rarely\nable to outbid developers, who nonetheless usually pay substantially belowmarket prices because of the forced nature of the sale. Ironically, once sale is\nordered, courts will not overturn a sale price unless it \xe2\x80\x9cshocks the conscience,\xe2\x80\x9d\neven though the rationale for ordering the sale was that it would provide the\ncotenants with more benefit than partition in kind. Sales have been confirmed\neven though the property sold for twenty percent or less of its market value. In\nmany states, family members who oppose partition by sale can even be required\nto pay the petitioner\xe2\x80\x99s attorneys\xe2\x80\x99 fees. Thomas Mitchell\xe2\x80\x94a law professor at\nTexas A&M University, a national expert on heirs property, and the Reporter\n\n\x0c444\n\nProperty\nfor the Uniform Law Commission\xe2\x80\x99s Uniform Partition of Heirs Property Act\xe2\x80\x94\nexplains: \xe2\x80\x9cIt would be like if you owned incredibly small shares of Microsoft,\nand you were given the right to go to your local state court and file a motion to\nliquidate Microsoft at a fire sale.\xe2\x80\x9d\nThe problem is substantial. Anna Stolley Persky, In the Cross-Heirs, ABA\nJOURNAL (May 2, 2009):\nAccording to the Land Loss Prevention Project, a Durham, N.C.based organization that provides legal support to financially\ndistressed farmers and landowners in the state, of the 15 million\nacres of land acquired by African-Americans after Emancipation,\nabout 2 million remain owned by their descendants. Nationally,\nit\xe2\x80\x99s estimated that African-American land ownership has\ndecreased from as much as 19 million acres in 1910 to 1.5 million\nacres in 1997, according to the Southern Coalition for Social\nJustice.\nThe problem also occurs in urban areas, where a family home may have been\npassed down through several generations. Barriers to transfers by will include\npoverty, lack of knowledge, or an unwillingness to cause family conflict by\npicking specific heirs. Heirs property created significant problems in New\nOrleans after Hurricane Katrina, when many people who thought they were\nowners were unable to show title to their homes.\nRecent dramatic investigative reports have drawn increased attention to the\ndecades of heirs property abuse documented by scholars and activists. See, e.g\nVICE, HOW PROPERTY LAW IS USED TO APPROPRIATE BLACK LAND (Aug. 11,\n2020), https://youtu.be/ls3P_FicO7I; ProPublica, Dispossessed: How Black\nFamilies are Losing Their Land, https://www.propublica.org/series/dispossessed.\nThese combined efforts have built momentum behind the Uniform Partition of\nHeirs\xe2\x80\x99 Property Act, a model state law that has been enacted in 17 states as of\n2020. The UPHPA provides co-owners with a right of first refusal to buy the\npetitioning co-owner\xe2\x80\x99s share, and, if they do not exercise that right, attempts to\ncreate a more competitive bidding process. The expectation is that even coowners who can\xe2\x80\x99t raise enough money to buy the entire parcel at fair market\n\n\x0cCo-ownership and Marital Property\n\n445\n\nvalue, as at a traditional partition sale, are more likely to be able to buy another\ncotenant\xe2\x80\x99s fractional share. Under the Act, courts can also consider the\nhistorical and cultural value of the land to the people living on it, not just the\neconomic value of the land, in deciding whether to reject partition by sale. See,\ne.g., Chuck v. Gomes, 532 P.2d 657 (Haw. 1975) (Richardson, C.J., dissenting):\n[T]here are interests other than financial expediency which I\nrecognize as essential to our Hawaiian way of life. Foremost is\nthe individual\xe2\x80\x99s right to retain ancestral land in order to\nperpetuate the concept of the family homestead. Such right is\nderived from our proud cultural heritage. . . . [W]e must not lose\nsight of the cultural traditions which attach fundamental\nimportance to keeping ancestral land in a particular family line.\n6. Preventing Fractionation. The common law operated under a presumption\nthat grants to multiple grantees created a joint tenancy\xe2\x80\x94precisely the opposite\nof the modern presumption in favor of a tenancy in common. Should we return\nto a presumption in favor of joint tenancy, at least for family homes where\nchildren are the heirs by intestacy?\nOr should small fractional interests disappear over time? Recall that\ntraditionally, one cotenant\xe2\x80\x99s possession is not adverse to any other cotenant\xe2\x80\x99s\npossession, unless there is an ouster. Although cotenants are due their share of\nrents or other income arising from use of the property, mere failure to pay them\ndoes not start the adverse possession clock running. Would it make sense to\nchange these rules? What are the risks from doing so? (There would be due\nprocess and takings issues if legislatures tried to extinguish fractional interests\noutright. *)\n\nDue to previous legislation attempting to assimilate members of Indian tribes into (white) American society,\ncombined with generations of inherited interests, reservation land has often become highly fractionated. Many\nallotments have several hundred owners. Fractional shares have been denominated in millions, billions, and even\n54 trillion. For example, one tract of forty acres produced $1080 in annual income. It had 439 owners, onethird of whom received less than five cents in annual rent and two-thirds of whom received less than a dollar.\nThe largest interest holder received $82.85 a year, while the smallest was entitled to one penny every 177 years.\nThe administrative costs to the Bureau of Indian Affairs of managing this distribution were over $17,000 per\n\n*\n\n\x0c446\n\nProperty\n\n7. Contracting around partition rights. Should cotenants be able to waive their\nright to partition? See Gore v. Beren, 867 P.2d 330 (Kan. 1994) (cotenants\nagreed to a right of first refusal if any cotenant wished to sell; this agreement\nimpliedly waived the right to partition and didn\xe2\x80\x99t violate the Rule Against\nPerpetuities because it was personal to the parties and would necessarily end\nduring the lifetime of one of the parties); see also Michalski v. Michalski, 142\nA.2d 645 (N.J. Super. 1958) (otherwise valid restriction on right to partition may\nbe unenforceable when circumstances have changed so much that enforcement\nwould be unduly harsh); Reilly v. Sageser, 467 P.2d 358 (Wash. Ct. App. 1970)\n(option to purchase from cotenant at cost of cotenant\xe2\x80\x99s investment in land and\nimprovements was valid unless both parties agreed or one party substantially\nbreached other elements of agreement); cf. Low v. Spellman, 629 A.2d 57 (Me.\n1993) (invalidating right of first refusal given to grantors, heirs, and assigns as\nin violation of the Rule Against Perpetuities; fixed price of $6500 also created\nunreasonable restraint on alienation).\n8. Partitioning a future interest. Can owners who own only a future interest\nseek partition of that interest? At common law, the answer was no because they\nlacked a present possessory interest, and some states still adhere to this rule. See,\ne.g., Trieber v. Citizens State Bank, 598 N.W.2d 96 (N.D. 1999). Many states,\nhowever, allow co-owners of vested future interests to seek partition of that\ninterest. See, e.g., ARK. CODE \xc2\xa718-60-401.\n\nyear. Hodel v. Irving, 481 U.S. 704 (1987). Fractionation makes productive use of land almost impossible.\nIndian Land Consolidation Act Amendment, S. Rep. No. 98-632, at 82-83 (1984), reprinted in 1984 U.S.C.C.A.N.\n5470. Allotment lands can only be leased or partitioned with the unanimous consent of all interest holders. The\nIndian Land Consolidation Act of 1983 attempted to solve these problems by mandating that extremely\nfractionated interests would escheat to the relevant tribe, without compensation to the fractional owners. The\nSupreme Court invalidated this law as an unconstitutional taking, Hodel, and likewise invalidated the attempted\nreplacement, Babbitt v. Youpee, 519 U.S. 234 (1997).\nThe American Indian Probate Reform Act of 2004 tried again; the Department of the Interior runs a land\nconsolidation program under which it buys back fractionated shares. Under the AIPRA, if Indian land would\npass by intestate succession, the Department of the Interior can buy any interests in the land that are under 5%.\nThis purchase can occur even if the heir objects, unless the heir is living on the land. Other heirs, co-owners,\nand the tribe on whose reservation the land is located can also buy the land, as long as they pay fair market value\nand have the consent of anyone holding more than a 5% interest.\n\n\x0cCo-ownership and Marital Property\n\n447\n\n9. Partitioning personal property. Are there circumstances in which a physical\npartition of personal property would make sense? How would you divide up a\nphoto album with hundreds of photographs? See In re Estate of McDowell,\n345 N.Y.S.2d 828 (Sur. Ct. 1973) (custody of rocking chair desired by both heirs\nshould be divided in six-month increments, remainder to the survivor); Ronen\nPerry & Tal Zarsky, Taking Turns, 43 FLA. ST. U. L. REV. (2015). This solution\nraises a more general question: why don\xe2\x80\x99t we see more co-ownership of real\nproperty on the time-share model?\n\nC. Joint Tenancy\nJoint tenancy (in some jurisdictions called a \xe2\x80\x9cjoint tenancy with right of survivorship\xe2\x80\x9d\nand abbreviated \xe2\x80\x9cJTWROS\xe2\x80\x9d) is a form of ownership that can be unilaterally severed\nand turned into a tenancy in common. Its distinctive feature is the right of\nsurvivorship: If a joint tenancy is not severed before a joint tenant\xe2\x80\x99s death, that joint\ntenant\xe2\x80\x99s interest disappears and the remaining tenant continues to own an undivided\ninterest, allowing the survivor to avoid probate. Thus, joint tenancy is most widely\nused today as a substitute for a will. *\nIn modern times, tenancy in common is preferred to other kinds of co-ownership. A\nconveyance \xe2\x80\x9cto Alice and Beth\xe2\x80\x9d therefore creates a tenancy in common by default,\nthough it\xe2\x80\x99s relatively standard to include \xe2\x80\x9cas tenants in common\xe2\x80\x9d to avoid all\nuncertainty. The creation and continuation of a joint tenancy is beset with traps, even\nthough it may well be most co-owners\xe2\x80\x99 preferred form of ownership for residential\nproperty. Some states have statutes that appear to abolish the joint tenancy, but they\nwill often find joint tenancies with a right of survivorship if the intent to create them\nis clear enough. See, e.g., McLeroy v. McLeroy, 40 S.W.2d 1027 (Tenn. 1931).\n\nNote that the federal government does not follow the fiction that nothing passes at death to the surviving joint\ntenant; the decedent\xe2\x80\x99s interest will be taxed as if it were transferred to the survivor, though if the joint tenants\nare married no tax will be due.\n\n*\n\n\x0c448\n\nProperty\n\n1. Creating a Joint Tenancy\nThe traditional test for the creation and continuation of a joint tenancy depended upon\nthe presence of the four \xe2\x80\x9cunities\xe2\x80\x9d: (1) time\xe2\x80\x94the joint tenants\xe2\x80\x99 interests were all\nacquired at the same time; (2) title\xe2\x80\x94the interests were all acquired by the same\ndocument or by joint adverse possession; (3) interest\xe2\x80\x94the tenants\xe2\x80\x99 shares must all be\nequal and undivided; and (4) possession\xe2\x80\x94all joint tenants must have equal rights to\npossess the whole (in the absence of an agreement to the contrary *:\nUnless the unities existed at the tenancy\xe2\x80\x99s inception, or if they were\nbroken at any subsequent point, the joint tenancy was automatically\nsevered, and the owners became tenants in common. This requirement\nmeant, for example, that the owner of property could not create a joint\ntenancy in himself and others without first making use of a straw man.\nBecause all joint tenants had to receive their interest in the property at\nthe same time and by the same title, the owner had first to convey to a\nthird party, who would in turn convey the property back to the grantor\nand the other tenants. They would then take in joint tenancy. Without\nthis purely formal step, however, they would be only tenants in common.\nR. H. Helmholz, Realism and Formalism in the Severance of Joint Tenancies, 77 NEB. L. REV.\n1 (1998). Today (as was already largely true in the 1950s), the necessity for using a straw\nman to create a joint tenancy has been largely eliminated from American law,\nsometimes by judicial decision but more often by statutory enactment. We will examine\nthis issue further below, when we discuss severance of a joint tenancy.\nA conveyance \xe2\x80\x9cto Alice and Beth as joint tenants, and not as tenants in common,\xe2\x80\x9d will\ncreate a joint tenancy in most states. See Kurpiel v. Kurpiel, 271 N.Y.S.2d 114 (N.Y.\nSup. Ct. 1966) (joint tenancy created). Most states consider that this language confirms\nthe grantor\xe2\x80\x99s intent\xe2\x80\x94\xe2\x80\x9cjoint\xe2\x80\x9d alone might have been misunderstood by a layperson who\nthinks that tenants in common are joint owners in a general sense, though some states\n\nAt common law, joint tenants could not hold unequal shares, and attempting to create such a tenancy would\ncreate a tenancy in common. However, modern courts are increasingly willing to accept a clearly shown intent\nto hold unequal shares. See Moat v. Ducharme, 555 N.E.2d 897 (Mass. App. 1990) (unequal contributions); Jezo\nv. Jezo, 127 N.W.2d 246 (Wis. 1964) (evidence of contrary intent can override presumption of equal shares).\n\n*\n\n\x0cCo-ownership and Marital Property\n\n449\n\naccept \xe2\x80\x9cto Alice and Beth jointly\xe2\x80\x9d as sufficient to create a joint tenancy. Compare\nDowning v. Downing, 606 A.2d 208 (Md. 1992) (\xe2\x80\x9cto A and B as joint tenants\xe2\x80\x9d creates\na joint tenancy where the state statute provides that a tenancy in common is created\nunless a written instrument \xe2\x80\x9cexpressly provides that the property granted is to be held\nin joint tenancy\xe2\x80\x9d), and Germaine v. Delaine, 318 So. 2d 681 (Ala. 1975) (\xe2\x80\x9cjointly as\ntenants in common\xe2\x80\x9d created a joint tenancy where the deed indicated a clear intent for\nsurvivorship), with Taylor v. Taylor, 17 N.W.2d 745 (Mich. 1945) (\xe2\x80\x9cjointly,\xe2\x80\x9d absent\ncircumstantial evidence of intent to create the legal effect of a joint tenancy, does not\nsuffice to create a joint tenancy); Montgomery v. Clarkson, 585 S.W.2d 483 (Mo. 1979)\n(\xe2\x80\x9cjointly\xe2\x80\x9d is not \xe2\x80\x9cexpress declaration\xe2\x80\x9d of joint tenancy, as required by state statute);\nOverheiser v. Lackey, 100 N.E. 738 (N.Y. 1913) (where the layman who prepared a\nwill used \xe2\x80\x9cjointly,\xe2\x80\x9d the will created a tenancy in common), and Householter v.\nHouseholter, 164 P.2d 101 (Kan. 1945) (\xe2\x80\x9cjointly,\xe2\x80\x9d used five times in a will prepared by\na person who had served as a probate judge, created a joint tenancy).\nIn some states, precedents require more, usually specific invocation of a right of\nsurvivorship. Compare Germaine v. Delaine, 318 So. 2d 681 (Ala. 1975) (deed to A and\nB \xe2\x80\x9cjointly, as tenants in common and to the survivor thereof\xe2\x80\x9d created joint tenancy\nbecause of survivorship language), with Hoover v. Smith, 444 S.E.2d 546 (Va. 1994)\n(\xe2\x80\x9cto A and B as joint tenants, and not as tenants in common\xe2\x80\x9d was insufficient to create\na joint tenancy because it was not explicit about the right of survivorship).\nIn other states, however, use of that same language will cause problems. See, e.g.,\nHunter v. Hunter, 320 S.W.2d 529 (Mo. 1959) (will devising property to A and B \xe2\x80\x9cas\njoint tenants with the right of survivorship\xe2\x80\x9d created life estates with remainder to the\nsurvivor); Snover v. Snover, 502 N.W.2d 370 (Mich. Ct. App. 1993) (\xe2\x80\x9cto A and B as\njoint tenants with full rights of survivorship and not as tenants in common\xe2\x80\x9d created\nlife estate in tenancy in common with remainder to survivor). Be sure you understand\nwhat the problem is: under what circumstances will it make a difference whether A and\nB have a joint tenancy, with right of survivorship, or instead have a tenancy in common\nin life estate, with the remainder to the survivor? Courts sometimes refer to the latter\nas an \xe2\x80\x9cindestructible\xe2\x80\x9d remainder, which is confusing language\xe2\x80\x94the remainder can\xe2\x80\x99t be\ndestroyed by the other cotenant, whereas a right of survivorship in a joint tenancy can\nbe unilaterally destroyed.\n\n\x0c450\n\nProperty\n\nIt is vitally important to consult your state\xe2\x80\x99s statutes and precedent before drafting a\nconveyance to more than one owner. James v. Taylor, 969 S.W.2d 672 (Ark. App. Ct.\n1998), is an example of how the law can lay traps for the well-intentioned but poorly\nadvised. The issue in the case was whether a deed conveyed property from a mother\nto her three children as tenants in common or as joint tenants. The court of appeals\nreversed an initial ruling that the conveyance created a joint tenancy. The deed named\nthe three children \xe2\x80\x9cjointly and severally, and unto their heirs, assigns and successors\nforever,\xe2\x80\x9d and the mother retained a life estate. Two of the three children subsequently\ndied, and then the mother died. Melba Taylor, the surviving child, sought a declaration\nthat she was the sole owner, while the heirs of the other two children opposed her.\nArkansas, like most states, provides that every shared interest in land \xe2\x80\x9cshall be in\ntenancy in common unless expressly declared in the grant or devise to be a joint\ntenancy.\xe2\x80\x9d ARK. CODE ANN. \xc2\xa7 18-12-603 (1987).\nThe heirs argued that any ambiguity therefore pointed to a tenancy in common,\nwhereas Taylor argued that her mother\xe2\x80\x99s intent to create a joint tenancy could be\ndetermined from the surrounding circumstances. The evidence of such intent was\nrelatively strong: Taylor testified that her mother told her lawyer that she wanted the\ndeed drafted so that, if one of her children died, the property would belong to the other\ntwo children, and so on; and that her mother was upset when she learned, just before\nher death, that there was a problem with the deed. In addition, after the first child died,\nthe mother drafted a new will splitting her property between her two living children\nand giving nothing to the dead child\xe2\x80\x99s heirs, and the mother deleted the names of each\ndead child from bank accounts payable on death, leaving only Taylor\xe2\x80\x99s name.\nThe court of appeals nonetheless held that the policy of the statute, favoring tenancy\nin common unless a joint tenancy was expressly granted, overrode any inquiry into the\nmother\xe2\x80\x99s intent. While the words \xe2\x80\x9cjoint tenancy\xe2\x80\x9d didn\xe2\x80\x99t need to be used, some intent\nto convey a survivorship estate needed to appear in the grant. The words \xe2\x80\x9cjointly and\nseverally\xe2\x80\x9d were insufficient, contradictory, and therefore meaningless in the context of\nestates.\nAssuming a court looked for extrinsic evidence of the drafter\xe2\x80\x99s intent in a case involving\nambiguous language, what would constitute persuasive evidence of an intent to create\na joint tenancy?\n\n\x0cCo-ownership and Marital Property\n\n451\n\n2. Severance of a Joint Tenancy\nSeverance is any act that destroys one or more of the four unities required to maintain\na joint tenancy. The legal consequence of severance is that the joint tenancy is\nconverted to a tenancy in common. (For those rare joint tenancies involving three or\nmore joint tenants, one joint tenant may sever the joint tenancy as to his interest, but\nthe others remain joint tenants with each other.) The traditional rule for severance\nrequired either that all the tenants expressly agree to hold as tenants in common, or\nthat one of the tenants convey to a third person in order to destroy the unities\n(particularly the unities of time and title), to turn a joint tenancy into a tenancy in\ncommon. In modern times, a conveyance from oneself as joint tenant to oneself as\ntenant in common is likely to succeed just as well as a conveyance by one tenant to a\nstraw owner plus a reconveyance from the straw. See Hendrickson v. Minneapolis Fed.\nSav. & Loan Ass\xe2\x80\x99n, 161 N.W.2d 688 (Minn. 1968); Riddle v. Harmon, 162 Cal. Rptr.\n530 (Cal. Ct. App. 1980); see also Countrywide Funding Corp. v. Palmer, 589 So. 2d\n994 (Fla. Dist. Ct. App. 1991) (one joint tenant forged the other\xe2\x80\x99s signature in\npurported conveyance to himself; court held that his act severed the tenancy). But see\nKrause v. Crossley, 277 N.W.2d 242 (Neb. 1979) (rejecting this modern trend and\nrequiring conveyance to a third party for an effective severance); L.B. 694, \xc2\xa7 11, 1980\nNeb. Laws 577 (codified as NEB. REV. STAT. \xc2\xa7 76-118(4) (Reissue 1996)) (reversing\nresult in Krause and allowing self-conveyance to sever).\nThe largest problem in severance is one of surprise, which can occur whether or not a\nthird party straw is required to partipate in the severance. As Helmholz explains:\nSince one joint tenant has always been able to sever the tenancy without\nthe concurrence or even the knowledge of the other, the possibility of a\nseverance that is unfair to the other has long existed. It can take several\nforms, as where the joint tenant who has contributed nothing to the\npurchase of the assets then severs unilaterally, thereby upsetting the\nnormal expectations of the other joint tenant. Its most extreme form is\nthe secret severance. If the tenant who severs secretly is the first to die,\nthe heirs or successors produce the severing document and take half of\nthe property. It accrues to them under the tenancy in common that was\nthe result of the severance. If the severing tenant survives, however, the\nsevering document is suppressed and the survivor takes the whole. The\n\n\x0c452\n\nProperty\nheirs or successors of the first to die get nothing. It is what the\neconomists call \xe2\x80\x9cstrategic behavior.\xe2\x80\x9d\n\nHelmholz, supra, at 25-26.\nWhy not impose a notice requirement for a deliberate severance? What about imposing\na requirement that a severing instrument be timely recorded in the public land records?\nSee CAL. CIV. CODE \xc2\xa7 683.2 (West 1998) (if a joint tenancy is recorded, severance is\nonly effective against the non-severing tenant if the severance is recorded either before\nthe severing tenant\xe2\x80\x99s death or, in limited circumstances, recorded within seven days\nafter death; the severing tenant\xe2\x80\x99s right of survivorship is cut off even without\nrecording); MINN. STAT. ANN. \xc2\xa7 500.19-5 (West 1997) (requiring recording to make\nunilateral severance valid); N.Y. REAL PROP. LAW \xc2\xa7 240-c(2) (similar). Does a\nrecording requirement solve the problem of surprise?\nJoint tenants may also take acts that are more ambiguous with respect to their rights.\nCourts then have to decide what kinds of acts are sufficient to work a severance.\nHarms v. Sprague\n473 N.E.2d 930 (1984)\nThomas J. MORAN, Justice.\nPlaintiff, William H. Harms, filed a complaint to quiet title and for declaratory judgment\nin the circuit court of Greene County. Plaintiff had taken title to certain real estate with\nhis brother John R. Harms, as a joint tenant, with full right of survivorship. The plaintiff\nnamed, as a defendant, Charles D. Sprague, the executor of the estate of John Harms\nand the devisee of all the real and personal property of John Harms. Also named as\ndefendants were Carl T. and Mary E. Simmons, alleged mortgagees of the property in\nquestion. Defendant Sprague filed a counterclaim against plaintiff, challenging\nplaintiff\xe2\x80\x99s claim of ownership of the entire tract of property and asking the court to\nrecognize his (Sprague\xe2\x80\x99s) interest as a tenant in common, subject to a mortgage lien. At\nissue was the effect the granting of a mortgage by John Harms had on the joint tenancy.\nAlso at issue was whether the mortgage survived the death of John Harms as a lien\nagainst the property.\n\n\x0cCo-ownership and Marital Property\n\n453\n\nThe trial court held that the mortgage given by John Harms to defendants Carl and\nMary Simmons severed the joint tenancy. Further, the court found that the mortgage\nsurvived the death of John Harms as a lien against the undivided one-half interest in\nthe property which passed to Sprague by and through the will of the deceased. The\nappellate court reversed, finding that the mortgage given by one joint tenant of his\ninterest in the property does not sever the joint tenancy. Accordingly, the appellate\ncourt held that plaintiff, as the surviving joint tenant, owned the property in its entirety,\nunencumbered by the mortgage lien.\xe2\x80\xa6\nTwo issues are raised on appeal: (1) Is a joint tenancy severed when less than all of the\njoint tenants mortgage their interest in the property? and (2) Does such a mortgage\nsurvive the death of the mortgagor as a lien on the property?\nA review of the stipulation of facts reveals the following. Plaintiff, William Harms, and\nhis brother John Harms, took title to real estate located in Roodhouse, on June 26,\n1973, as joint tenants. The warranty deed memorializing this transaction was recorded\non June 29, 1973, in the office of the Greene County recorder of deeds.\nCarl and Mary Simmons owned a lot and home in Roodhouse. Charles Sprague entered\ninto an agreement with the Simmons whereby Sprague was to purchase their property\nfor $25,000. Sprague tendered $18,000 in cash and signed a promissory note for the\nbalance of $7,000. Because Sprague had no security for the $7,000, he asked his friend,\nJohn Harms, to co-sign the note and give a mortgage on his interest in the joint tenancy\nproperty. Harms agreed, and on June 12, 1981, John Harms and Charles Sprague,\njointly and severally, executed a promissory note for $7,000 payable to Carl and Mary\nSimmons. The note states that the principal sum of $7,000 was to be paid from the\nproceeds of the sale of John Harms\xe2\x80\x99 interest in the joint tenancy property, but in any\nevent no later than six months from the date the note was signed. The note reflects\nthat five monthly interest payments had been made, with the last payment recorded\nNovember 6, 1981. In addition, John Harms executed a mortgage, in favor of the\nSimmonses, on his undivided one-half interest in the joint tenancy property, to secure\npayment of the note. William Harms was unaware of the mortgage given by his brother.\nJohn Harms moved from his joint tenancy property to the Simmons property which\nhad been purchased by Charles Sprague. On December 10, 1981, John Harms died. By\n\n\x0c454\n\nProperty\n\nthe terms of John Harms\xe2\x80\x99 will, Charles Sprague was the devisee of his entire estate. The\nmortgage given by John Harms to the Simmonses was recorded on December 29, 1981.\nPrior to the appellate court decision in the instant case no court of this State had directly\naddressed the principal question we are confronted with herein-the effect of a mortgage,\nexecuted by less than all of the joint tenants, on the joint tenancy. Nevertheless, there\nare numerous cases which have considered the severance issue in relation to other\ncircumstances surrounding a joint tenancy. All have necessarily focused on the four\nunities which are fundamental to both the creation and the perpetuation of the joint\ntenancy. These are the unities of interest, title, time, and possession. The voluntary or\ninvoluntary destruction of any of the unities by one of the joint tenants will sever the\njoint tenancy.\nIn a series of cases, this court has considered the effect that judgment liens upon the\ninterest of one joint tenant have on the stability of the joint tenancy. In Peoples Trust\n& Savings Bank v. Haas (1927), 328 Ill. 468, 160 N.E. 85, the court found that a\njudgment lien secured against one joint tenant did not serve to extinguish the joint\ntenancy. As such, the surviving joint tenant \xe2\x80\x9csucceeded to the title in fee to the whole\nof the land by operation of law.\xe2\x80\x9d\n\xe2\x80\xa6Clearly, this court adheres to the rule that a lien on a joint tenant\xe2\x80\x99s interest in\nproperty will not effectuate a severance of the joint tenancy, absent the conveyance by\na deed following the expiration of a redemption period. It follows, therefore, that if\nIllinois perceives a mortgage as merely a lien on the mortgagor\xe2\x80\x99s interest in property\nrather than a conveyance of title from mortgagor to mortgagee, the execution of a\nmortgage by a joint tenant, on his interest in the property, would not destroy the unity\nof title and sever the joint tenancy.\nEarly cases in Illinois, however, followed the title theory of mortgages. In 1900, this\ncourt recognized the common law precept that a mortgage was a conveyance of a legal\nestate vesting title to the property in the mortgagee. Consistent with this title theory of\nmortgages, therefore, there are many cases which state, in dicta, that a joint tenancy is\nsevered by one of the joint tenants mortgaging his interest to a stranger. Yet even the\nearly case of Lightcap v. Bradley, cited above, recognized that the title held by the\nmortgagee was for the limited purpose of protecting his interests. The court went on\nto say that \xe2\x80\x9cthe mortgagor is the owner for every other purpose and against every other\n\n\x0cCo-ownership and Marital Property\n\n455\n\nperson. The title of the mortgagee is anomalous, and exists only between him and the\nmortgagor * * *.\xe2\x80\x9d Lightcap v. Bradley (1900), 186 Ill. 510, 522-23, 58 N.E. 221.\nBecause our cases had early recognized the unique and narrow character of the title\nthat passed to a mortgagee under the common law title theory, it was not a drastic\ndeparture when this court expressly characterized the execution of a mortgage as a\nmere lien \xe2\x80\xa6\n[A] joint tenancy is not severed when one joint tenant executes a mortgage on his\ninterest in the property, since the unity of title has been preserved. As the appellate\ncourt in the instant case correctly observed: \xe2\x80\x9cIf giving a mortgage creates only a lien,\nthen a mortgage should have the same effect on a joint tenancy as a lien created in\nother ways.\xe2\x80\x9d Other jurisdictions following the lien theory of mortgages have reached\nthe same result.\n\xe2\x80\xa6An inherent feature of the estate of joint tenancy is the right of survivorship, which\nis the right of the last survivor to take the whole of the estate. Because we find that a\nmortgage given by one joint tenant of his interest in the property does not sever the\njoint tenancy, we hold that the plaintiff\xe2\x80\x99s right of survivorship became operative upon\nthe death of his brother. As such plaintiff is now the sole owner of the estate, in its\nentirety.\nFurther, we find that the mortgage executed by John Harms does not survive as a lien\non plaintiff\xe2\x80\x99s property. A surviving joint tenant succeeds to the share of the deceased\njoint tenant by virtue of the conveyance which created the joint tenancy, not as the\nsuccessor of the deceased. The property right of the mortgaging joint tenant is\nextinguished at the moment of his death. While John Harms was alive, the mortgage\nexisted as a lien on his interest in the joint tenancy. Upon his death, his interest ceased\nto exist and along with it the lien of the mortgage. Under the circumstances of this case,\nwe would note that the mortgage given by John Harms to the Simmonses was only\nvalid as between the original parties during the lifetime of John Harms since it was\nunrecorded. In addition, recording the mortgage subsequent to the death of John\nHarms was a nullity. As we stated above, John Harms\xe2\x80\x99 property rights in the joint\ntenancy were extinguished when he died. Thus, he no longer had a property interest\nupon which the mortgage lien could attach\xe2\x80\xa6.\n\n\x0c456\n\nProperty\nNotes and Questions\n\n1. The result in Harms, in which the mortgage disappears if the joint tenant who\ngranted it predeceases the other joint tenant, is the most common result in \xe2\x80\x9clien\ntheory\xe2\x80\x9d states, which represent the vast majority of states today. However, for\nthe reasons discussed in Harms, the results in \xe2\x80\x9ctitle theory\xe2\x80\x9d states are mixed.\nCompare Downing v. Downing, 606 A.2d 208 (Md. 1992) (no automatic\nseverance although Maryland is a \xe2\x80\x9ctitle\xe2\x80\x9d state), with Schaefer v. Peoples Heritage\nSavings Bank, 669 A.2d 185 (Me. 1996) (mortgage severs joint tenancy), and\nGeneral Credit Co. v. Cleck, 609 A.2d 553 (Pa. Sup. Ct. 1992) (same); Taylor\nMattis, Severance of Joint Tenancies by Mortgages: A Contextual Approach, 1977 S. ILL.\nU. L.J. 27.\nSuppose we adopted an intent-based standard to determine whether the joint\ntenancy was severed. How would we have determined John Harms\xe2\x80\x99 intent after\nhis death?\n2. Is the result in Harms fair? Suppose John had instead survived William. Would\nthe mortgage burden half the interest in the property, or the whole interest? See\nPeople v. Nogarr, 330 P.2d 858 (Cal. Ct. App. 1958) (if the mortgaging joint\ntenant survives the nonmortgaging joint tenant, the lien attaches to the entire\ninterest). Wouldn\xe2\x80\x99t the mortgagees get a windfall if the value of their secured\ninterest suddently jumped in value? On the other hand, isn\xe2\x80\x99t that just the flip\nside of the loss they suffer if William survives John? Should we create a hybrid\nthat would protect the lender, and burden William\xe2\x80\x99s interest after John\xe2\x80\x99s death,\neven without severing?\nSuppose the mortgage had worked a severance. If John had paid the mortgage\noff before dying, should the severance be undone and the joint tenancy\nrestored? What would the parties likely have expected?\n3. Given the result in Harms, how will lenders behave when one co-owner seeks\nto take out a loan? Sophisticated lenders make mistakes, see Texas American\nBank v. Morgan, 733 P.2d 864 (N.M. 1987), but mostly the lenders at risk are\nordinary people, often relatives or friends of the borrower.\n\n\x0cCo-ownership and Marital Property\n\n457\n\nWhat about a creditor who has a judgment against one joint tenant\xe2\x80\x94what\nshould she do to make sure she can get access to the property to satisfy the\njudgment? In practice, the creditor must act during the debtor\xe2\x80\x99s life to attach a\nlien to the property and foreclose on that lien. See, e.g., Rembe v. Stewart, 387\nN.W.2d 313 (Iowa 1986); Jamestown Terminal Elev., Inc. v. Knopp, 246\nN.W.2d 612 (N.D. 1976) (judgment lien on joint tenancy property did not\nsurvive when debtor cotenant died before execution sale); Jackson v. Lacy, 97\nN.E.2d 839 (Ill. 1951) (severance doesn\xe2\x80\x99t occur at foreclosure, but only on\nexpiration of the redemption period after foreclosure sale); see also Harris v.\nCrowder, 322 S.E.2d 854 (W. Va. 1984) (a creditor may do what the debtor\ncould do, so a creditor of one joint tenant could convert a joint tenancy into a\ntenancy in common, as long as the other cotenant\xe2\x80\x99s interest wouldn\xe2\x80\x99t be\notherwise prejudiced; an example of prejudice would be the loss of a favorable\ninterest rate on a mortgage due to the timing of the creditor\xe2\x80\x99s act).\n4. According to Charles Sprague\xe2\x80\x99s lawyer, Charles and John were romantically\ninvolved. If the events underlying the case occurred today, they could have\nmarried before John\xe2\x80\x99s death. Would that have changed anything?\nIn Riccelli v. Forcinito, 595 A.2d 1322 (Pa. Super. Ct. 1991), discussed above, Sam\nRiccelli and Carmen Pirozek had a joint tenancy. Four years later, Sam Riccelli\nmarried Rita Riccelli. Carmen Pirozek lived in the Riccelli-Pirozek property\nuntil her death in 1984. Her son lived in the house until Sam Riccelli died in\n1987; Rita Riccelli then sued to kick him out, claiming to be the sole owner\nbecause Sam had inherited the whole property by right of survivorship. Did the\nmarriage sever the joint tenancy? It might seem that the marriage, which gave\nRita at least a potential interest in the property, severed the unities of time, title,\ninterest, and possession. However, the court held that marriage of one joint\ntenant did not sever the joint tenancy. What\xe2\x80\x99s the best argument against\nseverance? Is it the same as the argument in Harms against allowing a mortgage\ngiven by only one joint tenant to sever the joint tenancy?\nCompare the case of Goldman v. Gelman, 77 N.E.2d 200 (N.Y. 2000). Before a\ndivorce decree became final, the wife gave her divorce attorney a mortgage on\nthe marital home, which was owned by the entirety, in order to secure her debt\n\n\x0c458\n\nProperty\nto her attorney. The husband was awarded exclusive title to the whole marital\nhome. New York\xe2\x80\x99s highest court held that the divorce did not destroy the\nmortgage, because the wife\xe2\x80\x99s interest was valid until the final divorce decree,\nwhich turned the tenancy by the entirety into a tenancy in common. The\nmortgage still burdened the wife\xe2\x80\x99s interest, and survived when the wife\xe2\x80\x99s interest\nwas transferred to the husband. Who ultimately has to pay the wife\xe2\x80\x99s divorce\nlawyer?\n\n5. Other acts that might work a severance. Technical breaches of the four\nunities are unlikely to work a severance. For example, when one joint tenant is\nadjudged an incompetent and the legal title to the incompetent\xe2\x80\x99s property is\nassigned to a guardian, courts hold that no severance occurred. See, e.g., Moses\nv. Butner (In re Estate and Guardianship of Wood), 14 Cal. Rptr. 147 (Cal. Ct.\nApp. 1961). Cases are divided on whether the grant of a lease by one joint\ntenant works a severance. Compare Tenhet v. Boswell, 554 P.2d 330 (Cal. 1976)\n(lease by one joint tenant does not sever joint tenancy, though lease is\nterminated by death of leasing joint tenant), with Estate of Gulledge, 673 A.2d\n1278 (D.C. 1996) (lease to third person severs joint tenancy); see also In re Estate\nof Johnson, 739 N.W.2d 493 (Iowa 2007) (adopting intent-based approach to\nseverance). Some cases even suggest that a lease only works a temporary\nseverance, and the joint tenancy is automatically reformed when the lease ends.\nIsn\xe2\x80\x99t that a ridiculous rule? Are the four unities doing any real work here?\nThe traditional rule was that, when property is held jointly by spouses, divorce\ndid not sever the joint tenancy. Unlike entireties property, jointly held property\nneed not be held by spouses, so the four unities remain intact even after divorce.\nDoes this make sense? Some states now presume severance upon divorce. See\ne.g., OHIO REV. CODE ANN. \xc2\xa7 5302.20(c)(5) (Anderson 1996). Others require\ncourts to deal with the status of property as part of the divorce decree. See, e.g.,\nJohnson v. Johnson, 169 N.W.2d 595 (Minn. 1969). The majority rule is that\ndivorce works a severance, though the cases are divided; Helmholz argues that\nthe results turn not on the four unities but on the courts\xe2\x80\x99 best understanding of\nthe parties\xe2\x80\x99 intent. In a divorce case, both parties are alive, so it may seem\npossible to determine that intent. As Helmholz points out, matters get dicey\nwhen a divorce or a sale is pending and one of the spouses dies:\n\n\x0cCo-ownership and Marital Property\n\n459\n\nMost of these disputes arose where the parties were not thinking\nat all about what would happen if one of them died. Why would\nthey? They assumed that the divorce would be completed or that\nthe contract for sale would be fulfilled. In most situations that is\nexactly what did happen. But not all. Where the unexpected does\nhappen and one party dies, litigation all too easily ensues. In it,\nthe courts have been left with the task of discovering the intent\nof the parties from what are very often the slenderest of\nindications.\nHelmholz, supra, at 25. Given that \xe2\x80\x9cintent\xe2\x80\x9d may be an unworkable standard, is\na formalist approach looking only to the four unities preferable in that it at least\nprovides courts with an answer?\nFinally, where joint tenants have sought partition but the partition hasn\xe2\x80\x99t yet\noccurred, the almost universal rule is that there is no severance until a court has\ngranted the partition, or at least until only the barest formalities remain to\nfinalize it. See, e.g., Heintz v. Hudkins, 824 S.W.2d 139 (Mo. Ct. App. 1992).\nHelmholz again:\nAlthough it may be said in favor of this rule that the parties might\nalways have changed their mind before the final decree, that\nseems a poor justification in the face of their clearly expressed\nintent to sever and the untimely death of one of them. The true\nreason for the rule must be a formal one: the rule is necessary in\norder to safeguard the integrity of the underlying action for\npartition. Partition cannot be effective before it is obtained. One\ncannot secure the results of a judicial action simply by asking for\nit.\nHelmholz, supra, at 30.\n6. What shares exist after severance? The general assumption is that joint\ntenants have equal shares after severance\xe2\x80\x94after all, the unity of interest requires\nthat all joint tenants have equal shares before severance. However, if the equities\nstrongly favored unequal shares, courts might well bend the rules. Compare\n\n\x0c460\n\nProperty\nCunningham v. Hastings, 556 N.E.2d 12 (Ind. Ct. App. 1990) (though one\ncotenant paid the purchase price, the creation of a joint tenancy entitles each\nparty to an equal share of the proceeds on partition; equitable adjustments to\ncotenants\xe2\x80\x99 equal shares are allowed for tenancies in common, not joint\ntenancies), with Moat v. Ducharme, 555 N.E.2d 897 (Mass. App. Ct. 1990)\n(presumption of equal shares is rebuttable because partition must be equitable),\nand Jezo v. Jezo, 127 N.W.2d 246 (Wis. 1964) (presumption of equal shares is\nrebuttable).\n\n7. Joint tenants who kill. The general rule is that a person who intentionally\ncauses another\xe2\x80\x99s death loses any inheritance rights he otherwise would have had\nfrom his victim\xe2\x80\x99s estate. In Estate of Castiglioni, 47 Cal. Rptr. 2d 288 (Ct. App.\n1995), the surviving spouse petitioned for half of the property she held in joint\ntenancy with her deceased husband, of whose murder she was subsequently\nconvicted. California Probate Code Section 251 provides in part: \xe2\x80\x9cA joint\ntenant who feloniously and intentionally kills another joint tenant thereby\neffects a severance of the interest of the decedent so that the share of the\ndecedent passes as the decedent\xe2\x80\x99s property and the killer has no rights by\nsurvivorship.\xe2\x80\x9d Thus, there was no question that she could not inherit the entire\nproperty through a right of survivorship; her husband\xe2\x80\x99s share went to her\nhusband\xe2\x80\x99s heir, a daughter.\nHowever, years before the murder, the husband put his separate property in\njoint tenancy with the wife. The question was therefore whether the husband\xe2\x80\x99s\nshare was an undivided half of the former joint tenancy property, or whether\nequitable tracing rules should apply to increase that share. The court of appeals\nheld the latter, and that it was error to give the killer half of the joint tenancy\nproperty. The court noted that, had the tenancy been severed by divorce rather\nthan by murder, the widow/murderer wouldn\xe2\x80\x99t have received any of the\nproperty at issue, because under California\xe2\x80\x99s community property regime the\nhusband would have been reimbursed by tracing his contributions to their joint\nproperty. CAL. FAMILY CODE \xc2\xa7 2640(b). Thus, equitable principles dictated\nthat she should not be allowed to benefit from her crime, and her share would\nbe reduced by the amount necessary to reflect his contribution.\n\n\x0cCo-ownership and Marital Property\n\n461\n\nWhat should have happened if the couple had lived in a state without\ncommunity property rules, the source of the court\xe2\x80\x99s equitable tracing principle?\nSuppose section 251 instead read: \xe2\x80\x9cIf a joint tenant feloniously and intentionally\nkills another joint tenant, the share of the decedent passes as though the killer\nhad predeceased the decedent.\xe2\x80\x9d What would the result be in Estate of Castiglioni\nin that situation?\n8. Simultaneous death. What happens when two joint tenants die in the same\naccident, or the order of their death can\xe2\x80\x99t be determined? The Uniform\nSimultaneous Death Act initially provided that, without sufficient evidence of\nthe order of death, half of the property should be distributed as if the first joint\ntenant had died first, and the other half as if the other joint tenant had died first.\nThis rule led to some unpleasant litigation and \xe2\x80\x9cgruesome\xe2\x80\x9d attempts by heirs to\nprove that a specific joint tenant died first. The 1993 revision of the USDA\nstates that, unless a governing instrument such as a will specifies otherwise, the\nhalf-and-half approach will be used in the absence of \xe2\x80\x9cclear and convincing\xe2\x80\x9d\nevidence that one joint tenant survived the other by 120 hours.\n9. Joint accounts with rights of survivorship. \xe2\x80\x9cJoint accounts\xe2\x80\x9d are bank\naccounts generally held by couples, children and parents, or business partners.\nEach account holder has the ability to draw on the account. Many joint\naccounts come with a right of survivorship: If a joint account owner dies, the\nsurvivor(s) get all the money\xe2\x80\x94creating another way around the delays involved\nin probating a will.\nIn many states, joint account-holders do not have the same undivided interest\nand rights to the use and enjoyment of the deposits that joint owners of real\nproperty do. That is, the donee/nondepositor isn\xe2\x80\x99t entitled to the funds unless\nshe survives the donor/depositor. See UNIFORM PROBATE CODE \xc2\xa76-211 (2008).\nOn the donor/depositor\xe2\x80\x99s death, the majority rule is that the surviving joint\ntenant takes the balance in a joint account unless there is clear and convincing\nevidence that the depositor\xe2\x80\x99s intent was to create a \xe2\x80\x9cconvenience account,\xe2\x80\x9d that\nis, an account that was supposed to be used by the nondepositor\xe2\x80\x94usually a\nyounger relative\xe2\x80\x94to take care of the depositor\xe2\x80\x99s business affairs. Some\n\n\x0c462\n\nProperty\njurisdictions conclusively presume that the surviving joint tenant should receive\nthe balance. See Wright v. Bloom, 635 N.E.2d 31 (Ohio 1994).\nWhat should happen if Orlando deposits $10,000 in a joint bank account with\nAbbie, and Abbie then withdraws $5000 from the account while Orlando is\nalive, without his permission or later agreement? Orlando can force Abbie to\nreturn the money. Why not presume that Orlando intended a present gift to\nAbbie? By the same logic, her creditors can\xe2\x80\x99t reach all the money to satisfy their\nclaims against her unless and until she survives the donor/depositor. N.\nWilliam Hines, Personal Property Joint Tenancies: More Law, Fact and Fancy, 54 MINN.\nL. REV. 509 (1970).\nHowever, the presumption against a present gift can be overcome by clear and\nconvincing evidence. In a minority of jurisdictions, joint account owners have\nequal shares in the account during their lifetimes, as in a joint tenancy in land.\nJoint accounts with a right of survivorship can be used as a will substitute, but\nthere are potential tax consequences, not to mention risks of dispute during the\ntime the person who put the money in the account is alive, or disputes after\ndeath when alternate heirs argue that the account was never intended to benefit\nthe survivor. If the depositor\xe2\x80\x99s intent is to give whatever money is in the\naccount to the non-depositing joint account holder when the depositor dies but\nnot before, many states allow accounts to be designated \xe2\x80\x9cpayable on death,\xe2\x80\x9d\npreventing the non-depositing account holder from withdrawing the money\nwhile the depositor is alive. In the alternative, a revocable inter vivos trust will\nalso provide the desired results. As for an elderly parent who wants her child\nto use money for her care, a better solution would be a power of attorney,\nmaking her child into her agent with the power to act on her behalf. This power\nof attorney would end with the parent\xe2\x80\x99s death.\n\n10. Why not allow severance by will? If a joint tenant can sever without\nconstraint during her lifetime, why not by will? Courts will not recognize such\na transfer. See, e.g., Gladson v. Gladson, 800 S.W.2d 709 (Ark. 1990). There is\nan easy formalist explanation: by definition, the joint tenant\xe2\x80\x99s interest ends at\nher death and ownership automatically passes to the survivor, so there is\nnothing for her to pass by will. But isn\xe2\x80\x99t this just playing with definitions? A\n\n\x0cCo-ownership and Marital Property\n\n463\n\nnumber of cases have allowed severance by will when the joint owners make\njoint wills, indicating a clear intent to sever at death, on the theory that it\xe2\x80\x99s the\nagreement to make the joint will that severs the joint tenancy.\nThe best explanation for the \xe2\x80\x9cno severance by will\xe2\x80\x9d rule is that it is about the\noperation of the system of wills, and preserves the use of joint tenancy as a\ndevice to avoid probate, even if it frustrates the intent of the testator. In addition,\na joint tenant who severs by will is playing a no-lose game at the other tenant\xe2\x80\x99s\nexpense. If she dies first, her designated heir takes her share. If she survives the\nother tenant, she takes all. If she has to sever during her lifetime, the severance\noccurs, whether that ends up benefiting her or not. This rule may not matter\nmuch given the cavalier way states allow secret severances, but still, severance\nby will is so contrary to the sharing spirit of joint tenancies that the rule requiring\njoint wills makes sense.\n\nD. Marital Interests\n1. Tenancy by the Entirety\nU.S. v. Craft\n535 U.S. 274 (2002)\nJustice O\xe2\x80\x99CONNOR delivered the opinion of the Court.\nThis case raises the question whether a tenant by the entirety possesses \xe2\x80\x9cproperty\xe2\x80\x9d or\n\xe2\x80\x9crights to property\xe2\x80\x9d to which a federal tax lien may attach. Relying on the state law\nfiction that a tenant by the entirety has no separate interest in entireties property, the\nUnited States Court of Appeals for the Sixth Circuit held that such property is exempt\nfrom the tax lien. We conclude that, despite the fiction, each tenant possesses individual\nrights in the estate sufficient to constitute \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9crights to property\xe2\x80\x9d for the\npurposes of the lien, and reverse the judgment of the Court of Appeals.\nI\nIn 1988, the Internal Revenue Service (IRS) assessed $482,446 in unpaid income tax\nliabilities against Don Craft, the husband of respondent Sandra L. Craft, for failure to\nfile federal income tax returns for the years 1979 through 1986. When he failed to pay,\n\n\x0c464\n\nProperty\n\na federal tax lien attached to \xe2\x80\x9call property and rights to property, whether real or\npersonal, belonging to\xe2\x80\x9d him. 26 U.S.C. \xc2\xa7 6321.\nAt the time the lien attached, respondent and her husband owned a piece of real\nproperty in Grand Rapids, Michigan, as tenants by the entirety. After notice of the lien\nwas filed, they jointly executed a quitclaim deed purporting to transfer the husband\xe2\x80\x99s\ninterest in the property to respondent for one dollar. When respondent attempted to\nsell the property a few years later, a title search revealed the lien. The IRS agreed to\nrelease the lien and allow the sale with the stipulation that half of the net proceeds be\nheld in escrow pending determination of the Government\xe2\x80\x99s interest in the property.\nRespondent brought this action to quiet title to the escrowed proceeds. The\nGovernment claimed that its lien had attached to the husband\xe2\x80\x99s interest in the tenancy\nby the entirety. It further asserted that the transfer of the property to respondent was\ninvalid as a fraud on creditors. The District Court granted the Government\xe2\x80\x99s motion\nfor summary judgment, holding that the federal tax lien attached at the moment of the\ntransfer to respondent, which terminated the tenancy by the entirety and entitled the\nGovernment to one-half of the value of the property.\nBoth parties appealed. The Sixth Circuit held that the tax lien did not attach to the\nproperty because under Michigan state law, the husband had no separate interest in\nproperty held as a tenant by the entirety. It remanded to the District Court to consider\nthe Government\xe2\x80\x99s alternative claim that the conveyance should be set aside as\nfraudulent.\nOn remand, the District Court concluded that where, as here, state law makes property\nexempt from the claims of creditors, no fraudulent conveyance can occur. It found,\nhowever, that respondent\xe2\x80\x99s husband\xe2\x80\x99s use of nonexempt funds to pay the mortgage on\nthe entireties property, which placed them beyond the reach of creditors, constituted a\nfraudulent act under state law, and the court awarded the IRS a share of the proceeds\nof the sale of the property equal to that amount. \xe2\x80\xa6\nWe granted certiorari to consider the Government\xe2\x80\x99s claim that respondent\xe2\x80\x99s husband\nhad a separate interest in the entireties property to which the federal tax lien attached.\n\n\x0cCo-ownership and Marital Property\n\n465\nII\n\nWhether the interests of respondent\xe2\x80\x99s husband in the property he held as a tenant by\nthe entirety constitutes \xe2\x80\x9cproperty and rights to property\xe2\x80\x9d for the purposes of the\nfederal tax lien statute, is ultimately a question of federal law. The answer to this federal\nquestion, however, largely depends upon state law. The federal tax lien statute itself\n\xe2\x80\x9ccreates no property rights but merely attaches consequences, federally defined, to\nrights created under state law.\xe2\x80\x9d Accordingly, \xe2\x80\x9c[w]e look initially to state law to\ndetermine what rights the taxpayer has in the property the Government seeks to reach,\nthen to federal law to determine whether the taxpayer\xe2\x80\x99s state-delineated rights qualify\nas \xe2\x80\x98property\xe2\x80\x99 or \xe2\x80\x98rights to property\xe2\x80\x99 within the compass of the federal tax lien legislation.\xe2\x80\x9d\nA common idiom describes property as a \xe2\x80\x9cbundle of sticks\xe2\x80\x9d\xe2\x80\x94a collection of individual\nrights which, in certain combinations, constitute property. State law determines only\nwhich sticks are in a person\xe2\x80\x99s bundle. Whether those sticks qualify as \xe2\x80\x9cproperty\xe2\x80\x9d for\npurposes of the federal tax lien statute is a question of federal law.\nIn looking to state law, we must be careful to consider the substance of the rights state\nlaw provides, not merely the labels the State gives these rights or the conclusions it\ndraws from them. Such state law labels are irrelevant to the federal question of which\nbundles of rights constitute property that may be attached by a federal tax lien. In Drye\nv. United States, 528 U.S. 49 (1999), we considered a situation where state law allowed\nan heir subject to a federal tax lien to disclaim his interest in the estate. The state law\nalso provided that such a disclaimer would \xe2\x80\x9ccreat[e] the legal fiction\xe2\x80\x9d that the heir had\npredeceased the decedent and would correspondingly be deemed to have had no\nproperty interest in the estate. We unanimously held that this state law fiction did not\ncontrol the federal question and looked instead to the realities of the heir\xe2\x80\x99s interest. We\nconcluded that, despite the State\xe2\x80\x99s characterization, the heir possessed a \xe2\x80\x9cright to\nproperty\xe2\x80\x9d in the estate\xe2\x80\x94the right to accept the inheritance or pass it along to another\n\xe2\x80\x94to which the federal lien could attach.\nIII\nWe turn first to the question of what rights respondent\xe2\x80\x99s husband had in the entireties\nproperty by virtue of state law.\xe2\x80\xa6\n\n\x0c466\n\nProperty\n\nIn determining whether respondent\xe2\x80\x99s husband possessed \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9crights to\nproperty\xe2\x80\x9d within the meaning of 26 U.S.C. \xc2\xa7 6321, we look to the individual rights\ncreated by these state law rules. According to Michigan law, respondent\xe2\x80\x99s husband had,\namong other rights, the following rights with respect to the entireties property: the right\nto use the property, the right to exclude third parties from it, the right to a share of\nincome produced from it, the right of survivorship, the right to become a tenant in\ncommon with equal shares upon divorce, the right to sell the property with the\nrespondent\xe2\x80\x99s consent and to receive half the proceeds from such a sale, the right to\nplace an encumbrance on the property with the respondent\xe2\x80\x99s consent, and the right to\nblock respondent from selling or encumbering the property unilaterally.\nIV\nWe turn now to the federal question of whether the rights Michigan law granted to\nrespondent\xe2\x80\x99s husband as a tenant by the entirety qualify as \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9crights to\nproperty\xe2\x80\x9d under \xc2\xa7 6321. The statutory language authorizing the tax lien \xe2\x80\x9cis broad and\nreveals on its face that Congress meant to reach every interest in property that a\ntaxpayer might have.\xe2\x80\x9d \xe2\x80\x9cStronger language could hardly have been selected to reveal a\npurpose to assure the collection of taxes.\xe2\x80\x9d We conclude that the husband\xe2\x80\x99s rights in the\nentireties property fall within this broad statutory language.\nMichigan law grants a tenant by the entirety some of the most essential property rights:\nthe right to use the property, to receive income produced by it, and to exclude others\nfrom it. See Dolan v. City of Tigard, 512 U.S. 374, 384 (1994) (\xe2\x80\x9c[T]he right to exclude\nothers\xe2\x80\x9d is \xe2\x80\x9c\xe2\x80\x98one of the most essential sticks in the bundle of rights that are commonly\ncharacterized as property\xe2\x80\x99\xe2\x80\x9d). These rights alone may be sufficient to subject the\nhusband\xe2\x80\x99s interest in the entireties property to the federal tax lien. They gave him a\nsubstantial degree of control over the entireties property, and, as we noted in Drye, \xe2\x80\x9cin\ndetermining whether a federal taxpayer\xe2\x80\x99s state-law rights constitute \xe2\x80\x98property\xe2\x80\x99 or \xe2\x80\x98rights\nto property,\xe2\x80\x99 [t]he important consideration is the breadth of the control the [taxpayer]\ncould exercise over the property.\xe2\x80\x9d\nThe husband\xe2\x80\x99s rights in the estate, however, went beyond use, exclusion, and income.\nHe also possessed the right to alienate (or otherwise encumber) the property with the\nconsent of respondent, his wife. It is true, as respondent notes, that he lacked the right\nto unilaterally alienate the property, a right that is often in the bundle of property rights.\n\n\x0cCo-ownership and Marital Property\n\n467\n\nThere is no reason to believe, however, that this one stick\xe2\x80\x94the right of unilateral\nalienation\xe2\x80\x94is essential to the category of \xe2\x80\x9cproperty.\xe2\x80\x9d\xe2\x80\xa6\nExcluding property from a federal tax lien simply because the taxpayer does not have\nthe power to unilaterally alienate it would, moreover, exempt a rather large amount of\nwhat is commonly thought of as property. \xe2\x80\xa6 Community property States often\nprovide that real community property cannot be alienated without the consent of both\nspouses. Accordingly, the fact that respondent\xe2\x80\x99s husband could not unilaterally alienate\nthe property does not preclude him from possessing \xe2\x80\x9cproperty and rights to property\xe2\x80\x9d\nfor the purposes of \xc2\xa7 6321.\nRespondent\xe2\x80\x99s husband also possessed the right of survivorship\xe2\x80\x94the right to\nautomatically inherit the whole of the estate should his wife predecease him.\nRespondent argues that this interest was merely an expectancy, which we suggested in\nDrye would not constitute \xe2\x80\x9cproperty\xe2\x80\x9d for the purposes of a federal tax lien. 528 U.S.,\nat 60, n. 7 (\xe2\x80\x9c[We do not mean to suggest] that an expectancy that has pecuniary value\n\xe2\x80\xa6 would fall within \xc2\xa7 6321 prior to the time it ripens into a present estate\xe2\x80\x9d). Drye did\nnot decide this question, however, nor do we need to do so here. As we have discussed\nabove, a number of the sticks in respondent\xe2\x80\x99s husband\xe2\x80\x99s bundle were presently existing.\nIt is therefore not necessary to decide whether the right to survivorship alone would\nqualify as \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9crights to property\xe2\x80\x9d under \xc2\xa7 6321.\nThat the rights of respondent\xe2\x80\x99s husband in the entireties property constitute \xe2\x80\x9cproperty\xe2\x80\x9d\nor \xe2\x80\x9crights to property\xe2\x80\x9d \xe2\x80\x9cbelonging to\xe2\x80\x9d him is further underscored by the fact that, if\nthe conclusion were otherwise, the entireties property would belong to no one for the\npurposes of \xc2\xa7 6321. Respondent had no more interest in the property than her husband;\nif neither of them had a property interest in the entireties property, who did? This result\nnot only seems absurd, but would also allow spouses to shield their property from\nfederal taxation by classifying it as entireties property, facilitating abuse of the federal\ntax system.\nJustice SCALIA\xe2\x80\x99s and Justice THOMAS\xe2\x80\x99 dissents claim that the conclusion that the\nhusband possessed an interest in the entireties property to which the federal tax lien\ncould attach is in conflict with the rules for tax liens relating to partnership property.\nThis is not so. As the authorities cited by Justice THOMAS reflect, the federal tax lien\ndoes attach to an individual partner\xe2\x80\x99s interest in the partnership, that is, to the fair\n\n\x0c468\n\nProperty\n\nmarket value of his or her share in the partnership assets.. As a holder of this lien, the\nFederal Government is entitled to \xe2\x80\x9creceive \xe2\x80\xa6 the profits to which the assigning partner\nwould otherwise be entitled,\xe2\x80\x9d including predissolution distributions and the proceeds\nfrom dissolution....\nThere is, however, a difference between the treatment of entireties property and\npartnership assets. The Federal Government may not compel the sale of partnership\nassets (although it may foreclose on the partner\xe2\x80\x99s interest). It is this difference that is\nreflected in Justice SCALIA\xe2\x80\x99s assertion that partnership property cannot be\nencumbered by an individual partner\xe2\x80\x99s debts. This disparity in treatment between the\ntwo forms of ownership, however, arises from our decision in United States v. Rodgers,\nsupra (holding that the Government may foreclose on property even where the coowners lack the right of unilateral alienation), and not our holding today. In this case,\nit is instead the dissenters\xe2\x80\x99 theory that departs from partnership law, as it would hold\nthat the Federal Government\xe2\x80\x99s lien does not attach to the husband\xe2\x80\x99s interest in the\nentireties property at all, whereas the lien may attach to an individual\xe2\x80\x99s interest in\npartnership property\xe2\x80\xa6.\nWe therefore conclude that respondent\xe2\x80\x99s husband\xe2\x80\x99s interest in the entireties property\nconstituted \xe2\x80\x9cproperty\xe2\x80\x9d or \xe2\x80\x9crights to property\xe2\x80\x9d for the purposes of the federal tax lien\nstatute. We recognize that Michigan makes a different choice with respect to state law\ncreditors: \xe2\x80\x9c[L]and held by husband and wife as tenants by entirety is not subject to levy\nunder execution on judgment rendered against either husband or wife alone.\xe2\x80\x9d But that\nby no means dictates our choice. The interpretation of 26 U.S.C. \xc2\xa7 6321 is a federal\nquestion, and in answering that question we are in no way bound by state courts\xe2\x80\x99\nanswers to similar questions involving state law. As we elsewhere have held, \xe2\x80\x9c\xe2\x80\x98exempt\nstatus under state law does not bind the federal collector.\xe2\x80\x99\xe2\x80\x9d\xe2\x80\xa6\nJustice SCALIA, with whom Justice THOMAS joins, dissenting.\n\xe2\x80\xa6I write separately to observe that the Court nullifies (insofar as federal taxes are\nconcerned, at least) a form of property ownership that was of particular benefit to the\nstay-at-home spouse or mother. She is overwhelmingly likely to be the survivor that\nobtains title to the unencumbered property; and she (as opposed to her business-world\nhusband) is overwhelmingly unlikely to be the source of the individual indebtedness\n\n\x0cCo-ownership and Marital Property\n\n469\n\nagainst which a tenancy by the entirety protects. It is regrettable that the Court has\neliminated a large part of this traditional protection retained by many States.\nJustice THOMAS, with whom Justice STEVENS and Justice SCALIA join, dissenting.\n\xe2\x80\xa6The Court does not contest that the tax liability the IRS seeks to satisfy is Mr. Craft\xe2\x80\x99s\nalone, and does not claim that, under Michigan law, real property held as a tenancy by\nthe entirety belongs to either spouse individually. Nor does the Court suggest that the\nfederal tax lien attaches to particular \xe2\x80\x9crights to property\xe2\x80\x9d held individually by Mr. Craft.\nRather, borrowing the metaphor of \xe2\x80\x9cproperty as a \xe2\x80\x98bundle of sticks\xe2\x80\x99\xe2\x80\x94a collection of\nindividual rights which, in certain combinations constitute property,\xe2\x80\x9d the Court\nproposes that so long as sufficient \xe2\x80\x9csticks\xe2\x80\x9d in the bundle of \xe2\x80\x9crights to property\xe2\x80\x9d\n\xe2\x80\x9cbelong to\xe2\x80\x9d a delinquent taxpayer, the lien can attach as if the property itself belonged\nto the taxpayer.\nThis amorphous construct ignores the primacy of state law in defining property\ninterests \xe2\x80\xa6.\nI\nTitle 26 U.S.C. \xc2\xa7 6321 provides that a federal tax lien attaches to \xe2\x80\x9call property and rights\nto property, whether real or personal, belonging to\xe2\x80\x9d a delinquent taxpayer. It is\nuncontested that a federal tax lien itself \xe2\x80\x9ccreates no property rights but merely attaches\nconsequences, federally defined, to rights created under state law.\xe2\x80\x9d Consequently, the\nGovernment\xe2\x80\x99s lien under \xc2\xa7 6321 \xe2\x80\x9ccannot extend beyond the property interests held by\nthe delinquent taxpayer,\xe2\x80\x9d under state law\xe2\x80\xa6.\nA\n\xe2\x80\xa6As the Court recognizes, pursuant to Michigan law, as under English common law,\nproperty held as a tenancy by the entirety does not belong to either spouse, but to a\nsingle entity composed of the married persons. Neither spouse has \xe2\x80\x9cany separate\ninterest in such an estate.\xe2\x80\x9d An entireties estate constitutes an indivisible \xe2\x80\x9csole tenancy.\xe2\x80\x9d\nBecause Michigan does not recognize a separate spousal interest in the Grand Rapids\nproperty, it did not \xe2\x80\x9cbelong\xe2\x80\x9d to either respondent or her husband individually when\nthe IRS asserted its lien for Mr. Craft\xe2\x80\x99s individual tax liability. Thus, the property was\nnot property to which the federal tax lien could attach for Mr. Craft\xe2\x80\x99s tax liability.\n\n\x0c470\n\nProperty\n\nDrye \xe2\x80\xa6 was concerned not with whether state law recognized \xe2\x80\x9cproperty\xe2\x80\x9d as belonging\nto the taxpayer in the first place, but rather with whether state laws could disclaim or\nexempt such property from federal tax liability after the property interest was created.\nDrye held only that a state-law disclaimer could not retroactively undo a vested right in\nan estate that the taxpayer already held, and that a federal lien therefore attached to the\ntaxpayer\xe2\x80\x99s interest in the estate. 528 U.S., at 61 (recognizing that a disclaimer does not\nrestore the status quo ante because the heir \xe2\x80\x9cdetermines who will receive the\nproperty\xe2\x80\x94himself if he does not disclaim, a known other if he does\xe2\x80\x9d).\xe2\x80\xa6\nB\n\xe2\x80\xa6Rather than adopt the majority\xe2\x80\x99s approach, I would ask specifically, as the statute\ndoes, whether Mr. Craft had any particular \xe2\x80\x9crights to property\xe2\x80\x9d to which the federal\ntax lien could attach. He did not. 5 \xe2\x80\xa6 With such rights subject to lien, the taxpayer\xe2\x80\x99s\ninterest has \xe2\x80\x9cripen[ed] into a present estate\xe2\x80\x9d of some form and is more than a mere\nexpectancy, and thus the taxpayer has an apparent right \xe2\x80\x9cto channel that value to\n[another].\xe2\x80\x9d\nIn contrast, a tenant in a tenancy by the entirety not only lacks a present divisible vested\ninterest in the property and control with respect to the sale, encumbrance, and transfer\nof the property, but also does not possess the ability to devise any portion of the\nproperty because it is subject to the other\xe2\x80\x99s indestructible right of survivorship. This\nlatter fact makes the property significantly different from community property, where\neach spouse has a present one-half vested interest in the whole, which may be devised\nby will or otherwise to a person other than the spouse. See 4 G. Thompson, Real\nProperty \xc2\xa7 37.14(a) (D. Thomas ed. 1994) (noting that a married person\xe2\x80\x99s power to\ndevise one-half of the community property is \xe2\x80\x9cconsistent with the fundamental\n\n5 Even\n\nsuch rights as Mr. Craft arguably had in the Grand Rapids property bear no resemblance to those to which\na federal tax lien has ever attached. See W. Elliott, Federal Tax Collections, Liens, and Levies \xc2\xb6 \xc2\xb6 9.09[3][a]\xe2\x80\x94[f]\n(2d ed.1995 and 2000 Cum. Supp.) (listing examples of rights to property to which a federal tax lien attaches,\nsuch as the right to compel payment; the right to withdraw money from a bank account, or to receive money\nfrom accounts receivable; wages earned but not paid; installment payments under a contract of sale of real estate;\nannuity payments; a beneficiary\xe2\x80\x99s rights to payment under a spendthrift trust; a liquor license; an easement; the\ntaxpayer\xe2\x80\x99s interest in a timeshare; options; the taxpayer\xe2\x80\x99s interest in an employee benefit plan or individual\nretirement account).\n\n\x0cCo-ownership and Marital Property\n\n471\n\ncharacteristic of community property\xe2\x80\x9d: \xe2\x80\x9ccommunity ownership means that each\nspouse owns 50% of each community asset\xe2\x80\x9d).\nIt is clear that some of the individual rights of a tenant in entireties property are\nprimarily personal, dependent upon the taxpayer\xe2\x80\x99s status as a spouse, and similarly not\nsusceptible to a tax lien. For example, the right to use the property in conjunction with\none\xe2\x80\x99s spouse and to exclude all others appears particularly ill suited to being transferred\nto another, and to lack \xe2\x80\x9cexchangeable value.\xe2\x80\x9d\nNor do other identified rights rise to the level of \xe2\x80\x9crights to property\xe2\x80\x9d to which a \xc2\xa7 6321\nlien can attach, because they represent, at most, a contingent future interest, or an\n\xe2\x80\x9cexpectancy\xe2\x80\x9d that has not \xe2\x80\x9cripen[ed] into a present estate.\xe2\x80\x9d By way of example, the\nsurvivorship right wholly depends upon one spouse outliving the other, at which time\nthe survivor gains \xe2\x80\x9csubstantial rights, in respect of the property, theretofore never\nenjoyed by [the] survivor.\xe2\x80\x9d \xe2\x80\xa6\nSimilarly, while one spouse might escape the absolute limitations on individual action\nwith respect to tenancy by the entirety property by obtaining the right to one-half of\nthe property upon divorce, or by agreeing with the other spouse to sever the tenancy\nby the entirety, neither instance is an event of sufficient certainty to constitute a \xe2\x80\x9cright\nto property\xe2\x80\x9d for purposes of \xc2\xa7 6321. Finally, while the federal tax lien could arguably\nhave attached to a tenant\xe2\x80\x99s right to any \xe2\x80\x9crents, products, income, or profits\xe2\x80\x9d of real\nproperty held as tenants by the entirety, the Grand Rapids property created no rents,\nproducts, income, or profits for the tax lien to attach to\xe2\x80\xa6.\nOwnership by \xe2\x80\x9cthe marriage\xe2\x80\x9d is admittedly a fiction of sorts, but so is a partnership or\ncorporation. There is no basis for ignoring this fiction so long as federal law does not\ndefine property, particularly since the tenancy by the entirety property remains subject\nto lien for the tax liability of both tenants\xe2\x80\xa6.\nNotes and Questions\n1. Sawada v. Endo, 561 P.2d 1291 (Haw. 1977), reached a different result under\nstate law. Sawada allowed a transfer of entireties property (the family home) by\na husband and wife to their children, in order to avoid the risk that the home\nwould be vulnerable to claims by Masako and Helen Sawada, who\xe2\x80\x99d been\ninjured when they were struck by a car operated by the husband, and who\n\n\x0c472\n\nProperty\neventually became judgment creditors as a result of the lawsuits they filed\nagainst the husband, Kokichi Endo. Given that any lien against the house could\nonly attach to the husband\xe2\x80\x99s interest and that the house couldn\xe2\x80\x99t be sold without\nthe wife\xe2\x80\x99s consent, what exactly was the risk to the Endos\xe2\x80\x99 ownership of the\nhouse?\nThe Endos conveyed the house to their children, for no valuable consideration,\nafter the accident and after the first complaint was filed. The parents continued\nto live in the house, though they had no legal interest in it. After trial, both\nSawadas were awarded a total of roughly $25,000. The wife, Ume Endo, died\nshortly thereafter, survived by Kokichi. The Sawadas, unable to recover against\nKokichi Endo\xe2\x80\x99s personal property, sought to invalidate the transfer of the\nfamily home to the children as fraudulent.\nThe Hawaii Supreme Court found that a spouse\xe2\x80\x99s interest in property held by\nthe entireties was not subject to levy and execution by that spouse\xe2\x80\x99s individual\ncreditors, even though some states do allow seizure and sale by creditors, subject\nto the other spouse\xe2\x80\x99s contingent right of survivorship. The Hawaii Supreme\nCourt reasoned that the Married Women\xe2\x80\x99s Property Acts equalized husband\nand wife, creating a unity of equals who both had the right to use and enjoy the\nwhole estate. This insulated the wife\xe2\x80\x99s interest in the estate from the separate\ndebts of her husband, and vice versa. \xe2\x80\x9cA joint tenancy may be destroyed by\nvoluntary alienation, or by levy and execution, or by compulsory partition, but\na tenancy by the entirety may not. The indivisibility of the estate, except by joint\naction of the spouses, is an indispensable feature of the tenancy by the entirety.\xe2\x80\x9d\nCreditors of one spouse could not even attach that spouse\xe2\x80\x99s right of\nsurvivorship, because that would make a conveyance by both spouses too\nuncertain, harming the other spouse\xe2\x80\x99s interest.\nThe Hawaii Supreme Court continued, \xe2\x80\x9cthere is obviously nothing to prevent\n[a] creditor from insisting upon the subjection of property held in tenancy by\nthe entirety as a condition precedent to the extension of credit. Further, the\ncreation of a tenancy by the entirety may not be used as a device to defraud\nexisting creditors.\xe2\x80\x9d That\xe2\x80\x99s all well and good for voluntary creditors, but what\nabout involuntary creditors like the Sawadas? They weren\xe2\x80\x99t offered any options\n\n\x0cCo-ownership and Marital Property\n\n473\n\nbefore they extended \xe2\x80\x9ccredit\xe2\x80\x9d to Kokichi Endo in the form of the injuries he\ninflicted on them. Is this rule fair to them? (Is the proper comparison a world\nin which Kokichi Endo didn\xe2\x80\x99t own a house at all when he hit them, or a world\nin which he owned a house jointly or in common when he hit them? Does it\nmatter that the law is less directly involved in whether Endo owned a house\nthan in the rules of co-ownership?)\nThe Hawaii Supreme Court concluded that public policy supported its\nholding, because tenancy by the entirety protected an interest in family\nsolidarity:\nWhen a family can afford to own real property, it becomes their\nsingle most important asset. Encumbered as it usually is by a first\nmortgage, the fact remains that so long as it remains whole during\nthe joint lives of the spouses, it is always available in its entirety\nfor the benefit and use of the entire family. Loans for education\nand other emergency expenses, for example, may be obtained on\nthe security of the marital estate. This would not be possible\nwhere a third party has become a tenant in common or a joint\ntenant with one of the spouses, or where the ownership of the\ncontingent right of survivorship of one of the spouses in a third\nparty has cast a cloud upon the title of the marital estate, making\nit virtually impossible to utilize the estate for these purposes.\n561 P.2d at 1297. A dissent pointed out that, under the Married Women\xe2\x80\x99s\nProperty Acts, what was required was equality as between spouses, not any\nparticular rule about creditors. At common law, \xe2\x80\x9cthe interest of the husband in\nan estate by the entireties could be taken by his separate creditors on execution\nagainst him, subject only to the wife\xe2\x80\x99s right of survivorship.\xe2\x80\x9d Thus, the dissent\nreasoned, equal treatment merely required that both spouses be subjected to\nthis rule.\nOne way of looking at the matter: entireties property is specifically designed, at\nleast in its modern incarnation, to protect the interest of one spouse against the\nother\xe2\x80\x99s independent acts. If that\xe2\x80\x99s the case, then aren\xe2\x80\x99t the Craft dissents correct?\nIf a state may choose this objective in its property law, why shouldn\xe2\x80\x99t this choice\n\n\x0c474\n\nProperty\nbe respected? Or are there special concerns relating to federal tax that justify\noverriding this choice? If so, should the government be able to force the sale\nof entireties property, or should it be forced to wait to see which spouse survives\nthe other?\n\n2. Forfeiture. What about criminal forfeiture of property involved in a crime,\nsuch as a house in which a drug transaction occurred? Some forfeiture statutes\nexempt property used without the consent or knowledge of its owner. Under\nthose statutes, some courts allow the innocent spouse to retain use and\npossession of entirety property during her lifetime, as well as her right of\nsurvivorship. Compare United States v. 1500 Lincoln Ave., 949 F.2d 73 (3d Cir.\n1991) (guilty spouse\xe2\x80\x99s interest is forfeited, subject to innocent spouse\xe2\x80\x99s\npossession and survivorship rights), with United States v. 15621 S.W. 209th Ave.,\n894 F.2d 1511 (11th Cir. 1990) (not allowing current forfeiture, but allowing\ngovernment to file lis pendens * preserving its right to guilty spouse\xe2\x80\x99s interest upon\ndeath of innocent spouse or severance of estate). What if a forfeiture statute\ndoesn\xe2\x80\x99t protect innocent owners? In that case, the government can seize the\nentire property, including the innocent spouse\xe2\x80\x99s interest. Bennis v. Michigan,\n516 U.S. 442 (1996) (rejecting takings and due process claims).\n3. Homestead acts as an alternative? Many states have so-called \xe2\x80\x9chomestead\xe2\x80\x9d\nacts, protecting the family home (up to a certain value or size) from many\ncreditors\xe2\x80\x99 claims, though not against foreclosure of a mortgage on that home.\nCalifornia provides for $50,000 for a single person, $75,000 for a \xe2\x80\x9cfamily unit,\xe2\x80\x9d\nand $150,000 for people 65 or older, disabled, or 55 or older with an annual\nincome under $15,000. CAL. CIV. PROC. CODE \xc2\xa7 704.730 (2003). Washington\nprovides for protections for $40,000 real property or $15,000 personal property.\nWASH. REV. CODE \xc2\xa7 6.13.030 (1999). Should the tenancy by the entirety be\n\nLis pendens translates to \xe2\x80\x9ca suit is pending\xe2\x80\x9d; it refers to a written notice on the public title records that a lawsuit\nhas been filed concerning the title to real property or some interest in that real property. In general, potential\npurchasers of any interest in the real property are charged with notice of lis pendens and therefore any interest they\nacquire is subject to the outcome of the pending litigation. We will more thoroughly discuss the effects of this\ntype of \xe2\x80\x9crecord notice\xe2\x80\x9d on the rights of subsequent purchasers later in our chapter on Recording Acts.\n*\n\n\x0cCo-ownership and Marital Property\n\n475\n\nabolished in favor of homestead exemptions? Compare the protections for\nmortgagors, discussed in the unit on Mortgages.\n4. Creating a tenancy by the entirety. Traditionally, a tenancy by the entirety\nwas created by granting property \xe2\x80\x9cto X and Y, husband and wife, as tenants by\nthe entirety.\xe2\x80\x9d Today, X and Y can be any spouses, and states that recognize\ntenancies by the entirety often presume that a transfer \xe2\x80\x9cto A and B, [spouses],\xe2\x80\x9d\ncreates that estate. See, e.g., Constitution Bank v. Olson, 620 A.2d 1146 (Pa.\nSuper. Ct. 1993). Other states always presume a tenancy in common even when\nthe co-owners are married, so a clear expression of the requisite intent is\nrequired. See MISS. CODE ANN. \xc2\xa789-11-7. As a rule, the magic words \xe2\x80\x9ctenants\nby the entirety\xe2\x80\x9d should be used.\nIf the cotenants are not married, the magic words will not work. In Riccelli v.\nForcinito, 595 A.2d 1322 (Pa. Super. Ct. 1991), Sam Riccelli and Carmen Pirozek\nbought property in 1962 \xe2\x80\x9cas tenants by the entireties with the right of\nsurvivorship.\xe2\x80\x9d However, they weren\xe2\x80\x99t married at the time of the purchase, and\nso they couldn\xe2\x80\x99t have a tenancy by the entirety. What kind of tenancy did they\nhave? The court reasoned: \xe2\x80\x9cThe appropriate form of tenancy is to be\ndetermined by the intention of the parties, \xe2\x80\x98the ultimate guide by which all deeds\nmust be interpreted.\xe2\x80\x99\xe2\x80\xa6 [J]oint tenancy with the right of survivorship best\neffectuates their intention to the extent legally permissible, that being the form\nof tenancy for unmarried persons most nearly resembling the tenancy by the\nentireties enjoyed by husband and wife, since in both instances the survivor\ntakes the whole.\xe2\x80\x9d The modern presumption in favor of tenancy in common\nyielded to a clearly expressed contrary intent. See also Funches v. Funches, 413\nS.E.2d 44 (Va. 1992) (\xe2\x80\x9ctenancy by the entirety\xe2\x80\x9d with express survivorship\nlanguage that was given to unmarried parties created a joint tenancy because of\nthe survivorship language). But see Smith v. Stewart, 596 S.W.2d 346 (Ark. Ct.\nApp. 1980) (deed \xe2\x80\x9cto A and B, his wife,\xe2\x80\x9d when A and B were unmarried, failed\nto create a joint tenancy; the relevant state statute required an express\ndeclaration of joint tenancy with right of survivorship), aff\xe2\x80\x99d, 601 S.W.2d 837\n(Ark. 1980).\n\n\x0c476\n\nProperty\n\n5. Divorce. Because marriage is a requirement for a tenancy by the entirety,\ndivorce ends that form of ownership. What should replace it? The modern\npreference is for tenancy in common as a general rule, and many states follow\nthat rule with tenancies by the entireties that end by divorce. See, e.g., MICH.\nCOMP. LAWS ANN. \xc2\xa7 552.102. A few states presume that a tenancy by the\nentirety is converted to a joint tenancy unless the parties otherwise agree. See,\ne.g., Estate of Childress v. Long, 5888 So. 2d 192 (Miss. 1991).\n6. Common law marriage. Common law marriage was widely recognized when\naccess to formal marriage was sometimes difficult, particularly in rural areas.\nHowever, it is now recognized only in 11 states and the District of Columbia.\nWhere it is recognized, the parties must manifest an intent to be married and\nhold themselves out as husband and wife. If they do so, they have exactly the\nsame rights as any other married couple. Is this a kind of \xe2\x80\x9cadverse possession\xe2\x80\x9d\nof the benefits of marriage?\nMany states abolished common law marriage on the theory that it was no longer\nrequired, given the ease of accessing a marriage license, and that it encouraged\npeople to lie about whether they\xe2\x80\x99d held themselves out as husband and wife.\nMoreover, a marriage license makes it easy to understand who is entitled to\npensions and other benefits, which became more important as those types of\nassets became more significant throughout the twentieth century.\n\n2. Community Property\nNine states, representing roughly 30% of the population of the U.S., recognize\ncommunity property for married people: Arizona, California, Idaho, Louisiana, Nevada,\nNew Mexico, Texas, Washington, and Wisconsin. Under community property regimes,\nmarital property belongs to each spouse equally. Each spouse has a right to pass on his\nor her share to anyone by will, making community property different from joint\ntenancy; however, it is also possible to hold community property with a right of\nsurvivorship, highly similar to joint tenancy. In the absence of a right of survivorship,\na surviving spouse is typically entitled to some of the community property when the\nother spouse dies intestate; his or her share generally depends on whether there are\nsurviving issue (children and other descendants), and how many there are.\n\n\x0cCo-ownership and Marital Property\n\n477\n\nThe basic idea of community property is that a marriage is a cooperative endeavor, and\neach spouse contributes to gains, whether directly or indirectly. Except for Alaska,\nwhich requires an explicit agreement, ALASKA STAT. \xc2\xa7 34.77.090 (2002), the default\nrule under a community property regime is that property earned by a spouse during\nmarriage belongs to the marital community, and each spouse owns half of the\ncommunity property as an equal undivided interest. This includes property purchased\nwith income earned during the marriage. This contrasts to common law states, in\nwhich property belongs by default to the spouse who acquires it during the marriage.\nProperty owned before marriage, as well as property acquired by inheritance or gift\nduring the marriage, remains separate property in most states. States are divided about\nwhether and when income from separate property, such as interest, royalties, and rent,\nbecomes part of the community property. Idaho, Louisiana, Texas and Wisconsin treat\nthe income from all property as community property, while the other states allow such\nincome to remain separate property. Classification may prove complicated: for\nexample, is an award of damages from a bike accident involving one spouse community\nproperty? The answer may depend on whether the award represents economic harm\nsuch as lost earnings (community property) or pain and suffering (separate property).\nWhat if the award is for loss of a limb, which has both earnings-related and quality of\nlife-related aspects? What if the award is for loss of consortium\xe2\x80\x94the caretaking and\nintimate relations shared between spouses?\nIn general, spouses are free to take property as separate property by agreement, and to\nconvert property from one regime to the other by agreement. If community and\nseparate property are commingled, tracing the shares may prove very difficult, and the\nparty with the burden of showing that the property is separate may have a hard time\nprevailing. Carefully kept records may allow a tracing spouse to overcome the\npresumption that assets held during marriage are community property. Under the\n\xe2\x80\x9cfamily expense presumption,\xe2\x80\x9d family expenses are presumed to have come from\ncommunity assets in a commingled account. If such expenses exceeded deposits of\ncommunity funds, the balance will be separate property. See v. See, 415 P.2d 776 (Cal.\n1966). As for outstanding debt paid off in part with community property, California\napportions community and separate property according to the contributions made.\nThus, a person who has a house subject to a mortgage before she marries, and then\npays the remainder of the mortgage with money earned during marriage, will own the\n\n\x0c478\n\nProperty\n\nhouse partly as separate property and partly as community property. Other states use\nan \xe2\x80\x9cinception\xe2\x80\x9d theory and consider the house entirely separate property because the\npurchase was made before the marriage. And other states use a \xe2\x80\x9cvesting\xe2\x80\x9d theory and\nconsider the house entirely community property because title didn\xe2\x80\x99t vest until the\nmortgage was paid off.\nIn most cases, either spouse may manage community property. However, if title is in\nonly one spouse\xe2\x80\x99s name, that spouse may be the only one who can manage the property.\nIn addition, a spouse who runs a business that is community property may have\nexclusive control. The controlling spouse has a kind of fiduciary duty: she must act in\ngood faith towards her spouse, but she is not required to act with good judgment.\nTransferring or mortgaging community property, unlike day-to-day management,\nrequires the consent of both spouses in a number of community property states,\nthough not all. See J. Thomas Oldham, Management of the Community Estate During an\nIntact Marriage, 56 L. & CONTEMP. PROBS. 99 (1993). The fact that a deed says that\nproperty is separate property is not controlling, because the law prevents a spouse from\nconverting community property to separate property unilaterally. In some states, such\nas Texas, the controlling spouse can make reasonable gifts of community property,\nwhile California and Washington allow any gift by the managing spouse to be set aside\nby the other spouse. In most states, a bona fide purchaser from any managing spouse\nis protected against invalidation of the sale.\nIn some states, creditors can reach whatever property a spouse is entitled to manage.\nIf the spouses share the family car, for example, then a creditor of either spouse could\nseize the car to satisfy one spouse\xe2\x80\x99s debt (after following the appropriate procedures).\nOthers only allow creditors to reach community property if both spouses consented to\nthe relevant debt, and others limit the amount of community property creditors of only\none spouse can reach.\nA spouse may dispose of half of the community property at his or her death. There is\nno right of survivorship, but the other half belongs to the survivor. The decedent can\nallocate the property however she wants in a will; if there is no will, then some\ncommunity property states make the other spouse the heir, while others give the\ndecedent\xe2\x80\x99s issue priority.\n\n\x0cCo-ownership and Marital Property\n\n479\n\nThere is no such thing as a tenancy by the entireties in a community property state;\nthere can be joint tenancy or tenancy in common, but property held in those forms is\nseparate property. Like a tenancy by the entireties, community property can only exist\nbetween married people. Moreover, neither spouse alone can convey his or her\nundivided share to another person, except to the other spouse. Community property\nis not subject to partition. Without agreement, the spouse\xe2\x80\x99s only option to separate the\ncouple\xe2\x80\x99s undivided interests is divorce, which will result in an equal or \xe2\x80\x9cequitable\xe2\x80\x9d\ndivision of community property, depending on the state. California, New Mexico, and\nLouisiana divide community property and debts equally, * while courts use the more\nflexible equitable division in the other community property states. In California, absent\na written agreement to the contrary, a spouse who contributes separate property to\nacquiring community property must be reimbursed for the contribution at divorce,\nthough the spouse can\xe2\x80\x99t get interest or an adjustment for a change in the value of the\nproperty, and the reimbursement can\xe2\x80\x99t exceed the net value of the property at the time\nthe property was acquired. CAL. FAMILY CODE \xc2\xa72640(b). Can you see why the\nlegislature felt it necessary to impose the net value cap? What kind of unsavory\nactivities might result if the rule were different?\nIf a married couple moves to a non-community property state, community property\nretains its character, which can lead to some complicated situations.\nA family law course will cover the significant differences between community property\nand joint tenancy in more detail, including tax implications. The regimes reward careful\nplanning, especially for people with substantial assets. See Andrea B. Carroll,\nIncentivizing Divorce, 30 CARDOZO L. REV. 1925 (2009) (arguing that marital property\nrules, particularly in community property states, create perverse incentives toward\ndivorce).\n\nIn the absence of agreement to the contrary or deliberate misappropriation of community property by one\nspouse.\n\n*\n\n\x0cLeasing Real Property\nThe law of concurrent ownership, discussed in the previous chapter, generally regulates\nrelationships between intimates. Arrangements like the joint tenancy generally arise\nbetween individuals who know each other and remain locked in ongoing relationships.\nAs a result, there\xe2\x80\x99s not much arms-length bargaining and relatively few disputes work\ntheir way into the court system.\nThe law of landlord-tenant is very different. It is the law of strangers\xe2\x80\x94strangers who\noften have little in common and may never interact after the lease terminates. How\nthe law responds to this difference is one of the central theoretical questions you will\nwrestle with in this chapter. More practically, in this section of the course you will learn\nabout the types of leaseholds, tenant selection, transferring leases, ending leases, and\nthe various rights and responsibilities of tenants and landlords during the course of the\nlease.\n\nA. The Dual Nature of the Lease\nIn its simplest form, the lease is a transfer in which the owner of real property conveys\nexclusive possession to a tenant (generally in exchange for rent). Most law students\nknow through personal experience that the process of renting generally entails signing\na lease contract. Like other contracts, a lease\xe2\x80\x99s terms can be negotiated and they\nexplicitly govern many of the rights and responsibilities of the parties involved. So why\nthen are leases discussed in the property course rather than contracts?\nThe short response is that a lease is a property-contract hybrid. While it is surely a\ncontract, it\xe2\x80\x99s a contract for a very particular kind of property interest. The fuller answer,\nlike so much in property, lies in the history of feudal land law. Under the traditional\ncommon law, a leasehold was understood primarily as a property interest, similar in\nnature to the estates covered in our chapter on Estates and Future Interests. A lord\n(often a baron) conveyed a possessory right to a tenant (usually a peasant) and retained\nfor himself a future interest (typically a reversion). Importantly, once the landlord\ntransferred the right to possession, he had few other obligations to the tenant.\n480\n\n\x0cLeasing Real Property\n\n481\n\nThis basic model survived until the 1960s, when many jurisdictions began to introduce\ngeneral contract law principles (e.g. the implied duty of good faith and fair dealing) into\nthe law of landlord-tenant. Importing contract theories into the lease has had two\npractical effects. First, parties to a lease now have the option to terminate in the case\nof any material breach; in the past tenants could only terminate if the landlord interfered\nwith their possession. Second, modern tenants have far more protections from\nindifferent and unscrupulous landlords than their counterparts 50 years ago. Courts\nand legislatures have proven particularly eager to help residential tenants\xe2\x80\x94whom they\nview as vulnerable\xe2\x80\x94from predations of the free market.\n\nB. Creating the Leasehold\n1. A Lease or Something Else?\nA lease is a transfer of the right of possession of specific property for a limited period\nof time. It\xe2\x80\x99s important to see that not all legal relationships that grant the use of an\nowner\xe2\x80\x99s property qualify as leaseholds. Take, for example, the case of Snow White and\nSeven Dwarfs. If the Dwarfs give Snow White sole possession of their cottage for 12\nmonths in exchange for a monthly payment, they have almost certainly created a lease.\nIf, however, the Dwarfs invite Snow White to sleep on their couch for a few nights\nwhile she evades the Queen, they probably have created something called a license (a\nrevocable permission to use the property of another, which we\xe2\x80\x99ll study in greater detail\nlater in the book) rather than a leasehold. This determination matters (as we\xe2\x80\x99ll soon\nsee) because the law extends a number of protections to grantees who qualify as tenants.\nIt affects, among other things, whether the grantee can exclude the owner from certain\nspaces, how the parties can terminate the interest, whether the grantee can invite\noutsiders onto the property, who has the obligation to perform maintenance, who is\nliable if the grantee suffers an injury on the property, and what remedies the parties\nhave if a disagreement arises.\nTo determine whether parties have created a leasehold or some other legal interest,\ncourts have traditionally focused on whether a grantor has turned over exclusive\npossession or a more limited set of use rights. Possession, however, remains a slippery\nconcept, difficult to define. Consider the following post from an internet message\nboard:\n\n\x0c482\n\nProperty\n\nDoes the nanny have a lease? Do we need any other information? Should courts look\nbeyond mere facts of possession and consider the policy considerations of extending\nlandlord-tenant protections to the parties in the case? What might those policy\nconsiderations entail? As you read through the materials, you may want to revisit this\nquestion.\n\n2. Types of Leasehold\nAs we have seen throughout this course, property interests come in a limited number\nof forms, many of which we have inherited directly from feudal England. This theme\nholds in landlord-tenant. The common law developed three types of leaseholds that\nour modern property system still recognizes: the term of years, the periodic tenancy,\nand the tenancy at will.\na. The Term of Years\nThe term of years is a leasehold measured by any fixed period of time. The most familiar\nterm of years lease is the residential one-year lease. The actual term, however, may vary\ngreatly. In 2001, the U.S. government signed a 99-year lease for an embassy in\nSingapore. Leases of hundreds or even thousands of years are not unheard of, either.\nSee Monbar v. Monaghan, 18 Del. Ch. 395 (1932) (two thousand year lease). At the\nother end of the spectrum, vacation properties like beach condos and lake houses\ncommonly rent for one-week periods.\nWhatever the duration, a term of years automatically ends when the stated term expires.\nFor example, imagine L leases Blackacre to T \xe2\x80\x9cfrom September 1, 2015 to August 31,\n2016.\xe2\x80\x9d Neither party is required to give the other notice of termination. The tenant\nmust simply surrender possession to the landlord by midnight on August 31. The death\nof either contracting party does not affect a term of years lease, unless the landlord and\n\n\x0cLeasing Real Property\n\n483\n\ntenant have agreed otherwise. If the tenant dies, the law requires her estate to carry\nout the lease.\nb. The Periodic Tenancy\nThe periodic tenancy is a lease for some fixed duration that automatically renews for\nsucceeding periods until either the landlord or tenant gives notice of termination. This\nautomatic renewal is the chief practical difference between the periodic tenancy and\nthe term of years. The most common type of periodic tenancy is the month-to-month\nlease. As the name suggests, a month-to-month lease lasts for a month and then\ncontinues for subsequent months, until either the landlord or tenant ends the lease.\nPeriodic tenancies have no certain end date; some residential tenants with month-tomonth leases stay in their apartments for decades.\nTermination requires one party to give advance notice to the other. These notice\nrequirements are now heavily regulated by statute in most jurisdictions. Under the\ncommon law (which is still the basis for many state regulations), for year-to-year\nperiodic leases (or any periodic lease with a longer initial duration), parties must give\nnotice at least six months before the period ends. For leases less than a year, the\nminimum notice equals the length of the lease period. Additionally, unless the parties\nmake an agreement to the contrary, the lease must terminate on the final day of a period.\nAssume, for example, that T signs a month-to-month lease that begins May 1. On\nAugust 20, T gives notice of termination to her landlord. When will the lease end? T\nmust give the landlord a minimum of one month notice. That pushes T\xe2\x80\x99s obligations\nunder the lease to September 19. A periodic tenancy, however, must end on the last\nday of a period. Thus, T\xe2\x80\x99s lease will terminate on September 30 at midnight.\nThe death of either the landlord or tenant does not end a periodic tenancy. If, for\nexample, the tenant dies before the lease terminates, the law vests the tenant\xe2\x80\x99s estate\nwith the responsibility to fulfill the remaining obligations under the lease.\nc. The Tenancy at Will\nThe tenancy at will has no fixed duration and endures so long as both of the parties desire.\nFor example, if the landlord and tenant sign a document that reads, \xe2\x80\x9cTenant will pay\nthe Landlord $500 on the first of the month and the lease will endure as long as both\n\n\x0c484\n\nProperty\n\nof us wish\xe2\x80\x9d they have created a tenancy at will. Under the common law, either party\ncould end such a lease at any moment. Today, most states have enacted statutes that\nestablish minimum notice periods\xe2\x80\x9430 days is common. Tenancies at will also\nterminate if the landlord sells the property, the tenant abandons the unit, or either party\ndies. *\nTenancies at will can arise as a result of the clear intention of the parties\xe2\x80\x94the ease of\ntermination is a valued feature in some negotiations. But note, the tenancy at will is\nalso the catchall lease category. If a leasehold doesn\xe2\x80\x99t qualify as either a term of years\nor periodic tenancy, the law crams it into the tenancy at will box\xe2\x80\x94even if that clearly\nviolates the goals of the parties. This occasionally creates real hardship for individuals\nwith sloppily drafted leases.\nEffel v. Rosberg\n360 S.W.3d 626 (Tex. App. 2012)\nMORRIS, Justice.\nThis is an appeal from the trial court\xe2\x80\x99s judgment awarding Robert G. Rosberg\npossession of property in a forcible detainer action. Appellant Lena Effel brings\nseventeen issues generally contending the trial court . . . erred in concluding Rosberg\nwas entitled to possession of the property. After examining the record on appeal and\nreviewing the applicable law, we conclude appellant\xe2\x80\x99s arguments are without merit. We\naffirm the trial court\xe2\x80\x99s judgment.\nI.\n[On March 1, 2006, Robert G. Rosberg filed suit against Lena Effel\xe2\x80\x99s nephews, Henry\nEffel and Jack Effel. The parties settled the dispute out of court and signed a\ncompromise settlement agreement. As part of the settlement, Rosberg received a piece\nof land owned by Henry and Jack Effel. The property contained the home where Lena\nEffel lived. The settlement agreement between the Effels and Rosberg stated that Lena\nEffel] \xe2\x80\x9cshall continue to occupy the property for the remainder of her natural life, or\n\nIn jurisdictions that require 30-day notice periods before the termination of a tenancy at will, this is one of the\nkey remaining differences between the month-to-month periodic lease and the tenancy at will.\n\n*\n\n\x0cLeasing Real Property\n\n485\n\nuntil such time as she voluntarily chooses to vacate the premises.\xe2\x80\x9d The settlement\nagreement further stated that a lease agreement incorporating the terms of the\nsettlement agreement would be prepared before the closing date of the purchase. . . .\nThe property in question was deeded to Rosberg with no reservation of a life estate. A\nlease for appellant was prepared by the Effels\xe2\x80\x99 attorney. The term of the lease was \xe2\x80\x9cfor\na term equal to the remainder of the Lessee\xe2\x80\x99s life, or until such time that she voluntarily\nvacates the premises.\xe2\x80\x9d The lease also contained various covenants relating to payment\nof rent and charges for utilities as well as the use and maintenance of the grounds. The\nlease provided that if there was any default in the payment of rent or in the performance\nof any of the covenants, the lease could be terminated at the option of the lessor. The\nlease was signed by Rosberg as lessor and by Henry Effel on behalf of appellant under\na power of attorney as lessee.\nThree years later, on February 24, 2010, Rosberg, through his attorney, sent a letter to\nappellant both by regular mail and certified mail stating that he was terminating her\nlease effective immediately. The reason for the termination, according to the letter, was\nRosberg\xe2\x80\x99s discovery that appellant had installed a wrought iron fence in the front yard\nof the property in violation of two covenants of the lease. The letter stated that\nappellant was required to leave and surrender the premises within ten days and, if she\ndid not vacate the premises, Rosberg would commence eviction proceedings. Appellant\ndid not vacate the property.\nOn April 29, 2010, Rosberg filed this forcible detainer action in the justice court. The\njustice court awarded possession of the property to Rosberg, and appellant appealed\nthe decision to the county court at law. The county court held a trial de novo without\na jury and, again, awarded the property to Rosberg. The court concluded the lease\ncreated a tenancy at will terminable at any time by either party. The court further\nconcluded that Rosberg was authorized to terminate the lease, whether because it was\nterminable at will or because appellant violated the terms of the lease, and the lease was\nproperly terminated on February 24, 2010. Appellant now appeals the county court\xe2\x80\x99s\njudgment.\n\n\x0c486\n\nProperty\nII.\n\n. . . In appellant\xe2\x80\x99s remaining issues, she challenges the findings of fact and conclusions\nof law made by the county court. In her tenth issue, appellant challenges the county\ncourt\xe2\x80\x99s first conclusion of law in which it stated \xe2\x80\x9c[t]he lease, which purported to be for\nthe rest of Lena Effel\xe2\x80\x99s life, created only a tenancy at will terminable at any time by\neither party.\xe2\x80\x9d Appellant argues that the lease must be read together with the settlement\nagreement and the court must give effect to the intent of the parties. Appellant was not\na party to the settlement agreement, however. Appellant was a party only to the lease.\nIt is the lease, and not the settlement agreement, that forms the basis of this forcible\ndetainer action. Accordingly, we look solely to the lease to determine appellant\xe2\x80\x99s rights\nin this matter.\nThe lease states that appellant was a lessee of the property \xe2\x80\x9cfor a term equal to the\nremainder of Lessee\xe2\x80\x99s life, or until such time as she voluntarily vacates the premises.\xe2\x80\x9d\nIt is the long-standing rule in Texas that a lease must be for a certain period of time or\nit will be considered a tenancy at will. See Holcombe v. Lorino, 124 Tex. 446, 79 S.W.2d\n307, 310 (1935). Courts that have applied this rule to leases that state they are for the\nterm of the lessee\xe2\x80\x99s life have concluded that the uncertainty of the date of the lessee\xe2\x80\x99s\ndeath rendered the lease terminable at will by either party.\nAppellant argues the current trend in court decisions is away from finding a lease such\nas hers to be terminable at will. Appellant relies on the 1982 decision of Philpot v. Fields,\n633 S.W.2d 546 (Tex. App. 1982). In Philpot, the court stated that the trend in law was\naway from requiring a lease to be of a definite and certain duration. In reviewing the\nlaw since Philpot, however, we discern no such trend. See Kajo Church Square, Inc. v.\nWalker, 2003 WL 1848555, at *5 (Tex. App. 2003). The rule continues to be that a lease\nfor an indefinite and uncertain length of time is an estate at will. See Providence Land\nServs., L.L.C. v. Jones, 353 S.W.3d 538, 542 (Tex. App. 2011). In this case, not only was\nthe term of the lease stated to be for the uncertain length of appellant\xe2\x80\x99s life, but her\ntenancy was also \xe2\x80\x9cuntil such time that she voluntarily vacates the premises.\xe2\x80\x9d If a lease\ncan be terminated at the will of the lessee, it may also be terminated at the will of the\nlessor. Because the lease at issue was terminable at will by either party, the trial court\xe2\x80\x99s\nfirst conclusion of law was correct. We resolve appellant\xe2\x80\x99s tenth issue against her.\n\n\x0cLeasing Real Property\n\n487\n\nIn her fourth issue, appellant contends the trial court erred in concluding that Rosberg\nsent her a proper notice to vacate the premises under section 24.005 of the Texas\nProperty Code. Section 24.005 states that a landlord must give a tenant at will at least\nthree days\xe2\x80\x99 written notice to vacate before filing a forcible detainer suit unless the\nparties contracted for a longer or shorter notice period in a written lease or agreement.\nTEX. PROP. CODE ANN. \xc2\xa7 24.005(b) (West Supp. 2011). The section also states that\nthe notice must be delivered either in person or by mail at the premises in question. Id.\n\xc2\xa7 24.005(f). If the notice is delivered by mail, it may be by regular mail, registered mail,\nor certified mail, return receipt requested, to the premises in question.\nThe undisputed evidence in this case shows that Rosberg, through his attorney, sent\nappellant a written notice to vacate the premises by both regular mail and certified mail\non February 24, 2010. The notice stated that appellant had ten days to surrender the\npremises. Nothing in the lease provided for a longer notice period. Henry Effel testified\nat trial that appellant received the notice and read it. Rosberg did not bring this forcible\ndetainer action until April 29, 2010. The evidence conclusively shows, therefore, that\nRosberg\xe2\x80\x99s notice to vacate the property complied with section 24.005. . . .\nBecause Rosberg had the right to terminate appellant\xe2\x80\x99s tenancy at any time and properly\nnotified her of the termination under section 24.005 of the Texas Property Code, the\ntrial court did not err in awarding the property at issue to Rosberg. Consequently, it is\nunnecessary for us to address the remainder of appellant\xe2\x80\x99s issues.\nWe affirm the trial court\xe2\x80\x99s judgment.\nNotes and Questions\n1. The parties\xe2\x80\x99 intent? When Henry and Jack Effel drafted the settlement\nagreement transferring their property to Robert Rosberg, what where they\ntrying to accomplish? Did the court carry out the intentions of the parties?\nWhy?\n2. Other approaches. In Garner v. Gerrish, 473 N.E.2d 223 (N.Y. 1984), the New\nYork Court of Appeals faced a case with very similar facts. The tenant, Lou\nGerrish, had a lease stating, \xe2\x80\x9cLou Gerrish [sic] has the privilege of termination\n[sic] this agreement at a date of his own choice.\xe2\x80\x9d The New York court found\nthat the document created a new kind of leasehold\xe2\x80\x94a lease for life. The Garner\n\n\x0c488\n\nProperty\nopinion attacked the argument in favor of the tenancy at will as being grounded\nin the \xe2\x80\x9cantiquated notion[s]\xe2\x80\x9d of medieval property law. Is there any good reason\nfor the law to only recognize three leasehold tenancies? What if, instead, the\nlease gave only the landlord the power to terminate, and required the tenant to\nstay and pay as long as the landlord desired?\n\n3. Working within the system. Could the lease have been drafted in a way that\nwould have let Lena Effel stay on the property for the duration of her life or\nuntil she chose to move, as long as she kept paying the rent?\n4. Institutional competence. Are courts or legislatures better positioned to\ncreate new property forms?\n5. The background story. Lena Effel lived in the house owned by her nephews\nfor over 20 years. Before that, her twin brother (Henry and Jack\xe2\x80\x99s father) had\nlived in the home for many years. At the time the compromise settlement\nagreement was signed, Lena was 93 years old. At the time Rosberg sought to\nevict her, Lena was 97. Should any of those facts have influenced the judges in\nthe case?\nLease Hypotheticals\nA professionally drafted lease will almost always make clear what type of leasehold the\nparties have elected. When problems arise it\xe2\x80\x99s often because lessors and lessees have\ndrafted legal documents without the help of a qualified lawyer. In the following\nexamples try to figure out what kind of leasehold the parties have created. If it\xe2\x80\x99s a term\nof years, how long is the term? If it\xe2\x80\x99s a periodic tenancy, what is the period?\n1. L and T sign an agreement that reads, \xe2\x80\x9cThe term is one year, beginning\nSeptember 1.\xe2\x80\x9d\n2. L and T sign a lease that reads, \xe2\x80\x9cThis agreement lasts as long as the parties\nconsent.\xe2\x80\x9d\n3. L and T sign an agreement that reads, \xe2\x80\x9cThe lease will run from September 1\nuntil the following August 31. One thousand dollars payable on the first of\nevery month.\xe2\x80\x9d\n\n\x0cLeasing Real Property\n\n489\n\n4. L and T enter a lease that reads in relevant part, \xe2\x80\x9cthe rent is $48,000 per year,\npayable $4,000 on the first of each month.\xe2\x80\x9d\n5. L and T enter a lease that reads, \xe2\x80\x9cthe rent is $1,000 per month.\xe2\x80\x9d\n6. L and T enter a lease that reads, \xe2\x80\x9cthe rent is $1,000 per month and lasts until\nthe tenant completes medical school.\xe2\x80\x9d\n7. L and T are negotiating on the phone over an apartment lease. At the end of\nthe conversation L says, \xe2\x80\x9cHave we got a deal? Five years lease with rent at\n$10,000 a year?\xe2\x80\x9d T replies, \xe2\x80\x9cGreat. I accept. It\xe2\x80\x99s a deal.\xe2\x80\x9d\n\n3. The Problem of Holdovers\na. The Tenancy at Sufferance\nImagine that you own a small apartment building in a college town. At the end of the\nschool year, one of your tenants refuses to move out. The law refers to such tenants\nas holdovers. As a landlord, what are your options in this situation? How does the legal\nsystem treat individuals who stay past the end of their leases? Can you kick them out?\nAre they obligated to pay you rent?\nWhen a tenant stays in possession after the lease has expired, the law allows the\nlandlord to make a one-time election. The landlord has the option to treat the holdover\nas a trespasser, bring an eviction proceeding, and sue for damages. Alternatively, the\nlandlord may renew the holdover\xe2\x80\x99s lease for another term. This second option is\ntypically referred to as a tenancy at sufferance. Some hornbooks list the tenancy at\nsufferance as a fourth type of common law leasehold. The tenancy at sufferance,\nhowever, is not based on any affirmative agreement between parties and is probably\nbetter understood as a remedy for wrongful occupancy. Also note that disputes\nsometimes pop-up over what election the landlord has made. For example, what if the\nlandlord does nothing for two months but then initiates eviction?\nIn most jurisdictions, when a landlord chooses to hold the tenant to a new lease, it\ncreates a periodic tenancy. States differ, however, on how to compute the length of\nthe period and, thus, the amount of the damages. Some simply copy over the length\nof the original lease (with a maximum of one year). Others divine the repeating period\n\n\x0c490\n\nProperty\n\nby looking at how the rent was paid. Imagine, for example, your tenant had originally\nsigned a lease reading, \xe2\x80\x9cThis lease will run from January 1, 2014 to December 31, 2014.\nRent is due on the first of each month.\xe2\x80\x9d The tenancy created by the holdover would\neither be a year-to-year lease or a month-to-month lease depending on the jurisdiction.\nStill other states take other approaches. Some, for example, specify that a holdover\nmust pay double (or triple) rent for the holdover period.\nNotes and Questions\n1. The landlord\xe2\x80\x99s options. Under what circumstances should a landlord move to\nevict a tenant who holds over? Are there any scenarios where a landlord might\nwant to keep a tenant who has already proven themselves untrustworthy by\nstaying past the agreed-upon term?\n2. Drafting. How can landlords draft leases to better protect themselves from the\nthreat of holdovers?\n3. A holdover problem. Seven years ago, Tommy Hillclimber leased a\ncommercial building on a busy street from Lisa. The lease was for a five-year\nterm with annual rent of $100,000. At the end of the term, Tommy retained\npossession of the building but continued to make rent payments. Lisa has\ncashed all of Tommy\xe2\x80\x99s rent checks. Last week, Sprawl-Mart contacted Lisa and\noffered to rent the building for $200,000 a year. Lisa quickly sent notice to\nTommy stating that the lease will terminate in 30 days. Does Tommy have to\nvacate?\n\n\x0cLeasing Real Property\n\n491\n\nb. Delivering Possession\nHoldovers can also cause problems for other renters. Suppose that before the start of\nlaw school you agree to a one-year lease that begins on August 1. Although you\xe2\x80\x99ve\nsigned a binding lease agreement and have received a set of keys, when your van pulls\ninto the driveway on move-in day, you find that the previous tenant hasn\xe2\x80\x99t left \xe2\x80\x9cyour\xe2\x80\x9d\napartment. If the lease doesn\xe2\x80\x99t include a contingency for such an event, what are your\nrights?\nHannan v. Dusch\n153 S.E. 824 (Va. 1930)\nPRENTIS, C.J.,\nThe declaration filed by the plaintiff, Hannan, against the defendant, Dusch, alleges\nthat Dusch had on August 31, 1927, leased to the plaintiff certain real estate in the city\nof Norfolk, Virginia, therein described, for fifteen years, the term to begin January 1,\n1928, at a specified rental; that it thereupon became and was the duty of the defendant\nto see to it that the premises leased by the defendant to the plaintiff should be open\nfor entry by him on January 1, 1928, the beginning of the term, and to put said\npetitioner in possession of the premises on that date; that the petitioner was willing and\nready to enter upon and take possession of the leased property, and so informed the\ndefendant; yet the defendant failed and refused to put the plaintiff in possession or to\nkeep the property open for him at that time or on any subsequent date; and that the\ndefendant suffered to remain on said property a certain tenant or tenants who occupied\na portion or portions thereof, and refused to take legal or other action to oust said\ntenants or to compel their removal from the property so occupied. Plaintiff alleged\ndamages which he had suffered by reason of this alleged breach of the contract and\ndeed, and sought to recover such damages in the action. There is no express covenant\nas to the delivery of the premises . . . .\nThe single question of law therefore presented in this case is whether a landlord, who\nwithout any express covenant as to delivery of possession leases property to a tenant,\nis required under the law to oust trespassers and wrongdoers so as to have it open for\nentry by the tenant at the beginning of the term \xe2\x80\x94 that is, whether without an express\ncovenant there is nevertheless an implied covenant to deliver possession. . . .\n\n\x0c492\n\nProperty\n\nIt seems to be perfectly well settled that there is an implied covenant in such cases on\nthe part of the landlord to assure to the tenant the legal right of possession \xe2\x80\x94 that is,\nthat at the beginning of the term there shall be no legal obstacle to the tenant\xe2\x80\x99s right of\npossession. This is not the question presented. Nor need we discuss in this case the\nrights of the parties in case a tenant rightfully in possession under the title of his\nlandlord is thereafter disturbed by some wrongdoer. In such case the tenant must\nprotect himself from trespassers, and there is no obligation on the landlord to assure\nhis quiet enjoyment of his term as against wrongdoers or intruders.\nOf course, the landlord assures to the tenant quiet possession as against all who\nrightfully claim through or under the landlord.\nThe discussion then is limited to the precise legal duty of the landlord in the absence\nof an express covenant, in case a former tenant, who wrongfully holds over, illegally\nrefuses to surrender possession to the new tenant. This is a question about which there\nis a hopeless conflict of the authorities. It is generally claimed that the weight of the\nauthority favors the particular view contended for. There are, however, no scales upon\nwhich we can weigh the authorities. In numbers and respectability they may be quite\nequally balanced.\nIt is then a question about which no one should be dogmatic, but all should seek for\nthat rule which is supported by the better reason. . . .\nIt is conceded by all that the two rules, one called the English rule, which implies a\ncovenant requiring the lessor to put the lessee in possession, and that called the\nAmerican rule, which recognizes the lessee\xe2\x80\x99s legal right to possession, but implies no\nsuch duty upon the lessor as against wrongdoers, are irreconcilable.\nThe English rule is that in the absence of stipulations to the contrary, there is in every\nlease an implied covenant on the part of the landlord that the premises shall be open\nto entry by the tenant at the time fixed by the lease for the beginning of his term. . . .\n[A] case which supports the English rule is Herpolsheimer v. Christopher, 76 Neb. 352, 107\nN.W. 382, 111 N.W. 359, 9 L.R.A. (N.S.) 1127, 14 Ann. Cas. 399, note. In that case the\ncourt gave these as its reasons for following the English rule:\n\n\x0cLeasing Real Property\n\n493\n\nWe think . . . that the English rule is most in consonance with good\nconscience, sound principle, and fair dealing. Can it be supposed that the\nplaintiff in this case would have entered into the lease if he had known\nat the time that he could not obtain possession on the 1st of March, but\nthat he would be compelled to begin a lawsuit, await the law\xe2\x80\x99s delays,\nand follow the case through its devious turnings to an end before he\ncould hope to obtain possession of the land he had leased? Most\nassuredly not. It is unreasonable to suppose that a man would knowingly\ncontract for a lawsuit, or take the chance of one. Whether or not a tenant\nin possession intends to hold over or assert a right to future term may\nnearly always be known to the landlord, and is certainly much more apt\nto be within his knowledge than within that of the prospective tenant.\nMoreover, since in an action to recover possession against a tenant\nholding over, the lessee would be compelled largely to rely upon the\nlessor\xe2\x80\x99s testimony in regard to the facts of the claim to hold over by the\nwrongdoer, it is more reasonable and proper to place the burden upon\nthe person within whose knowledge the facts are most apt to lie. We are\nconvinced, therefore, that the better reason lies with the courts following\nthe English doctrine, and we therefore adopt it, and hold that, ordinarily,\nthe lessor impliedly covenants with the lessee that the premises leased\nshall be open to entry by him at the time fixed in the lease as the\nbeginning of the term. . . .\nSo let us not lose sight of the fact that under the English rule a covenant which might\nhave been but was not made is nevertheless implied by the court, though it is manifest\nthat each of the parties might have provided for that and for every other possible\ncontingency relating to possession by having express covenants which would\nunquestionably have protected both.\nReferring then to the American rule: Under that rule, in such cases, [ ]the landlord is\nnot bound to put the tenant into actual possession, but is bound only to put him in\nlegal possession, so that no obstacle in the form of superior right of possession will be\ninterposed to prevent the tenant from obtaining actual possession of the demised\npremises. If the landlord gives the tenant a right of possession he has done all that he\nis required to do by the terms of an ordinary lease, and the tenant assumes the burden\n\n\x0c494\n\nProperty\n\nof enforcing such right of possession as against all persons wrongfully in possession,\nwhether they be trespassers or former tenants wrongfully holding over.[ ] . . .\nSo that, under the American rule, where the new tenant fails to obtain possession of\nthe premises only because a former tenant wrongfully holds over, his remedy is against\nsuch wrongdoer and not against the landlord \xe2\x80\x94 this because the landlord has not\ncovenanted against the wrongful acts of another and should not be held responsible\nfor such a tort unless he has expressly so contracted. This accords with the general rule\nas to other wrongdoers, whereas the English rule appears to create a specific exception\nagainst lessors. It does not occur to us now that there is any other instance in which\none clearly without fault is held responsible for the independent tort of another in\nwhich he has neither participated nor concurred and whose misdoings he cannot\ncontrol. . . .\nFor the reasons which have been so well stated by those who have enforced the\nAmerican rule, our judgment is that there is no error in the judgment complained of.\nAffirmed\nNotes and Questions\n1. The basic law. U.S. jurisdictions remain split over the landlord\xe2\x80\x99s duty to\nprovide possession. A majority of jurisdictions (and the Uniform Residential\nLandlord and Tenant Act) now follow the English rule, but the American rule\nremains alive and well. As should be obvious, the biggest difference between\nthe two approaches is the remedy available to the dispossessed tenant. Under\nthe English view, the tenant may terminate the lease and sue the landlord for\ndamages. The tenant can also choose to withhold payment from the landlord\nuntil the tenant is able to take possession. In contrast, under the American rule,\nthe tenant must bring an eviction action directly against the holdover.\n2. Justifying the rules. What policies support the English view? What polices\nsupport the American view? Would you find the remedies available under the\nAmerican rule helpful?\n3. Conceptual Arguments. The Hannan case does an excellent job discussing the\npolicy rationales for and against the two rules. But what about the more\n\n\x0cLeasing Real Property\n\n495\n\nconceptual arguments? If we view the lease as a conveyance of the legal right\nto possession, isn\xe2\x80\x99t the American rule \xe2\x80\x9ccorrect?\xe2\x80\x9d Once a landlord turns over\npossessory rights, aren\xe2\x80\x99t her obligations fulfilled?\n4. What do tenants know? Do you think that tenants in American rule\njurisdictions know that their landlord has no obligation provide them with\nactual possession? Should that matter?\n5. What rules are mandatory? Imagine that you sit in a state legislature that wants\nto adopt the English Rule by statute. Should you make the new law a mandatory\nrule or a default position that parties can negotiate around?\n6. Your Lease? Does the lease for the apartment you\xe2\x80\x99re currently renting make\nany provision for this problem?\n\n4. Tenant Selection\nAs we saw earlier in the textbook, the right to exclude remains a cornerstone of\nproperty ownership. Owners have expansive power to keep others off of their land\nand out of their homes. Generally speaking, this right extends to landlords, who have\nbroad discretion to select tenants as they see fit. Landlords, for example, remain free\nto exclude smokers from their properties. They can also refuse to rent to a tenant who\nacts erratically, possesses a criminal record, or has a low credit score. Landlords,\nhowever, cannot violate state or federal anti-discrimination laws when they go through\nthe leasing process.\na. The Civil Rights Act of 1866\nOne of the oldest laws that protects tenants against discrimination in the housing\nmarket is the Civil Rights Act of 1866. Passed in the aftermath of the Civil War, the\nCivil Rights Act of 1866 prohibits all discrimination based on race in the purchase or\nrental of real or personal property. See Jones v. Alfred H. Mayer Co., 392 U.S. 409\n(1968). Thus, landlords cannot deny an apartment unit to a potential tenant based on\ntenant\xe2\x80\x99s heritage or the color of their skin. There are no exceptions.\n\n\x0c496\n\nProperty\n\nb. The Fair Housing Act of 1968\nThe Fair Housing Act of 1968 (and its many amendments) greatly expanded the\nnumber of individuals covered by anti-discrimination law. Broadly speaking, the Fair\nHousing Act (FHA) prohibits discrimination in the renting, selling, advertising, or\nfinancing of real estate on the basis of race, color, national origin, religion, sex, familial\nstatus, and disability. It is worth looking closely at some of its provisions. The Act\nbegins with a statement of policy and a few (counter-intuitive) definitions:\n\xc2\xa73601. Declaration of Policy\nIt is the policy of the United States to provide, within constitutional\nlimitations, for fair housing throughout the United States.\n\xc2\xa73602. Definitions\nAs used in this subchapter . . .\n(c) \xe2\x80\x9cFamily\xe2\x80\x9d includes a single individual. .. .\n(h) \xe2\x80\x9cHandicap\xe2\x80\x9d means, with respect to a person\xe2\x80\x94\n(1) a physical or mental impairment which substantially\nlimits one or more of such person\xe2\x80\x99s major life activities,\n(2) a record of having such an impairment, or\n(3) being regarded as having such an impairment, but such\nterm does not include current, illegal use of or addiction to a controlled\nsubstance (as defined in section 802 of title 21). . . .\n(k) \xe2\x80\x9cFamilial status\xe2\x80\x9d means one or more individuals (who have not\nattained the age of 18 years) being domiciled with\xe2\x80\x94\n(1) a parent or another person having legal custody of such\nindividual or individuals; or\n(2) the designee of such parent or other person having such\ncustody, with the written permission of such parent or other person.\nThe protections afforded against discrimination on the basis of familial\nstatus shall apply to any person who is pregnant or is in the process of\n\n\x0cLeasing Real Property\n\n497\n\nsecuring legal custody of any individual who has not attained the age of\n18 years.\nThe definition of \xe2\x80\x9cfamilial status\xe2\x80\x9d surprises many students. Whom, exactly, does it\nprotect? Unmarried people? Single mothers? Although more intuitive, the definition of\nhandicap has generated a number of legal disputes. Alcohol, for example, is not a\ncontrolled substance under section 802 of title 21. Does that mean that a landlord\ncannot refuse to rent to a person who drinks heavily or sounds very drunk (and\nbelligerent) over the phone?\nThe real meat of the Fair Housing act comes in \xc2\xa73604. The first subsection makes it\nunlawful to \xe2\x80\x9crefuse to sell or rent . . . or otherwise make unavailable\xe2\x80\x9d a \xe2\x80\x9cdwelling\xe2\x80\x9d to\nany person because of race, color, religion, sex, familial status, or national origin. See 42\nU.S.C. \xc2\xa73604(a). Later sections provide similar protections for the handicapped. The\nAct then takes a number of additional steps designed to eliminate discrimination from\nthe housing market. Under the terms of the law it is illegal to:\n(1) discriminate in the terms or conditions of a sale or rental [\xc2\xa73604(b)];\n(2) create or publish an advertisement or statement that express a preference\nor hostility toward individuals in any of the protected categories\n[\xc2\xa73604(c)];\n(3) lie about or misrepresent the availability of housing [\xc2\xa73604(d)];\n(4) refuse to permit handicapped tenants from making reasonable\nmodifications of the existing premise at their own expense\n[\xc2\xa73604(f)(3)(A)];\n(5) refuse to make reasonable accommodations in rules and policies to\naccommodate individuals with handicaps [\xc2\xa73604(f)(3)(B)];\n(6) Harass or intimidate persons in their enjoyment of a dwelling [\xc2\xa73617].\nUnlike the Civil Rights Act of 1866, the Fair Housing Act does contain a number of\nimportant exemptions. Section 3607(b), for example, allows housing designated for\nolder persons to bar families with young children. Similarly, section 3607(a) allows\nreligious organizations and private clubs to give preferences to their own members.\n\n\x0c498\n\nProperty\n\nThe most controversial exemption, reproduced below, is the so-called Mrs. Murphy\nexemption:\n(b) Nothing in section 3604 of this title (other than subsection (c)) shall\napply to\xe2\x80\x94\n(1) any single-family house sold or rented by an owner: Provided,\nThat such private individual owner does not own more than three\nsuch single-family houses at any one time: Provided further , That\nin the case of the sale of any such single-family house by a private\nindividual owner not residing in such house at the time of such\nsale or who was not the most recent resident of such house prior\nto such sale, the exemption granted by this subsection shall apply\nonly with respect to one such sale within any twenty-four month\nperiod: Provided further , That such bona fide private individual\nowner does not own any interest in, nor is there owned or\nreserved on his behalf, under any express or voluntary agreement,\ntitle to or any right to all or a portion of the proceeds from the\nsale or rental of, more than three such single-family houses at any\none time: Provided further , That after December 31, 1969, the\nsale or rental of any such single-family house shall be excepted\nfrom the application of this subchapter only if such house is sold\nor rented (A) without the use in any manner of the sales or rental\nfacilities or the sales or rental services of any real estate broker,\nagent, or salesman, or of such facilities or services of any person\nin the business of selling or renting dwellings, or of any employee\nor agent of any such broker, agent, salesman, or person and (B)\nwithout the publication, posting or mailing, after notice, of any\nadvertisement or written notice in violation of section 3604(c) of\nthis title; but nothing in this proviso shall prohibit the use of\nattorneys, escrow agents, abstractors, title companies, and other\nsuch professional assistance as necessary to perfect or transfer\nthe title, or\n(2) rooms or units in dwellings containing living quarters\noccupied or intended to be occupied by no more than four\n\n\x0cLeasing Real Property\n\n499\n\nfamilies living independently of each other, if the owner actually\nmaintains and occupies one of such living quarters as his\nresidence.\nWhat does this exemption allow? If the act is intended to root out pernicious\ndiscrimination, why include this provision?\nIt is crucial to note that the plain text of the Mrs. Murphy exemption states that it does\nnot apply to 3604(c)\xe2\x80\x94the subsection that prohibits discriminatory advertising. Thus,\nalthough certain categories of landlords are exempted from the statute\xe2\x80\x99s basic\nframework, they are still not allowed to post discriminatory advertisements.\nc. State Anti-Discrimination Efforts\nSome state legislatures have passed laws that afford far more protection from\ndiscrimination than the federal statutes provide. Minnesota, for example, protects\nagainst housing discrimination on the basis of sexual orientation, gender identity,\nmarital status, and source of income. Other states in the Northeast and West Coast\nprovide similar coverage, but these positions are in no way a majority. As the map\nbelow indicates, in most states nothing in state law prevents a landlord from denying\nan apartment to an engaged heterosexual couple, based on the belief that cohabitation\nbefore marriage is sinful.\n\n\x0c500\n\nProperty\n\nDespite the small number of states that extend protection against housing\ndiscrimination on the basis of sexual orientation or transgender status, recent changes\nin the interpretation of federal antidiscrimination law may make state protections a\nmoot point. In June of 2020, the Supreme Court held that an employer who fires an\nemployee for their sexual orientation or transgender status unlawfully discriminates on\nthe basis of sex for purposes of Title VII of the Civil Rights Act of 1964. See 42 U.S.C.\n\xc2\xa7 2000e\xe2\x80\x932(a)(1) (prohibiting employment discrimination \xe2\x80\x9cbecause of \xe2\x80\xa6 sex.\xe2\x80\x9d). As the\nCourt explained:\n[I]t is impossible to discriminate against a person for being homosexual\nor transgender without discriminating against that individual based on\nsex. Consider, for example, an employer with two employees, both of\nwhom are attracted to men. The two individuals are, to the employer\xe2\x80\x99s\nmind, materially identical in all respects, except that one is a man and the\nother a woman. If the employer fires the male employee for no reason\nother than the fact he is attracted to men, the employer discriminates\nagainst him for traits or actions it tolerates in his female colleague. Put\ndifferently, the employer intentionally singles out an employee to fire\nbased in part on the employee\xe2\x80\x99s sex, and the affected employee\xe2\x80\x99s sex is\na but-for cause of his discharge. Or take an employer who fires a\ntransgender person who was identified as a male at birth but who now\nidentifies as a female. If the employer retains an otherwise identical\nemployee who was identified as female at birth, the employer\nintentionally penalizes a person identified as male at birth for traits or\nactions that it tolerates in an employee identified as female at birth. Again,\nthe individual employee\xe2\x80\x99s sex plays an unmistakable and impermissible\nrole in the discharge decision.\nBostock v. Clayton Cty., Ga., 140 S.Ct. 1731, 1741-42 (2020). Given that the Fair\nHousing Act uses the same \xe2\x80\x9cbecause of \xe2\x80\xa6 sex\xe2\x80\x9d language as Title VII, it seems probable\nthat the federal courts will conclude that sexual orientation and transgender status are\nprotected categories under the Fair Housing Act as well.\n\n\x0cLeasing Real Property\n\n501\n\nd. Proving Discrimination\nTwo broad categories of cases may be brought under the Fair Housing Act: disparate\ntreatment claims and disparate impact claims.\n\nA sign erected by white homeowners trying to prevent black tenants from\nmoving into their Detroit neighborhood (1942).\n\nDisparate treatment claims target intentional forms of discrimination, including the\nrefusal to rent based on one of the protected categories. A plaintiff can show intent to\ndiscriminate with \xe2\x80\x9csmoking gun\xe2\x80\x9d style evidence, such as statements by the landlord\nthat he \xe2\x80\x9cwould never rent to an Irishman.\xe2\x80\x9d Of course, modern landlords rarely make\nsuch forthright admissions. As a result, courts in the United States have established a\nburden-shifting approach that allows plaintiffs to prove intentional discrimination with\nindirect circumstantial evidence. The initial burden is on the plaintiff to make a prima\nfacie case of discrimination. In a refusal to rent case, the plaintiff must show that (1)\nthat she is a member of a class protected by the FHA; (2) that she applied for and was\nqualified to rent the unit; (3) that she was rejected; and (4) the unit remained unrented.\nOnce the plaintiff has established sufficient evidence to state a prima facie case, the\nburden shifts to the defendant landlord to proffer a legitimate nondiscriminatory\nreason for the refusal to rent. If the defendant meets this requirement, the burden then\nshifts back to the tenant to prove that the reason offered is a pretext.\n\n\x0c502\n\nProperty\n\nDiscrimination is often ferreted out through the use of \xe2\x80\x9ctesters.\xe2\x80\x9d Advocacy groups,\nmany of which are funded by the federal government, will send comparable white and\nblack individuals to inquire about renting a vacant unit. If the landlord treats the testers\ndifferently (e.g., provides different levels of assistance, shows different units, provides\ndifferent information about unit availability) this provides persuasive evidence of illegal\ndiscrimination.\nDisparate impact claims allege that some seemingly neutral policy has a\ndisproportionately harmful effect on members of a group protected by the FHA.\nThese cases rely heavily on statistical evidence and employ a very similar burdenshifting methodology as the disparate treatment claims. Using statistics, plaintiffs need\nto show that a defendant\xe2\x80\x99s policy has actually caused some disparity. The defendant\nthen has the opportunity to escape liability if it can show show that its actions are\nnecessary to achieve a valid goal. See Texas Department of Housing & Community\nAffairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015).\nProblems\n1. William Neithamer, who is gay and HIV positive attempted to rent an\napartment from Brenneman Properties. Neithamer did not reveal his HIV\nstatus, but admitted to the property manager that he had dismal credit because\nhe had recently devoted all of his resources to taking care of a lover who had\ndied of AIDS. Neithamer, however, offered to pre-pay one year\xe2\x80\x99s rent.\nBrenneman Properties rejected Neithamer\xe2\x80\x99s application and, in turn, Neithamer\nsued under the FHA. Does he have a case? See Neithamer v. Brenneman\nProperty Services, Inc., 81 F. Supp 2d 1 (D.D.C. 1999).\n2. Over the phone, Landlord said to Plaintiff, \xe2\x80\x9cDo you have children? I don\xe2\x80\x99t want\nany little boys because they\xe2\x80\x99ll mess up the house and nobody would be here to\nwatch them. Really, this house isn\xe2\x80\x99t good for kids because it\xe2\x80\x99s right next to a\nmain road.\xe2\x80\x9d Plaintiff sues. Landlord argues that her statements only show that\nshe is concerned about the welfare of children. Is that a legitimate nondiscriminatory reason to refuse to rent?\n3. A local government has decided to knock down two high-rise public housing\nprojects within its borders. The high-rises primarily house recent immigrants\n\n\x0cLeasing Real Property\n\n503\n\nfrom Guatemala. A local advocacy group brings a lawsuit on their behalf,\nclaiming that the government action has a disparate impact on a protected group.\nIs this a disparate treatment or disparate impact case? Can you think of a nondiscriminatory reason why the government may have taken such an action?\n4. The FHA requires landlords to make \xe2\x80\x9creasonable accommodations\xe2\x80\x9d for\nindividuals with handicaps. Which of the following requests by a tenant would\nqualify as a reasonable accommodation? (a) Asking a landlord with a firstcome/first-served parking policy to create a reserved parking space for a tenant\nwho has difficulty walking; (b) Requesting that a landlord waive parking fees for\na disabled tenant\xe2\x80\x99s home health care aide; (c) Asking the landlord to make an\nexception to the building\xe2\x80\x99s \xe2\x80\x9cno pets\xe2\x80\x9d rule for a tenant with a service animal; (d)\nRequesting landlord to pay for a sign language interpreter for a deaf individual\nduring the application process; (e) Asking the landlord to provide oral reminders\nto pay the rent for a tenant with documented short-term memory loss.\n\n\x0c504\n\nProperty\n\ne. An Exercise in Advertising\nImagine that you are a lawyer for a newspaper in a large metropolitan area. The local\nchapter of the ACLU has raised concerns that some advertisements in the classifieds\nsection of your paper violate the Fair Housing Act. * Your boss has asked you to review\nthe ads for any offending language. Which of the following would you feel comfortable\nprinting? \xe2\x80\xa0\n\n*\n\nWould any of these ads violate the Civil Rights Act of 1866?\n\nThe government does provide some guidance to landlords worried about triggering FHA liability through their\nadvertisements. There are, for example, published lists of \xe2\x80\x9cwords to avoid\xe2\x80\x9d and \xe2\x80\x9cacceptable language.\xe2\x80\x9d Although\ncontext is important, landlords can generally use these phrases: good neighborhood, secluded setting, single\nfamily home, quality construction, near public transportation, near places of worship, and assistance animals only.\n\n\xe2\x80\xa0\n\n\x0cLeasing Real Property\n\n505\n\nWhat about this ad for a roommate on Craigslist? Is it objectionable to you? Does it\nviolate the FHA? Does it matter that the poster is looking for a roommate? Would your\nanswers change if the advertisement read, \xe2\x80\x9cHave a room available for an able-bodied\nwhite man with no children?\xe2\x80\x9d\n\nFair Housing Council of San Fernando Valley v. Roommate.com, LLC\n666 F.3d 1216 (9th Cir. 2012)\nKOZINSKI, Chief Judge:\nThere\xe2\x80\x99s no place like home. In the privacy of your own home, you can take off your\ncoat, kick off your shoes, let your guard down and be completely yourself. While we\nusually share our homes only with friends and family, sometimes we need to take in a\nstranger to help pay the rent. When that happens, can the government limit whom we\nchoose? Specifically, do the anti-discrimination provisions of the Fair Housing Act\n(\xe2\x80\x9cFHA\xe2\x80\x9d) extend to the selection of roommates?\nRoommate.com, LLC (\xe2\x80\x9cRoommate\xe2\x80\x9d) operates an internet-based business that helps\nroommates find each other. Roommate\xe2\x80\x99s website receives over 40,000 visits a day and\nroughly a million new postings for roommates are created each year. When users sign\nup, they must create a profile by answering a series of questions about their sex, sexual\norientation and whether children will be living with them. An open-ended \xe2\x80\x9cAdditional\nComments\xe2\x80\x9d section lets users include information not prompted by the questionnaire.\nUsers are asked to list their preferences for roommate characteristics, including sex,\nsexual orientation and familial status. Based on the profiles and preferences, Roommate\nmatches users and provides them a list of housing-seekers or available rooms meeting\ntheir criteria. Users can also search available listings based on roommate characteristics,\nincluding sex, sexual orientation and familial status. The Fair Housing Councils of San\n\n\x0c506\n\nProperty\n\nFernando Valley and San Diego (\xe2\x80\x9cFHCs\xe2\x80\x9d) sued Roommate in federal court, alleging\nthat the website\xe2\x80\x99s questions requiring disclosure of sex, sexual orientation and familial\nstatus, and its sorting, steering and matching of users based on those characteristics,\nviolate the Fair Housing Act (\xe2\x80\x9cFHA\xe2\x80\x9d), 42 U.S.C. \xc2\xa7 3601 et seq. . . .\nANALYSIS\nIf the FHA extends to shared living situations, it\xe2\x80\x99s quite clear that what Roommate\ndoes amounts to a violation. The pivotal question is whether the FHA applies to\nroommates.\nI\nThe FHA prohibits discrimination on the basis of \xe2\x80\x9crace, color, religion, sex, familial\nstatus, or national origin\xe2\x80\x9d in the \xe2\x80\x9csale or rental of a dwelling.\xe2\x80\x9d 42 U.S.C. \xc2\xa7 3604(b)\n(emphasis added). The FHA also makes it illegal to:\nmake, print, or publish, or cause to be made, printed, or published any notice,\nstatement, or advertisement, with respect to the sale or rental of a dwelling that\nindicates any preference, limitation, or discrimination based on race, color,\nreligion, sex, handicap, familial status, or national origin, or an intention to make\nany such preference, limitation, or discrimination.\nId. \xc2\xa7 3604(c) (emphasis added). The reach of the statute turns on the meaning of\n\xe2\x80\x9cdwelling.\xe2\x80\x9d\nThe FHA defines \xe2\x80\x9cdwelling\xe2\x80\x9d as \xe2\x80\x9cany building, structure, or portion thereof which is\noccupied as, or designed or intended for occupancy as, a residence by one or more\nfamilies.\xe2\x80\x9d Id. \xc2\xa7 3602(b). A dwelling is thus a living unit designed or intended for\noccupancy by a family, meaning that it ordinarily has the elements generally associated\nwith a family residence: sleeping spaces, bathroom and kitchen facilities, and common\nareas, such as living rooms, dens and hallways.\nIt would be difficult, though not impossible, to divide a single-family house or\napartment into separate \xe2\x80\x9cdwellings\xe2\x80\x9d for purposes of the statute. Is a \xe2\x80\x9cdwelling\xe2\x80\x9d a\nbedroom plus a right to access common areas? What if roommates share a bedroom?\n\n\x0cLeasing Real Property\n\n507\n\nCould a \xe2\x80\x9cdwelling\xe2\x80\x9d be a bottom bunk and half an armoire? It makes practical sense to\ninterpret \xe2\x80\x9cdwelling\xe2\x80\x9d as an independent living unit and stop the FHA at the front door.\nThere\xe2\x80\x99s no indication that Congress intended to interfere with personal relationships\ninside the home. Congress wanted to address the problem of landlords discriminating\nin the sale and rental of housing, which deprived protected classes of housing\nopportunities. But a business transaction between a tenant and landlord is quite\ndifferent from an arrangement between two people sharing the same living space. We\nseriously doubt Congress meant the FHA to apply to the latter. Consider, for example,\nthe FHA\xe2\x80\x99s prohibition against sex discrimination. Could Congress, in the 1960s, really\nhave meant that women must accept men as roommates? Telling women they may not\nlawfully exclude men from the list of acceptable roommates would be controversial\ntoday; it would have been scandalous in the 1960s.\nWhile it\xe2\x80\x99s possible to read dwelling to mean sub-parts of a home or an apartment, doing\nso leads to awkward results. . . . Nonetheless, this interpretation is not wholly\nimplausible and we would normally consider adopting it, given that the FHA is a\nremedial statute that we construe broadly. Therefore, we turn to constitutional\nconcerns, which provide strong countervailing considerations.\nII\nThe Supreme Court has recognized that \xe2\x80\x9cthe freedom to enter into and carry on certain\nintimate or private relationships is a fundamental element of liberty protected by the\nBill of Rights.\xe2\x80\x9d Bd. of Dirs. of Rotary Int\xe2\x80\x99l v. Rotary Club of Duarte, 481 U.S. 537 (1987).\n\xe2\x80\x9c[C]hoices to enter into and maintain certain intimate human relationships must be\nsecured against undue intrusion by the State because of the role of such relationships\nin safeguarding the individual freedom that is central to our constitutional scheme.\xe2\x80\x9d\nRoberts v. U.S. Jaycees, 468 U.S. 609, 617-18 (1984). Courts have extended the right of\nintimate association to marriage, child bearing, child rearing and cohabitation with\nrelatives. Id. While the right protects only \xe2\x80\x9chighly personal relationships,\xe2\x80\x9d IDK, Inc. v.\nClark Cnty., 836 F.2d 1185, 1193 (9th Cir. 1988) (quoting Roberts, 468 U.S. at 618), the\nright isn\xe2\x80\x99t restricted exclusively to family, Bd. of Dirs. of Rotary Int\xe2\x80\x99l, 481 U.S. at 545. The\nright to association also implies a right not to associate. Roberts, 468 U.S. at 623.\n\n\x0c508\n\nProperty\n\nTo determine whether a particular relationship is protected by the right to intimate\nassociation we look to \xe2\x80\x9csize, purpose, selectivity, and whether others are excluded from\ncritical aspects of the relationship.\xe2\x80\x9d Bd. of Dirs. of Rotary Int\xe2\x80\x99l, 481 U.S. at 546. The\nroommate relationship easily qualifies: People generally have very few roommates; they\nare selective in choosing roommates; and non-roommates are excluded from the critical\naspects of the relationship, such as using the living spaces. Aside from immediate family\nor a romantic partner, it\xe2\x80\x99s hard to imagine a relationship more intimate than that\nbetween roommates, who share living rooms, dining rooms, kitchens, bathrooms, even\nbedrooms.\nBecause of a roommate\xe2\x80\x99s unfettered access to the home, choosing a roommate\nimplicates significant privacy and safety considerations. The home is the center of our\nprivate lives. Roommates note our comings and goings, observe whom we bring back\nat night, hear what songs we sing in the shower, see us in various stages of undress and\nlearn intimate details most of us prefer to keep private. . . .\nEqually important, we are fully exposed to a roommate\xe2\x80\x99s belongings, activities, habits,\nproclivities and way of life. This could include matter we find offensive (pornography,\nreligious materials, political propaganda); dangerous (tobacco, drugs, firearms);\nannoying (jazz, perfume, frequent overnight visitors, furry pets); habits that are\nincompatible with our lifestyle (early risers, messy cooks, bathroom hogs, clothing\nborrowers). When you invite others to share your living quarters, you risk becoming a\nsuspect in whatever illegal activities they engage in.\nGovernment regulation of an individual\xe2\x80\x99s ability to pick a roommate thus intrudes into\nthe home, which \xe2\x80\x9cis entitled to special protection as the center of the private lives of\nour people.\xe2\x80\x9d Minnesota v. Carter, 525 U.S. 83, 99 (1998) (Kennedy, J., concurring). . . .\nHolding that the FHA applies inside a home or apartment would allow the government\nto restrict our ability to choose roommates compatible with our lifestyles. This would\nbe a serious invasion of privacy, autonomy and security.\nFor example, women will often look for female roommates because of modesty or\nsecurity concerns. As roommates often share bathrooms and common areas, a girl may\nnot want to walk around in her towel in front of a boy. She might also worry about\nunwanted sexual advances or becoming romantically involved with someone she must\ncount on to pay the rent.\n\n\x0cLeasing Real Property\n\n509\n\nAn orthodox Jew may want a roommate with similar beliefs and dietary restrictions, so\nhe won\xe2\x80\x99t have to worry about finding honey-baked ham in the refrigerator next to the\npotato latkes. Non-Jewish roommates may not understand or faithfully follow all of\nthe culinary rules, like the use of different silverware for dairy and meat products, or\nthe prohibition against warming non-kosher food in a kosher microwave. . . .\nIt\xe2\x80\x99s a \xe2\x80\x9cwell-established principle that statutes will be interpreted to avoid constitutional\ndifficulties.\xe2\x80\x9d Frisby v. Schultz, 487 U.S. 474, 483 (1988). \xe2\x80\x9c[W]here an otherwise\nacceptable construction of a statute would raise serious constitutional problems, the\nCourt will construe the statute to avoid such problems unless such construction is\nplainly contrary to the intent of Congress.\xe2\x80\x9d Pub. Citizen v. U.S. Dep\xe2\x80\x99t of Justice, 491 U.S.\n440, 466 (1989). Because the FHA can reasonably be read either to include or exclude\nshared living arrangements, we can and must choose the construction that avoids\nraising constitutional concerns. . . . Reading \xe2\x80\x9cdwelling\xe2\x80\x9d to mean an independent\nhousing unit is a fair interpretation of the text and consistent with congressional intent.\nBecause the construction of \xe2\x80\x9cdwelling\xe2\x80\x9d to include shared living units raises substantial\nconstitutional concerns, we adopt the narrower construction that excludes roommate\nselection from the reach of the FHA. . . .\nAs the underlying conduct is not unlawful, Roommate\xe2\x80\x99s facilitation of discriminatory\nroommate searches does not violate the FHA.\nNotes and Questions\n1. What\xe2\x80\x99s a dwelling? The FHA defines \xe2\x80\x9cdwelling\xe2\x80\x9d as \xe2\x80\x9cany building, structure,\nor portion thereof which is occupied as, or designed or intended for occupancy\nas, a residence by one or more families.\xe2\x80\x9d Id. \xc2\xa7 3602(b). Do you think the FHA\napplies to college dormitories? Is it illegal to reserve some dormitories for\nwomen or to have ethnic-themed dorms?\n2. A broader Craigslist problem. It\xe2\x80\x99s not unusual to stumble across\nadvertisements for apartments (as opposed to just roommate ads) on Craigslist\nthat violate the FHA. If a local newspaper published similar ads they would be\nliable under the FHA for publishing discriminatory material. Why doesn\xe2\x80\x99t\nanyone sue Craigslist? The answer is that section 230(c) of the Communications\nDecency Act provides internet service providers and website owners with broad\n\n\x0c510\n\nProperty\nimmunity from liability for content posted by third parties. Craigslist and other\nsimilar sites may voluntarily remove offending posts, but they are not required\nto do so.\n3.\n\nC. Exiting a Lease\nMost leases expire either at the end of the agreed-upon term or when one party serves\nthe other with notice that they\xe2\x80\x99ve decided not to renew for another period. Sometimes,\nhowever, either a tenant or landlord seeks to get out of the lease before the negotiated\nterm concludes. For example, a new job in a faraway state, a family emergency, or a\nbusiness failure can all change a tenant\xe2\x80\x99s needs or ability to pay the rent. We turn now\nto the legal consequences of exiting a lease.\n\n1. Landlord Exit: Transfer\nLandlords may sell their properties to third parties at any time. The law categorizes a\nlandlord\xe2\x80\x99s interest in rented property as a reversion and, like most other property\ninterests, the landlord\xe2\x80\x99s reversion is fully alienable. But what happens to a lease if a\nproperty is transferred? As a default rule, when a landlord sells his interest, the\npurchaser takes subject to any leases. If there are tenants with unexpired term-of-years\nleases, for example, the new landlord cannot evict them. Conversely, the tenants must\ncontinue to pay the agreed upon rent to the new owner. If the lease is a periodic\ntenancy (or tenancy at will), the new landlord may end the leasehold by providing the\ntenant with the required notice. Until then, the leases continue unabated.\nRemember that these are default rules, alterable by contract. In fact, landlords often\ninsert provisions into leases that give them the option to terminate rental agreements\nupon sale of the property.\n\n2. Tenant Exit: Transfer\nTenants have exit options, too. The default rule is that a tenant\xe2\x80\x99s interest in a term of\nyears lease or periodic tenancy is also freely transferable. (Note, however, that a tenant\ncannot transfer a tenancy at will to another party.) The law recognizes two types of\ntransfer: the assignment and the sublease. The vast majority of jurisdictions use an\n\n\x0cLeasing Real Property\n\n511\n\nobjective test to distinguish the two. In an assignment, the original tenant transfers all\nof the remaining interest under the lease to a new tenant. In a sublease, on the other\nhand, the original tenant transfers less than all of her remaining rights in the unexpired\nperiod\xe2\x80\x94the original tenant either gets the unit back at the end of the sublease or\nreserves a right to cut the sublease short.\nAn example should illuminate the concepts. Imagine that the Witch leases her\nGingerbread Cottage to Hansel for a period of one year\xe2\x80\x94January 1 to December 31\xe2\x80\x94\nin exchange for $100 a month. Four months into the lease, Hansel then transfers all\nof his remaining interest in the property to Gretel so that she now has exclusive\npossessory rights until the end of the term. This transfer is an assignment because\nHansel has no further rights in the property. If Hansel had retained for himself the\nfinal two months of the lease or if he\xe2\x80\x99d rented the cottage to Gretel for only the summer\nmonths, we would then categorize the agreement as a sublease.\n\nA minority of jurisdictions takes a less formalistic approach to the assignment/sublease\ndivision. In these states, the subjective intent of the parties, rather than the structure\nof the transaction, controls. Arkansas, for example, allows parties to designate their\nleases as subleases or assignment (and receive all the attendant rights and obligations\nunder the chosen category) regardless of whether the new tenant takes the unit for the\nentire remaining term.\nThe distinction between subleases and assignments has a few significant legal\nconsequences. Primarily, it affects who can benefit from the promises in the original\nlease and who is on the hook for the obligations. Think again about the Hansel and\n\n\x0c512\n\nProperty\n\nGretel example described above. If Gretel, who took over the lease, stops making rent\npayments, whom can the landlord sue? The original tenant, Hansel? Gretel? Both?\nWhat if the original one-year lease contained a provision allowing the tenant to renew\nfor a second year with the same terms? Can Gretel take advantage of that clause?\nTo enforce any promise, the law requires a certain type of legal relationship between\nthe parties, known as privity. Donald Trump, for example, cannot successfully sue you\nif one of his Trump Tower tenants suddenly fails to pay rent\xe2\x80\x94there\xe2\x80\x99s simply no\nconnection between Trump and you. Trump could only sue you if a privity relationship\nexists: either privity of contract or privity of estate. Privity of contract is easy enough to\nunderstand. Parties are in privity of contract if they have entered into a valid contract\nwith each other. In our example, the Witch and Hansel are in privity of contract\nbecause they signed the original lease agreement. The Witch gave Hansel the right to\nexclusive possession for one year and Hansel promised to pay rent every month. As a\nresult of this legal relationship, the Witch has the option to sue Hansel if she doesn\xe2\x80\x99t\nreceive rent. That remains true even if Hansel transfers his lease to someone else. That\nbears repeating: the original tenant\xe2\x80\x99s promise to pay the landlord stands until the\noriginal lease expires (or until the landlord releases the tenant from this obligation).\nWhen Hansel and the Witch first sign the lease, they also stand in privity of estate with\neach other. This concept is yet another holdover from feudal times. Privity of estate\nmakes concrete the medieval belief that an individual takes on a series of rights and\nobligations when they occupy land owned by another. * For our purposes, privity of\nestate arises when two parties have successive ownership claims in the same property.\nHansel and the Witch have privity of estate because once Hansel\xe2\x80\x99s possessory interest\nconcludes, his property rights flow immediately back to the Witch. Despite its archaic\norigin, the idea remains important in modern property law because individuals in privity\nof estate can sue each other directly for (some) violations of a rental agreement. \xe2\x80\xa0\n\nThe medieval mind thought of rent as something that came from the land itself: the tenant paid the land-lord\nout of the fruits of the land, sometimes metaphorically but sometimes literally, with crops harvested from the\nland being leased.\n*\n\nWe\xe2\x80\x99ll learn more about which promises \xe2\x80\x9crun with the land\xe2\x80\x9d in a later chapter about covenants. For now, it\xe2\x80\x99s\nenough to know that transferees can only enforce promises that concern the property or land.\n\n\xe2\x80\xa0\n\n\x0cLeasing Real Property\n\n513\n\nConsider, again, what happens when Hansel transfers his rights in the gingerbread\ncottage to Gretel. Can the Witch successfully haul Gretel into court if she stops making\npayments? It should be obvious that Gretel has not made any direct agreement with\nthe Witch (or made any promise to benefit her) so they are not in privity of contract.\nBut what about privity of estate? This is where the distinction between assignments\nand subleases matters. If Hansel assigns his interest to Gretel, then Gretel and the\nWitch would be in privity of estate (and the Witch could sue Gretel for the missing\nrent). We know they have privity of estate because when Gretel\xe2\x80\x99s rights end under the\nassignment, the Witch would immediately be entitled to exclusive possession of the\ncottage\xe2\x80\x94they have successive interests in the same piece of real estate. Conversely, if\nHansel subleases his apartment to Gretel for the summer, a privity relationship would\nnot arise between Gretel and the Witch. Instead, Gretel would have privity of estate\nwith Hansel because at the conclusion of Gretel\xe2\x80\x99s interest, Hansel would have the right\nto exclusive possession. Thus, under the sublease, the Witch could not sue Gretel for\nrent.\nFiguring out which parties stand in privity of estate can initially cause a lot of confusion.\nHowever, asking two quick questions can help define these relationships. The first\nstep is to ask, \xe2\x80\x9cHave any tenants made an assignment of their rights?\xe2\x80\x9d If a tenant has\nassigned their rights they have no chance of possessing the property again and, thus,\ncannot stand in privity of estate with anyone (although they may still be in privity of\ncontract with various parties). For all the remaining tenants ask, \xe2\x80\x9cWho receives the\nproperty when this tenant\xe2\x80\x99s possessory rights finally end?\xe2\x80\x9d Remember, parties with\nsuccessive interests have privity of estate.\nAlthough it may be redundant, a few diagrams may help clarify these relationships.\nAssume that L leases an apartment to T. Whenever a landlord initially leases to a tenant\nthe two parties are in both privity of contract and privity of estate:\n\n\x0c514\n\nProperty\n\nWhen T\xe2\x80\x99s rights\nend,\nL\ngets\nproperty\nback,\nestablishing privity\nof estate\n\nLease\nestablishes\nprivity of\ncontract\n\nL and T are in privity of contract because they agreed on a lease contract. To figure out\nthe privity of estate relationships, we first ask if anyone has assigned their interest. The\nanswer here is \xe2\x80\x9cno.\xe2\x80\x9d For all remaining tenants, we inquire \xe2\x80\x9cwho gets control over the\nproperty when this tenant\xe2\x80\x99s possessory rights end?\xe2\x80\x9d In this hypothetical, who gets the\nleased premise when T\xe2\x80\x99s term concludes? The answer, of course, is the landlord. T and\nL are in privity of estate because the landlord gets the property back from the tenant\nat the end of the lease.\nThe relationships change if T assigns his rights to a new party, T2. The diagram of an\nassignment is below:\n\nprivity\nprivity\n\nprivity\n\n\x0cLeasing Real Property\n\n515\n\nThe contractual relationships are easy enough to map. As discussed earlier, when T\nassigns his interest, he remains in privity of contract with L\xe2\x80\x94they signed a rental\nagreement that has not expired. T and T2 are also in privity of contract as a result of\nthe assignment contract. But what about privity of estate? L and T are no longer in\nprivity of estate because T has relinquished all of his property interests. Remember\nthat parties who assign their rights stand in privity of estate with no one. For all other\ntenants we ask, \xe2\x80\x9cWho receives the property when this tenant\xe2\x80\x99s possessory rights finally\nend?\xe2\x80\x9d When T2\xe2\x80\x99s possessory rights conclude, who takes control of the property? The\nanswer is the landlord. L and T2 now have a privity of estate relationship.\nHow do things change with a sublease?\n\nprivity\nprivity\nprivity\n\nprivity\n\nAs before, T remains in privity of contract with L for the duration of the original lease.\nIn this example, there are no assignments, so we begin by asking which parties have\nsuccessive property interests. When the possessory rights of T2 end, T will then have\ncontrol over the property. Thus T2 and T have a privity of estate relationship. Then,\nwhen T\xe2\x80\x99s rights over the property conclude, the possessory rights will flow back to the\nlandlord, meaning that T and L also have privity of estate.\nBefore moving on, one final wrinkle merits attention. As discussed earlier, when the\noriginal tenant subleases or assigns his leasehold, the default rule is that the landlord\nand the new tenant are not in privity of contract. It is possible, however, to create a\nprivity of contract relationship between the L and T2. Most often this is accomplished\n\n\x0c516\n\nProperty\n\nby including a clause in the takeover agreement between the original tenant and the\nnew tenant that reads, \xe2\x80\x9cNew Tenant assumes the obligation to perform all of the\noriginal tenant\xe2\x80\x99s duties under the original lease.\xe2\x80\x9d If the new tenant takes on this\nresponsibility, the landlord becomes a third-party beneficiary to the agreement and\ncomes into privity of contract with the new tenant.\nProblems\n1. Landlord leases property to T1 from January 1, 2015 to December 31, 2015.\nOn March 1, T1 sold T2 her remaining interest in the property. On October 1,\nT2 rented the property to T3 for two months. Describe the privity relationships\nbetween all of the parties. If T3 stops sending rent payments to Landlord,\nwhom can the Landlord sue to recover the money?\n2. Alger, a landlord, rents a commercial building to Brown for 5 years. Six months\ninto the lease, Brown subleases his interest to Clancy for 3 years. Clancy then\nturns around and assigns his interest to Dahl. Describe the privity relationships\nbetween all of the parties. If Dahl stops sending rent checks to Alger, whom\ncan Alger sue to recover the money.\n3. Picasso, a landlord, rents an apartment to Renoir for one year. The lease\ncontains a provision allowing the tenant to renew the leasehold for a second\nyear on the same terms. Renoir assigns his interest in the lease to Seurat. Seurat\nthen assigns his interest to Turner. What are the privity relationships between\nthe parties? Can Turner exercise the renewal clause in the original lease? See\nCastle v. Double Time, Inc., 737 P.2d 900 (Okla. 1987) (discussing renewal\nclauses).\n4. Landlord leases a unit to T1 for ten years beginning in 2010. In 2012, T1\ntransfers all of his right to T2 \xe2\x80\x9cfor a period of five\xe2\x80\x9d years. In 2013, T2 subleases\nto T3 for one year. What are the privity relationships and whom can the\nlandlord sue if T3 stops paying rent?\n5. L leases a commercial property to T1 for ten years beginning in 2010. In 2012,\nT1 assigns all of her interest to T2. A year later, T2 assigns all of her interest to\nT3. In 2014, T3 subleases to T4 for a term of four years. In the sublease\ncontract, T4 agrees to assume \xe2\x80\x9call of the covenants and promises\xe2\x80\x9d in the original\n\n\x0cLeasing Real Property\n\n517\n\nlease between L and T1. In 2015, T4\xe2\x80\x99s business fails and she ceases making\npaying rent. What are the privity relationships? Whom can L sue to recover\nthe unpaid rent money?\n\n3. Tenant Exit: Limiting the Right to Transfer\nUnder the traditional common law, leaseholds were freely transferable property\ninterests. Modern courts continue to recognize the alienability of tenancies as a default\nposition, but allow parties to contract around the basic rule. As a result, most leases\n(including yours, probably) now contain some restriction on a tenant\xe2\x80\x99s ability to assign\nor sublease her property interests. For example, one oft-used lease agreement, which\ncan be downloaded for free from the Internet, includes the following provision: \xe2\x80\x9cThe\ntenant will not assign this Lease, or sublet or grant any concession or license to use the\nProperty or any part of the Property. Any assignment or subletting will be void and\nwill, at the Landlord\xe2\x80\x99s option, terminate the Lease.\xe2\x80\x9d In most states, courts uphold such\nbars on transfer as reasonable restraints on alienation. More controversial are clauses\nthat allow sublease or assignment but only \xe2\x80\x9cwith the consent of the landlord.\xe2\x80\x9d\nJulian v. Christopher\n575 A.2d 735 (Md. 1990)\nCHASANOW, Judge.\nIn 1961, this Court decided the case of Jacobs v. Klawans, 169 A.2d 677 (1961) and held\nthat when a lease contained a \xe2\x80\x9csilent consent\xe2\x80\x9d clause prohibiting a tenant from\nsubletting or assigning without the consent of the landlord, landlords had a right to\nwithhold their consent to a subletting or assignment even though the withholding of\nconsent was arbitrary and unreasonable. . . . We now have before us the issue of\nwhether the common law rule applied in Klawans should be changed.\nIn the instant case, the tenants, Douglas Julian and William J. Gilleland, III, purchased\na tavern and restaurant business, as well as rented the business premises from landlord,\nGuy D. Christopher. The lease stated in clause ten that the premises, consisting of both\nthe tavern and an upstairs apartment, could not be assigned or sublet \xe2\x80\x9cwithout the prior\nwritten consent of the landlord.\xe2\x80\x9d Sometime after taking occupancy, the tenants\nrequested the landlord\xe2\x80\x99s written permission to sublease the upstairs apartment. The\n\n\x0c518\n\nProperty\n\nlandlord made no inquiry about the proposed sublessee, but wrote to the tenants that\nhe would not agree to a sublease unless the tenants paid additional rent in the amount\nof $150.00 per month. When the tenants permitted the sublessee to move in, the\nlandlord filed an action in the District Court of Maryland in Baltimore City requesting\nrepossession of the building because the tenants had sublet the premises without his\npermission.\nAt the district court trial, the tenants testified that they specifically inquired about clause\nten, and were told by the landlord that the clause was merely included to prevent them\nfrom subletting or assigning to \xe2\x80\x9csomeone who would tear the apartment up.\xe2\x80\x9d The\ndistrict court judge refused to consider this testimony. He stated in his oral opinion\nthat he would \xe2\x80\x9cremain within the four corners of the lease, and construe the document\nstrictly,\xe2\x80\x9d at least as it pertained to clause ten. Both the District Court and, on appeal,\nthe Circuit Court for Baltimore City found in favor of the landlord. The circuit judge\nnoted: \xe2\x80\x9cIf you don\xe2\x80\x99t have the words that consent will not be unreasonably withheld,\nthen the landlord can withhold his consent for a good reason, a bad reason, or no\nreason at all in the context of a commercial lease, which is what we\xe2\x80\x99re dealing with.\xe2\x80\x9d\nWe granted certiorari to determine whether the Klawans holding should be modified in\nlight of the changes that have occurred since that decision.\nWhile we are concerned with the need for stability in the interpretation of leases, we\nrecognize that since the Klawans case was decided in 1961, the foundations for that\nholding have been substantially eroded. The Klawans opinion cited Restatement of\nProperty \xc2\xa7 410 as authority for its holding. The current Restatement (Second) of\nProperty \xc2\xa7 15.2 rejects the Klawans doctrine and now takes the position that:\nA restraint on alienation without the consent of the landlord of the\ntenant\xe2\x80\x99s interest in the leased property is valid, but the landlord\xe2\x80\x99s consent\nto an alienation by the tenant cannot be withheld unreasonably, unless a\nfreely negotiated provision in the lease gives the landlord an absolute\nright to withhold consent.\nAnother authority cited in Klawans in support of its holding was 2 R. Powell, Powell on\nReal Property. The most recent edition of that text now states:\n\n\x0cLeasing Real Property\n\n519\n\nThus, if a lease clause prohibited the tenant from transferring his or her\ninterest without the landlord\xe2\x80\x99s consent, the landlord could withhold\nconsent arbitrarily. This result was allowed because it was believed that\nthe objectives served by allowing the restraints outweighed the social\nevils implicit in them, inasmuch as the restraints gave the landlord\ncontrol over choosing the person who was to be entrusted with the\nlandlord\xe2\x80\x99s property and was obligated to perform the lease covenants. It\nis doubtful that this reasoning retains full validity today. Relationships\nbetween landlord and tenant have become more impersonal and housing\nspace (and in many areas, commercial space as well) has become scarce.\nThese changes have had an impact on courts and legislatures in varying\ndegrees. Modern courts almost universally adopt the view that\nrestrictions on the tenant\xe2\x80\x99s right to transfer are to be strictly construed.\n(Footnotes omitted.)\n2 R. Powell, Powell on Real Property \xc2\xa7 248[1] (1988).\nFinally, in support of its decision in Klawans, this Court noted that, \xe2\x80\x9calthough it,\napparently, has not been passed upon in a great number of jurisdictions, the decisions\nof the courts that have determined the question are in very substantial accord.\xe2\x80\x9d Klawans,\n169 A.2d at 679. This is no longer true. Since Klawans, the trend has been in the opposite\ndirection. \xe2\x80\x9cThe modern trend is to impose a standard of reasonableness on the landlord\nin withholding consent to a sublease unless the lease expressly states otherwise.\xe2\x80\x9d\nCampbell v. Westdahl, 715 P.2d 288, 292 (Ariz. Ct. App. 1985). . . .\nTraditional property rules favor the free and unrestricted right to alienate interests in\nproperty. Therefore, absent some specific restriction in the lease, a lessee has the right\nto freely alienate the leasehold interest by assignment or sublease without obtaining the\npermission of the lessor. R. Schoshinski, American Law of Landlord and Tenant \xc2\xa7 5:6\n(1980); 1 American Law of Property \xc2\xa7 3.56 (1952).\nContractual restrictions on the alienability of leasehold interests are permitted. R.\nCunningham, W. Stoebuck, and D. Whitman, The Law of Property \xc2\xa7 12.40 (1984).\nConsequently, landlords often insert clauses that restrict the lessee\xe2\x80\x99s common law right\nto freely assign or sublease. Id. Probably the most often used clause is a \xe2\x80\x9csilent consent\xe2\x80\x9d\n\n\x0c520\n\nProperty\n\nclause similar to the provision in the instant case, which provides that the premises may\nnot be assigned or sublet without the written consent of the lessor.\nIn a \xe2\x80\x9csilent consent\xe2\x80\x9d clause requiring a landlord\xe2\x80\x99s consent to assign or sublease, there\nis no standard governing the landlord\xe2\x80\x99s decision. Courts must insert a standard. The\nchoice is usually between 1) requiring the landlord to act reasonably when withholding\nconsent, or 2) permitting the landlord to act arbitrarily and capriciously in withholding\nconsent.\nPublic policy requires that when a lease gives the landlord the right to withhold consent\nto a sublease or assignment, the landlord should act reasonably, and the courts ought\nnot to imply a right to act arbitrarily or capriciously. If a landlord is allowed to arbitrarily\nrefuse consent to an assignment or sublease, for what in effect is no reason at all, that\nwould virtually nullify any right to assign or sublease.\nBecause most people act reasonably most of the time, tenants might expect that a\nlandlord\xe2\x80\x99s consent to a sublease or assignment would be governed by standards of\nreasonableness. Most tenants probably would not understand that a clause stating \xe2\x80\x9cthis\nlease may not be assigned or sublet without the landlord\xe2\x80\x99s written consent\xe2\x80\x9d means the\nsame as a clause stating \xe2\x80\x9cthe tenant shall have no right to assign or sublease.\xe2\x80\x9d Some\nlandlords may have chosen the former wording rather than the latter because it vaguely\nimplies, but does not grant to the tenant, the right to assign or sublet.\nThere are two public policy reasons why the law enunciated in Klawans should now be\nchanged. The first is the public policy against restraints on alienation. The second is\nthe public policy which implies a covenant of good faith and fair dealing in every\ncontract.\nBecause there is a public policy against restraints on alienation, if a lease is silent on the\nsubject, a tenant may freely sublease or assign. Restraints on alienation are permitted in\nleases, but are looked upon with disfavor and are strictly construed. Powell on Real\nProperty, supra. If a clause in a lease is susceptible of two interpretations, public policy\nfavors the interpretation least restrictive of the right to alienate freely. Interpreting a\n\xe2\x80\x9csilent consent\xe2\x80\x9d clause so that it only prohibits subleases or assignments when a\nlandlord\xe2\x80\x99s refusal to consent is reasonable, would be the interpretation imposing the\nleast restraint on alienation and most in accord with public policy.\n\n\x0cLeasing Real Property\n\n521\n\nSince the Klawans decision, this Court has recognized that in a lease, as well as in other\ncontracts, \xe2\x80\x9cthere exists an implied covenant that each of the parties thereto will act in\ngood faith and deal fairly with the others.\xe2\x80\x9d Food Fair v. Blumberg, A.2d 166, 174 (1964).\nWhen the lease gives the landlord the right to exercise discretion, the discretion should\nbe exercised in good faith, and in accordance with fair dealing; if the lease does not\nspell out any standard for withholding consent, then the implied covenant of good faith\nand fair dealing should imply a reasonableness standard.\nWe are cognizant of the value of the doctrine of stare decisis, and of the need for stability\nand certainty in the law. However, as we noted in Harrison v. Mont. Co. Bd. of Educ., 456\nA.2d 894, 903 (1983), a common law rule may be modified \xe2\x80\x9cwhere we find, in light of\nchanged conditions or increased knowledge, that the rule has become unsound in the\ncircumstances of modern life, a vestige of the past, no longer suitable to our people.\xe2\x80\x9d\nThe Klawans common law interpretation of the \xe2\x80\x9csilent consent\xe2\x80\x9d clause represents such\na \xe2\x80\x9cvestige of the past,\xe2\x80\x9d and should now be changed.\nREASONABLENESS OF WITHHELD CONSENT\nIn the instant case, we need not expound at length on what constitutes a reasonable\nrefusal to consent to an assignment or sublease. We should, however, point out that\nobvious examples of reasonable objections could include the financial irresponsibility\nor instability of the transferee, or the unsuitability or incompatibility of the intended\nuse of the property by the transferee. We also need not expound at length on what\nwould constitute an unreasonable refusal to consent to an assignment or sublease. If\nthe reasons for withholding consent have nothing to do with the intended transferee\nor the transferee\xe2\x80\x99s use of the property, the motivation may be suspect. Where, as alleged\nin this case, the refusal to consent was solely for the purpose of securing a rent increase,\nsuch refusal would be unreasonable unless the new subtenant would necessitate\nadditional expenditures by, or increased economic risk to, the landlord.\nPROSPECTIVE EFFECT\nThe tenants ask us to retroactively overrule Klawans, and hold that in all leases with\n\xe2\x80\x9csilent consent\xe2\x80\x9d clauses, no matter when executed, consent to assign or sublease may\nnot be unreasonably withheld by a landlord. We decline to do so. In the absence of\nevidence to the contrary, we should assume that parties executing leases when Klawans\n\n\x0c522\n\nProperty\n\ngoverned the interpretation of \xe2\x80\x9csilent consent\xe2\x80\x9d clauses were aware of Klawans and the\nimplications drawn from the words they used. We should not, and do not, rewrite these\ncontracts.\nIn appropriate cases, courts may \xe2\x80\x9cin the interest of justice\xe2\x80\x9d give their decisions only\nprospective effect. Contracts are drafted based on what the law is; to upset such\ntransactions even for the purpose of improving the law could be grossly unfair. . . .\nFor leases with \xe2\x80\x9csilent consent\xe2\x80\x9d clauses which were entered into before the mandate in\nthis case, Klawans is applicable, and we assume the parties were aware of the court\ndecisions interpreting a \xe2\x80\x9csilent consent\xe2\x80\x9d clause as giving the landlord an unrestricted\nright to withhold consent.\nFor leases entered into after the mandate in this case, if the lease contains a \xe2\x80\x9csilent\nconsent\xe2\x80\x9d clause providing that the tenant must obtain the landlord\xe2\x80\x99s consent in order\nto assign or sublease, such consent may not be unreasonably withheld. If the parties\nintend to preclude any transfer by assignment or sublease, they may do so by a freely\nnegotiated provision in the lease. . . . For example, the clause might provide, \xe2\x80\x9cconsent\nmay be withheld in the sole and absolute subjective discretion of the lessor.\xe2\x80\x9d\nThe final question is whether the tenants in the instant case, having argued successfully\nfor a change in the law, should receive the benefit of the change. . . . [Even though our\ndecision is to have only prospective effect] [t]he tenants in the instant case should get\nthe benefit of the interpretation of the \xe2\x80\x9csilent consent\xe2\x80\x9d clause that they so persuasively\nargued for, unless this interpretation would be unfair to the landlord. We note that the\ntenants testified they were told that the clause was only to prevent subleasing to\n\xe2\x80\x9csomeone who would tear the apartment up.\xe2\x80\x9d Therefore, we will reverse the judgment\nof the Circuit Court with instructions to vacate the judgment of the District Court and\nremand for a new trial. At that trial, the landlord will have the burden of establishing\nthat it would be unfair to interpret the \xe2\x80\x9csilent consent\xe2\x80\x9d clause in accordance with our\ndecision that a landlord must act reasonably in withholding consent. He may establish\nthat it would be unfair to do so by establishing that when executing the lease he was\naware of and relied on the Klawans interpretation of the \xe2\x80\x9csilent consent\xe2\x80\x9d clause. . . .\n\n\x0cLeasing Real Property\n\n523\nNotes and Questions\n\n1. Landlords love restrictions. Why are restrictions on transfer so common in\nboth commercial and residential leases? You might want to refer back to the\nSprawl-Mart example from earlier in the chapter, which makes clear why a\nlandlord and tenant might disagree about who should get the benefit of the\nremaining term.\n2. Status of the Julian rule. The approach taken in Julian, which reads a\nreasonableness requirement into the lease, is still a minority rule. Roughly 15\nstates have taken a position similar to Maryland\xe2\x80\x99s highest court, including\nCalifornia, Illinois, North Carolina, and Ohio. Although the Julian/minority\napproach has gained popularity in the last two decades (and is considered the\n\xe2\x80\x9cmodern\xe2\x80\x9d rule), it\xe2\x80\x99s important to note that in most states a landlord may still\narbitrarily refuse to consent to any sublease or assignment under a \xe2\x80\x9csilent\nconsent\xe2\x80\x9d clause.\n3. Contracting around the rule? Imagine a lease that includes the following\nprovision: \xe2\x80\x9cThe tenant shall not sublease or assign any part of their interest in\nthe property without the Landlord\xe2\x80\x99s written permission. The Landlord reserves\nthe absolute right to deny any request for any and all reasons at his sole and\nabsolute discretion.\xe2\x80\x9d Under the holding in Julian, would this clause be valid?\nSee RESTATEMENT (SECOND) PROPERTY \xc2\xa7 15.2 (\xe2\x80\x9cA restraint on alienation with\nthe consent of the landlord of the tenant\xe2\x80\x99s interest in the leased property is valid,\nbut the landlord\xe2\x80\x99s consent to an alienation by the tenant cannot be withheld\nunreasonably, unless a freely negotiated provision in the lease gives the landlord\nan absolute right to withhold consent.\xe2\x80\x9d)\n4. Defining reasonableness. What counts as a reasonable objection to a sublease\nor assignment request? Courts in Illinois have found that it\xe2\x80\x99s proper to consider:\n(1) the sublessee\xe2\x80\x99s credit history, (2) the sublessee\xe2\x80\x99s capital on hand, (3) whether\nthe subleesee\xe2\x80\x99s business is compatible with landlord\xe2\x80\x99s other properties, (4)\nwhether the sublessee\xe2\x80\x99s business will compete with those of the leassor or any\nother lessee, and, (5) the subleesee\xe2\x80\x99s expertise and business plan. See, e.g., Jack\nFrost Sales, Inc. v. Harris Trust & Savings Bank, 433 N.E. 2d 941 (Ill. App. 3d\n\n\x0c524\n\nProperty\n1982). In most jurisdictions, tenants have the burden to show the sublessee or\nassignee meets the reasonable commercial standard.\n\n5. The Landlord\xe2\x80\x99s Stance. Is the reasonableness rule fair to landlords? Imagine\nyou\xe2\x80\x99re a landlord and your original tenant announces that they\xe2\x80\x99re moving out\nand proffers a subleasee for your approval. If you\xe2\x80\x99re not completely satisfied\nwith the new tenant, should you object? If you say \xe2\x80\x9cno\xe2\x80\x9d and the tenant either\nleaves or sues you, how much will that enforcement action cost?\n6. Residential v. Commercial. Courts have not imposed the rule articulated in\nJulian on residential tenants. Why not? Aren\xe2\x80\x99t commercial tenants better able\nto protect themselves and bargain than residential tenants? Consider the\nfollowing statute from a jurisdiction where residential leases account for a huge\nproportion of extremely scarce housing stock: New York. As you read it,\nconsider whether and to what extent the statute permits parties to residential\nleases to contract around its provisions, and whether it is more or less restrictive\nthan the rule of Julian.\nNew York Real Property Law \xc2\xa7 226-B\n1. Unless a greater right to assign is conferred by the lease, a tenant renting a residence\nmay not assign his lease without the written consent of the owner, which consent may\nbe unconditionally withheld without cause provided that the owner shall release the\ntenant from the lease upon request of the tenant upon thirty days notice if the owner\nunreasonably withholds consent which release shall be the sole remedy of the tenant.\nIf the owner reasonably withholds consent, there shall be no assignment and the tenant\nshall not be released from the lease.\n2. (a) A tenant renting a residence pursuant to an existing lease in a dwelling having\nfour or more residential units shall have the right to sublease his premises subject to\nthe written consent of the landlord in advance of the subletting. Such consent shall not\nbe unreasonably withheld.\n(b) The tenant shall inform the landlord of his intent to sublease by mailing a notice of\nsuch intent by certified mail, return receipt requested. Such request shall be\naccompanied by the following information: (i) the term of the sublease, (ii) the name\nof the proposed sublessee, (iii) the business and permanent home address of the\n\n\x0cLeasing Real Property\n\n525\n\nproposed sublessee, (iv) the tenant\xe2\x80\x99s reason for subletting, (v) the tenant\xe2\x80\x99s address for\nthe term of the sublease, (vi) the written consent of any cotenant or guarantor of the\nlease, and (vii) a copy of the proposed sublease, to which a copy of the tenant\xe2\x80\x99s lease\nshall be attached if available, acknowledged by the tenant and proposed subtenant as\nbeing a true copy of such sublease.\n(c) Within ten days after the mailing of such request, the landlord may ask the tenant\nfor additional information as will enable the landlord to determine if rejection of such\nrequest shall be unreasonable. Any such request for additional information shall not be\nunduly burdensome. Within thirty days after the mailing of the request for consent, or\nof the additional information reasonably asked for by the landlord, whichever is later,\nthe landlord shall send a notice to the tenant of his consent or, if he does not consent,\nhis reasons therefor. Landlord\xe2\x80\x99s failure to send such a notice shall be deemed to be a\nconsent to the proposed subletting. If the landlord consents, the premises may be\nsublet in accordance with the request, but the tenant thereunder, shall nevertheless\nremain liable for the performance of tenant\xe2\x80\x99s obligations under said lease. If the\nlandlord reasonably withholds consent, there shall be no subletting and the tenant shall\nnot be released from the lease. If the landlord unreasonably withholds consent, the\ntenant may sublet in accordance with the request and may recover the costs of the\nproceeding and attorneys fees if it is found that the owner acted in bad faith by\nwithholding consent.\n\xe2\x80\xa6\n5. Any sublet or assignment which does not comply with the provisions of this section\nshall constitute a substantial breach of lease or tenancy.\n6. Any provision of a lease or rental agreement purporting to waive a provision of this\nsection is null and void.\nProblems\n1. Last year, X rented a storefront in a local strip mall and opened a successful\ncoffee shop. The lease is for 10 years and includes the following provision: \xe2\x80\x9cNo\nassignments or subleases without the landlord\xe2\x80\x99s consent. Landlord can only\ndeny consent based on commercially reasonable objections.\xe2\x80\x9d Recently X was\noffered her dream job on a coffee plantation in a faraway country. She now\n\n\x0c526\n\nProperty\nwishes to exit her lease. Must the Landlord consent to the following assignment\nproposals?\na. Alfred plans to open a mattress store. He\xe2\x80\x99s a college dropout with no\nbusiness experience but his rich father will co-sign the lease and\nguarantee all payments get made on time.\nb. Bob, an experienced therapist with good credit, wants to open a marriage\ncounseling practice targeted at same-sex couples. The landlord, however,\nbelieves same-sex marriage is immoral and worries that the counseling\ncenter will hurt the business of a Christian bookstore in the strip mall.\nc. Cathy has a well-thought out plan to open a shooting range. The\nLandlord agrees to the assignment on the condition that Cathy increase\nthe rent payment by $100/month. Cathy refuses.\n\n4. Tenant Exit: Abandonment and the Duty to Mitigate\nA tenant who needs to exit a lease early and cannot find another party to sublet must\nseek out other alternatives. For example, a tenant can always ask her landlord to\nterminate the lease before the term ends. The tenant generally agrees to turn over the\nproperty and pay a small fee and, in return, the landlord releases the tenant from all\nfurther obligations. This is called a surrender.\nAlternatively, a tenant may simply pack her things, abandon the premise, and stop\nmaking rent payments. This often happens if a tenant cannot work out a surrender\nagreement or finds herself in desperate financial circumstances. What are the rights\nand obligations of the parties in this scenario? What happens if a tenant breaks a lease\nand leaves?\n\n\x0cLeasing Real Property\n\n527\n\nThe Pierre Apartments today\n\nSommer v. Kridel\n378 A.2d 767 (N.J. 1977)\nPASHMAN, J.\nWe granted certification in these cases to consider whether a landlord seeking damages\nfrom a defaulting tenant is under a duty to mitigate damages by making reasonable\nefforts to re-let an apartment wrongfully vacated by the tenant. Separate parts of the\nAppellate Division held that, in accordance with their respective leases, the landlords\nin both cases could recover rents due under the leases regardless of whether they had\nattempted to re-let the vacated apartments. Although they were of different minds as\nto the fairness of this result, both parts agreed that it was dictated by Joyce v. Bauman,\n174 A. 693 (1934) . . . . We now reverse and hold that a landlord does have an obligation\nto make a reasonable effort to mitigate damages in such a situation. We therefore\noverrule Joyce v. Bauman to the extent that it is inconsistent with our decision today.\nI.\nThis case was tried on stipulated facts. On March 10, 1972 the defendant, James Kridel,\nentered into a lease with the plaintiff, Abraham Sommer, owner of the \xe2\x80\x9cPierre\nApartments\xe2\x80\x9d in Hackensack, to rent apartment 6-L in that building. The term of the\nlease was from May 1, 1972 until April 30, 1974, with a rent concession for the first six\nweeks, so that the first month\xe2\x80\x99s rent was not due until June 15, 1972.\n\n\x0c528\n\nProperty\n\nOne week after signing the agreement, Kridel paid Sommer $690. Half of that sum was\nused to satisfy the first month\xe2\x80\x99s rent. The remainder was paid under the lease provision\nrequiring a security deposit of $345. Although defendant had expected to begin\noccupancy around May 1, his plans were changed. He wrote to Sommer on May 19,\n1972, explaining:\nI was to be married on June 3, 1972. Unhappily the engagement was\nbroken and the wedding plans cancelled. Both parents were to assume\nresponsibility for the rent after our marriage. I was discharged from the\nU.S. Army in October 1971 and am now a student. I have no funds of\nmy own, and am supported by my stepfather.\nIn view of the above, I cannot take possession of the apartment and am\nsurrendering all rights to it. Never having received a key, I cannot return\nsame to you.\nI beg your understanding and compassion in releasing me from the lease,\nand will of course, in consideration thereof, forfeit the 2 month\xe2\x80\x99s rent\nalready paid.\nPlease notify me at your earliest convenience.\nPlaintiff did not answer the letter.\nSubsequently, a third party went to the apartment house and inquired about renting\napartment 6-L. Although the parties agreed that she was ready, willing and able to rent\nthe apartment, the person in charge told her that the apartment was not being shown\nsince it was already rented to Kridel. In fact, the landlord did not re-enter the apartment\nor exhibit it to anyone until August 1, 1973. At that time it was rented to a new tenant\nfor a term beginning on September 1, 1973. The new rental was for $345 per month\nwith a six week concession similar to that granted Kridel.\nPrior to re-letting the new premises, plaintiff sued Kridel in August 1972, demanding\n$7,590, the total amount due for the full two-year term of the lease. Following a mistrial,\nplaintiff filed an amended complaint asking for $5,865, the amount due between May\n1, 1972 and September 1, 1973. The amended complaint included no reduction in the\nclaim to reflect the six week concession provided for in the lease or the $690 payment\nmade to plaintiff after signing the agreement. Defendant filed an amended answer to\n\n\x0cLeasing Real Property\n\n529\n\nthe complaint, alleging that plaintiff breached the contract, failed to mitigate damages\nand accepted defendant\xe2\x80\x99s surrender of the premises. He also counterclaimed to demand\nrepayment of the $345 paid as a security deposit.\nThe trial judge ruled in favor of defendant. Despite his conclusion that the lease had\nbeen drawn to reflect \xe2\x80\x9cthe \xe2\x80\x98settled law\xe2\x80\x99 of this state,\xe2\x80\x9d he found that \xe2\x80\x9cjustice and fair\ndealing\xe2\x80\x9d imposed upon the landlord the duty to attempt to re-let the premises and\nthereby mitigate damages. He also held that plaintiff\xe2\x80\x99s failure to make any response to\ndefendant\xe2\x80\x99s unequivocal offer of surrender was tantamount to an acceptance, thereby\nterminating the tenancy and any obligation to pay rent. As a result, he dismissed both\nthe complaint and the counterclaim. The Appellate Division reversed in a per curiam\nopinion, 153 N.J.Super. 1 (1976), and we granted certification. . . .\nII\nAs the lower courts in both appeals found, the weight of authority in this State supports\nthe rule that a landlord is under no duty to mitigate damages caused by a defaulting\ntenant. See Joyce v. Bauman, supra . . . . This rule has been followed in a majority of\nstates . . . and has been tentatively adopted in the American Law Institute\xe2\x80\x99s Restatement\nof Property. . . .\nNevertheless, while there is still a split of authority over this question, the trend among\nrecent cases appears to be in favor of a mitigation requirement. . . .\nThe majority rule is based on principles of property law which equate a lease with a\ntransfer of a property interest in the owner\xe2\x80\x99s estate. Under this rationale the lease\nconveys to a tenant an interest in the property which forecloses any control by the\nlandlord; thus, it would be anomalous to require the landlord to concern himself with\nthe tenant\xe2\x80\x99s abandonment of his own property. Wright v. Baumann, 398 P.2d 119, 12021 (Or. 1965).\nFor instance, in Muller v. Beck, supra, where essentially the same issue was posed, the\ncourt clearly treated the lease as governed by property, as opposed to contract, precepts.\nThe court there observed that the \xe2\x80\x9ctenant had an estate for years, but it was an estate\nqualified by this right of the landlord to prevent its transfer,\xe2\x80\x9d 110 A. at 832, and that\n\xe2\x80\x9cthe tenant has an estate with which the landlord may not interfere.\xe2\x80\x9d Id. at 832. Similarly,\nin Heckel v. Griese, supra, the court noted the absolute nature of the tenant\xe2\x80\x99s interest in\n\n\x0c530\n\nProperty\n\nthe property while the lease was in effect, stating that \xe2\x80\x9cwhen the tenant vacated, . . . no\none, in the circumstances, had any right to interfere with the defendant\xe2\x80\x99s possession of\nthe premises.\xe2\x80\x9d 171 A. 148, 149. Other cases simply cite the rule announced in Muller v.\nBeck, supra, without discussing the underlying rationale. See Joyce v. Bauman, supra, 174 A.\n693 . . . .\nYet the distinction between a lease for ordinary residential purposes and an ordinary\ncontract can no longer be considered viable. As Professor Powell observed, evolving\n\xe2\x80\x9csocial factors have exerted increasing influence on the law of estates for years.\xe2\x80\x9d 2\nPowell on Real Property (1977 ed.), \xc2\xa7 221(1) at 180-81. The result has been that:\n[t]he complexities of city life, and the proliferated problems of modern\nsociety in general, have created new problems for lessors and lessees and\nthese have been commonly handled by specific clauses in leases. This\ngrowth in the number and detail of specific lease covenants has\nreintroduced into the law of estates for years a predominantly\ncontractual ingredient.\n(Id. at 181). . . .\nThis Court has taken the lead in requiring that landlords provide housing services to\ntenants in accordance with implied duties which are hardly consistent with the property\nnotions expressed in Muller v. Beck, supra, and Heckel v. Griese, supra. See Braitman v.\nOverlook Terrace Corp., 346 A.2d 76 (1975) (liability for failure to repair defective\napartment door lock); Berzito v. Gambino, 308 A.2d 17 (1973) (construing implied\nwarranty of habitability and covenant to pay rent as mutually dependent); Marini v.\nIreland, 265 A.2d 526 (1970) (implied covenant to repair); Reste Realty Corp. v. Cooper, 251\nA.2d 268 (1969) (implied warranty of fitness of premises for leased purpose). In fact,\nin Reste Realty Corp. v. Cooper, supra, we specifically noted that the rule which we\nannounced there did not comport with the historical notion of a lease as an estate for\nyears. 251 A.2d 268. And in Marini v. Ireland, supra, we found that the \xe2\x80\x9cguidelines\nemployed to construe contracts have been modernly applied to the construction of\nleases.\xe2\x80\x9d 265 A.2d at 532.\n\n\x0cLeasing Real Property\n\n531\n\nApplication of the contract rule requiring mitigation of damages to a residential lease\nmay be justified as a matter of basic fairness. Professor McCormick first commented\nupon the inequity under the majority rule when he predicted in 1925 that eventually:\n4\n\nthe logic, inescapable according to the standards of a \xe2\x80\x98jurisprudence of\nconceptions\xe2\x80\x99 which permits the landlord to stand idly by the vacant,\nabandoned premises and treat them as the property of the tenant and\nrecover full rent, [will] yield to the more realistic notions of social\nadvantage which in other fields of the law have forbidden a recovery for\ndamages which the plaintiff by reasonable efforts could have avoided.\n(McCormick, The Rights of the Landlord Upon Abandonment of the Premises by\nthe Tenant, 23 Mich. L. Rev. 211, 221-22 (1925)).\nVarious courts have adopted this position.\nThe pre-existing rule cannot be predicated upon the possibility that a landlord may lose\nthe opportunity to rent another empty apartment because he must first rent the\napartment vacated by the defaulting tenant. Even where the breach occurs in a multidwelling building, each apartment may have unique qualities which make it attractive\nto certain individuals. Significantly, in Sommer v. Kridel, there was a specific request to\nrent the apartment vacated by the defendant; there is no reason to believe that absent\nthis vacancy the landlord could have succeeded in renting a different apartment to this\nindividual.\nWe therefore hold that antiquated real property concepts which served as the basis for\nthe pre-existing rule, shall no longer be controlling where there is a claim for damages\nunder a residential lease. Such claims must be governed by more modern notions of\nfairness and equity. A landlord has a duty to mitigate damages where he seeks to recover\nrents due from a defaulting tenant.\nIf the landlord has other vacant apartments besides the one which the tenant has\nabandoned, the landlord\xe2\x80\x99s duty to mitigate consists of making reasonable efforts to relet the apartment. In such cases he must treat the apartment in question as if it was one\nof his vacant stock.\nAs part of his cause of action, the landlord shall be required to carry the burden of\nproving that he used reasonable diligence in attempting to re-let the premises. We note\n\n\x0c532\n\nProperty\n\nthat there has been a divergence of opinion concerning the allocation of the burden of\nproof on this issue. See Annot., supra, s 12 at 577. While generally in contract actions\nthe breaching party has the burden of proving that damages are capable of mitigation . . .\nhere the landlord will be in a better position to demonstrate whether he exercised\nreasonable diligence in attempting to re-let the premises. . . .\nIII\nThe Sommer v. Kridel case presents a classic example of the unfairness which occurs\nwhen a landlord has no responsibility to minimize damages. Sommer waited 15 months\nand allowed $4658.50 in damages to accrue before attempting to re-let the apartment.\nDespite the availability of a tenant who was ready, willing and able to rent the apartment,\nthe landlord needlessly increased the damages by turning her away. While a tenant will\nnot necessarily be excused from his obligations under a lease simply by finding another\nperson who is willing to rent the vacated premises, see, e. g., Reget v. Dempsey-Tegler &\nCo., 216 N.E.2d 500 (Ill. App.1966) (new tenant insisted on leasing the premises under\ndifferent terms); Edmands v. Rust & Richardson Drug Co., 77 N.E. 713 (Mass. 1906)\n(landlord need not accept insolvent tenant), here there has been no showing that the\nnew tenant would not have been suitable. We therefore find that plaintiff could have\navoided the damages which eventually accrued, and that the defendant was relieved of\nhis duty to continue paying rent. Ordinarily we would require the tenant to bear the\ncost of any reasonable expenses incurred by a landlord in attempting to re-let the\npremises . . . but no such expenses were incurred in this case. . . .\nIn assessing whether the landlord has satisfactorily carried his burden, the trial court\nshall consider, among other factors, whether the landlord, either personally or through\nan agency, offered or showed the apartment to any prospective tenants, or advertised\nit in local newspapers. Additionally, the tenant may attempt to rebut such evidence by\nshowing that he proffered suitable tenants who were rejected. However, there is no\nstandard formula for measuring whether the landlord has utilized satisfactory efforts\nin attempting to mitigate damages, and each case must be judged upon its own facts.\nCompare . . . Carpenter v. Wisniewski, 215 N.E.2d 882 (Ind. App.1966) (duty satisfied\nwhere landlord advertised the premises through a newspaper, placed a sign in the\nwindow, and employed a realtor); Re Garment Center Capitol, Inc., 93 F.2d 667, 115 A.L.R.\n202 (2 Cir. 1938) (landlord\xe2\x80\x99s duty not breached where higher rental was asked since it\n\n\x0cLeasing Real Property\n\n533\n\nwas known that this was merely a basis for negotiations); Foggia v. Dix, 509 P.2d 412,\n414 (Or. 1973) (in mitigating damages, landlord need not accept less than fair market\nvalue or \xe2\x80\x9csubstantially alter his obligations as established in the pre-existing lease\xe2\x80\x9d); with\nAnderson v. Andy Darling Pontiac, Inc., 43 N.W.2d 362 (Wis. 1950) (reasonable diligence\nnot established where newspaper advertisement placed in one issue of local paper by a\nbroker); . . . Consolidated Sun Ray, Inc. v. Oppenstein, 335 F.2d 801, 811 (8 Cir. 1964)\n(dictum) (demand for rent which is \xe2\x80\x9cfar greater than the provisions of the lease called\nfor\xe2\x80\x9d negates landlord\xe2\x80\x99s assertion that he acted in good faith in seeking a new tenant).\nIV\nThe judgment in Sommer v. Kridel is reversed.\nNotes and Questions\n1. The basic law. Today almost all states impose a duty to mitigate on residential\nlandlords. The rule also applies to commercial tenancies in many states. The\nRestatement (Second) of Property \xc2\xa7 12.1(3), however, continues to cling to the\ncommon law notion that a landlord can wait until the end of the term and then\nsue the tenant for all of the unpaid rent. The authors of the Restatement believe\nthe traditional rule discourages abandonment, limits vandalism, and better\nprotects the expectations of landlords. The New York courts have similarly\ncontinued to uphold the traditional common law rule in both residential and\ncommercial contexts, primarily to avoid unsettling the expectations of landlords\nand tenants as to their legal rights and obligations. See Holy Properties, Ltd. v.\nKenneth Cole Productions, Inc., 87 N.Y.2d 130, 134 (1995) (commercial\nleases); Rios v. Carrillo, 861 N.Y.S.2d 129 (N.Y App. Div. 2d 2008) (residential\nleases). But see Jeremy N. Sheff, A Tale of Two Cities: The Residential Landlord\xe2\x80\x99s Duty\nto Mitigate in New York, 25 J. CIV. RTS. & ECON. DEV. 673 (2011) (discussing\nearlier lower court rulings in New York that had applied a duty to mitigate in\nthe residential context).\n2. Tenants still on the hook. Importantly, the duty to mitigate does not relieve\nan abandoning tenant of all liability. Even if a new tenant rents the unit, the\nlandlord can still recover damages for all of the costs of finding the replacement\ntenant and for any time that the unit remained empty. The landlord can also\n\n\x0c534\n\nProperty\nrecoup any unpaid rent that accrued before the abandonment. Finally, if the\nrental market in the area has softened and landlord is forced to rent the unit at\nlower price, the tenant is responsible for the difference between the new rent\nand the original rent.\n\n3. Property v. Contract. The lingering controversy over the duty to mitigate\nstems largely from the property/contract tension inherent in the nature of the\nlease. If a leasehold is primarily a property interest, then the landlord has few\nresponsibilities to the tenant after ceding possession and control\xe2\x80\x94the tenant is\nfree to use the property or let it lay fallow. If, on the other hand, the lease is\nviewed through the lens of contract law, the parties clearly have a responsibility\nto mitigate damages. But see Edward Chase & E. Hunter Taylor, Jr., Landlord\nand Tenant: A Study in Prooperty and Contract, 30 VILL. L. REV. 571 (1985) (arguing\nthe distinction is overstated).\n4. What\xe2\x80\x99s a good faith effort? Ken rents an apartment to Sarah for one year.\nThree months into the lease, Sarah gets a new job in a different state and turns\nthe apartment back over to Ken. Ken puts an 8x11 \xe2\x80\x9cfor rent\xe2\x80\x9d sign in the\nwindow of the unit. Has he made a good faith effort to mitigate damages? Does\nit matter how he advertises the other units? What if Tim offers to rent Sarah\xe2\x80\x99s\nunit but Tim has bad credit: does Ken have to accept Tim?\n5. The Legend of Jim Kridel. The woman Jim Kridel intended to marry came\nfrom a family with significant assets. When the engagement fell through,\nKridel\xe2\x80\x94who had no income of his own\xe2\x80\x94could not afford the rent at the Pierre\nApartments. The opinion mentions that Kridel notified Sommer of his\npredicament in writing, but does not reflect that Kridel and Sommer also had a\nheated discussion on the phone. During the telephone conversation, Kridel\noffered Sommer $750 of the pre-paid rent as compensation for breaking the\nlease (adjusted for inflation, that\xe2\x80\x99s roughly equivalent to $3000 today). Sommer,\nhowever, knew that Kridel\xe2\x80\x99s stepfather was a prominent (and presumably welloff) physician and demanded an additional $750. Kridel refused, and told\nSommer, \xe2\x80\x9cIf you don\xe2\x80\x99t like it, you can sue me, baby!\xe2\x80\x9d Sommer did just that.\nWhen the litigation began, Kridel was a first year law student at Rutgers. He\ninitially represented himself but gradually picked up pro bono help from lawyers\n\n\x0cLeasing Real Property\n\n535\n\nhe met at summer jobs and partners in the firm where he worked after\ngraduating. Kridel estimates that Sommer\xe2\x80\x94a very wealthy landlord\xe2\x80\x94spent\nover $500,000 on legal fees. Kridel also recalls that the law of New Jersey was\nfirmly against his position that the lease should be governed by contract\nprinciples. On appeal, he relied primarily on a case from the state of Oregon,\nwhich opposing counsel disparaged as a place full of bumpkin fishermen and\nloggers. When Kridel won, he wrapped the opinion around an Oregon salmon\nand sent to Sommer\xe2\x80\x99s lawyers. Asked why he pursued the case with such vigor,\nhe replied, \xe2\x80\x9cSommer was wrong. The rule was unfair. And I was probably the\nonly tenant in New Jersey who could afford to pour that much time and\nattention into a case like that.\xe2\x80\x9d In the intervening years, Kridel has had a long\nand successful legal career in New Jersey and New York. He\xe2\x80\x99s currently best\nknown for representing Real Housewives of New Jersey star Teresa Giudice in her\nbankruptcy proceeding.\n\n5. Tenant Exit: Eviction\nIf a tenant fails to pay rent or otherwise commits a material breach of the lease, the\nlandlord can elect to terminate the leasehold and evict the tenant from the property. It\nis undoubtedly true that the eviction process and the subsequent scramble for a new\nplace to live can be a traumatic, humiliating, and disruptive occurrence. Eviction\ndisplaces children from their schools, rends the social networks of the poor, and forces\nmany families into shelters or onto the streets. Matthew Desmond, a sociologist at\nHarvard, has found that forced relocations are also shockingly common. In Milwaukee,\nthe location of Desmond\xe2\x80\x99s research, 17 percent of the moves undertaken by renters\nover a two-year period were forced relocations. See Matthew Desmond et al., Forced\nRelocation and Residential Instability Among Urban Renters, 89 SOC. SCI. REV. 227 (2015). In\nresponse to the social cost of eviction, some American cities and many countries\naround the world make it difficult for landlords to remove tenants. Should more U.S.\njurisdictions follow suit? Consider the following story:\nA patient political scientist \xe2\x80\xa6 might be able to place American cities on\na left-to-right spectrum according to how long tenants whose eviction\nhas become a cause manage to stay where they are. It may be, for\ninstance that some city like Houston is on the far right of the\n\n\x0c536\n\nProperty\nspectrum. . . . Houston\xe2\x80\x99s most powerful citizens are known for a\ndevotion to private property so intense that they see routine planning\nand zoning as acts of naked confiscation. . . . San Francisco might qualify\nfor the left end of the spectrum. [I]ts best-known evictees [are] the\ntenants of the run-down three-story building called the International\nHotel . . . . In the fall of 1968, about a hundred and fifty people who\nwere living in the hotel . . . were told to be out of the building by January\n1, 1969. The building was finally cleared\xe2\x80\x94in what amounted to a\nmilitary operation requiring several hundred policemen\xe2\x80\x94on August 4,\n1977.\n\nCalvin Trillin, Some Thoughts on the International Hotel Controversy, NEW YORKER, Dec. 19,\n1977, at 116.\nNotes and Questions\n1. Would you rather be a tenant in a place like Houston\xe2\x80\x94where evictions happen\nquickly\xe2\x80\x94or in San Francisco\xe2\x80\x94where they do not?\n2. Imagine you\xe2\x80\x99re a landlord in a jurisdiction where it takes a long time to remove\na tenant for non-payment of rent. How would that change your business\nstrategy? Would you ever take a chance on a tenant with bad credit or a history\nof being evicted?\n3. The COVID-19 epidemic interrupted the income of millions of Americans in\nearly 2020, leading to fears of widespread defaults on rent and mortgage\npayments. Several jurisdictions, as well as Congress, attempted to stave off mass\ndislocations and housing loss by imposing moratoria on evictions, with varying\ndegrees of coverage and effect. See, e.g., CARES Act, Pub. L. No. 116-136 \xc2\xa7\n4024, 134 Stat. 281, 492-94 (Mar. 27, 2020), codified at 15 U.S.C. \xc2\xa7 9058\n(imposing a 120 day moratorium on the filing of eviction proceedings or the\ncharging of nonpayment penalties by any residential landlord whose property is\nsubject to a federally backed mortgage or certain other federal funding\nprograms). What is likely to be the net effect of such measures? How useful\nwould it be for landlords to initiate eviction proceedings for nonpayment of\nrent during the sharpest economic decline on record anyway?\n\n\x0cLeasing Real Property\n\n537\n\nWe turn now to the procedure of eviction. When a landlord believes that a tenant has\ncommitted a material breach of the lease, how exactly does she go about removing a\nlessee from the property?\nBerg v. Wiley\n264 N.W.2d 145 (Minn. 1978)\nROGOSHESKE, Justice.\nDefendant landlord, Wiley Enterprises, Inc., and defendant Rodney A. Wiley (hereafter\ncollectively referred to as Wiley) appeal from a judgment upon a jury verdict awarding\nplaintiff tenant, A Family Affair Restaurant, Inc., damages for wrongful eviction from\nits leased premises. The issues for review are whether the evidence was sufficient to\nsupport the jury\xe2\x80\x99s finding that the tenant did not abandon or surrender the premises\nand whether the trial court erred in finding Wiley\xe2\x80\x99s reentry forcible and wrongful as a\nmatter of law. We hold that the jury\xe2\x80\x99s verdict is supported by sufficient evidence and\nthat the trial court\xe2\x80\x99s determination of unlawful entry was correct as a matter of law, and\naffirm the judgment.\nOn November 11, 1970, Wiley, as lessor . . . executed a written lease agreement letting\nland and a building in Osseo, Minnesota, for use as a restaurant. The lease provided a\n5-year term beginning December 1, 1970, and specified that the tenant agreed to bear\nall costs of repairs and remodeling, to \xe2\x80\x9cmake no changes in the building structure\xe2\x80\x9d\nwithout prior written authorization from Wiley, and to \xe2\x80\x9coperate the restaurant in a\nlawful and prudent manner.\xe2\x80\x9d Wiley also reserved the right \xe2\x80\x9cat (his) option (to) retake\npossession\xe2\x80\x9d of the premises \xe2\x80\x9c(s)hould the Lessee fail to meet the conditions of this\nLease.\xe2\x80\x9d1 In early 1971, plaintiff Kathleen Berg took assignment of the lease from the\nprior lessee, and on May 1, 1971, she opened \xe2\x80\x9cA Family Affair Restaurant\xe2\x80\x9d on the\npremises. In January 1973, Berg incorporated the restaurant and assigned her interest\nin the lease to \xe2\x80\x9cA Family Affair Restaurant, Inc.\xe2\x80\x9d As sole shareholder of the\ncorporation, she alone continued to act for the tenant.\nThe present dispute has arisen out of Wiley\xe2\x80\x99s objection to Berg\xe2\x80\x99s continued remodeling\nof the restaurant without procuring written permission and her consequent operation\nof the restaurant in a state of disrepair with alleged health code violations. Strained\nrelations between the parties came to a head in June and July 1973. In a letter dated\n\n\x0c538\n\nProperty\n\nJune 29, 1973, Wiley\xe2\x80\x99s attorney charged Berg with having breached lease items 5 and 6\nby making changes in the building structure without written authorization and by\noperating an unclean kitchen in violation of health regulations. The letter demanded\nthat a list of eight remodeling items be completed within 2 weeks from the date of the\nletter, by Friday, July 13, 1973, or Wiley would retake possession of the premises under\nlease item 7. Also, a June 13 inspection of the restaurant by the Minnesota Department\nof Health had produced an order that certain listed changes be completed within\nspecified time limits in order to comply with the health code. The major items on the\ninspector\xe2\x80\x99s list, similar to those listed by Wiley\xe2\x80\x99s attorney, were to be completed by July\n15, 1973.\nDuring the 2-week deadline set by both Wiley and the health department, Berg\ncontinued to operate the restaurant without closing to complete the required items of\nremodeling. The evidence is in dispute as to whether she intended to permanently close\nthe restaurant and vacate the premises at the end of the 2 weeks or simply close for\nabout 1 month in order to remodel to comply with the health code. At the close of\nbusiness on Friday, July 13, 1973, the last day of the 2-week period, Berg dismissed her\nemployees, closed the restaurant, and placed a sign in the window saying \xe2\x80\x9cClosed for\nRemodeling.\xe2\x80\x9d Earlier that day, Berg testified, Wiley came to the premises in her absence\nand attempted to change the locks. When she returned and asserted her right to\ncontinue in possession, he complied with her request to leave the locks unchanged.\nBerg also testified that at about 9:30 p. m. that evening, while she and four of her\nfriends were in the restaurant, she observed Wiley hanging from the awning peering\ninto the window. Shortly thereafter, she heard Wiley pounding on the back door\ndemanding admittance. Berg called the county sheriff to come and preserve order.\nWiley testified that he observed Berg and a group of her friends in the restaurant\nremoving paneling from a wall. Allegedly fearing destruction of his property, Wiley\ncalled the city police, who, with the sheriff, mediated an agreement between the parties\nto preserve the status quo until each could consult with legal counsel on Monday, July\n16, 1973.\nWiley testified that his then attorney advised him to take possession of the premises\nand lock the tenant out. Accompanied by a police officer and a locksmith, Wiley\nentered the premises in Berg\xe2\x80\x99s absence and without her knowledge on Monday, July\n16, 1973, and changed the locks. Later in the day, Berg found herself locked out. The\n\n\x0cLeasing Real Property\n\n539\n\nlease term was not due to expire until December 1, 1975. The premises were re-let to\nanother tenant on or about August 1, 1973. Berg brought this damage action against\nWiley . . . . [for] intentional infliction of emotional distress . . . and other tort damages\nbased upon claims in wrongful eviction. . . . Wiley answered with an affirmative defense\nof abandonment and surrender and counterclaimed for damage to the premises. . . .\nWith respect to the wrongful eviction claim, the trial court found as a matter of law\nthat Wiley did in fact lock the tenant out, and that the lockout was wrongful.\nThe jury, by answers to the questions submitted, found no liability on Berg\xe2\x80\x99s claim for\nintentional infliction of emotional distress and no liability on Wiley\xe2\x80\x99s counterclaim for\ndamages to the premises, but awarded Berg $31,000 for lost profits and $3,540 for loss\nof chattels resulting from the wrongful lockout. The jury also specifically found that\nBerg neither abandoned nor surrendered the premises. . . .\nOn this appeal, Wiley seeks an outright reversal of the damages award for wrongful\neviction, claiming insufficient evidence to support the jury\xe2\x80\x99s finding of no\nabandonment or surrender and claiming error in the trial court\xe2\x80\x99s finding of wrongful\neviction as a matter of law.\nThe first issue before us concerns the sufficiency of evidence to support the jury\xe2\x80\x99s\nfinding that Berg had not abandoned or surrendered the leasehold before being locked\nout by Wiley. Viewing the evidence to support the jury\xe2\x80\x99s special verdict in the light\nmost favorable to Berg, as we must, we hold it amply supports the jury\xe2\x80\x99s finding of no\nabandonment or surrender of the premises. While the evidence bearing upon Berg\xe2\x80\x99s\nintent was strongly contradictory, the jury could reasonably have concluded, based on\nBerg\xe2\x80\x99s testimony and supporting circumstantial evidence, that she intended to retain\npossession, closing temporarily to remodel. Thus, the lockout cannot be excused on\nground that Berg abandoned or surrendered the leasehold.\nThe second and more difficult issue is whether Wiley\xe2\x80\x99s self-help repossession of the\npremises by locking out Berg was correctly held wrongful as a matter of law.\nMinnesota has historically followed the common-law rule that a landlord may rightfully\nuse self-help to retake leased premises from a tenant in possession without incurring\nliability for wrongful eviction provided two conditions are met: (1) The landlord is\nlegally entitled to possession, such as where a tenant holds over after the lease term or\n\n\x0c540\n\nProperty\n\nwhere a tenant breaches a lease containing a reentry clause; and (2) the landlord\xe2\x80\x99s means\nof reentry are peaceable. Mercil v. Broulette, 69 N.W. 218 (1896). Under the commonlaw rule, a tenant who is evicted by his landlord may recover damages for wrongful\neviction where the landlord either had no right to possession or where the means used\nto remove the tenant were forcible, or both. See, e. g., Poppen v. Wadleigh, 51 N.W.2d 75\n(1952) . . . .\nWiley contends that Berg had breached the provisions of the lease, thereby entitling\nWiley, under the terms of the lease, to retake possession, and that his repossession by\nchanging the locks in Berg\xe2\x80\x99s absence was accomplished in a peaceful manner. In a\nmemorandum accompanying the post-trial order, the trial court stated two grounds for\nfinding the lockout wrongful as a matter of law: (1) It was not accomplished in a\npeaceable manner and therefore could not be justified under the common-law rule, and\n(2) any self-help reentry against a tenant in possession is wrongful under the growing\nmodern doctrine that a landlord must always resort to the judicial process to enforce\nhis statutory remedy against a tenant wrongfully in possession. Whether Berg had in\nfact breached the lease and whether Wiley was hence entitled to possession was not\njudicially determined. . . .\nIn applying the common-law rule, we have not before had occasion to decide what\nmeans of self-help used to dispossess a tenant in his absence will constitute a\nnonpeaceable entry, giving a right to damages without regard to who holds the legal\nright to possession. Wiley argues that only actual or threatened violence used against a\ntenant should give rise to damages where the landlord had the right to possession. We\ncannot agree.\nIt has long been the policy of our law to discourage landlords from taking the law into\ntheir own hands, and our decisions and statutory law have looked with disfavor upon\nany use of self-help to dispossess a tenant in circumstances which are likely to result in\nbreaches of the peace. We gave early recognition to this policy in Lobdell v. Keene, 88\nN.W. 426, 430 (1901), where we said:\n\xe2\x80\x9cThe object and purpose of the legislature in the enactment of the\nforcible entry and unlawful detainer statute was to prevent those\nclaiming a right of entry or possession of lands from redressing their\nown wrongs by entering into possession in a violent and forcible manner.\n\n\x0cLeasing Real Property\n\n541\n\nAll such acts tend to a breach of the peace, and encourage high-handed\noppression. The law does not permit the owner of land, be his title ever\nso good, to be the judge of his own rights with respect to a possession\nadversely held, but puts him to his remedy under the statutes.\xe2\x80\x9d\nTo facilitate a resort to judicial process, the legislature has provided a summary\nprocedure in Minn. St. 566.02 to 566.17 whereby a landlord may recover possession of\nleased premises upon proper notice and showing in court in as little as 3 to 10 days. As\nwe recognized in Mutual Trust Life Ins. Co. v. Berg, 246 N.W. 9, 10 (1932), \xe2\x80\x9c(t)he forcible\nentry and unlawful detainer statutes were intended to prevent parties from taking the\nlaw into their own hands when going into possession of lands and tenements . . . .\xe2\x80\x9d To\nfurther discourage self-help, our legislature has provided treble damages for forcible\nevictions, ss 557.08 and 557.09, and has provided additional criminal penalties for\nintentional and unlawful exclusion of a tenant. \xc2\xa7 504.25. In Sweeney v. Meyers, supra, we\nallowed a business tenant not only damages for lost profits but also punitive damages\nagainst a landlord who, like Wiley, entered in the tenant\xe2\x80\x99s absence and locked the tenant\nout.\nIn the present case, as in Sweeney, the tenant was in possession, claiming a right to\ncontinue in possession adverse to the landlord\xe2\x80\x99s claim of breach of the lease, and had\nneither abandoned nor surrendered the premises. Wiley, well aware that Berg was\nasserting her right to possession, retook possession in her absence by picking the locks\nand locking her out. The record shows a history of vigorous dispute and keen animosity\nbetween the parties. Upon this record, we can only conclude that the singular reason\nwhy actual violence did not erupt at the moment of Wiley\xe2\x80\x99s changing of the locks was\nBerg\xe2\x80\x99s absence and her subsequent self-restraint and resort to judicial process. Upon\nthese facts, we cannot find Wiley\xe2\x80\x99s means of reentry peaceable under the common-law\nrule. Our long-standing policy to discourage self-help which tends to cause a breach of\nthe peace compels us to disapprove the means used to dispossess Berg. To approve\nthis lockout, as urged by Wiley, merely because in Berg\xe2\x80\x99s absence no actual violence\nerupted while the locks were being changed, would be to encourage all future tenants,\nin order to protect their possession, to be vigilant and thereby set the stage for the very\nkind of public disturbance which it must be our policy to discourage. . . .\nWe recognize that the growing modern trend departs completely from the commonlaw rule to hold that self-help is never available to dispossess a tenant who is in\n\n\x0c542\n\nProperty\n\npossession and has not abandoned or voluntarily surrendered the premises. Annotation,\n6 A.L.R.3d 177, 186; 76 Dickinson L.Rev. 215, 227. This growing rule is founded on\nthe recognition that the potential for violent breach of peace inheres in any situation\nwhere a landlord attempts by his own means to remove a tenant who is claiming\npossession adversely to the landlord. Courts adopting the rule reason that there is no\ncause to sanction such potentially disruptive self-help where adequate and speedy\nmeans are provided for removing a tenant peacefully through judicial process. At least\n16 states have adopted this modern rule, holding that judicial proceedings, including\nthe summary procedures provided in those states\xe2\x80\x99 unlawful detainer statutes, are the\nexclusive remedy by which a landlord may remove a tenant claiming possession. . . .\nWhile we would be compelled to disapprove the lockout of Berg in her absence under\nthe common-law rule as stated, we approve the trial court\xe2\x80\x99s reasoning and adopt as\npreferable the modern view represented by the cited cases. To make clear our departure\nfrom the common-law rule for the benefit of future landlords and tenants, we hold\nthat, subsequent to our decision in this case, the only lawful means to dispossess a\ntenant who has not abandoned nor voluntarily surrendered but who claims possession\nadversely to a landlord\xe2\x80\x99s claim of breach of a written lease is by resort to judicial process.\nWe find that Minn.St. 566.02 to 566.17 provide the landlord with an adequate remedy\nfor regaining possession in every such case. Where speedier action than provided in \xc2\xa7\xc2\xa7\n566.02 to 566.17 seems necessary because of threatened destruction of the property or\nother exigent circumstances, a temporary restraining order under Rule 65, Rules of\nCivil Procedure, and law enforcement protection are available to the landlord.\nConsidered together, these statutory and judicial remedies provide a complete answer\nto the landlord. In our modern society, with the availability of prompt and sufficient\nlegal remedies as described, there is no place and no need for self-help against a tenant\nin claimed lawful possession of leased premises.\nApplying our holding to the facts of this case, we conclude, as did the trial court, that\nbecause Wiley failed to resort to judicial remedies against Berg\xe2\x80\x99s holding possession\nadversely to Wiley\xe2\x80\x99s claim of breach of the lease, his lockout of Berg was wrongful as\na matter of law. The rule we adopt in this decision is fairly applied against Wiley, for it\nis clear that, applying the older common-law rule to the facts and circumstances\npeculiar to this case, we would be compelled to find the lockout nonpeaceable for the\nreasons previously stated. The jury found that the lockout caused Berg damage and, as\n\n\x0cLeasing Real Property\n\n543\n\nbetween Berg and Wiley, equity dictates that Wiley, who himself performed the act\ncausing the damage, must bear the loss.\nAffirmed.\nNotes and Questions\n1. Who did what wrong? Kathleen Berg, the tenant, never missed a rent payment.\nWhy, exactly, did Wiley think he was entitled to enter the property and exclude\nthe tenant? Is Rodney Wiley at fault for this dispute? If you were his lawyer at\nthe time, would you have given him different advice? If he was entitled to\npossession, how did he end up owing $34,500 to Berg?\n2. Tending to Cause a Breach of the Peace. In case you aren\xe2\x80\x99t convinced that\nrepossession carries an inherent risk of a breach of the peace, consider the story\nof Erskine G. Bryce. In the summer of 2001, Mr. Bryce\xe2\x80\x94a 66-year-old city\nmarshal in Brooklyn, New York\xe2\x80\x94arrived at the second-story apartment of 53year-old JoAnne Jones to remove her from possession pursuant to a duly issued\ncourt order for her eviction. At the time, Ms. Jones owed about $14,000 in back\nrent. She violently attacked the marshal, knocking him over a stairwell railing\ndown to the ground floor below. Mr. Bryce\xe2\x80\x99s head hit a refrigerator on the way\ndown. Ms. Jones grabbed an aluminum rod, ran down the stairs, and began\nbeating Mr. Bryce with the rod. She then doused his body with paint thinner\nand set him on fire with a cigarette lighter. Almost as quickly as it had arisen,\nMs. Jones\xe2\x80\x99s rage subsided, and she attempted to put out the flames she had\nignited by running back and forth to her apartment to fetch basins of water\xe2\x80\x94\nbut it was too late. The medical examiner concluded that Mr. Bryce died from\na combination of blunt force injuries and the flames that quickly consumed his\nupper body\xe2\x80\x94in other words, that he had been beaten to within an inch of his\nlife and then burned alive. C.J. Chivers, Tenant Held in Murder of Marshal, N.Y.\nTIMES (Aug. 23, 2001).\nMr. Bryce had two decades of experience as a marshal and a reputation for\ndealing calmly and compassionately with those he evicted. He was a stranger to\nMs. Jones until he arrived to evict her. But in the moment, the situation still\nexploded into horrific, deadly violence. How much more likely do we think such\n\n\x0c544\n\nProperty\nviolence would be where a landlord\xe2\x80\x94who has a personal stake in recovering\npossession, no particular professional experience in managing or defusing tense\nsituations, no imprimatur of government authority, and a bitter history with the\ntenant\xe2\x80\x94attempts to repossess?\n\n3. Do landlords love violence? If the court here is correct that all self-help\nremedies contain the inherent potential for violence, why do landlords seem so\neager to employ them? Why would a landlord ever resist going through the court\nprocess, which the Justice Rogosheske describes as \xe2\x80\x9cadequate and speedy\xe2\x80\x9d?\n4. Can landlords stand their ground? Many states have so-called \xe2\x80\x9cstand your\nground\xe2\x80\x9d laws. Stand your ground laws authorize individuals to use deadly force\nin self-defense when faced with a reasonable threat. There is no duty to retreat\nfirst. Why are legislatures concerned about violence in the landlord/tenant\ncontext but not in the self-defense setting?\n5. Costs. Who does the demise of self-help hurt?\n6. Basic eviction procedure. Every state has now enacted statutes\xe2\x80\x94often\nreferred to as forcible entry and detainer laws\xe2\x80\x94that help landlords to promptly\nregain possession when a tenant holds over or commits a material breach of the\nlease. In most jurisdictions, statutes mandate that landlords pursue relief\nthrough the court system and refrain from self-help remedies. While these\neviction procedures vary between jurisdictions, there are some significant\ncommonalities between most states\xe2\x80\x99 forced entry and detainer laws. In all\njurisdictions, for example, a landlord who wishes to evict a tenant must first\nsend the tenant proper written notice. The notice requirement generally obliges\nthe landlord to accurately state the tenant\xe2\x80\x99s name and address, and reveal the\nnature of the alleged breach. Most states also require the landlord to give the\ntenant an opportunity (often 3 days, but sometimes as long as 14) to either cure\nthe default or move out. These are often referred to as \xe2\x80\x9cCure or Quit\xe2\x80\x9d notices.\nIf the tenant corrects the problem, they must be allowed to stay. However, if\nthe tenant stays in the unit and does not cure the default, the landlord can file a\npetition for eviction with the local housing court. Upon the landlord\xe2\x80\x99s request,\nthe court will quickly set a trial date and a process server will deliver a summons\nand complaint to each tenant. Most tenants do not contest their evictions. If\n\n\x0cLeasing Real Property\n\n545\n\nthe tenant does not respond to the summons, the court will enter a judgment in\nfavor of the landlord and the landlord will then hire a local sheriff to remove\nthe tenant from the property. The entire process generally takes from 20 to 60\ndays.\n7. Defending against eviction. Occasionally a tenant will mount a vigorous\ndefense to an eviction notice. The most commonly raised defenses are (1)\nnotice was faulty, (2) the tenant cured the default, (3) the landlord illegally\nretaliated against the tenant, and, (4) the tenant had a right to withhold rent\nbecause the unit failed to meet certain minimum standards required by law.\n\n6. Tenant Exit: Security Deposits\nMost landlords require their tenants to pay a security deposit\xe2\x80\x94a sum of money that\nthe landlord can raid if the tenant defaults on the rent, leaves the unit untidy, or\ndamages any property during the course of the tenancy. State law mandates that if the\ntenant has compiled with all terms of the lease and kept the unit in good order, the\nlandlord must return the security deposit (generally within 30 or 60 days). If the tenant\ncauses damage, the landlord has the right to use the security to restore the unit to its\nprevious condition, but must provide the tenant with a list of damages and receipts for\nthe repairs.\nAlthough the law of security deposits is generally crystal-clear, a huge number of renters\nreport that they have unfairly lost deposit money to their landlords. Why is this so?\nGame theorists argue that the structure of the landlord-tenant relationship makes\ndisputes over security deposits almost unavoidable. The key insight is that while the\ntenancy is ongoing, landlords and tenants have incentives to get along and make\ncompromises\xe2\x80\x94the landlord wants the tenant to make timely rent payments and the\ntenant wants the landlord to respond quickly when problems arise. However, once the\nlandlord and tenant decide to end their relationship, there are few checks to prevent\nbad behavior. If the landlord will never interact with the tenant again, why not fudge\na little bit with security deposit? Additionally, the small amounts of money involved\nsecurity deposit disputes mean that it\xe2\x80\x99s rarely worth hiring a lawyer or taking the time\nto sue the landlord in small claims court.\n\n\x0c546\n\nProperty\nNotes and Questions\n\n1. Tenant self help? If tenants recognize that landlords often cheat them out of\ntheir security deposits, why don\xe2\x80\x99t more tenants respond by refusing to pay the\nlast month\xe2\x80\x99s rent? After all, eviction procedures almost always take longer than\n30 days.\n2. America v. England. To solve the security deposit dilemma, English law does\nnot permit landlords to keep their tenants\xe2\x80\x99 deposits. Rather, they must place\nthem with a government-approved holding agency. If a dispute arises over the\nmoney at the end of the lease, the parties are referred to an arbitrator who works\nfor the organization that holds the money. The dispute resolution service does\nnot charge either party but they are bound by its decision. Should jurisdictions\nin the U.S. move toward this model? Would it change your opinion to know\nthat English landlords routinely fail to comply with these rules? Are there other\nsolutions worth considering?\n\nD. The Quest for Clean, Safe, and Affordable Premises\nIn feudal England, policy makers and government officials expressed little concern\nover the housing conditions of renters. The law was well-settled: Once a landlord\nturned over the right of possession, the tenant became responsible for maintenance of\nthe leased property. If a tenant decided to live in squalor rather than complete basic\nrepairs, that was the tenant\xe2\x80\x99s problem, not the landlord\xe2\x80\x99s worry. Although it may seem\ncounterintuitive to modern readers (who rely on landlords to fix nearly everything),\nputting the burden on the tenant to maintain the property actually produced efficient\nresults in the medieval world: landlords often lived long distances from their lessees,\ncommunication was slow, houses were simply constructed, and most tenants had the\nknowledge and skills to complete basic repairs.\nThe basic principle that tenants are responsible for their own living conditions\nremained unchallenged until the 1960s, when both academics and politicians expressed\ngrowing concern about the rental housing stock in central cities. Many worried that\nexploitative landlords were flouting safety regulations and taking advantage of tenants\nwho had few housing choices as a result of their poverty and the rampant\ndiscrimination in the housing market. The problems in the poorest neighborhoods\n\n\x0cLeasing Real Property\n\n547\n\nalso had spillover effects in surrounding communities\xe2\x80\x94disease, vermin, and fires do\nnot respect municipal borders. In response to these problems, the law began to vest\ntenants with a new series of rights against their landlords. This subsection traces the\nevolution of these rights and explores the rise of legal tools to ensure minimum housing\nstandards for all renters.\n\n1. The Covenant of Quiet Enjoyment\nTraditional common law principles do not leave renters completely defenseless against\nunprincipled landlords. Every lease, whether residential or commercial, contains a\ncovenant of quiet enjoyment. Often this promise is explicitly stated in the lease contract.\nWhere it\xe2\x80\x99s not specifically mentioned, all courts will imply it into the agreement. The\nbasic idea is that the landlord cannot interfere with the tenant\xe2\x80\x99s use of the property.\nMost courts state the legal test this way: A breach of the covenant of quiet enjoyment\noccurs when the landlord substantially interferes with the tenant\xe2\x80\x99s use or enjoyment of\nthe premises.\nConsider the following hypothetical:\nLittle Bo Peep Detective Services rents the second floor of a four-floor\nbuilding. A year into the five-year lease, the landlord suddenly begins a\nconstruction project designed to update the suites on the first floor.\nThese renovations create loud noise and regular interruptions of electric\nservice. The construction work has also made the parking lot inaccessible.\nEmployees and customers need to walk a quarter-mile to access the\nbuilding from a nearby parking garage.\n\nDo these problems amount to a violation of the covenant of quiet enjoyment? To\ndetermine whether the interference is \xe2\x80\x9csubstantial\xe2\x80\x9d courts generally consider the\npurpose the premises are leased for, the foreseeability of the problem, the potential\nduration, and the degree of harm. In this example, if the construction project lasts for\nmore than a few days, then Little Bo Peep can most likely bring a successful claim\nagainst its landlord under the covenant of quiet enjoyment. The problems here are not\nmere trifles\xe2\x80\x94the noise, lack of electricity, and inadequate parking fundamentally affect\nthe company\xe2\x80\x99s ability to use the property as they intended.\n\n\x0c548\n\nProperty\n\nThe difficult conceptual issue with the covenant of quiet enjoyment concerns the\nremedy. If the landlord breaks the covenant, what are the tenant\xe2\x80\x99s options? After a\nbreach, the tenant can always choose to stay in the leased property, continue to pay\nrent, and sue the landlord for damages.\nAdditionally, certain violations of the covenant of quiet enjoyment allow the tenant to\nconsider the lease terminated, leave, and stop paying rent. Recall from earlier in the\nchapter that the landlord\xe2\x80\x99s fundamental responsibility is to provide the tenant with\npossession (or, in some jurisdictions, the right to possession). From that principle,\ncourts developed a rule that in cases where the landlord wrongfully evicts the tenant,\nall the tenant\xe2\x80\x99s obligations under the lease cease. Imagine:\nLandlord and tenant both sign a lease that reads, \xe2\x80\x9cLandlord agrees to\nprovide Tenant with possession of 123 Meadowlark Lane for a period\nof 12 months beginning April 1. Tenant agrees to pay $100 per month.\xe2\x80\x9d\nAfter 4 months, however, the Landlord retakes possession of the\nproperty by forcing the tenant out and changing the locks.\nAssuming the tenant hasn\xe2\x80\x99t committed a material breach, the landlord\xe2\x80\x99s actions\nconstitute an obvious violation of the covenant of quiet enjoyment\xe2\x80\x94the tenant can no\nlonger use the property for any purpose. Thus, any eviction where the tenant is\nphysically denied access to the unit ends the tenant\xe2\x80\x99s obligation to pay rent and allows\nthe tenant to sue for damages incurred from being removed from possession (A tenant\ncould also sue to regain the unit). The law is very clear on this point. Relatedly, if the\nlandlord denies the tenant access to some portion of the rented space (say, an allotted\nparking space) that, too, constitutes a breach of the covenant of quiet enjoyment. The\ntenant subject to such a partial eviction has the option to terminate the lease and sue\nfor damages.\nBut what if the landlord doesn\xe2\x80\x99t physically interfere with her tenant\xe2\x80\x99s occupancy? What\nif the landlord creates an environment that\xe2\x80\x99s so miserable that the tenant is forced to\nflee? Is this an \xe2\x80\x9ceviction\xe2\x80\x9d that would allow the tenant to consider the lease terminated\nor must the tenant stay and continue paying rent while he brings a damages lawsuit\n\n\x0cLeasing Real Property\n\n549\n\nFidelity Mutual Life Insurance Co. v. Kaminsky\n768 S.W.2d 818 (Tex. App. 1989)\nMURPHY, Justice.\nThe issue in this landlord-tenant case is whether sufficient evidence supports the jury\xe2\x80\x99s\nfindings that the landlord and appellant, Fidelity Mutual Life Insurance Company\n[\xe2\x80\x9cFidelity\xe2\x80\x9d], constructively evicted the tenant, Robert P. Kaminsky, M.D., P.A. [\xe2\x80\x9cDr.\nKaminsky\xe2\x80\x9d] by breaching the express covenant of quiet enjoyment contained in the\nparties\xe2\x80\x99 lease. We affirm.\nDr. Kaminsky is a gynecologist whose practice includes performing elective abortions.\nIn May 1983, he executed a lease contract for the rental of approximately 2,861 square\nfeet in the Red Oak Atrium Building for a two year term which began on June 1, 1983.\nThe terms of the lease required Dr. Kaminsky to use the rented space solely as \xe2\x80\x9can\noffice for the practice of medicine.\xe2\x80\x9d Fidelity owns the building and hires local\ncompanies to manage it. At some time during the lease term, Shelter Commercial\nProperties [\xe2\x80\x9cShelter\xe2\x80\x9d] replaced the Horne Company as managing agents. Fidelity has\nnot disputed either management company\xe2\x80\x99s capacity to act as its agent.\nThe parties agree that: (1) they executed a valid lease agreement; (2) Paragraph 35 of\nthe lease contains an express covenant of quiet enjoyment conditioned on Dr.\nKaminsky\xe2\x80\x99s paying rent when due, as he did through November 1984; Dr. Kaminsky\nabandoned the leased premises on or about December 3, 1984 and refused to pay\nadditional rent; anti-abortion protestors began picketing at the building in June of 1984\nand repeated and increased their demonstrations outside and inside the building until\nDr. Kaminsky abandoned the premises.\nWhen Fidelity sued for the balance due under the lease contract following Dr.\nKaminsky\xe2\x80\x99s abandonment of the premises, he claimed that Fidelity constructively\nevicted him by breaching Paragraph 35 of the lease. Fidelity apparently conceded\nduring trial that sufficient proof of the constructive eviction of Dr. Kaminsky would\nrelieve him of his contractual liability for any remaining rent payments. Accordingly,\nhe assumed the burden of proof and the sole issue submitted to the jury was whether\nFidelity breached Paragraph 35 of the lease, which reads as follows:\n\n\x0c550\n\nProperty\nQuiet Enjoyment.\nLessee, on paying the said Rent, and any Additional Rental, shall and\nmay peaceably and quietly have, hold and enjoy the Leased Premises for\nthe said term.\n\nA constructive eviction occurs when the tenant leaves the leased premises due to\nconduct by the landlord which materially interferes with the tenant\xe2\x80\x99s beneficial use of\nthe premises. See Downtown Realty, Inc. v. 509 Tremont Bldg., 748 S.W.2d 309, 313\n(Tex.App.\xe2\x80\x94Houston [14th Dist.] 1988, n.w.h.). Texas law relieves the tenant of\ncontractual liability for any remaining rentals due under the lease if he can establish a\nconstructive eviction by the landlord. . . .\nIn order to prevail on his claim that Fidelity constructively evicted him and thereby\nrelieved him of his rent obligation, Dr. Kaminsky had to show the following: 1) Fidelity\nintended that he no longer enjoy the premises, which intent the trier of fact could infer\nfrom the circumstances; 2) Fidelity, or those acting for Fidelity or with its permission,\ncommitted a material act or omission which substantially interfered with use and\nenjoyment of the premises for their leased purpose, here an office for the practice of\nmedicine; 3) Fidelity\xe2\x80\x99s act or omission permanently deprived Dr. Kaminsky of the use\nand enjoyment of the premises; and 4) Dr. Kaminsky abandoned the premises within\na reasonable period of time after the act or omission. E.g., Downtown Realty, Inc., 748\nS.W.2d at 311 . . . .\n[T]he jury found that Dr. Kaminsky had established each element of his constructive\neviction defense. The trial court entered judgment that Fidelity take nothing on its suit\nfor delinquent rent.\nFidelity raises four points of error. . . .\nFidelity\xe2\x80\x99s first point of error relies on Angelo v. Deutser, 30 S.W.2d 707 (Tex.Civ.App.\xe2\x80\x94\nBeaumont 1930, no writ), Thomas v. Brin, 38 Tex.Civ.App. 180, 85 S.W. 842 (1905, no\nwrit) and Sedberry v. Verplanck, 31 S.W. 242 (Tex.Civ.App.1895, no writ). These cases\nall state the general proposition that a tenant cannot complain that the landlord\nconstructively evicted him and breached a covenant of quiet enjoyment, express or\nimplied, when the eviction results from the actions of third parties acting without the\nlandlord\xe2\x80\x99s authority or permission. Fidelity insists the evidence conclusively establishes:\n\n\x0cLeasing Real Property\n\n551\n\na) that it did nothing to encourage or sponsor the protestors and; b) that the protestors,\nrather than Fidelity or its agents, caused Dr. Kaminsky to abandon the premises.\nFidelity concludes that reversible error resulted because the trial court refused to set\naside the jury\xe2\x80\x99s answers to the special issues and enter judgment in Fidelity\xe2\x80\x99s favor and\nbecause the trial court denied its motion for a new trial. We disagree. . . .\nThe protests took place chiefly on Saturdays, the day Dr. Kaminsky generally scheduled\nabortions. During the protests, the singing and chanting demonstrators picketed in the\nbuilding\xe2\x80\x99s parking lot and inner lobby and atrium area. They approached patients to\nspeak to them, distributed literature, discouraged patients from entering the building\nand often accused Dr. Kaminsky of \xe2\x80\x9ckilling babies.\xe2\x80\x9d As the protests increased, the\ndemonstrators often occupied the stairs leading to Dr. Kaminsky\xe2\x80\x99s office and\nprevented patients from entering the office by blocking the doorway. Occasionally they\nsucceeded in gaining access to the office waiting room area.\nDr. Kaminsky complained to Fidelity through its managing agents and asked for help\nin keeping the protestors away, but became increasingly frustrated by a lack of response\nto his requests. The record shows that no security personnel were present on Saturdays\nto exclude protestors from the building, although the lease required Fidelity to provide\nsecurity service on Saturdays. The record also shows that Fidelity\xe2\x80\x99s attorneys prepared\na written statement to be handed to the protestors soon after Fidelity hired Shelter as\nits managing agent. The statement tracked TEX.PENAL CODE ANN. \xc2\xa7 30.05\n(Vernon Supp.1989) and generally served to inform trespassers that they risked criminal\nprosecution by failing to leave if asked to do so. Fidelity\xe2\x80\x99s attorneys instructed Shelter\xe2\x80\x99s\nrepresentative to \xe2\x80\x9chave several of these letters printed up and be ready to distribute\nthem and verbally demand that these people move on and off the property.\xe2\x80\x9d The same\nrepresentative conceded at trial that she did not distribute these notices. Yet when Dr.\nKaminsky enlisted the aid of the Sheriff\xe2\x80\x99s office, officers refused to ask the protestors\nto leave without a directive from Fidelity or its agent. Indeed, an attorney had instructed\nthe protestors to remain unless the landlord or its representative ordered them to leave.\nIt appears that Fidelity\xe2\x80\x99s only response to the demonstrators was to state, through its\nagents, that it was aware of Dr. Kaminsky\xe2\x80\x99s problems.\nBoth action and lack of action can constitute \xe2\x80\x9cconduct\xe2\x80\x9d by the landlord which amounts\nto a constructive eviction. E.g., Downtown Realty Inc., 748 S.W.2d at 311. In Steinberg v.\n\n\x0c552\n\nProperty\n\nMedical Equip. Rental Serv., Inc., 505 S.W.2d 692 (Tex. Civ. App.\xe2\x80\x94Dallas 1974, no writ)\naccordingly, the court upheld a jury\xe2\x80\x99s determination that the landlord\xe2\x80\x99s failure to act\namounted to a constructive eviction and breach of the covenant of quiet enjoyment.\n505 S.W.2d at 697. Like Dr. Kaminsky, the tenant in Steinberg abandoned the leased\npremises and refused to pay additional rent after repeatedly complaining to the landlord.\nThe Steinberg tenant complained that Steinberg placed trash bins near the entrance to\nthe business and allowed trucks to park and block customer\xe2\x80\x99s access to the tenant\xe2\x80\x99s\nmedical equipment rental business. The tenant\xe2\x80\x99s repeated complaints to Steinberg\nyielded only a request \xe2\x80\x9cto be patient.\xe2\x80\x9d Id. Fidelity responded to Dr. Kaminsky\xe2\x80\x99s\ncomplaints in a similar manner: although it acknowledged his problems with the\nprotestors, Fidelity, like Steinberg, effectively did nothing to prevent the problems.\nThis case shows ample instances of Fidelity\xe2\x80\x99s failure to act in the fact of repeated\nrequests for assistance despite its having expressly covenanted Dr. Kaminsky\xe2\x80\x99s quiet\nenjoyment of the premises. These instances provided a legally sufficient basis for the\njury to conclude that Dr. Kaminsky abandoned the leased premises, not because of the\ntrespassing protestors, but because of Fidelity\xe2\x80\x99s lack of response to his complaints\nabout the protestors. Under the circumstances, while it is undisputed that Fidelity did\nnot \xe2\x80\x9cencourage\xe2\x80\x9d the demonstrators, its conduct essentially allowed them to continue\nto trespass. The general rule of the Angelo, Thomas and Sedberry cases, that a landlord is\nnot responsible for the actions of third parties, applies only when the landlord does not\npermit the third party to act. See e.g., Angelo, 30 S.W.2d at 710 [\xe2\x80\x9cthe act or omission\ncomplained of must be that of the landlord and not merely of a third person acting\nwithout his authority or permission\xe2\x80\x9d (emphasis added) ]. We see no distinction between\nFidelity\xe2\x80\x99s lack of action here, which the record shows resulted in preventing patients\xe2\x80\x99\naccess to Dr. Kaminsky\xe2\x80\x99s medical office, and the Steinberg case where the landlord\xe2\x80\x99s\ninaction resulted in trucks\xe2\x80\x99 blocking customer access to the tenant\xe2\x80\x99s business. We\noverrule the first point of error. . . . .\nIn its [final] point of error, Fidelity maintains the evidence is factually insufficient to\nsupport the jury\xe2\x80\x99s finding that its conduct permanently deprived Dr. Kaminsky of use\nand enjoyment of the premises. Fidelity essentially questions the permanency of Dr.\nKaminsky\xe2\x80\x99s being deprived of the use and enjoyment of the leased premises. To\nsupport its contentions, Fidelity points to testimony by Dr. Kaminsky in which he\nconcedes that none of his patients were ever harmed and that protests and\n\n\x0cLeasing Real Property\n\n553\n\ndemonstrations continued despite his leaving the Red Oak Atrium building. Fidelity\nalso disputes whether Dr. Kaminsky actually lost patients due to the protests.\nThe evidence shows that the protestors, whose entry into the building Fidelity failed to\nprohibit, often succeeded in blocking Dr. Kaminsky\xe2\x80\x99s patients\xe2\x80\x99 access to his medical\noffice. Under the reasoning of the Steinberg case, omissions by a landlord which result\nin patients\xe2\x80\x99 lack of access to the office of a practicing physician would suffice to\nestablish a permanent deprivation of the use and enjoyment of the premises for their\nleased purpose, here \xe2\x80\x9can office for the practice of medicine.\xe2\x80\x9d Steinberg, 505 S.W.2d at\n697; accord, Downtown Realty, Inc., 748 S.W.2d at 312 (noting jury\xe2\x80\x99s finding that a\nconstructive eviction resulted from the commercial landlord\xe2\x80\x99s failure to repair a heating\nand air conditioning system in a rooming house).\nTexas law has long recited the requirement, first stated in Stillman, 266 S.W.2d at 916,\nthat the landlord commit a \xe2\x80\x9cmaterial and permanent\xe2\x80\x9d act or omission in order for his\ntenant to claim a constructive eviction. However, as the Steinberg and Downtown Realty,\nInc. cases illustrate, the extent to which a landlord\xe2\x80\x99s acts or omissions permanently and\nmaterially deprive a tenant of the use and enjoyment of the premises often involves a\nquestion of degree. Having reviewed all the evidence before the jury in this case, we\ncannot say that its finding that Fidelity\xe2\x80\x99s conduct permanently deprived Dr. Kaminsky\nof the use and enjoyment of his medical office space was so against the great weight\nand preponderance of the evidence as to be manifestly unjust. We overrule the fourth\npoint of error.\nWe affirm the judgment of the trial court.\nNotes and Questions\n1. Evolution of the doctrine. As discussed above, English judges widely\nrecognized that tenants could terminate the lease (and sue for damages) if the\nlandlord physically denied them possession of the rented property. Eventually\nthe basic concept was expanded to situations where the landlord commits some\nact that, while it falls short of an actual eviction, so severely affects the value of\nthe tenancy that the tenant is forced to flee. This is known as constructive eviction.\n2. Basic constrictive eviction law. To make a claim of constructive eviction a\ntenant must show that some act or omission by the landlord substantially\n\n\x0c554\n\nProperty\ninterferes with the tenant\xe2\x80\x99s use and enjoyment of the property. The tenant also\nneeds to notify the landlord about the problem, give the landlord an opportunity\nto cure the defect, and then vacate the premise within a reasonable amount of\ntime.\n\n3. Stay or go? Why might a tenant contemplating bringing a constructive eviction\nclaim worry about the requirement to vacate the premises? Is constructive\neviction a more powerful remedy in a place like San Francisco, which has a very\ntight housing market, or Houston, which has more open units?\n4. Landlord\xe2\x80\x99s wrongful conduct. To make use of the doctrine of quiet\nenjoyment, the tenant must show that the landlord committed some wrongful\nact. There\xe2\x80\x99s wide agreement that any affirmative step taken by the landlord that\nimpedes the tenant\xe2\x80\x99s use of the property can meet the requirement of an \xe2\x80\x9cact.\xe2\x80\x9d\nExamples would include burning toxic substances on the property, prolonged\nconstruction activities, or a substantial alteration of an essential feature of the\nleased premises. The trickier doctrinal question is whether a landlord\xe2\x80\x99s failure\nto act can ever qualify as the wrongful conduct. Traditionally, courts hesitated\nto impose liability on landlords for their omissions, but the law of most states\nnow asserts that a \xe2\x80\x9clack of action\xe2\x80\x9d can constitute the required act. For example,\na landlord\xe2\x80\x99s failure to provide heat in the winter months is generally found to\nviolate the covenant of quiet enjoyment. Some courts, nervous about unjustly\nexpanding landlords\xe2\x80\x99 potential liability, deem omissions wrongful only when the\nlandlord fails to fulfill some clear duty\xe2\x80\x94either a duty bargained for in the lease\nor a statutory duty.\n5. Troublesome tenants. Suppose your landlord rents the floor above your\napartment to the members of a Led Zeppelin cover band. If the band practices\nevery night between the hours of 3:00 am and 4:00 am, could you bring a\nsuccessful constructive eviction claim against the landlord?\n6. Third parties. What if the Led Zeppelin cover band played every night at a\nclub across the street? If the noise from the bar kept you awake, could you sue\nyour landlord for constructive eviction?\n\n\x0cLeasing Real Property\n\n555\n\n2. The Implied Warranty of Habitability\nAlthough the covenant of quiet enjoyment offers tenants some protections, the\ndoctrine\xe2\x80\x94without more\xe2\x80\x94can leave renters exposed to dreadful living conditions.\nWhat if cockroaches invade a tenant\xe2\x80\x99s apartment? Or a sewer pipe in the basement\nbegins to leak? What if a storm shatters the windows of the apartment? Or a wall of a\nbuilding falls down? Unless the landlord somehow caused any of these disasters (or\nhad a clearly articulated duty to fix them) a tenant cannot bring a successful case under\nthe covenant of quiet enjoyment. In Hughes v. Westchester Development Corp., 77 F.2d 550\n(D.C. Cir. 1935), for example, vermin invaded the tenant\xe2\x80\x99s apartment, making it\n\xe2\x80\x9cimpossible to use the kitchen and toilet facilities.\xe2\x80\x9d Despite the infestation, the court\nfound that the tenant remained responsible for the rent because the landlord was not\nto blame for the bugs\xe2\x80\x99 sudden appearance. Leases, the court ruled, contained no\nimplied promise that the premise was fit for the purpose it was leased. If tenants\ndesired more and better protection, they had the burden to bargain for such provisions\nin the lease.\nAll of this changed in the late 1960s and early 70s. The most lasting accomplishment\nof the tenants\xe2\x80\x99 rights movement was the widespread adoption of the implied warranty of\nhabitability. In the United States, only Arkansas has failed to adopt the rule. In a nutshell,\nthe implied warranty of habitability imposes a duty on landlords to provide residential\ntenants with a clean, safe, and habitable living space.\nHilder v. St. Peter\n478 A.2d 202 (Vt. 1984)\nBILLINGS, Chief Justice.\nDefendants appeal from a judgment rendered by the Rutland Superior Court. The\ncourt ordered defendants to pay plaintiff damages in the amount of $4,945.00, which\nrepresented \xe2\x80\x9creimbursement of all rent paid and additional compensatory damages\xe2\x80\x9d\nfor the rental of a residential apartment over a fourteen month period in defendants\xe2\x80\x99\nRutland apartment building. Defendants filed a motion for reconsideration on the issue\nof the amount of damages awarded to the plaintiff, and plaintiff filed a cross-motion\nfor reconsideration of the court\xe2\x80\x99s denial of an award of punitive damages. The court\ndenied both motions. On appeal, defendants raise [two] issues for our consideration:\n\n\x0c556\n\nProperty\n\nfirst, whether the court correctly calculated the amount of damages awarded the\nplaintiff; secondly, whether the court\xe2\x80\x99s award to plaintiff of the entire amount of rent\npaid to defendants was proper since the plaintiff remained in possession of the\napartment for the entire fourteen month period. . . .\nThe facts are uncontested. In October, 1974, plaintiff began occupying an apartment\nat defendants\xe2\x80\x99 10\xe2\x80\x9312 Church Street apartment building in Rutland with her three\nchildren and new-born grandson. Plaintiff orally agreed to pay defendant Stuart St.\nPeter $140 a month and a damage deposit of $50; plaintiff paid defendant the first\nmonth\xe2\x80\x99s rent and the damage deposit prior to moving in. Plaintiff has paid all rent due\nunder her tenancy. Because the previous tenants had left behind garbage and items of\npersonal belongings, defendant offered to refund plaintiff\xe2\x80\x99s damage deposit if she\nwould clean the apartment herself prior to taking possession. Plaintiff did clean the\napartment, but never received her deposit back because the defendant denied ever\nreceiving it. Upon moving into the apartment, plaintiff discovered a broken kitchen\nwindow. Defendant promised to repair it, but after waiting a week and fearing that her\ntwo year old child might cut herself on the shards of glass, plaintiff repaired the window\nat her own expense. Although defendant promised to provide a front door key, he\nnever did. For a period of time, whenever plaintiff left the apartment, a member of her\nfamily would remain behind for security reasons. Eventually, plaintiff purchased and\ninstalled a padlock, again at her own expense. After moving in, plaintiff discovered that\nthe bathroom toilet was clogged with paper and feces and would flush only by dumping\npails of water into it. Although plaintiff repeatedly complained about the toilet, and\ndefendant promised to have it repaired, the toilet remained clogged and mechanically\ninoperable throughout the period of plaintiff\xe2\x80\x99s tenancy. In addition, the bathroom light\nand wall outlet were inoperable. Again, the defendant agreed to repair the fixtures, but\nnever did. In order to have light in the bathroom, plaintiff attached a fixture to the wall\nand connected it to an extension cord that was plugged into an adjoining room. Plaintiff\nalso discovered that water leaked from the water pipes of the upstairs apartment down\nthe ceilings and walls of both her kitchen and back bedroom. Again, defendant\npromised to fix the leakage, but never did. As a result of this leakage, a large section of\nplaster fell from the back bedroom ceiling onto her bed and her grandson\xe2\x80\x99s crib. Other\nsections of plaster remained dangling from the ceiling. This condition was brought to\nthe attention of the defendant, but he never corrected it. Fearing that the remaining\nplaster might fall when the room was occupied, plaintiff moved her and her grandson\xe2\x80\x99s\n\n\x0cLeasing Real Property\n\n557\n\nbedroom furniture into the living room and ceased using the back bedroom. During\nthe summer months an odor of raw sewage permeated plaintiff\xe2\x80\x99s apartment. The odor\nwas so strong that the plaintiff was ashamed to have company in her apartment.\nResponding to plaintiff\xe2\x80\x99s complaints, Rutland City workers unearthed a broken sewage\npipe in the basement of defendants\xe2\x80\x99 building. Raw sewage littered the floor of the\nbasement, but defendant failed to clean it up. Plaintiff also discovered that the electric\nservice for her furnace was attached to her breaker box, although defendant had agreed,\nat the commencement of plaintiff\xe2\x80\x99s tenancy, to furnish heat.\nIn its conclusions of law, the court held that the state of disrepair of plaintiff\xe2\x80\x99s\napartment, which was known to the defendants, substantially reduced the value of the\nleasehold from the agreed rental value, thus constituting a breach of the implied\nwarranty of habitability. The court based its award of damages on the breach of this\nwarranty and on breach of an express contract. Defendant argues that the court\nmisapplied the law of Vermont relating to habitability because the plaintiff never\nabandoned the demised premises and, therefore, it was error to award her the full\namount of rent paid. Plaintiff counters that, while never expressly recognized by this\nCourt, the trial court was correct in applying an implied warranty of habitability and\nthat under this warranty, abandonment of the premises is not required. Plaintiff urges\nthis Court to affirmatively adopt the implied warranty of habitability.\nHistorically, relations between landlords and tenants have been defined by the law of\nproperty. Under these traditional common law property concepts, a lease was viewed\nas a conveyance of real property. See Note, Judicial Expansion of Tenants\xe2\x80\x99 Private Law\nRights: Implied Warranties of Habitability and Safety in Residential Urban Leases, 56 Cornell\nL.Q. 489, 489\xe2\x80\x9390 (1971) (hereinafter cited as Expansion of Tenants\xe2\x80\x99 Rights). The\nrelationship between landlord and tenant was controlled by the doctrine of caveat\nlessee; that is, the tenant took possession of the demised premises irrespective of their\nstate of disrepair. Love, Landlord\xe2\x80\x99s Liability for Defective Premises: Caveat Lessee, Negligence,\nor Strict Liability?, 1975 Wis. L. Rev. 19, 27\xe2\x80\x9328. The landlord\xe2\x80\x99s only covenant was to\ndeliver possession to the tenant. The tenant\xe2\x80\x99s obligation to pay rent existed\nindependently of the landlord\xe2\x80\x99s duty to deliver possession, so that as long as possession\nremained in the tenant, the tenant remained liable for payment of rent. The landlord\nwas under no duty to render the premises habitable unless there was an express\n\n\x0c558\n\nProperty\n\ncovenant to repair in the written lease. Expansion of Tenants\xe2\x80\x99 Rights, supra, at 490. The\nland, not the dwelling, was regarded as the essence of the conveyance.\nAn exception to the rule of caveat lessee was the doctrine of constructive eviction.\nLemle v. Breeden, 462 P.2d 470, 473 (Haw. 1969). Here, if the landlord wrongfully\ninterfered with the tenant\xe2\x80\x99s enjoyment of the demised premises, or failed to render a\nduty to the tenant as expressly required under the terms of the lease, the tenant could\nabandon the premises and cease paying rent. Legier v. Deveneau, 126 A. 392, 393 (Vt.\n1924).\nBeginning in the 1960\xe2\x80\x99s, American courts began recognizing that this approach to\nlandlord and tenant relations, which had originated during the Middle Ages, had\nbecome an anachronism in twentieth century, urban society. Today\xe2\x80\x99s tenant enters into\nlease agreements, not to obtain arable land, but to obtain safe, sanitary and comfortable\nhousing.\n[T]hey seek a well known package of goods and services\xe2\x80\x94a package\nwhich includes not merely walls and ceilings, but also adequate heat, light\nand ventilation, serviceable plumbing facilities, secure windows and\ndoors, proper sanitation, and proper maintenance.\nJavins v. First National Realty Corp., 428 F.2d 1071, 1074 (D.C.Cir.), cert. denied, 400 U.S.\n925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970).\nNot only has the subject matter of today\xe2\x80\x99s lease changed, but the characteristics of\ntoday\xe2\x80\x99s tenant have similarly evolved. The tenant of the Middle Ages was a farmer,\ncapable of making whatever repairs were necessary to his primitive dwelling. Green v.\nSuperior Court, 517 P.2d 1168, 1172 (Cal. 1974). Additionally, \xe2\x80\x9cthe common law courts\nassumed that an equal bargaining position existed between landlord and tenant. . . .\xe2\x80\x9d\nNote, The Implied Warranty of Habitability: A Dream Deferred, 48 UMKC L.REV. 237, 238\n(1980) (hereinafter cited as A Dream Deferred).\nIn sharp contrast, today\xe2\x80\x99s residential tenant, most commonly a city dweller, is not\nexperienced in performing maintenance work on urban, complex living units. Green v.\nSuperior Court, supra, 517 P.2d at 1173. The landlord is more familiar with the dwelling\nunit and mechanical equipment attached to that unit, and is more financially able to\n\xe2\x80\x9cdiscover and cure\xe2\x80\x9d any faults and break-downs. Id. Confronted with a recognized\n\n\x0cLeasing Real Property\n\n559\n\nshortage of safe, decent housing, see 24 V.S.A. \xc2\xa7 4001(1), today\xe2\x80\x99s tenant is in an inferior\nbargaining position compared to that of the landlord. Park West Management Corp. v.\nMitchell, 391 N.E.2d 1288, 1292 (N.Y. 1979). Tenants vying for this limited housing are\n\xe2\x80\x9cvirtually powerless to compel the performance of essential services.\xe2\x80\x9d Id.\nIn light of these changes in the relationship between tenants and landlords, it would be\nwrong for the law to continue to impose the doctrine of caveat lessee on residential\nleases.\n\nThe modern view favors a new approach which recognizes that a lease\nis essentially a contract between the landlord and the tenant wherein the\nlandlord promises to deliver and maintain the demised premises in\nhabitable condition and the tenant promises to pay rent for such\nhabitable premises. These promises constitute interdependent and\nmutual considerations. Thus, the tenant\xe2\x80\x99s obligation to pay rent is\npredicated on the landlord\xe2\x80\x99s obligation to deliver and maintain the\npremises in habitable condition.\nBoston Housing Authority v. Hemingway, 293 N.E.2d 831, 842 (Mass. 1973).\nRecognition of residential leases as contracts embodying the mutual covenants of\nhabitability and payment of rent does not represent an abrupt change in Vermont law.\nOur case law has previously recognized that contract remedies are available for\nbreaches of lease agreements. Clarendon Mobile Home Sales, Inc. v. Fitzgerald, 381 A.2d\n1063, 1065 (Vt. 1977). . . . More significantly, our legislature, in establishing local\nhousing authorities, 24 V.S.A. \xc2\xa7 4003, has officially recognized the need for assuring\nthe existence of adequate housing.\n[S]ubstandard and decadent areas exist in certain portions of the state\nof Vermont and . . . there is not . . . an adequate supply of decent, safe\nand sanitary housing for persons of low income and/or elderly persons\nof low income, available for rents which such persons can afford to\npay . . . this situation tends to cause an increase and spread of\ncommunicable and chronic disease . . . [and] constitutes a menace to the\n\n\x0c560\n\nProperty\nhealth, safety, welfare and comfort of the inhabitants of the state and is\ndetrimental to property values in the localities in which it exists . . . .\n\n24 V.S.A. \xc2\xa7 4001(4). In addition, this Court has assumed the existence of an implied\nwarranty of habitability in residential leases. Birkenhead v. Coombs, 465 A.2d 244, 246 (Vt.\n1983).\nTherefore, we now hold expressly that in the rental of any residential dwelling unit an\nimplied warranty exists in the lease, whether oral or written, that the landlord will\ndeliver over and maintain, throughout the period of the tenancy, premises that are safe,\nclean and fit for human habitation. This warranty of habitability is implied in tenancies\nfor a specific period or at will. Boston Housing Authority v. Hemingway, supra, 293 N.E.2d\nat 843. Additionally, the implied warranty of habitability covers all latent and patent\ndefects in the essential facilities of the residential unit. Id. Essential facilities are\n\xe2\x80\x9cfacilities vital to the use of the premises for residential purposes. . . .\xe2\x80\x9d Kline v. Burns,\n276 A.2d 248, 252 (N.H. 1971). This means that a tenant who enters into a lease\nagreement with knowledge of any defect in the essential facilities cannot be said to have\nassumed the risk, thereby losing the protection of the warranty. Nor can this implied\nwarranty of habitability be waived by any written provision in the lease or by oral\nagreement.\nIn determining whether there has been a breach of the implied warranty of habitability,\nthe courts may first look to any relevant local or municipal housing code; they may also\nmake reference to the minimum housing code standards enunciated in 24 V.S.A. \xc2\xa7\n5003(c)(1)\xe2\x80\x935003(c)(5). A substantial violation of an applicable housing code shall\nconstitute prima facie evidence that there has been a breach of the warranty of\nhabitability. \xe2\x80\x9c[O]ne or two minor violations standing alone which do not affect\xe2\x80\x9d the\nhealth or safety of the tenant, shall be considered de minimus and not a breach of the\nwarranty. Javins v. First National Realty Corp., supra, 428 F.2d at 1082 n. 63. . . . In addition,\nthe landlord will not be liable for defects caused by the tenant. Javins v. First National\nRealty Corp., supra, 428 F.2d at 1082 n. 62.\nHowever, these codes and standards merely provide a starting point in determining\nwhether there has been a breach. Not all towns and municipalities have housing codes;\nwhere there are codes, the particular problem complained of may not be addressed.\nPark West Management Corp. v. Mitchell, supra, 391 N.E.2d at 1294. In determining\n\n\x0cLeasing Real Property\n\n561\n\nwhether there has been a breach of the implied warranty of habitability, courts should\ninquire whether the claimed defect has an impact on the safety or health of the tenant.\nId.\nIn order to bring a cause of action for breach of the implied warranty of habitability,\nthe tenant must first show that he or she notified the landlord \xe2\x80\x9cof the deficiency or\ndefect not known to the landlord and [allowed] a reasonable time for its correction.\xe2\x80\x9d\nKing v. Moorehead, supra, 495 S.W.2d at 76.\nBecause we hold that the lease of a residential dwelling creates a contractual\nrelationship between the landlord and tenant, the standard contract remedies of\nrescission, reformation and damages are available to the tenant when suing for breach\nof the implied warranty of habitability. Lemle v. Breeden, supra, 462 P.2d at 475. The\nmeasure of damages shall be the difference between the value of the dwelling as\nwarranted and the value of the dwelling as it exists in its defective condition. Birkenhead\nv. Coombs, supra, 465 A.2d at 246. In determining the fair rental value of the dwelling as\nwarranted, the court may look to the agreed upon rent as evidence on this issue. Id.\n\xe2\x80\x9c[I]n residential lease disputes involving a breach of the implied warranty of habitability,\npublic policy militates against requiring expert testimony\xe2\x80\x9d concerning the value of the\ndefect. Id. at 247. The tenant will be liable only for \xe2\x80\x9cthe reasonable rental value [if any]\nof the property in its imperfect condition during his period of occupancy.\xe2\x80\x9d Berzito v.\nGambino, 308 A.2d 17, 22 (N.J. 1973).\nWe also find persuasive the reasoning of some commentators that damages should be\nallowed for a tenant\xe2\x80\x99s discomfort and annoyance arising from the landlord\xe2\x80\x99s breach of\nthe implied warranty of habitability. See Moskovitz, The Implied Warranty of Habitability:\nA New Doctrine Raising New Issues, 62 CAL. L. REV. 1444, 1470\xe2\x80\x9373 (1974) (hereinafter\ncited as A New Doctrine); A Dream Deferred, supra, at 250\xe2\x80\x9351. Damages for annoyance\nand discomfort are reasonable in light of the fact that:\nthe residential tenant who has suffered a breach of the warranty . . .\ncannot bathe as frequently as he would like or at all if there is inadequate\nhot water; he must worry about rodents harassing his children or\nspreading disease if the premises are infested; or he must avoid certain\nrooms or worry about catching a cold if there is inadequate weather\nprotection or heat. Thus, discomfort and annoyance are the common\n\n\x0c562\n\nProperty\ninjuries caused by each breach and hence the true nature of the general\ndamages the tenant is claiming.\n\nMoskovitz, A New Doctrine, supra, at 1470\xe2\x80\x9371. Damages for discomfort and annoyance\nmay be difficult to compute; however, \xe2\x80\x9c[t]he trier [of fact] is not to be deterred from\nthis duty by the fact that the damages are not susceptible of reduction to an exact\nmoney standard.\xe2\x80\x9d Vermont Electric Supply Co. v. Andrus, 315 A.2d 456, 459 (Vt. 1974).\nAnother remedy available to the tenant when there has been a breach of the implied\nwarranty of habitability is to withhold the payment of future rent. King v. Moorehead,\nsupra, 495 S.W.2d at 77. The burden and expense of bringing suit will then be on the\nlandlord who can better afford to bring the action. In an action for ejectment for\nnonpayment of rent, 12 V.S.A. \xc2\xa7 4773, \xe2\x80\x9c[t]he trier of fact, upon evaluating the\nseriousness of the breach and the ramification of the defect upon the health and safety\nof the tenant, will abate the rent at the landlord\xe2\x80\x99s expense in accordance with its\nfindings.\xe2\x80\x9d A Dream Deferred, supra, at 248. The tenant must show that: (1) the landlord\nhad notice of the previously unknown defect and failed, within a reasonable time, to\nrepair it; and (2) the defect, affecting habitability, existed during the time for which rent\nwas withheld. See A Dream Deferred, supra, at 248\xe2\x80\x9350. Whether a portion, all or none of\nthe rent will be awarded to the landlord will depend on the findings relative to the\nextent and duration of the breach. Javins v. First National Realty Corp., supra, 428 F.2d at\n1082\xe2\x80\x9383. Of course, once the landlord corrects the defect, the tenant\xe2\x80\x99s obligation to\npay rent becomes due again. Id. at 1083 n. 64.\nAdditionally, we hold that when the landlord is notified of the defect but fails to repair\nit within a reasonable amount of time, and the tenant subsequently repairs the defect,\nthe tenant may deduct the expense of the repair from future rent. 11 Williston on\nContracts \xc2\xa7 1404 (3d ed. W. Jaeger 1968); Marini v. Ireland, 265 A.2d 526, 535 (N.J.\n1970).\nIn addition to general damages, we hold that punitive damages may be available to a\ntenant in the appropriate case. Although punitive damages are generally not recoverable\nin actions for breach of contract, there are cases in which the breach is of such a willful\nand wanton or fraudulent nature as to make appropriate the award of exemplary\ndamages. Clarendon Mobile Home Sales, Inc. v. Fitzgerald, supra, 381 A.2d at 1065. A willful\nand wanton or fraudulent breach may be shown \xe2\x80\x9cby conduct manifesting personal ill\n\n\x0cLeasing Real Property\n\n563\n\nwill, or carried out under circumstances of insult or oppression, or even by conduct\nmanifesting . . . a reckless or wanton disregard of [one\xe2\x80\x99s] rights . . . . \xe2\x80\x9d Sparrow v. Vermont\nSavings Bank, 112 A. 205, 207 (Vt. 1921). When a landlord, after receiving notice of a\ndefect, fails to repair the facility that is essential to the health and safety of his or her\ntenant, an award of punitive damages is proper. 111 East 88th Partners v. Simon, 434\nN.Y.S.2d 886, 889 (N.Y. Civ. Ct. 1980).\nThe purpose of punitive damages . . . is to punish conduct which is\nmorally culpable. . . . Such an award serves to deter a wrongdoer . . .\nfrom repetitions of the same or similar actions. And it tends to\nencourage prosecution of a claim by a victim who might not otherwise\nincur the expense or inconvenience of private action. . . . The public\nbenefit and a display of ethical indignation are among the ends of the\npolicy to grant punitive damages.\nDavis v. Williams, 402 N.Y.S.2d 92, 94 (N.Y.Civ.Ct.1977).\nIn the instant case, the trial court\xe2\x80\x99s award of damages, based in part on a breach of the\nimplied warranty of habitability, was not a misapplication of the law relative to\nhabitability. Because of our holding in this case, the doctrine of constructive eviction,\nwherein the tenant must abandon in order to escape liability for rent, is no longer viable.\nWhen, as in the instant case, the tenant seeks, not to escape rent liability, but to receive\ncompensatory damages in the amount of rent already paid, abandonment is similarly\nunnecessary. Northern Terminals, Inc. v. Smith Grocery & Variety, Inc., supra, 418 A.2d at\n26\xe2\x80\x9327. Under our holding, when a landlord breaches the implied warranty of\nhabitability, the tenant may withhold future rent, and may also seek damages in the\namount of rent previously paid.\nIn its conclusions of law the trial court stated that the defendants\xe2\x80\x99 failure to make\nrepairs was compensable by damages to the extent of reimbursement of all rent paid\nand additional compensatory damages. The court awarded plaintiff a total of $4,945.00;\n$3,445.00 represents the entire amount of rent plaintiff paid, plus the $50.00 deposit. . . .\nAdditionally, the court denied an award to plaintiff of punitive damages on the ground\nthat the evidence failed to support a finding of willful and wanton or fraudulent\nconduct. See Clarendon Mobile Home Sales, Inc. v. Fitzgerald, supra, 381 A.2d at 1065. The\n\n\x0c564\n\nProperty\n\nfacts in this case, which defendants do not contest, evince a pattern of intentional\nconduct on the part of defendants for which the term \xe2\x80\x9cslumlord\xe2\x80\x9d surely was coined.\nDefendants\xe2\x80\x99 conduct was culpable and demeaning to plaintiff and clearly expressive of\na wanton disregard of plaintiff\xe2\x80\x99s rights. The trial court found that defendants were\naware of defects in the essential facilities of plaintiff\xe2\x80\x99s apartment, promised plaintiff\nthat repairs would be made, but never fulfilled those promises. The court also found\nthat plaintiff continued, throughout her tenancy, to pay her rent, often in the face of\nverbal threats made by defendant Stuart St. Peter. These findings point to the \xe2\x80\x9cbad\nspirit and wrong intention\xe2\x80\x9d of the defendants, Glidden v. Skinner, 458 A.2d 1142, 1144\n(Vt. 1983), and would support a finding of willful and wanton or fraudulent conduct,\ncontrary to the conclusions of law and judgment of the trial judge. However, the\nplaintiff did not appeal the court\xe2\x80\x99s denial of punitive damages, and issues not appealed\nand briefed are waived. R. Brown & Sons, Inc. v. International Harvester Corp., 453 A.2d 83,\n84 (Vt. 1982).\nNotes and Questions\n1. Residential v. commercial. Unlike the covenant of quiet enjoyment, the\nimplied warranty of habitability only applies to residential leases. Commercial\ntenants still largely operate under common-law legal rules. Commonly,\ncommercial landlords and tenants do not rely on the default rules, but rather\nassign the duty of upkeep and repair with an express provision in the lease.\n2. What is habitability? Do all defects in an apartment amount to violations?\nWhat is the standard of habitability as laid out in Hilder?\n3. Paternalism? Is the implied warranty of habitability too paternalistic? Some\neconomists argue that the poorest Americans should have more freedom over\nhow they spend their limited dollars. Isn\xe2\x80\x99t it possible that some individuals\nmight want to occupy a really cheap (if slightly dangerous) dwelling so that they\nhave more money to spend on healthy foods, transportation, and clothes?\nWould it matter if the evidence showed that such apartments were in fact\ncheaper than \xe2\x80\x9chabitable\xe2\x80\x9d apartments?\n\n\x0cLeasing Real Property\n\n565\n\n4. Necessary? Do you agree with the arguments made by the court in Hilder\nabout the necessity of the implied warranty of habitability? Don\xe2\x80\x99t landlords\nalready have excellent incentives to maintain their buildings?\n5. Arkansas and beyond. As mentioned above, Arkansas is the one state that\nhas not adopted the implied warranty of habitability\xe2\x80\x94either by statute or\njudicial fiat. Is Arkansas a Mad Max-style hellscape for renters? Are tenants\nthere worse (or worse off) than the tenants in other states? Some people think\nso. Vice magazine recently dubbed Arkansas, \xe2\x80\x9cThe Worst Place to Rent in\nAmerica.\xe2\x80\x9d You can see the report on renting in Arkansas at:\nhttps://www.youtube.com/watch?v=9G2Pk2JZP-E. But does the implied\nwarranty of habitability provide much practical protection? Do poor tenants\nknow about it? Do they have the resources to push back against aggressive\nlandlords who threaten lawsuits and other forms of retaliation? Professor\nDavid Super has suggested that the decision of tenants\xe2\x80\x99 rights movement to\nfocus on habitability over affordability and overcrowding was a strategic mistake.\nSee David A. Super, The Rise and Fall of the Implied Warranty of Habitability, 99 CAL.\nL. REV. 389-463 (2011). Is there a nirvana for renters anywhere?\n6. Procedure & remedies. If a tenant believes his apartment does not meet the\nstandard of habitability, he must first must notify the landlord of the defects\nand give the landlord a reasonable amount of time to cure the problems. If the\nlandlord either cannot or will not make repairs, the implied warranty of\nhabitability offers the renter a menu of options. Each option presents a\ndifferent combination of costs and risks to the tenant. If the landlord breaches,\nthe tenant may:\na. Leave, terminate contract. The tenant may consider the lease terminated and\nmove out.\nb. Stay and sue for damages. As with the covenant of quiet enjoyment, a tenant\nmay stay in the unit and pay rent, while suing the landlord for damages.\nThere is significant disagreement among jurisdictions about how to\ncalculate damages. In Hilder, the court uses the difference between the\nrental price of the dwelling if it met the standard of habitability and the\nvalue of the dwelling as it exists; the rent charged is not evidence of\n\n\x0c566\n\nProperty\nactual value, but rather evidence of the appropriate price if it met the\nstandard of habitability. [Note that given the court\xe2\x80\x99s calculation, the\nvalue was apparently zero?] Other courts look at the difference between\nthe amount of rent stated in the lease and the fair market value of the\npremises. What is the better approach? Should the rent charged be\nconsidered evidence of fair market value? If not, why not?\nc. Stay and charge the cost of repair. A tenant has the option to fix the defect\nand then deduct the cost of repair from the rent.\nd. Stay and withhold rent. In most jurisdictions, a tenant can withhold the\nentire rent for violations of the implied warranty of habitability (although,\na cautious tenant should pay the rent into an escrow account). This is a\nvery powerful remedy. First, it gives the landlord strong incentive to\nrespond to valid complaints from tenants. Second, it puts the burden\non the landlord (rather than the tenant) to initiate a lawsuit when\ncontested issues arise. Finally, if the landlord does move to evict the\ntenant for non-payment, violations of the implied warranty of\nhabitability can serve as a defense.\ne. Extreme violations. Tenants have won punitive damages in cases where\nthe landlord committed repeated or gruesome violations of the implied\nwarranty.\nProblem\n\n1. The Mad Hatter and the Alice each decide to rent an apartment in Wonderland.\nThe Mad Hatter walks into a large apartment and sees a hole in the roof, but he\ndecides to rent the unit anyway. The apartment that Alice decides to lease has\nno obvious problems. The next day, however, some mold spots appear by one\nof the vents. The mold grows rapidly and Alice starts to have regular headaches\nand some trouble breathing. Additionally, an unknown troublemaker smashed\nAlice\xe2\x80\x99s air conditioning unit and it no longer works. Can either the Mad Hatter\nor Alice win a lawsuit against their landlord if their problems aren\xe2\x80\x99t fixed?\n\n\x0cLeasing Real Property\n\n567\n\n3. Retaliatory Eviction\nImperial Colliery Co. v. Fout\n373 S.E.2d 489 (W. Va. 1988)\nDanny H. Fout, the defendant below, appeals a summary judgment dismissing his claim\nof retaliatory eviction based on the provisions of W.Va.Code, 55\xe2\x80\x933A\xe2\x80\x933(g), which is\nour summary eviction statute. Imperial Colliery had instituted an eviction proceeding\nand Fout sought to defend against it, claiming that his eviction was in retaliation for\nhis participation in a labor strike.\nThis case presents two issues: (1) whether a residential tenant who is sued for\npossession of rental property under W.Va.Code, 55\xe2\x80\x933A\xe2\x80\x931, et seq., may assert retaliation\nby the landlord as a defense, and (2) whether the retaliation motive must relate to the\ntenant\xe2\x80\x99s exercise of a right incidental to the tenancy.\nFout is presently employed by Milburn Colliery Company as a coal miner. For six years,\nhe has leased a small house trailer lot in Burnwell, West Virginia, from Imperial Colliery\nCompany. It is alleged that Milburn and Imperial are interrelated companies. A written\nlease was signed by Fout and an agent of Imperial in June, 1983. This lease was for a\nprimary period of one month, and was terminable by either party upon one month\xe2\x80\x99s\nnotice. An annual rental of $1.00 was payable in advance on January 1 of each year. No\nsubsequent written leases were signed by the parties.\nOn February 14, 1986, Imperial advised Fout by certified letter that his lease would be\nterminated as of March 31, 1986. Fout\xe2\x80\x99s attorney corresponded with Imperial before\nthe scheduled termination date. He advised that due to various family and monetary\nproblems, Fout would be unable to timely vacate the property. Imperial voluntarily\nagreed to a two-month extension of the lease. A second letter from Fout\xe2\x80\x99s attorney,\ndated May 27, 1986, recited Fout\xe2\x80\x99s personal problems and requested that Imperial\xe2\x80\x99s\nattempts to oust Fout be held \xe2\x80\x9cin abeyance\xe2\x80\x9d until they were resolved. A check for $1.00\nwas enclosed to cover the proposed extension. Imperial did not reply.\nOn June 11, 1986, Imperial sued for possession of the property, pursuant to\nW.Va.Code, 55\xe2\x80\x933A\xe2\x80\x931, et seq., in the Magistrate Court of Kanawha County. Fout\nanswered and removed the suit to the circuit court on June 23, 1986. He asserted as a\n\n\x0c568\n\nProperty\n\ndefense that Imperial\xe2\x80\x99s suit was brought in retaliation for his involvement in the United\nMine Workers of America and, more particularly, in a selective strike against Milburn.\nImperial\xe2\x80\x99s retaliatory motive was alleged to be in violation of the First Amendment\nrights of speech and assembly, and of the National Labor Relations Act, 29 U.S.C. \xc2\xa7\n151, et seq. Fout also counter-claimed, seeking an injunction against Imperial and\ndamages for annoyance and inconvenience.\nAfter minimal discovery, Imperial moved for summary judgment. The circuit court\ngranted Imperial\xe2\x80\x99s motion in an amended judgment order dated October 8, 1986,\nrelying principally upon Criss v. Salvation Army Residences, 173 W.Va. 634, 319 S.E.2d 403\n(1984). The court concluded that the retaliation defense \xe2\x80\x9cmust derive from, or in some\nrespect be related to, exercise by the tenant of rights incident to his capacity as a\n\xe2\x80\x98tenant\xe2\x80\x99.\xe2\x80\x9d Since Fout\xe2\x80\x99s participation in the labor strike was admittedly unrelated to his\ntenancy, the defense was dismissed and possession of the property was awarded to\nImperial. It is from this order that Fout appeals.\nOur initial inquiry is whether retaliation by the landlord may be asserted by the tenant\nas a defense in a suit under W.Va.Code, 55\xe2\x80\x933A\xe2\x80\x933(g). We addressed this issue in Criss v.\nSalvation Army Residences, supra, and stated without any extended discussion that this\nsection \xe2\x80\x9cspecifically provides for the defense of retaliation.\xe2\x80\x9d 173 W.Va. at 640, 319\nS.E.2d at 409. We did not have occasion in Criss to trace the development of the\nretaliatory eviction defense.\nIt appears that the first case that recognized retaliatory eviction as a defense to a\nlandlord\xe2\x80\x99s eviction proceeding was Edwards v. Habib, 397 F.2d 687 (D.C.Cir.1968), cert.\ndenied, 393 U.S. 1016, 89 S.Ct. 618, 21 L.Ed.2d 560 (1969). There, a month-to-month\ntenant who resided in a District of Columbia apartment complex reported to a local\nhealth agency a number of sanitary code violations existing in her apartment. The\nagency investigated and ordered that remedial steps be taken by the landlord, who then\nadvised Edwards that her lease was terminated. When the landlord sued for possession\nof the premises, Edwards alleged the suit was brought in retaliation for her reporting\nof the violations. A verdict was directed for the landlord and Edwards appealed.\nOn appeal, the court reviewed at length the goals sought to be advanced by local\nsanitary and safety codes. It concluded that to allow retaliatory evictions by landlords\nwould seriously jeopardize the efficacy of the codes. A prohibition against such\n\n\x0cLeasing Real Property\n\n569\n\nretaliatory conduct was therefore to be implied, even though the regulations were silent\non the matter.\nMany states have protected tenant rights either on the Edwards theory or have implied\nsuch rights from the tenant\xe2\x80\x99s right of habitability. Others have utilized statutes\nanalogous to section 5.101 of the Uniform Residential Landlord and Tenant Act, 7B\nU.L.A. 503 (1985), which is now adopted in fifteen jurisdictions. Similar landlord and\ntenant reform statutes in seventeen other states also provide protection for tenancyrelated activities.\nUnder W.Va.Code, 37\xe2\x80\x936\xe2\x80\x9330, a tenant is, with respect to residential property, entitled\nto certain rights to a fit and habitable dwelling. In Teller v. McCoy, 162 W.Va. 367, 253\nS.E.2d 114 (1978), we spoke at some length of the common law right of habitability\nwhich a number of courts had developed to afford protection to the residential tenant.\nWe concluded that these rights paralleled and were spelled out in more detail in\nW.Va.Code, 37\xe2\x80\x936\xe2\x80\x9330. In Teller, we also fashioned remedies for the tenant where there\nhad been a breach of the warranty of habitability. However, we had no occasion to\ndiscuss the retaliatory eviction issue in Teller.\nThe central theme underlying the retaliatory eviction defense is that a tenant should\nnot be punished for claiming the benefits afforded by health and safety statutes passed\nfor his protection. These statutory benefits become a part of his right of habitability. If\nthe right to habitability is to have any meaning, it must enable the tenant to exercise\nthat right by complaining about unfit conditions without fear of reprisal by his landlord.\nSee Annot., 40 A.L.R.3d 753 (1971).\nAfter the seminal decision in Edwards, other categories of tenant activity were deemed\nto be protected. Such activity was protected against retaliation where it bore a\nrelationship to some legitimate aspect of the tenancy. For example, some cases\nprovided protection for attempts by tenants to organize to protect their rights as\ntenants. Others recognized the right to press complaints directly against the landlord\nvia oral communications, petitions, and \xe2\x80\x9crepair and deduct\xe2\x80\x9d remedies. . . .\nA few courts recognize that even where a tenant\xe2\x80\x99s activity is only indirectly related to\nthe tenancy relationship, it may be protected against retaliatory conduct if such conduct\nwould undermine the tenancy relationship. Typical of these cases is Winward Partners v.\n\n\x0c570\n\nProperty\n\nDelos Santos, 59 Haw. 104, 577 P.2d 326 (1978). There a group of month-to-month\ntenants gave testimony before a state land use commission in opposition to a proposal\nto redesignate their farm property from \xe2\x80\x9cagricultural\xe2\x80\x9d to \xe2\x80\x9curban\xe2\x80\x9d uses. The proposal\nwas sponsored by the landlord, a land developer. As a result of coordinated activity by\nthe tenants, the proposal was defeated. Within six months, the landlord ordered the\ntenants to vacate the property and brought suit for possession.\nThe Hawaii Supreme Court noted that statutory law provided for public hearings on\nproposals to redesignate property, and specifically invited the views of the affected\ntenants. The court determined that the legislative policy encouraging such input would\nbe jeopardized \xe2\x80\x9cif ... [landlords] were permitted to retaliate against ... tenants for\nopposing land use changes in a public forum.\xe2\x80\x9d 59 Haw. at 116, 577 P.2d at 333. It relied\non Pohlman v. Metropolitan Trailer Park, Inc., 126 N.J.Super. 114, 312 A.2d 888\n(Ch.Div.1973), which involved a similar fact pattern where tenants\xe2\x80\x99 intervention in\nzoning matters to protect their tenancy was sufficiently germane to the landlord-tenant\nrelationship to support the defense of retaliatory eviction. See also S.P. Growers Ass\xe2\x80\x99n v.\nRodriguez, 17 Cal.3d 719, 552 P.2d 721, 131 Cal.Rptr. 761 (1976) (retaliation for suit by\ntenant charging violation of Farm Labor Contractor Registration Act, 7 U.S.C. \xc2\xa7 2041,\net seq.).\nThe Legislature, in giving approval to the retaliation defense, must have intended to\nbring our State into line with the clear weight of case law and statutory authority\noutlined above. We accordingly hold that retaliation may be asserted as a defense to a\nsummary eviction proceeding under W.Va.Code, 55\xe2\x80\x933A\xe2\x80\x931, et seq., if the landlord\xe2\x80\x99s\nconduct is in retaliation for the tenant\xe2\x80\x99s exercise of a right incidental to the tenancy.\nFout seeks to bring this case within the Windward line of authority. He argues principally\nthat Imperial\xe2\x80\x99s conduct violated a public policy which promotes the rights of\nassociation and free speech by tenants. We do not agree, simply because the activity\nthat Fout points to as triggering his eviction was unrelated to the habitability of his\npremises.\nFrom the foregoing survey of law, we are led to the conclusion that the retaliatory\neviction defense must relate to activities of the tenant incidental to the tenancy. First\nAmendment rights of speech and association unrelated to the tenant\xe2\x80\x99s property interest\nare not protected under a retaliatory eviction defense in that they do not arise from the\n\n\x0cLeasing Real Property\n\n571\n\ntenancy relationship. Such rights may, of course, be vindicated on other independent\ngrounds.\nFor the reasons discussed above, the judgment of the Circuit Court of Kanawha\nCounty is affirmed.\nNotes and Questions\n1. The basic law. In states that recognize retaliatory eviction, a landlord may not\npunish tenants when they exercise legal rights incidental to their tenancy.\nGenerally, this means that a landlord cannot raise the rent, reduce services,\nrefuse to renew a lease, or bring an eviction action for the purpose of retaliating\nagainst a tenant who has complained about the condition of the unit, filed a\nlawsuit concerning the fitness of the unit, contacted a local agency, or exercised\nrights under the implied warranty of habitability.\n2. Legal change. Under the traditional English common law, a landlord could\nraise the rent or refuse to renew a tenant\xe2\x80\x99s lease for any reason. How does the\ncourt in Imperial Colliery justify changing a long-settled rule?\n3. Rise of the doctrine. The doctrine of retaliatory eviction came to prominence\naround the same time as the implied warranty of habitability. What\xe2\x80\x99s the link\nbetween these two rules?\n4. Retaliate for what? West Virginia, like most states, protects tenants from\nretaliatory eviction. In the case above, Fout presented evidence that he lost his\ntenancy as a result of retaliation by his landlord. Why then did Fout lose? Do\nyou agree with the limitations that West Virginia has put on the doctrine of\nretaliatory eviction? Why should tenants fear losing their homes if they exercise\ntheir First Amendment rights?\n5. Property serves human values? Recall New Jersey v. Shack (private farm owners\ncannot bar social service workers from meeting with migrant laborers who live\non the farm). In that opinion we saw that property rights are occasionally\ntrumped by other values. Why don\xe2\x80\x99t Fout\xe2\x80\x99s rights under the First Amendment\nand the National Labor Relations Act outweigh his landlord\xe2\x80\x99s desire to kick him\nout? Can you distinguish Imperial Colliery from Shack?\n\n\x0c572\n\nProperty\n\n6. Is housing special? Is housing a good like any other, or is it somehow different\nfrom most things we buy and sell on the market? In continental European\ncountries there\xe2\x80\x99s a tentative national consensus that all housing\xe2\x80\x94even privately\nowned apartments\xe2\x80\x94has a uniquely public or social dimension. As a result,\nmany European nations grant citizens strong protections against forced\nrelocations. For example, \xe2\x80\x9cgood faith\xe2\x80\x9d eviction schemes are pervasive. In a\n\xe2\x80\x9cgood faith\xe2\x80\x9d jurisdiction, a landlord can only refuse to renew a tenancy for a\ngood reason\xe2\x80\x94generally some faulty behavior on the part of the tenant\n(damaging the premise, creating a nuisance, breaching a material term in the\nlease) or the landlord\xe2\x80\x99s desire to remodel the unit. Should U.S. states adopt such\na rule?\n7. Remedies. What\xe2\x80\x99s the appropriate remedy for a tenant who wins a retaliatory\neviction case?\n8. Establishing motive. Peter Pan calls his local Board of Health to complain\nabout the conditions in The Neverland Apartments, where he rents a twobedroom unit. The landlord, Hook, is furious at Pan. They get into a heated\nscreaming match in front of the building. If Hook waits a year and then\ndramatically raises Pan\xe2\x80\x99s rent, will Pan be able to win a retaliatory eviction case?\nWhat if Hook waits six months? Three months? Some states require the tenant\nto show that the landlord would not have taken action \xe2\x80\x9cbut for\xe2\x80\x9d the tenant\nexercising a right. Because of the difficulties in establishing motive, other states\nemploy a burden-shifting model in retaliatory eviction cases. In these\njurisdictions, the law presumes that the landlord has acted with a retaliatory\nmotive if the landlord raises the rent (or takes another retaliatory action) within\na certain amount of time after the tenant has availed himself of a legal\nentitlement. The window of time varies from three months to a year, but many\nstates use a six-month period. Importantly, the presumption against the\nlandlord is rebuttable.\n9. How common is retaliation? In his book, Evicted: Poverty and Profit in the\nAmerican City, Matthew Desmond recounts an anecdote about a landlord who\nwould immediately begin preparing eviction papers as soon as his tenants\ncomplained about their living conditions.\n\n\x0cLeasing Real Property\n\n573\n\n4. Landlord\xe2\x80\x99s Tort Liability\nA landlord\xe2\x80\x99s responsibility for injuries sustained on the leased premise has dramatically\nexpanded in the last 50 years. As discussed in the previous subsection, under the\ntraditional common law rule, the tenant had the duty to undertake all repairs and\nmaintenance on the rented property. As a result, the law absolved landlords from\nliability for injuries sustained because of dangerous conditions in the unit. The costs\nof damage (to both property and persons) sustained from rotted decks, falling plaster,\nand collapsing walls all fell squarely on tenants.\nAlmost every jurisdiction now imposes greater duties on landlords. At the very least,\nlandlords must exercise reasonable care in keeping common areas safe, use reasonable\ncare when making repairs, and warn tenants about latent defects\xe2\x80\x94unsafe conditions\nthat would not be obvious upon an inspection. Other jurisdictions, following the logic\nof the implied warranty of habitability, have gone farther. They reason that since the\nlandlord now has a duty to provide tenants (and their guests) with safe and clean\npremises, a failure to comply with this obligation may amount to negligence. The basic\nrule in these states is that a landlord must take reasonable steps to repair defects of\nwhich the landlord becomes aware. Failure to comply exposes landlords to liability for\ninjuries that result from the defective conditions.\nLandlords sometimes attempt to avoid the obligation to repair by inserting into the\nlease a clause stating that the lessor is not responsible for personal injury or property\ndamage that occurs on the premise. While such exculpatory clauses are typically upheld\nin commercial settings, courts increasingly strike them from residential leases as\nviolations of public policy.\n\n\x0c574\n\nProperty\n\n5. Gentrification & Rent Control\nDefined broadly, gentrification is the movement of wealthier people into a poor\nneighborhood, which results in a subsequent increase in rents and the ultimate\ndisplacement of longtime residents. The stereotypic progression starts when artists and\ngay couples move into a run-down but centrally located neighborhood in the urban\ncore. They fix up houses, open trendy cafes, and start galleries. The newcomers also\ndemand better public services and police protection from the local government. As\nthe number of amenities grows, home\nprices and rents begin to rise. Married\ncouples without children start to flow\ninto the area, followed quickly by\nbankers, lawyers, and families attracted\nthe neighborhood\xe2\x80\x99s beautiful older\nhomes and terrific location. As rents\ncontinue to rise, many of the original\nresidents\xe2\x80\x94who are often poor and\nblack\xe2\x80\x94can no longer afford the\nneighborhood. They are forced to\neither move or pay an enormous\npercentage of their income toward\nrent.\nOne resident of a gentrifying\nneighborhood in Portland gives a\npersonal account of the basic problem:\n\nPhoto courtesy of Flickr user Keith Hamm\n\nLast week I heard a shuffle at my front door and saw that my building\nmanager was slipping a notice under my door. I opened it only to read\nthat my rent was being raised by 10%. . . . [In the last year], my rent has\ngone up a total of 14%. If it continues at this pace, I\xe2\x80\x99ll have to find\nanother place to live because I\xe2\x80\x99ll be priced out of my very walkable, very\ncentrally-located neighborhood.\n[Gentrification is] an emotional tinderbox. People who are just going\nabout their lives are having to face eviction, displacement, or just have\n\n\x0cLeasing Real Property\n\n575\n\nto spend a lot more on housing if they want to stay where they are\nbecause of forces completely out of their control. In other words, you\ncould be doing everything \xe2\x80\x9cright\xe2\x80\x9d in your life\xe2\x80\x94being a responsible\ncitizen, earning a viable income and doing your best\xe2\x80\x94but it still isn\xe2\x80\x99t\ngood enough. Not unlike the tragedy of having your house destroyed by\na natural phenomenon like a hurricane or a flood, you could become a\nvictim of the \xe2\x80\x9cgreed phenomenon\xe2\x80\x9d where developers look with dollar\nsigns in their eyes at the house you live in with the intention of razing it\nand building a hugely profitable and expensive condo building there\ninstead.\nFor low-income individuals pushed out of their neighborhoods, the process of\ngentrification often produces traumatic effects. In addition to the financial costs of an\nunwanted move, gentrification often shatters valuable personal networks. People who\nhave lived their entire lives within a small geographic area may suddenly find\nthemselves separated from the friends and family who provide emotional support and\neconomic resources that serve as a vital buffer against the ills of poverty.\nMany activists have suggested that rent control laws are the best solution to problems\nspawned by gentrification. Rent control legislation comes in a variety of forms but\nmost often puts caps on the amount of rent that a landlord can charge (first-generation\ncontrols) and/or requires that prices for rented properties do not increase by more\nthan a certain percent each year (second-generation controls). Rent controls, activists\nargue, allow existing tenants to stay in their homes while continuing to devote the same\npercentage of their incomes to rent has they have in the past.\nEconomists have a very different perspective on fighting gentrification with rent\ncontrol mechanisms. American legal economists are typically opposed to rent controls.\nOften heatedly so. To understand why, put yourself in the shoes of a landlord in a city\nthat holds the price of rent below what the market will bear. How would you respond\nif you were forced to provide a service for less than the market price? First and\nforemost, you probably wouldn\xe2\x80\x99t build any new rental housing units. Why? Because\nyou\xe2\x80\x99d almost certainly make more money if you used your capital to build something\nthat\xe2\x80\x99s not regulated by the government. Ultimately, the lack of proper incentive to\nbuild apartments lowers the supply of rental housing and thereby increases the price\n(for anyone who doesn\xe2\x80\x99t qualify for rent controls). Second, you might decide to skimp\n\n\x0c576\n\nProperty\n\non the maintenance of your rent-controlled unit in order to recoup some of the lost\nprofits. After all, will a tenant in a rent-controlled apartment really give up their unit if\nyou don\xe2\x80\x99t respond to their request to fix the sink?\nSo goes the theory, at any rate\xe2\x80\x94and it is a theory that has found expression in judicial\nopinions, particularly among those judges of the U.S. Court of Appeals for the Seventh\nCircuit who moonlight as academic legal economists of the so-called \xe2\x80\x9cChicago School.\xe2\x80\x9d\nSee Chicago Board of Realtors, Inc. v. City of Chicago, 819 F.2d 732, 741-42 (7th Cir.\n1987) (Opinion of Posner, J.). In apparent agreement with these theoretical arguments,\nvery few American jurisdictions today maintain rent control policies\xe2\x80\x94only New York,\nLos Angeles, and a few places in the Bay Area have significant rent control laws. State\nand local governments are much more likely to attack problems of affordable housing\nby either giving rent vouchers to the poor or building government-owned housing\nprojects (are these better options?).\nBut perhaps the legal economists of a generation ago were mistaken\xe2\x80\x94or at least\ninsufficiently sensitive to the potential variety of rent control measures and the diversity\nof urban environments in which they can be deployed. While first-generation rent\ncontrol measures have few academic defenders in the United States, there is some\nsuggestion that the actual empirics of second-generation rent controls and other tenant\nprotections may diverge from the dire theoretical predictions of the Chicago School.\nIn particular, the effects of rent control on the supply, quality, and distribution of rental\nhousing may depend significantly on the nature of the protective regulation imposed,\nthe density of existing housing stock, availability of vacant land, the mix of other\nregulatory constraints on land use in general and housing in particular, and\nidiosyncrasies of the local economy\xe2\x80\x94particularly the degree of competition among\nlandlords. See generally Richard Arnott, Time for Revisionism on Rent Control?, 9 J. ECON.\nPERSPECT. 99 (1995); Bengt Turner & Stephen Malpezzi, A review of empirical evidence on\nthe costs and benefits of rent control, 10 SWED. ECON. POLICY REV. 11 (2003). Outside of\nthe United States, moreover, economists and politicians are less antagonistic toward\nrent control. Paris, for example, recently passed a law capping many rents. Germany,\nthe Netherlands, and Sweden also have widespread limitations on how much rent\nlandlords can charge.\n\n\x0cLeasing Real Property\n\n577\nNotes and Questions\n\n1. Europe v. America. What do you think accounts for the different views on\nrent control between European policy makers and their American counterparts?\n2. Getting to Affordability. If rent control isn\xe2\x80\x99t the answer, what steps should\ngovernment take to ensure access to affordable housing? Should the\ngovernment have any role at all in the housing market? Before the Great\nDepression the federal government played almost no part housing policy. How\nshould government housing policy regarding affordable housing fit into the mix\nof economic regulations addressing problems of poverty and equity?\n\nE. Wrapping Up\nThe following rental agreement is modeled on an actual lease that a friend of the\ncasebook authors was asked to sign. Do you see any potential problems for a tenant?\nWould you sign this lease?\nResidential Rental Agreement and Contract\nTHIS AGREEMENT (hereinafter known as the \xe2\x80\x9cLease\xe2\x80\x9d or the \xe2\x80\x9cAgreement\xe2\x80\x9d) is made\nand entered into this 1st day of September 2015, between Peter Rabbit (hereinafter\nreferred to as the \xe2\x80\x9cTenant\xe2\x80\x9d) and Mr. McGregor (hereinafter referred to as the\n\xe2\x80\x9cLandlord\xe2\x80\x9d). In exchange for valuable consideration, the landlord and tenant agree to\nthe following:\n1. Property. The landlord owns certain real property and improvements at 123\nVegetable Garden Way, Potterville, Beatrixia (hereinafter referred to as the\n\xe2\x80\x9cProperty\xe2\x80\x9d or the \xe2\x80\x9cPremise\xe2\x80\x9d). The Landlord wishes to lease the Premise to the Tenant\nupon the terms and conditions stated in this Lease. The Tenant wishes to lease the\nPremise from the Landlord upon the terms and conditions stated in this Lease.\n2. Term. This agreement shall commence on September 1, 2015 and shall commence\non August 31, 2018 at 11:59 PM. Upon any termination of the Agreement, the Tenant\nwill pay off all outstanding bills, remove all personal property from the Premise, bring\nthe leased premise back to the condition it was in upon move-in (excepting normal\n\n\x0c578\n\nProperty\n\nwear and tear), peacefully vacate the premise, return all keys to the Landlord, and give\nthe Landlord a forwarding address.\n3. Holdovers. If the Tenant holds over after the termination of the lease, a new\ntenancy from month-to-month shall be created. Under the new month-to-month lease\nthe Tenant shall be responsible for double the agreed upon rent.\n4. Rent. The Tenant shall pay the landlord $1000 per month as rent for the entire term\nof the agreement. The rent shall be due on the 1st day of each calendar month.\nWeekends, holidays, and religious observances do not excuse the Tenant\xe2\x80\x99s obligation\nto make timely payments.\n5. Delivery of Possession. The Landlord shall not be held liable for any failure to\ndeliver possession of the Premise by the starting date of the agreed upon term.\n6. Late Fees. A late fee of 5% shall be due if the rent is received after the 5th day of\nthe month. A late of 10% shall be due if the rent is received after the 10th day of the\nmonth. Acceptance of a late fee does not affect or waive any other right or remedy the\nLandlord may exercise for Tenant\xe2\x80\x99s failure to timely pay rent.\n7. Returned Checks. In the event that any payment by the Tenant is returned for\ninsufficient funds or if the Tenant stops payment, the Tenant will pay $100 to the\nLandlord for each such event, in addition to the Late Fees described above.\n8. Security Deposit. The Tenant shall deposit with the Landlord $1500 as a security\ndeposit for this Agreement. All interest that accrues on such a security deposit shall\nbelong to the Landlord alone. The Landlord may use the deposit money for any and\nall purposes allowed by law.\n9. Utilities. It is the responsibility of the Tenant to obtain all utilities for the leased\nProperty. Tenant\xe2\x80\x99s failure to make any payment for the utilities shall constitute a\nmaterial breach of the agreement. The Landlord shall not be held liable for any failure\nto deliver any utility service or for any damage caused by a problem with any utility\nservice, whatever the cause of such problem. The Tenants do hereby waive any claim\nfor damages that result from any problem with utility service.\n\n\x0cLeasing Real Property\n\n579\n\n10. Keys. The Tenant shall not install any new locks anywhere on the property or\nmake any copies of the keys. The Tenant also shall refrain from providing any keys to\nany person not listed on this Agreement. When the lease terminates, the Tenant shall\nreturn all keys to the Landlord.\n11. Pets. No pets of any kind, type, or breed shall be allowed on the property without\nthe Landlord\xe2\x80\x99s express written consent. This consent, if given, will require an\nadditional pet deposit.\n12. Use of the Premise. The premise shall be used and occupied solely by the Tenant.\nTenant shall not allow any other person to use or occupy the premise without first\nobtaining Landlord\xe2\x80\x99s written consent. No part of the Premise shall be used at any time\nduring the term for any business, trade, or other commercial purpose. Additionally,\nthe tenant agrees to comply with all local, state, and federal laws, regulations, and\nordinances. No part of the property may be used in any way that aids or advances a\ncriminal enterprise.\n13. Assignments and Subletting. The Tenant shall not license, assign, or sublet the\nProperty and/or this agreement without the written consent of the Landlord. An\nassignment, subletting or license without the Landlord\xe2\x80\x99s written consent shall be\nconsidered absolutely null and void and, at the Landlord\xe2\x80\x99s option, terminate this\nAgreement.\n14. Alterations. The Tenant shall make no alterations to the Premise without written\nconsent of the Landlord. If the Tenant makes any unauthorized improvement,\nmodification, or change to the Property, the landlord has the option to charge the\nTenant the cost of restoring the Premise to its original condition. In the event that the\nLandlord approves an alteration made by the Tenant, such alternations shall become\nthe property of the Landlord and remain on the Property.\n15. Maintenance & Repair. Except for normal wear and tear, the Tenant shall maintain\nthe Premise in the condition it was upon the starting date of the Agreement. Should\nany damages, malfunctions, breakages, or other problems occur during the course of\nthe Lease, the Landlord shall have a reasonable amount of time to complete such\nrepairs. During that time, the Tenant\xe2\x80\x99s rent shall remain due in full and on time despite\nany hardships such repairs or delays may cause. Tenant also has a contractual duty to\n\n\x0c580\n\nProperty\n\n(1) notify Landlord of any problems with the leased premise, (2) Deposit all trash,\nrubbish, refuse, and garbage in the trash cans provided by the city, (3) keep all windows,\ndoors, and locks in good order, (4) inspect the fire alarms each and every month.\n16. Noise. The Tenant and the Tenant\xe2\x80\x99s guests shall at all times keep the level of\nsound down to a level that does not annoy or interfere with other residents or\nneighbors.\n17. Sale of the Property. The Landlord shall have the right to sell or transfer his\nownership of the Property and this Agreement at any time and without restriction.\nUpon sale or transfer of the Landlord\xe2\x80\x99s interest, this agreement may be terminated by\neither the Landlord or the party who purchases the Landlord\xe2\x80\x99s interest. The Tenant\nagrees to release, waive, and hold harmless the Landlord and the Landlord\xe2\x80\x99s successor\nfrom all liabilty if such a transfer occurs.\n18. Access. The Landlord and his agents shall have the right to enter the Property\nwithout notice to inspect the property, make repairs, or show the property to\nprospective tenants or purchasers.\n19. Condition of the Premise. The Landlord makes no guarantees or warranties about\nthe condition of the leased premise. The Tenant assumes all risk of injury or harm\nstemming from any accidents or criminal acts occurring on or around the Premise. The\nTenant agrees to hold the Landlord harmless for all liability stemming any injury or\nharm to the Tenant, Tenant\xe2\x80\x99s property, or Tenant\xe2\x80\x99s guests. The Tenant further agrees\nto indemnify, defend, and hold harmless the Landlord from any and all claims over the\ncondition of the premise. Should the Tenant damage the Premise, he shall indemnify\nthe Landlord for all costs of repair or replacement within 30 days.\n20. Natural Disaster. In the event of a natural disaster, fire, or other catastrophic event,\nthe Landlord may choose not to repair the Premise, in which case the Lease shall\nterminate. The Landlord may also elect to fix the Premise, in which case the Tenant\nmust continue to pay the full monthly rent so long as the repairs are completed within\na reasonable time. In either case, any and all damages and injuries connected to acts of\nthe Tenant, his guests, or property shall be the sole financial responsibility of the\nTenant.\n\n\x0cLeasing Real Property\n\n581\n\n21. Eminent Domain. If a government or private entity takes the Premise or any part\nof the Premise by eminent domain, this Lease shall terminate. The new termination\nshall be the date of the final taking order. Any award or court judgment in favor of the\nLandlord in an eminent domain case or any settlement award stemming from an\neminent domain proceeding shall belong to the Landlord in full. The Tenant shall have\nno claim over such awards.\n22. Attorney\xe2\x80\x99s Fees. Tenant agrees to pay all reasonable attorney\xe2\x80\x99s fees, court costs,\nand other expenses if it becomes necessary for the Landlord to enforce any of the\nconditions of covenants of this Lease, including but not limited to eviction proceedings,\ncollection of rents, and damage to the Premise caused by the Tenant. The Tenant also\nagrees to indemnify the Landlord for all attorney\xe2\x80\x99s fees, court costs, and other expenses\nthat the Landlord may incur while successfully defending a lawsuit brought by the\nTenant.\n22. Abandonment. If at any time during the term of this Lease the Tenant abandons\nthe Premise, the Landlord may obtain possession of the Premise in any manner\nprovided for by law. Any personal property left behind shall be considered abandoned.\nThe Landlord may dispose of such personal property in any manner he deems fit and\nis released of all liability for doing so.\n23. Severability. If any portion of this Lease shall be found unenforceable, invalid, or\nvoid under any law or public policy, that portion of the Lease shall be severed from the\nremainder of the Agreement. All remaining portions of the Agreement will remain in\neffect and enforceable.\n24. Governing Law. This lease shall be governed and interpreted under the laws of\nthe Commonwealth of Beatrixia.\n25. Non-Waiver. No delay or non-enforcement of any term of this Agreement by the\nLandlord shall not be deemed a waiver. All terms and conditions of this Agreement\nshall remain fully enforceable should the Landlord seek to enforce any condition or\ncovenant at a later date, even if the Landlord has intentionally or unintentionally\nneglected to do so in a previous instance.\n\n\x0c582\n\nProperty\n\n26. Notices. Any notice required or permitted under this Agreement must be written\non 8\xc2\xbd x 11 paper and sent by United Parcel Service (UPS). Notice shall be sent to the\naddress of the Property for the Tenant or to 345 Bunny Pie Lane, Potterville,\nBeatrixia for the Landlord.\n27. Spelling and Grammar. Any mistakes in spelling, grammar, punctuation, or gender\nusage shall not be fatal to the Agreement. Rather, they shall be interpreted to carry out\nthe intent of the parties.\n28. Default. Tenant shall be in default of this Agreement if he fails to comply with\nany covenant, condition or term and/or fails to pay rent when due and/or causes\ndamage to the Premise during the term which cumulatively equals or exceeds $100.\nShould the Tenant ever default, the Landlord may with or without notice either (1)\nterminate the Lease or (2) terminate the Tenant\xe2\x80\x99s right to possession of the Premise\nwhile leaving this Agreement operative. If the Landlord elects option (2), the Landlord\nwill have the immediate right to possess the Premises and the Tenant shall lose all\npossessory rights and have the obligation to immediately vacate the Premise. However,\nthe Tenant shall still have the duty to pay all rents, fees and expenses mandated under\nthis Agreement and/or by the judicial system until either the agreed upon term\nconcludes or the property is re-rented at a monthly rate not less than the amount owned\nunder this Agreement with any negative balance owed by the Tenant.\n____________________\nTenant Signature\n_____________________\nDate\n_____________________\nLandlord Signature\n____________________\nDate\n\n\x0cPart IV: Transfers\nRules about transferring property are created by law. There are only certain ways\npeople can rearrange property relations. Some rearrangements happen even if the\npeople involved don\xe2\x80\x99t want them, and some don\xe2\x80\x99t happen even if the people involved\ndo want them. Knowing the rules is key to understanding which transfers work and\nwhy.\nThere are several methods of transferring property. The key voluntary methods are\ngifts, sales, and transfers at death, which can be divided into transfers by will (also\nknown as transfer by devise) and transfers by operation of law because of the\ndecedent\xe2\x80\x99s intestacy (dying without a will). We have already seen examples of transfers\nat death in our examination of the estates system. We will see more shortly in our\nchapter on Wills and Intestacy.\nIn this part of the course, we will focus primarily on transfers of interests in real\nproperty by sale, and the elaborate legal infrastructure established to support such\ntransactions. But we will begin our study of voluntary transfers with the law of gratuitous\ntransfers, specifically gifts of personal property. With this most simple of transfers, we\nwill lay a foundation for understanding how the law of transfers tries to respect and\nfacilitate the intent to consensually transfer property while guarding against fraud and\nmistake, all while being mindful of public policy interests that may compete with the\nprivate interests of some property owners.\n\n583\n\n\x0cGifts\nAlthough most litigated transfers involve sales, it is useful to study gifts for several\nreasons. First, gift law recapitulates our previous exploration of the significance of\npossession to ownership. Second, gift law highlights how some problems in contract\nlaw arise only out of executory promises: completed promises involving property will\noften be valid as gifts, even if they lacked consideration. Gift law also provides an\nintroduction to methods of transferring land, particularly transfers by deed and\ntransfers by will. In order for a valid gift to occur, three elements must be present: (1)\nthe donor must intend to give the property as a gift; (2) the donor must deliver the\nproperty to the donee; and (3) the donee must accept the gift. We won\xe2\x80\x99t spend much\ntime on the third element, because when the property has some value, acceptance will\ngenerally be presumed in the absence of an explicit rejection.\nUnlike a sale or a contract, a gift does not require consideration. This leads to concerns\nthat often shape judicial doctrine. First, without tangible consideration, we need to\nkeep people from lying about what was given to them. Because gift issues often arise\nafter the alleged donor died, courts have been concerned to protect the donor\xe2\x80\x99s heirs\nfrom having the donor\xe2\x80\x99s estate stripped by people who claim to be donees.\nSecond and relatedly, we desire to protect the system of written wills and to encourage\nits use. A standard will must be signed and witnessed. A system that easily allows premortem gifts might undermine people\xe2\x80\x99s incentives to take the time to write a will\xe2\x80\x94\nthey might think they can always just give their property away when death\napproaches\xe2\x80\x94and also harm the legitimate expectations of those who are named in a\nwill. If the person who writes a will, known as the testator, identifies specific property\nin her will, but sells it or gives it away before she dies, the devise in the will is nullified;\nit\xe2\x80\x99s no longer her property to give away when she dies. Although people named as\ndevisees in a will have no legal rights to the property before the testator dies, they might\nnonetheless have practically and morally compelling expectations\xe2\x80\x94especially if we\nworry about the people surrounding a dying person exercising undue influence and\nextracting gifts that the dying person wouldn\xe2\x80\x99t give if she were thinking more clearly.\nThus, by making it more difficult to give gifts, we may protect the overall system of\n584\n\n\x0cGifts\n\n585\n\nproperty transfers. This concern can lead courts to find that no gift has been made\neven when the would-be donor very clearly wanted to give the property away. Consider\nas you read whether this overall structural concern is justified.\n\nA. Intent\nAlthough laypeople may not be aware of this distinction, there is a huge legal difference\nbetween \xe2\x80\x9cI will give you this car when you graduate\xe2\x80\x9d and \xe2\x80\x9cI now give you this car.\xe2\x80\x9d\n(In the next section we will investigate a third variant, in which the gift is of a future\ninterest.) \xe2\x80\x9cI will give you this car\xe2\x80\x9d is a mere promise with no legal force. No matter\nhow serious the speaker\xe2\x80\x99s intent is, it is not an intent to make a present gift, and it will\ntherefore not result in a gift.\nIntent is rarely an issue in gift cases, but it can arise when it is not clear what the donor\nintended to give: Suppose O says to D, \xe2\x80\x9cI want you to have the jewelry box on my\ndresser and the jewelry inside,\xe2\x80\x9d believing that she\xe2\x80\x99s storing costume jewelry in the box.\nD takes the box, but inside there are no costume jewels, only a diamond necklace.\nWhat gift has been made? What if O says \xe2\x80\x9cI want you to have the jewelry box and its\ncontents,\xe2\x80\x9d and the contents are bearer bonds worth $100,000? If O is deceased when\nthe issue is litigated, how would you determine her intent?\n\nB. Delivery\nSimply put, the property must in some way pass out of the grantor\xe2\x80\x99s control in order\nfor a gift to be valid; this is known as delivery. Professor Philip Mechem summarized\nthe reasons for the requirement:\n(1) Delivery has psychological significance, forcing the donor to\nconfront the loss of the property: the \xe2\x80\x9cwrench of delivery\xe2\x80\x9d protects\nthe donor from poor choices.\n(2) Delivery signifies the gift to third party witnesses, settling doubts\nabout whether what was intended was a mere promise to make a gift\nin the future or a present gift.\n\n\x0c586\n\nProperty\n\n(3) Delivery lets the property itself bear mute witness to the fact of the\ngift: possession itself has evidentiary weight.\nPhilip Mechem, The Requirement of Delivery in Gifts of Chattels and of Choses in Action\nEvidenced by Commercial Instruments, 21 ILL. L. REV. 341, 348-49 (1926); but see Chad A.\nMcGowan, Special Delivery: Does the Postman Have to Ring at All\xe2\x80\x94the Current State of the\nDelivery Requirement for Valid Gifts, 31 REAL PROP. PROB. & TR. J. 357 (1996) (critiquing\nMechem).\nLand doesn\xe2\x80\x99t move, at least not for these purposes, so manual delivery is impossible,\nand \xe2\x80\x9csymbolic\xe2\x80\x9d delivery of land has always been accepted. At early common law, the\ntransfer of land involved a ceremony called livery of seisin, in which the transferor\nphysically handed over a clod of dirt or a twig from the land to the transferee.\nFortunately, transfer of an interest in land is now generally accomplished by a written\ninstrument, known as a deed. At a minimum, a deed must describe the land to be\ntransferred, contain some words indicating an intent to make a present transfer of title,\nand the grantor\xe2\x80\x99s signature (which courts construe liberally\xe2\x80\x94almost any mark or\nsymbol of the grantor\xe2\x80\x99s approval, including the signature of the grantor\xe2\x80\x99s agent, will be\nsufficient). These formalities will be covered in more detail in the land conveyancing\nsection.\nWhat about personal property? Most gifts, especially gifts of personal property, are\ngiven during life. Nonetheless, many litigated cases arise around near-death gifts. As\nyou read, consider why the case law would diverge so much from the practice of giving.\nIn re Estate of Evans\n356 A.2d 778 (Pa. 1976)\nAppellant, Vivian Kellow, objected to the inventory, proposed schedule of distribution\nand final accounting of the executor of the estate of Arthur Evans. After appellant\nfinished the presentation of her case, the lower court granted appellees\xe2\x80\x99 motion to\ndismiss appellant\xe2\x80\x99s objections. \xe2\x80\xa6 The thrust of her appeal to this Court is that certain\ncontents of a safe deposit box were the subject of an inter vivos gift to her from Arthur\nEvans, the deceased, and, consequently, should not have been included in his estate.\n\n\x0cGifts\n\n587\n\nAppellant, the niece of Arthur Evans\xe2\x80\x99 deceased wife, began working for the Evans\nfamily when she was 16. For several years she took care of Mrs. Evans who for some\nyears prior to death was an invalid. Appellant cooked meals for the Evanses, cleaned\ntheir house, did their laundry and generally cared for Mrs. Evans. She received adequate\ncompensation for performing these needed services. When Mrs. Evans died, appellant\ncontinued to cook at least one hot meal a day for Mr. Evans, do his laundry and make\nsure his house was tidy. After appellant was married, she continued to perform these\nsame services and visited Mr. Evans once a day. In May of 1971, following one of his\nfour hospitalizations, the deceased moved into appellant\xe2\x80\x99s home.\nAlthough at times Mr. Evans was confined to his bed because of water in his legs, he\nfrequently took walks, had visits with his lawyers and made trips to his bank. On\nOctober 22, 1971, appellant\xe2\x80\x99s husband drove Mr. Evans and a friend of his, Mr. Turley,\nto town so that Mr. Evans might go to the bank. Turley testified that Mr. Evans spent\nabout one hour going through the contents of his safe deposit box. Before leaving the\nbank, the deceased obtained both keys to the box.\nVarious witnesses presented by appellant testified to seeing the keys to the safe deposit\nbox beneath appellant\xe2\x80\x99s mattress and to statements by Mr. Evans to the effect that the\ncontents of the safe deposit box had been given to appellant. Mr. Evans entered the\nhospital for the last time on November 5, 1971. During this last hospital stay, Reverend\nCunnings visited with him and was told that Mr. Evans was giving the Reverend\xe2\x80\x99s\nchurch $10,000.00 and that he had given the rest of his possessions and the keys to his\nsafe deposit box to appellant. Mr. Evans expired on November 23, 1971.\nAppellant relinquished the keys to the safe deposit box to a bank officer, but not\nwithout protesting that the contents of the box were hers. The box revealed a\nholographic will of Mr. Evans dated September 16, 1965, and approximately\n$800,000.00 in bonds, preferred and common stock and several miscellaneous items. *\n\n*\n\nThe will was uncontested and under its terms provided for a $1,000.00 bequest to appellant.\n\n\x0c588\n\nProperty\n\nThe lower court correctly noted that the requirements for a valid inter vivos gift were\ndonative intent and delivery, actual or constructive. With respect to donative intent,\nthe court found:\n\xe2\x80\x98Turning to the facts of this case, certainly no one can reasonably argue\nthat Arthur Evans lacked sufficient motive to make a gift to Vivian. The\nrecord clearly manifests, both by his conduct and his statements,\ndonative intent, the first prerequisite.\xe2\x80\x99\nNevertheless, the court ruled that no delivery had been made. This result was\npredicated upon a finding that the deceased had not divested himself of complete\ndominion and control over the safe deposit box. After properly noting that\nconstructive delivery is sufficient when manual delivery is impractical or inconvenient,\nthe court reasoned:\nThe record contains no evidence of circumstances which were such that\nit was impractical or inconvenient to deliver the contents of this box into\nthe actual possession or control of Vivian.\nArthur Evans, although suffering physical infirmities and apprehensive of death, was\nnonetheless ambulatory. On October 22, 1971, he appeared at the Nanticoke National\nBank in the company of Harold Turley and Leroy Kellow and spent approximately one\nhour going over the contents of his safe deposit box in a cubicle provided in the bank\nfor that purpose. He left the bank after redepositing the contents and took with him\nonly the keys which independent testimony indicates he delivered to Vivian the next\nday. There was no manual delivery of the contents. The contents of the box remained\nundisturbed. The box, and its contents, were registered in the name of the decedent at\nthe date of his death. The objects of the gift were not placed in the hands of Vivian,\nnor was there placed within her power the means of obtaining the contents.\xe2\x80\x99\xe2\x80\xa6\n\xe2\x80\x98A claim of a gift inter vivos against the estate of the dead must be\nsupported by clear and convincing evidence. In order to effectuate an\ninter vivos gift there must be evidence of an intention to make a gift and a\ndelivery, actual or constructive, of a nature sufficient not only to divest\nthe donor of all dominion over the property but also invest the donee\n\n\x0cGifts\n\n589\n\nwith complete control over the subject-matter of the gift. \xe2\x80\xa6 [Tomayko\nv. Carson, 368 Pa. 379, 385 (1951).\nIn the instant case, the controversy focuses on whether there was an adequate delivery.\n\xe2\x80\xa6:\n\xe2\x80\xa6 \xe2\x80\x98If there remains something for the donor to do before the title of\nthe donee is complete, the donor may decline the further performance\nand resume his own,\xe2\x80\x99 \xe2\x80\xa6 \xe2\x80\x98(i)t is not possible that a chancellor would\ncompel an executor or administrator to complete a gift by the doing of\nany act which the alleged donor if living might have refused to do, and\nthereby revoked his purpose to give.\xe2\x80\x99 \xe2\x80\xa6 \xe2\x80\x98Though every other step be\ntaken that is essential to the validity of the gift, if there is no delivery, the\ngift must fail. Intention cannot supply it; words cannot supply it; actions\ncannot supply it. It is an indispensable requisite, without which the gift\nfails, regardless of consequence.\xe2\x80\x99 The consequence is that no matter how\noften or how emphatically the desire or intention of the donor to make\nthe gift has been expressed, upon his death before delivery has been\ncompleted, the promise or purpose to give is revoked.\nWe have recognized that in some cases due to the form of the subject matter of the\ngift or due to the immobility of the donor actual, manual delivery may be dispensed\nwith and constructive or symbolic delivery will suffice. In Ream Estate, 413 Pa. 489,\n198 A.2d 556 (1964), for example, the Court found there had been a valid constructive\ndelivery of an automobile where the donor gave the keys to the alleged donee and also\ngave him the title to the car after executing an assignment of it leaving the designation\nof the assignee blank. The assignment was executed in the presence of a justice of the\npeace and the evidence was overwhelming that the name of the donee was to be\ninserted upon the death of the decedent. \xe2\x80\xa6\nAppellant relies heavily on Leadenham\xe2\x80\x99s Estate, 289 Pa. 216, 137 A. 247 (1927), and\nLeitch v. Diamond National Bank, 234 Pa. 557, 83 A. 416 (1912). These decisions,\nhowever, support the Court\xe2\x80\x99s finding that there was no delivery in the instant case. In\nLeadenham\xe2\x80\x99s Estate, supra, the donor had rented a separate safe deposit box in the\nname of the intended donee, put the contents of his box into the newly rented one and\n\n\x0c590\n\nProperty\n\ndelivered the keys to it to the donee. On those facts we held that the constructive\ndelivery of the keys was sufficient to sustain the inter vivos gift because the donor had\ndivested himself of dominion and control and invested the donee with complete\ndominion and control.\nIn Leitch v. Diamond National Bank, supra, the donor and donee were husband and\nwife and had lived together harmoniously for many years. The husband had three safe\ndeposit boxes registered in his name and the name of his wife and he designated one\nof them as his wife\xe2\x80\x99s. He gave her the keys to that box. The Court found that she had\ncomplete control over that box and that he only entered it with her permission. Since\nshe had complete control over the access to the box the Court found there was a valid\ndelivery of the contents of the box to her.\nIn both of these cases, the determinative factor was that the donee had complete\ndominion and control over the box and its contents. In that posture we ruled that\ngiving the keys to the box to the donee was a valid constructive delivery. In the instant\ncase, appellant did not have dominion and control over the box even though she was\ngiven the keys to it. The box remained registered in Mr. Evans\xe2\x80\x99 name and she could\nnot have gained access to it even with the keys. Mr. Evans never terminated his control\nover the box, consequently he never made a delivery, constructive or otherwise.\nAlthough appellant suggests that it was impractical and inconvenient for Mr. Evans to\nmanually deliver the contents of his box to her because of his physical condition and\nthe hazards of taking such a large sum of money out of the bank to her home, we need\nonly note that the deceased was obviously a shrewd investor, familiar with banking\npractices, and could have made delivery in a number of simple, convenient ways. First,\nhe was not on his deathbed. He was ambulatory and not only went to the bank on\nOctober 22, 1971, but took walks thereafter and did not enter the hospital until\nNovember 5, 1971. On the day he went to the bank he could have rented a second safe\ndeposit box in appellant\xe2\x80\x99s name, delivered the contents of his box to it and then given\nthe keys to appellant. He could have assigned the contents of his box to appellant. For\nthat matter, he could have written a codicil to his will.\n\n\x0cGifts\n\n591\n\nThe lower court noted that the deceased was an enigmatic figure. It is not for us to\nguess why people perform as they do. On the record before us it is clear that regardless\nof Mr. Evans\xe2\x80\x99 intention to make a gift to appellant, he never executed that intention\nand we will not do it for him. On these facts, we are constrained to hold that there was\nnot an inter vivos gift to appellant and that the contents of the safe deposit box were\nproperly included in the inventory of Mr. Evans\xe2\x80\x99 estate\xe2\x80\xa6.\nROBERTS, Justice (dissenting).\nI dissent. The central issue in this case is whether donor made an adequate delivery of\nthe gift to donee. The majority finds that adequate delivery was not made because the\nsafe deposit box was leased solely in donor\xe2\x80\x99s name and supports this conclusion by\npointing out that there were several alternative means of delivering the gift which would\nhave been adequate. I believe that the inquiry should not be what form of delivery\nwould have been clearly sufficient, but rather whether the delivery made by donor was\nadequate. I believe that it was.\nIn Rynier Estate, 349 Pa. 471, 32 A.2d 736 (1943), we said that delivery is determined\non the facts of each case, with reference to the donor\xe2\x80\x99s intent.\n\xe2\x80\x98As the chief factor in the determination of the question whether a legal\ndelivery has been effected is the intention of the donor to transfer title\nto the donee, as manifested by his words and actions and by the\ncircumstances surrounding the transaction, it is evident that each case\nmust depend largely upon its own facts.\xe2\x80\x99\n\xe2\x80\xa6 The majority suggests that donor was \xe2\x80\x98obviously a shrewd investor, familiar with\nbanking practices. . . .\xe2\x80\x99 From this \xe2\x80\x98familiar(ity) with banking practices,\xe2\x80\x99 which is nowhere\nshown on the record, and the absence of a joint lease for the box, it apparently\nconcludes that donor did not intend a gift. There are two reasons why this result is not\ncorrect.\nFirst, there is no doubt in this case that donor intended a gift. He told many people\nthat he had given the contents of the box to appellant. In fact, there is competent\ntestimony that donor directed donee to display the keys, hidden under her mattress, to\nseveral witnesses.\n\n\x0c592\n\nProperty\n\nSecond, it is apparent from the record that donor believed undisputed and\nunconditional delivery of the keys to be sufficient to complete the gift. Most of this\nCourt\xe2\x80\x99s cases dealing with inter vivos gifts of the contents of safe deposit boxes turn on\nthe delivery or nondelivery of the keys to the box to the donee. If the key was delivered,\nthe gift was normally upheld; if the key was not delivered, the gift was set aside, whether\nor not the box was jointly leased. I have found no case which turned on the presence\nor absence of a joint lease. Given this line of authority, and accepting the majority\xe2\x80\x99s\nconclusion that donor was sophisticated in these matters, it must be concluded that\ndonor believed delivery of the keys to the box completed the gift. If this were not so,\nwhy would donor cause donee to take several witnesses into her bedroom to show\nthem that she had the keys and why would he speak in terms that indicated a completed\ngift\xe2\x80\x94\xe2\x80\x99I gave to Vivian . . . the keys and the contents are hers.\xe2\x80\x99 Because it is donor\xe2\x80\x99s\nintention to transfer title which is crucial to a valid delivery, and because this donor\nintended to transfer title, I dissent from the majority\xe2\x80\x99s conclusion\xe2\x80\xa6.\nNotes and Questions\n1. The majority writes, \xe2\x80\x9cregardless of Mr. Evans\xe2\x80\x99 intention to make a gift to\nappellant, he never executed that intention and we will not do it for him.\xe2\x80\x9d But\nit also quotes approvingly the lower court\xe2\x80\x99s statement that \xe2\x80\x9c[t]he record clearly\nmanifests, both by his conduct and his statements, [Mr. Evans\xe2\x80\x99] donative intent.\xe2\x80\x9d\nHas the court contradicted itself, or can these statements be squared?\n2. Why does the court note that Vivian Kellow \xe2\x80\x9creceived adequate compensation\xe2\x80\x9d\nfor the services she provided to Arthur Evans? What were his motivations for\nthe attempted gift, and why are the appellees contesting it? Does the family\nsetting shed any light on the positions of the majority and dissent?\n3. The common law required manual delivery of personal property for a valid gift\nunless the object was too big to move. See, e.g., Newman v. Bost, 20 S.E. 848\n(N.C. 1898) (symbolic delivery insufficient where objects were small items that\ncould easily have been physically delivered, even though would-be donor was ill\nin bed). If the object was too big to move, substitutes for physical delivery were\nacceptable. Keys are a classic example: handing over car keys is \xe2\x80\x9cconstructive\xe2\x80\x9d\nor \xe2\x80\x9csymbolic\xe2\x80\x9d delivery of the car. The keys symbolize the car (symbolic\n\n\x0cGifts\n\n593\n\ndelivery) and provide the means for exercising dominion and control over it\n(constructive delivery). Today, because all states require car owners to register\nthe title to their cars, many states require that a gift of a car is not complete\nunless the donor also hands over the title documents. Why would the law\nrequire delivery of the title documents? What happens when someone who\ndoesn\xe2\x80\x99t know this rule hands over only the keys, and then a year later changes\nher mind and demands the car back? (You should see here how a title system\ncan both make it easier to determine who owns property and easier for legally\nunsophisticated people to make significant mistakes.)\nWhy isn\xe2\x80\x99t saying \xe2\x80\x9cI give you this car\xe2\x80\x9d without delivery enough to complete the\ngift? The keys could be handed over later, after all. If there\xe2\x80\x99s a present donative\nintent, what further purpose does a delivery requirement serve? Most answers\nfocus on the evidentiary role played by delivery: possession of the property by\nthe putative donee is strong evidence that the putative donor really did make a\ngift. This is especially important because most gift disputes arise after the\nputative donor\xe2\x80\x99s death. Notice to third parties who deal with the property and\nneed to know who owns it is another common rationale. But when might a\nputative donee\xe2\x80\x99s possession not be particularly probative of whether a gift had\noccurred? Suppose a father allows his daughter to use his second car when she\nmoves to town, and that this continues for six months. If, after they have a\nfalling out, the father sought to retrieve the car, how would you figure out\nwhether this was a loan or a gift?\n4. Modern courts often relax the delivery requirement to allow constructive or\nsymbolic delivery even of smaller, more portable items, but some delivery\nrequirement remains. Suppose the would-be donor signed a document in front\nof two witnesses saying \xe2\x80\x9cI now give my daughter $100,000,\xe2\x80\x9d and gave the\ndocument to his daughter. But the donor didn\xe2\x80\x99t actually deliver the money.\nShould we relax the delivery requirement because we are very confident that a\ngift was intended? Or does delivery still serve an important purpose? See Devol\nv. Dye, 24 N.E. 246 (Ind. 1890) (\xe2\x80\x9cThe intention of a donor in peril of death,\nwhen clearly ascertained and fairly consummated within the meaning of wellestablished rules, is not to be thwarted by a narrow and illiberal construction of\n\n\x0c594\n\nProperty\n\nwhat may have been intended for and deemed by him a sufficient delivery.\xe2\x80\x9d);\nFerrell v. Stinson, 11 N.W.2d 701 (Iowa 1943) (deed made out to intended\ndonee was kept in box in donor\xe2\x80\x99s house, and recorded after grantor\xe2\x80\x99s death;\nheld: delivered given strong evidence of donor\xe2\x80\x99s intent and fact that seriously ill\ngrantor was physically inable to access box after executing deed); cf. Hocks v.\nJeremiah, 759 P.2d 312 (Or. App. 1988) (bonds and diamond ring placed over\na period of years in a safe deposit box held jointly with putative grantee were\nnot properly delivered). What should have happened in the Ferrell case if the\ngrantor had made out the deed, put it in the box, and then a week later, still in\nher sickbed, made out a deed to another person and handed that second deed\nto the intended grantee?\n5. The Restatement (Third) of Property: Wills and Other Donative Transfers \xc2\xa7 6.2,\nComment yy, takes the position that personal property can be validly given\nwithout delivery \xe2\x80\x9cif the donor\xe2\x80\x99s intent to make a gift is established by clear and\nconvincing evidence.\xe2\x80\x9d Is this the right rule? As you\xe2\x80\x99ll see in the next case, some\nstates require clear and convincing evidence of the presence of each element for\nany gift.\nGruen v. Gruen\n496 N.E.2d 869 (N.Y. 1986)\nPlaintiff commenced this action seeking a declaration that he is the rightful owner of a\npainting which he alleges his father, now deceased, gave to him. He concedes that he\nhas never had possession of the painting but asserts that his father made a valid gift of\nthe title in 1963 reserving a life estate for himself. His father retained possession of the\npainting until he died in 1980. Defendant, plaintiff\xe2\x80\x99s stepmother, has the painting now\nand has refused plaintiff\xe2\x80\x99s requests that she turn it over to him. She contends that the\npurported gift was testamentary in nature and invalid insofar as the formalities of a will\nwere not met or, alternatively, that a donor may not make a valid inter vivos gift of a\nchattel and retain a life estate with a complete right of possession. Following a sevenday nonjury trial, Special Term found that plaintiff had failed to establish any of the\nelements of an inter vivos gift and that in any event an attempt by a donor to retain a\npresent possessory life estate in a chattel invalidated a purported gift of it. The\n\n\x0cGifts\n\n595\n\nAppellate Division held that a valid gift may be made reserving a life estate and, finding\nthe elements of a gift established in this case \xe2\x80\xa6. We now affirm.\nThe subject of the dispute is a work entitled \xe2\x80\x9cSchloss Kammer am Attersee II\xe2\x80\x9d painted\nby a noted Austrian modernist, Gustav Klimt. It was purchased by plaintiff\xe2\x80\x99s father,\nVictor Gruen, in 1959 for $8,000. On April 1, 1963 the elder Gruen, a successful\narchitect with offices and residences in both New York City and Los Angeles during\nmost of the time involved in this action, wrote a letter to plaintiff, then an\nundergraduate student at Harvard, stating that he was giving him the Klimt painting\nfor his birthday but that he wished to retain the possession of it for his lifetime. This\nletter is not in evidence, apparently because plaintiff destroyed it on instructions from\nhis father. Two other letters were received, however, one dated May 22, 1963 and the\nother April 1, 1963. Both had been dictated by Victor Gruen and sent together to\nplaintiff on or about May 22, 1963. The letter dated May 22, 1963 reads as follows:\n\xe2\x80\x9cDear Michael:\n\xe2\x80\x9cI wrote you at the time of your birthday about the gift of the painting\nby Klimt.\n\xe2\x80\x9cNow my lawyer tells me that because of the existing tax laws, it was\nwrong to mention in that letter that I want to use the painting as long as\nI live. Though I still want to use it, this should not appear in the letter. I\nam enclosing, therefore, a new letter and I ask you to send the old one\nback to me so that it can be destroyed.\n\xe2\x80\x9cI know this is all very silly, but the lawyer and our accountant insist that\nthey must have in their possession copies of a letter which will serve the\npurpose of making it possible for you, once I die, to get this picture\nwithout having to pay inheritance taxes on it.\n\xe2\x80\x9cLove,\n\xe2\x80\x9cs/Victor\xe2\x80\x9d.\nEnclosed with this letter was a substitute gift letter, dated April 1, 1963, which stated:\n\n\x0c596\n\nProperty\n\n\xe2\x80\x9cDear Michael:\n\xe2\x80\x9cThe 21st birthday, being an important event in life, should be celebrated\naccordingly. I therefore wish to give you as a present the oil painting by\nGustav Klimt of Schloss Kammer which now hangs in the New York\nliving room. You know that Lazette and I bought it some 5 or 6 years\nago, and you always told us how much you liked it.\n\xe2\x80\x9cHappy birthday again.\n\xe2\x80\x9cLove,\n\xe2\x80\x9cs/Victor\xe2\x80\x9d. *\nPlaintiff never took possession of the painting nor did he seek to do so. Except for a\nbrief period between 1964 and 1965 when it was on loan to art exhibits and when\nrestoration work was performed on it, the painting remained in his father\xe2\x80\x99s possession,\nmoving with him from New York City to Beverly Hills and finally to Vienna, Austria,\nwhere Victor Gruen died on February 14, 1980. Following Victor\xe2\x80\x99s death plaintiff\nrequested possession of the Klimt painting and when defendant refused, he\ncommenced this action.\nThe issues framed for appeal are whether a valid inter vivos gift of a chattel may be made\nwhere the donor has reserved a life estate in the chattel and the donee never has had\nphysical possession of it before the donor\xe2\x80\x99s death and, if it may, which factual findings\non the elements of a valid inter vivos gift more nearly comport with the weight of the\nevidence in this case, those of Special Term or those of the Appellate Division. The\nlatter issue requires application of two general rules. First, to make a valid inter vivos gift\nthere must exist the intent on the part of the donor to make a present transfer; delivery\nof the gift, either actual or constructive to the donee; and acceptance by the donee.\nSecond, the proponent of a gift has the burden of proving each of these elements by\nclear and convincing evidence.\n\n[Eds.\xe2\x80\x94As we will discuss below, Victor Gruen evaded substantial taxes on this gift by pretending that he did\nnot reserve a life estate.]\n*\n\n\x0cGifts\n\n597\n\nDonative Intent\nThere is an important distinction between the intent with which an inter vivos gift is\nmade and the intent to make a gift by will. An inter vivos gift requires that the donor\nintend to make an irrevocable present transfer of ownership; if the intention is to make\na testamentary disposition effective only after death, the gift is invalid unless made by\nwill.\nDefendant contends that the trial court was correct in finding that Victor did not intend\nto transfer any present interest in the painting to plaintiff in 1963 but only expressed\nan intention that plaintiff was to get the painting upon his death. The evidence is all\nbut conclusive, however, that Victor intended to transfer ownership of the painting to\nplaintiff in 1963 but to retain a life estate in it and that he did, therefore, effectively\ntransfer a remainder interest in the painting to plaintiff at that time. Although the\noriginal letter was not in evidence, testimony of its contents was received along with\nthe substitute gift letter and its covering letter dated May 22, 1963. The three letters\nshould be considered together as a single instrument and when they are they\nunambiguously establish that Victor Gruen intended to make a present gift of title to\nthe painting at that time. But there was other evidence for after 1963 Victor made\nseveral statements orally and in writing indicating that he had previously given plaintiff\nthe painting and that plaintiff owned it. Victor Gruen retained possession of the\nproperty, insured it, allowed others to exhibit it and made necessary repairs to it but\nthose acts are not inconsistent with his retention of a life estate. \xe2\x80\xa6 Victor\xe2\x80\x99s failure to\nfile a gift tax return on the transaction was partially explained by allegedly erroneous\nlegal advice he received, and while that omission sometimes may indicate that the donor\nhad no intention of making a present gift, it does not necessarily do so and it is not\ndispositive in this case.\nDefendant contends that even if a present gift was intended, Victor\xe2\x80\x99s reservation of a\nlifetime interest in the painting defeated it. \xe2\x80\xa6 Defendant recognizes that a valid inter\nvivos gift of a remainder interest can be made not only of real property but also of such\nintangibles as stocks and bonds. Indeed, several of the cases she cites so hold. That\nbeing so, it is difficult to perceive any legal basis for the distinction she urges which\nwould permit gifts of remainder interests in those properties but not of remainder\n\n\x0c598\n\nProperty\n\ninterests in chattels such as the Klimt painting here. The only reason suggested is that\nthe gift of a chattel must include a present right to possession. [Permitting] a gift of the\nremainder in this case, however, is consistent with the distinction, well recognized in\nthe law of gifts as well as in real property law, between ownership and possession or\nenjoyment. Insofar as some of our cases purport to require that the donor intend to\ntransfer both title and possession immediately to have a valid inter vivos gift, they state\nthe rule too broadly and confuse the effectiveness of a gift with the transfer of the\npossession of the subject of that gift. The correct test is \xe2\x80\x9c \xe2\x80\x98whether the maker intended\nthe [gift] to have no effect until after the maker\xe2\x80\x99s death, or whether he intended it to\ntransfer some present interest.\xe2\x80\x99\xe2\x80\x9d As long as the evidence establishes an intent to make\na present and irrevocable transfer of title or the right of ownership, there is a present\ntransfer of some interest and the gift is effective immediately. Thus, in Speelman v.\nPascal, we held valid a gift of a percentage of the future royalties to the play \xe2\x80\x9cMy Fair\nLady\xe2\x80\x9d before the play even existed. There, as in this case, the donee received title or\nthe right of ownership to some property immediately upon the making of the gift but\npossession or enjoyment of the subject of the gift was postponed to some future time.\nDefendant suggests that allowing a donor to make a present gift of a remainder with\nthe reservation of a life estate will lead courts to effectuate otherwise invalid\ntestamentary dispositions of property. The two have entirely different characteristics,\nhowever, which make them distinguishable. Once the gift is made it is irrevocable and\nthe donor is limited to the rights of a life tenant not an owner. Moreover, with the gift\nof a remainder title vests immediately in the donee and any possession is postponed\nuntil the donor\xe2\x80\x99s death whereas under a will neither title nor possession vests\nimmediately\xe2\x80\xa6.\nDelivery\nIn order to have a valid inter vivos gift, there must be a delivery of the gift, either by a\nphysical delivery of the subject of the gift or a constructive or symbolic delivery such\nas by an instrument of gift, sufficient to divest the donor of dominion and control over\nthe property. As the statement of the rule suggests, the requirement of delivery is not\nrigid or inflexible, but is to be applied in light of its purpose to avoid mistakes by donors\nand fraudulent claims by donees. Accordingly, what is sufficient to constitute delivery\n\n\x0cGifts\n\n599\n\n\xe2\x80\x9cmust be tailored to suit the circumstances of the case.\xe2\x80\x9d The rule requires that \xe2\x80\x9c \xe2\x80\x98[t]he\ndelivery necessary to consummate a gift must be as perfect as the nature of the property\nand the circumstances and surroundings of the parties will reasonably permit.\xe2\x80\x99 \xe2\x80\x9d\nDefendant contends that when a tangible piece of personal property such as a painting\nis the subject of a gift, physical delivery of the painting itself is the best form of delivery\nand should be required. Here, of course, we have only delivery of Victor Gruen\xe2\x80\x99s letters\nwhich serve as instruments of gift. Defendant\xe2\x80\x99s statement of the rule as applied may be\ngenerally true, but it ignores the fact that what Victor Gruen gave plaintiff was not all\nrights to the Klimt painting, but only title to it with no right of possession until his\ndeath. Under these circumstances, it would be illogical for the law to require the donor\nto part with possession of the painting when that is exactly what he intends to retain.\nNor is there any reason to require a donor making a gift of a remainder interest in a\nchattel to physically deliver the chattel into the donee\xe2\x80\x99s hands only to have the donee\nredeliver it to the donor. As the facts of this case demonstrate, such a requirement\ncould impose practical burdens on the parties to the gift while serving the delivery\nrequirement poorly. Thus, in order to accomplish this type of delivery the parties would\nhave been required to travel to New York for the symbolic transfer and redelivery of\nthe Klimt painting which was hanging on the wall of Victor Gruen\xe2\x80\x99s Manhattan\napartment. Defendant suggests that such a requirement would be stronger evidence of\na completed gift, but in the absence of witnesses to the event or any written\nconfirmation of the gift it would provide less protection against fraudulent claims than\nhave the written instruments of gift delivered in this case.\nAcceptance\nAcceptance by the donee is essential to the validity of an inter vivos gift, but when a gift\nis of value to the donee, as it is here, the law will presume an acceptance on his part.\nPlaintiff did not rely on this presumption alone but also presented clear and convincing\nproof of his acceptance of a remainder interest in the Klimt painting by evidence that\nhe had made several contemporaneous statements acknowledging the gift to his friends\nand associates, even showing some of them his father\xe2\x80\x99s gift letter, and that he had\nretained both letters for over 17 years to verify the gift after his father died. Defendant\nrelied exclusively on affidavits filed by plaintiff in a matrimonial action with his former\n\n\x0c600\n\nProperty\n\nwife, in which plaintiff failed to list his interest in the painting as an asset. These\naffidavits were made over 10 years after acceptance was complete and they do not even\napproach the evidence in Matter of Kelly where the donee, immediately upon delivery\nof a diamond ring, rejected it as \xe2\x80\x9ctoo flashy\xe2\x80\x9d. We agree with the Appellate Division\nthat interpretation of the affidavit was too speculative to support a finding of rejection\nand overcome the substantial showing of acceptance by plaintiff.\nAccordingly, the judgment appealed from and the order of the Appellate Division\nbrought up for review should be affirmed, with costs.\nNotes and Questions:\n1. Postscript. Michael took possession and immediately sold the painting for $5\nmillion. A decade later it was resold for $23 million.\n2. Future Interests. Michael\xe2\x80\x99s remainder interest is a type of future interest. It\nis a future interest because Michael can only take possession in the future.\nHowever, as a legal matter, Michael\xe2\x80\x99s future interest exists before his right to\ntake possession does. Victor needed to have a present donative intent in order\nto make a valid gift, and he had that intent: he intended to give Michael something\nwhen he wrote. That something was a future interest.\nCorresponding to Michael\xe2\x80\x99s remainder interest is Victor Gruen\xe2\x80\x99s life estate,\nwhich is a present possessory interest as long as Victor Gruen lives\xe2\x80\x94and thus\nthe court holds that Victor may keep possession of the painting, despite the\ndelivery requirement. Victor isn\xe2\x80\x99t giving Michael a present possessory interest,\nso requiring him to deliver the painting wouldn\xe2\x80\x99t serve the ordinary purpose\nserved by delivery of uniting the property owner with physical possession of the\nproperty.\nDoes Gruen\xe2\x80\x99s willingness to recognize legal future interests in personal property\nundermine the certainty provided by a delivery requirement? What if Victor\nhad intended an even more complicated transfer\xe2\x80\x94perhaps giving the painting\nto his widow for as long as she lived, then to Michael? This could have raised\ntroubling issues of who owned what. On the other hand, if courts are going to\n\n\x0cGifts\n\n601\n\nallow freehold interests in personal property besides the fee simple absolute,\nhow can one deliver such an interest in accordance with the policies underlying\nthe delivery requirement?\n3. Tax fraud. If the donor retains a life estate in property transferred inter vivos,\nthat property will be included in the donor\xe2\x80\x99s estate for estate tax purposes. I.R.C.\n\xc2\xa72036(a). As a result, the estate tax owed will be the same as if the property\nhadn\xe2\x80\x99t been transferred at all. This provision is designed to discourage evasion\nof the estate tax (which was substantially more onerous when this case was\nlitigated). Victor did just this, but his lawyer told him to \xe2\x80\x9cdoctor up\xe2\x80\x9d the\ntransaction so that he wouldn\xe2\x80\x99t have to pay the resulting taxes. Do not do this.\nIt is called tax fraud, and you may be disbarred, or worse. Relatedly,\nbackdating the letter raises serious ethical problems, and it too could have\nserious consequences for a lawyer who advised backdating in situations where\nthe date of the transfer matters. Should Victor\xe2\x80\x99s apparently successful tax\nevasion have factored into the court\xe2\x80\x99s decision on the state law question of\nwhether the gift was valid? If so, how?\n4. Substitutes for testamentary transfers? Consider the outcomes of the\nfollowing scenarios:\n\xe2\x80\xa2 Victor Gruen writes the same letter giving his son Michael a\nfuture interest, but simply shows it to Michael rather than mailing\nit.\n\xe2\x80\xa2 Victor writes a letter granting Michael total ownership of the\npainting, without reserving a life estate for himself, and mails the\nletter to Michael, then dies before being able to deliver the\npainting.\n\xe2\x80\xa2 Victor writes a will in 1963 devising the painting to Michael.\nVictor dies in 1980. (What interest, if any, does Michael own in\nthe painting before Victor dies?)\n\n\x0c602\n\nProperty\n\n\xe2\x80\xa2 Victor writes a letter saying \xe2\x80\x9cI intend for you to have the painting\nwhen I die.\xe2\x80\x9d\nAs you should see, the last possibility is an attempted testamentary transfer, but\nit is unlikely to meet the requirements for a transfer by will. Rather than being\na present transfer of a future interest, it\xe2\x80\x99s a statement of intent to make a transfer\nin the future. Is the difference between what Victor actually did and \xe2\x80\x9cI intend\nfor you to have the painting when I die\xe2\x80\x9d big enough to explain the different\nresults? If this rule allows legally savvy people to carry out their intent more\nsuccessfully than laypeople innocent of the law, is that a good thing or a bad\nthing, compared to the alternatives? Some states now allow land transfers in\nthis form\xe2\x80\x94a deed that expressly says it won\xe2\x80\x99t take effect until the death of the\ngrantor will be honored, but only if it\xe2\x80\x99s recorded before the death of the grantor.\nSee MO. STAT. ANN. \xc2\xa7461.025(1). Would you support such a law?\n5. Another Variant of Symbolic or Constructive Delivery: Delivery to a Place.\nSometimes, the would-be donor does not physically hand the object or\ndocument to the donee, but instead puts it in a particular place, from which she\nexpects the donee to retrieve it. Should this constitute delivery? Courts have\ndisagreed about the details, but if the putative donee does not have any right to\ncontrol the place and other people do, then there is no delivery. For example,\na household servant does not have dominion over the whole house, so a piano\nplaced in the living room would not be delivered to such a servant, even if there\nwas explicit donative intent. Another rule is that, if the putative donee has\nexclusive dominion over the place, there is delivery. Thus, furniture placed in a\nlive-in servant\xe2\x80\x99s bedroom in her employer\xe2\x80\x99s house would be delivered to the\nservant. See Newman v. Bost, supra. (In such a case, disputes might still arise\nover donative intent.)\nWhat about shared spaces? Suppose four people are living together in a house,\nand A tells B that she\xe2\x80\x99s giving him a book, which she leaves on the kitchen table\nfor him. The kitchen is shared by all four residents. Should this be sufficient\ndelivery? Does the fact that she could easily instead have put the book in his\nbedroom, which is under his exclusive control, make any difference? (What\n\n\x0cGifts\n\n603\n\nshould we expect laypeople to know about the law of gifts?) Cf. Robinson v.\nHoalton, 2 P.2d 34 (Cal. 1931) (personal property was validly delivered when\nthere was an oral grant and the donor and donee lived together: \xe2\x80\x9cThe rule as to\ndelivery is not so strictly applied to transactions between members of a family\nliving in the same house \xe2\x80\xa6.\xe2\x80\x9d).\nDisclosure of the location of an item may also serve as delivery, at least when it\nis otherwise hidden or inaccessible. See Waite v. Grubbe, 73 P. 206 (Ore. 1903)\n(disclosing location of buried cash sufficed for valid gift); Teague v. Abbott, 100\nN.E. 27 (Ind. Ct. App. 1912) (disclosing combination to safe sufficed for valid\ngift).\n6. Intermediated Delivery. Can you identify a unifying principle behind the\nconstructive/symbolic delivery cases? Following the logic of these cases,\nsuppose that, while Buffy Summers is working at the fast food restaurant\nDoublemeat Palace, her friends leave a present for her at the door, before the\nrestaurant opens. When the manager comes to open up, he takes the present\nfor himself. Who should bring the claim against him, Buffy or her friends?\nHanding the property, or an appropriate symbol of the property, to a third party\nfor delivery to the donee will also complete delivery, as long as the donor has\nno power to recall the third party. If the donor can still control the third party\nand interrupt the delivery, by contrast, then the delivery is not complete. These\nprinciples have led courts to diverge on the proper treatment of checks: because\na check can be stopped by the payor at any time before it\xe2\x80\x99s cashed, * the majority\nof courts say there\xe2\x80\x99s no delivery until that time. The payor has not given up\ncomplete control until the check is cashed. See, e.g., Rosano v. United States, 67\nF. Supp. 2d 113 (E.D.N.Y. 1999); In re Estate of Heyn, 47 P.3d 724 (Colo. Ct.\nApp. 2002); Woo v. Smart, 442 S.E.2d 690 (Va. 1994). Other courts say that,\nat least with respect to gifts made in anticipation of death (of which more below),\n\nBe aware that the law governing checks is complicated, and stopping a check may not always succeed or may\nhave other consequences\xe2\x80\x94this note just discusses how courts in gift cases have treated checks.\n\n*\n\n\x0c604\n\nProperty\n\nwhen the check is not stopped before the donor dies, the gift is complete even\nbefore the check is cashed.\n7. Delivering Intangibles. Given the delivery requirement, how would you\naccomplish the gift of an intangible right, such as a copyright or a share of stock?\n\nC. Acceptance\nAs you\xe2\x80\x99ve seen, acceptance is generally presumed for gifts of value. Given that\npresumption, why do you think acceptance is an element of a valid gift at all?\nIf the donee doesn\xe2\x80\x99t want to accept the gift, then the donee may \xe2\x80\x9cdisclaim\xe2\x80\x9d the gift.\nThis usually only arises in cases of attempted transfers by will.\n\nD. Irrevocability of Gifts and Exceptions\nA gift, once given, is usually irrevocable: once the gift is complete, the donor may not\nchange her mind and demand the gift back. The donee may voluntarily give the property\nback, but that\xe2\x80\x99s a second transfer of ownership. Irrevocability makes it important to\nbe able to figure out when the gift was complete, because before it is complete, it is\nrevocable.\nSuppose that Bobby Singer leaves his junkyard to Dean Winchester in his will. Dean\nmoves in, then realizes after two days that he doesn\xe2\x80\x99t want to run a junkyard, disclaims\nthe gift, and tells Bobby\xe2\x80\x99s residual heirs\xe2\x80\x94Bobby\xe2\x80\x99s second cousins\xe2\x80\x94that the property\nis theirs. Is it?\nSuppose that, on Spencer Hastings\xe2\x80\x99s eighteenth birthday, her parents put the keys to a\ncar in an envelope by her place at the table. However, before the birthday meal, the\nfamily gets into a screaming fight, and the parents snatch up the keys from the table\nand say they no longer think Spencer deserves the car. Who owns the car?\nThere are two notable exceptions to the irrevocability of a gift: Gifts causa mortis and\nconditional gifts. In the materials that follow, we will explore complications relating to\nboth. As you read, keep an eye on the ways in which courts are interpreting the various\nelements of a gift in order to achieve an overall result they find appropriate.\n\n\x0cGifts\n\n605\n\n1. Gifts causa mortis .\nThe gifts with which you are likely most familiar\xe2\x80\x94gifts to mark a special occasion or\nrelationship\xe2\x80\x94are generally inter vivos gifts, that is, gifts given by living people (the Latin\nliterally means \xe2\x80\x9cbetween the living\xe2\x80\x9d). A special category of gift law exists to deal with\ngifts that are not given in a will, but are given because the donor fears he is soon to die.\nAgain, concerns about interfering with the law of wills and estates shape judicial\ntreatment of this category, known as gifts causa mortis (literally, \xe2\x80\x9cgifts on account [or\n\xe2\x80\x98because\xe2\x80\x99] of death\xe2\x80\x9d).\nThe elements of a gift causa mortis are the same as the elements of an inter vivos gift: (1)\nintent, (2) delivery, and (3) acceptance, but the donor must also (4) anticipate imminent\ndeath. A gift causa mortis is subject to a condition subsequent: if the donor survives the\nperil that caused her to fear death, the gift is either revoked or revocable. In most\nstates, the gift is revoked automatically, while in others the donor may choose to revoke\nthe gift. In the latter states, delay may be troublesome. See RESTATEMENT (SECOND)\nOF PROPERTY: DONATIVE TRANSFERS \xc2\xa731.3 (\xe2\x80\x9cA failure to revoke within a reasonable\ntime after the donor is no longer in apprehension of imminent death eliminates the\nright of revocation.\xe2\x80\x9d). In all states, if the donor dies from the anticipated cause, then\nthe gift becomes irrevocable. Some jurisdictions extend this to situations in which the\ndonor dies from something else within roughly the same time frame or in which the\ncause of death is related to the anticipated peril.\nSuppose D is going into the hospital for heart surgery that might end in death. She\nsays to her son, \xe2\x80\x9cIf I die, I want you to have the contents of my safe deposit box,\xe2\x80\x9d and\ngives him the key. While the surgery is a success, she dies a week later from an infection\nacquired in the hospital. Is the gift valid? What if she dies six months later from the\nsame infection? See Brind v. Int\xe2\x80\x99l Trust Co., 179 P. 148 (Colo. 1919) (putative donor\ndidn\xe2\x80\x99t die from the operation that caused her to fear death, but six months later from\nthe ailment that had triggered the operation; held: no gift causa mortis, because putative\ndonor was specific about the operation as the cause of the gift, and her lawyer told her\nthat she probably needed to take further action to reaffirm the gift, but she didn\xe2\x80\x99t).\nCourts are often suspicious of gifts causa mortis. Courts may apply the delivery\nrequirement more stringently than in other gift cases. Is this reluctance justified?\n\n\x0c606\n\nProperty\n\nFor example, in Foster v. Reiss, 112 A.2d 553 (N.J. 1955), the putative donee obtained\nthe property at issue by taking a note written to him from the hospital bedside of his\nestranged wife, who was then unconscious. The note disclosed the location of money\nand bank books (which gave access to savings accounts) hidden in their house. The\nhusband found out about the note from a friend who\xe2\x80\x99d been directed to tell him about\nit. He took the note, went home, and found the cash and the bank books. She died a\nfew days later, never having regained consciousness. Her will gave $1 to her estranged\nhusband and the rest of her estate to her children and grandchildren, who sued to\nrecover the cash and the bank books. The court held that there had been no gift causa\nmortis, and said the following:\n[A] gift causa mortis is essentially of a testamentary nature and as a practical matter\nthe doctrine, though well established, is an invasion into the province of the\nstatute of wills \xe2\x80\xa6.\n\xe2\x80\x98These gifts causa mortis are dangerous things. The law requires, before Mr. Hitt\ncan come into this court and claim $10,000 as an ordinary testamentary gift from\nMrs. Thompson, that he should produce an instrument in writing signed by Mrs.\nThompson, and also acknowledged with peculiar solemnity by her in the\npresence of two witnesses, who thereupon subscribed their names as witnesses.\nThat is what Mr. Hitt would have to prove if he claimed a testamentary gift in\nthe ordinary form of one-third of Mrs. Thompson\xe2\x80\x99s estate. And yet, in cases of\nthese gifts causa mortis, it is possible that a fortune of a million dollars can be\ntaken away from the heirs, the next of kin of a deceased person, by a stranger,\nwho simply has possession of the fortune, claims that he received it by way of\ngift, and brings parol testimony to sustain that claim.\xe2\x80\x99 Varick v. Hitt, 55 A. 139,\n153 (Ch.1903), affirmed 66 N.J.Eq. 442, 57 A. 406 (E. & A.1904).\nGifts causa mortis are not favored in the law \xe2\x80\xa6 \xe2\x80\x98for the reason that this mode of\ndisposition permits property without limit of value to be transferred by mere\ndelivery, and the proof thereof to be made when death has closed the lips of the\nclaimed donor.\xe2\x80\x99\xe2\x80\xa6\n\n\x0cGifts\n\n607\n\nThe first question confronting us is whether there has been \xe2\x80\x98actual, unequivocal,\nand complete delivery during the lifetime of the donor, wholly divesting him\n(her) of the possession, dominion, and control\xe2\x80\x99 of the property. \xe2\x80\xa6\nThe test was this: that the transfer was such that, in conjunction with the\ndonative intention, it completely stripped the donor of his dominion of the\nthing given, whether that thing was a tangible chattel or a chose in action.\xe2\x80\x99\nThus, under New Jersey law actual delivery of the property is still required\nexcept where \xe2\x80\x98there can be no actual delivery\xe2\x80\x99 or where \xe2\x80\x98the situation is\nincompatible with the performance of such ceremony.\xe2\x80\x99 In the case of a savings\naccount, where obviously there can be no actual delivery, delivery of the\npassbook or other indicia of title is required.\nThe court found that there had been no delivery. Instead, the putative donee had\nmerely taken possession of the property, at a time when the would-be donor was\nincapacitated and incapable of authorizing him to act for her. The court emphasized\nthe separateness of the two elements of intent and delivery:\nAs stated in Madison Trust Co. v. Allen, supra, 105 N.J.Eq. 230, 235, 147 A.\n546, 548, \xe2\x80\x98the burden of proof is upon the alleged donee to clearly prove both\ndelivery and donative intent\xe2\x80\x99 (emphasis supplied). This was clearly brought out\nby the court in Parker v. Copland, 70 N.J.Eq. 685, 64 A. 129, 130 (E. & A.1906):\n\xe2\x80\xa6 [T]he crucial test is not the strenuousness of the language in which the gift\nis couched, but in \xe2\x80\x98the transfer,\xe2\x80\x99 which is something that is both different from\nthe donative intention and yet capable of acting in conjunction with it, so that\nboth are necessary to the creation of an enforceable gift. \xe2\x80\xa6 [W]hen two steps\nare required by law to complete a transaction, the excess of one cannot supply\nthe lack of the other \xe2\x80\xa6.\nThus, an informal writing such as we have here does not satisfy the separate and\ndistinct requirement of delivery, but rather there must be such delivery of the\nproperty that the donor stands absolutely deprived of his control over it. \xe2\x80\xa6\n\n\x0c608\n\nProperty\n\nWe must not forget that since a gift causa mortis is made in contemplation of\ndeath and is subject to revocation by the donor up to the time of his death it\ndiffers from a legacy only in the requirement of delivery. Delivery is in effect\nthe only safeguard imposed by law upon a transaction which would ordinarily\nfall within the statute of wills. To eliminate delivery from the requirements for\na gift causa mortis would be to permit any writing to effectuate a testamentary\ntransfer, even though it does not comply with the requirements of the statute\nof wills.\nThe court quoted an earlier case emphasizing the risks of false testimony in such cases:\n\xe2\x80\x9c\xe2\x80\x98Around every other disposition of the property of the dead, the legislative power has\nthrown safeguards against fraud and perjury; around this mode the requirement of\nactual delivery is the only substantial protection, and the courts should not weaken it\nby permitting the substitution of convenient and easily proven devices.\xe2\x80\x99\xe2\x80\x9d\nA strong dissent emphasized that the donor was fully competent when she wrote her\nnote, clearly intended to make the gift, and never revoked the gift. The dissent would\nhave honored her clearly stated intent because \xe2\x80\x9cjustice fairly cries out for the fulfillment\nof [the] wife\xe2\x80\x99s wishes\xe2\x80\x9d:\nI find neither reason nor persuasive authority anywhere which compels this\nuntoward result. See Gulliver and Tilson, Classification of Gratuitous Transfers,\n51 Yale L.J. 1, 2 (1941):\n\xe2\x80\x98One fundamental proposition is that, under a legal system recognizing the\nindividualistic institution of private property and granting to the owner the\npower to determine his successors in ownership, the general philosophy of the\ncourts should favor giving effect to an intentional exercise of that power. This\nis commonplace enough but it needs constant emphasis, for it may be obscured\nor neglected in inordinate preoccupation with detail or dialectic. A court\nabsorbed in purely doctrinal arguments may lose sight of the important and\ndesirable objective of sanctioning what the transferror wanted to do, even\nthough it is convinced that he wanted to do it.\xe2\x80\x99\n\n\x0cGifts\n\n609\n\nConcerns over fraud or uncertainty, the dissent thought, were irrelevant here, where\nthe donor\xe2\x80\x99s wishes \xe2\x80\x9cwere freely and clearly expressed in a written instrument and the\ndonee\xe2\x80\x99s ensuing possession was admittedly bona fide.\xe2\x80\x9d The dissent noted that, in\ncontradiction to New Jersey\xe2\x80\x99s approach, other courts have relaxed the delivery\nrequirement in cases of gifts causa mortis, rather than strengthening it. Such courts\nreason that gifts causa mortis generally come about as the result of some emergency that\nmakes it impossible to write a formal will. While delivery is still important to avoid\nproblems of figuring out what was really given, the requirements for sufficient delivery\nought to be liberally interpreted to protect the donor\xe2\x80\x99s intent. Here, for example, the\nwife\xe2\x80\x99s authorization of the husband to take physical possession, and the fact that he\ndid indeed take physical possession before she died, ought to have sufficed. As the\ndissent saw it, \xe2\x80\x9c[w]hen Ethel Reiss signed the note and arranged to have her husband\nreceive it, she did everything that could reasonably have been expected of her to\neffectuate the gift causa mortis; and while her husband might conceivably have attempted\nto return the donated articles to her at the hospital for immediate redelivery to him, it\nwould have been unnatural for him to do so.\xe2\x80\x9d\nWhich position is more persuasive to you? Should it make a difference if the putative\ndonee were an unrelated friend? If the heirs named in the will were unrelated friends?\nAs noted above, in many cases, a donee\xe2\x80\x99s control over the place in which the gift was\nleft is likely to suffice for delivery. Why didn\xe2\x80\x99t the husband\xe2\x80\x99s possession of the house\nin which the money was hidden in Foster suffice for delivery?\n\n2. Conditional gifts\nSpeaking more generally, it is possible to give other kinds of conditional gifts. A\nconditional gift is a gift that will return to the donor if a condition subsequent is not\nfulfilled. (By contrast, a promise to give a gift if a condition precedent is fulfilled is an\nunenforceable promise to make a gift.) For example, a student\xe2\x80\x99s parents might give him\na car, conditioned on his graduating law school in three years. If the student fails to\ngraduate in that time, the car must be returned. During that period, however, the gift\nis otherwise irrevocable: the parents cannot change their minds in year two and demand\n\n\x0c610\n\nProperty\n\nthe car back, as long as the student remains willing to fulfill the condition and remains\non track to do so.\nSince many gifts are given orally, how can we know which are conditional, and what\nthose conditions are? Would you support a rule that conditions can only be imposed\non gifts if the conditions are written down? See State ex rel. Pai v. Thom, 563 P.2d 982\n(Haw. 1977) (delivery of a deed with an oral condition was irrevocable even if condition\nwas unsatisfied); but see Martinez v. Martinez, 678 P.2d 1163 (N.M. 1984) (allowing\ngrantor of deed to offer parol evidence of oral condition). We will discuss delivery of\ndeeds in a later unit on Land Transactions. Pai states the traditional common law\ndelivery rule for such transfers\xe2\x80\x94why do you think this is so? What might justify\nrelaxing the traditional rule?\nCan conditions sometimes be implied on gifts of personal property? Consider the\nfollowing case, involving an engagement ring.\nAlbinger v. Harris\n48 P.3d 711 (Mont. 2002)\nWho owns a ring given in anticipation of marriage after the engagement is broken?\nMichelle L. Harris (Harris) appeals the disposition of an engagement ring by the Eighth\nJudicial District Court, Cascade County, Montana, and Michael A. Albinger (Albinger)\ncross-appeals the denial of reimbursement for certain telephone charges incurred by\nHarris and the award of damages for a prior, unlitigated assault and battery claim. We\nreverse the disposition of the engagement ring, affirm the denial of reimbursement for\ntelephone charges and affirm the award for pain, suffering and emotional distress.\nWe frame the issues on appeal as follows:\n1. Did the District Court err in determining an engagement ring is a conditional gift\nthat may be revoked upon termination of the engagement?...\nFACTUAL AND PROCEDURAL BACKGROUND\nHarris and Albinger met in June 1995, and began a troubled relationship that endured\nfor the next three years, spiked by alcohol abuse, emotional turmoil and violence.\n\n\x0cGifts\n\n611\n\nAlbinger presented Harris with a diamond ring and diamond earrings on December 14,\n1995. The ring was purchased for $29,000. Days after accepting the ring, Harris\nreturned it to Albinger and traveled to Kentucky for the holidays. Albinger immediately\nsent the ring back to Harris by mail. The couple set a tentative wedding date of June\n27, 1997, but plans to marry were put on hold as Harris and Albinger separated and\nreconciled several times. The ring was returned to or reclaimed by Albinger upon each\nseparation, and was re-presented to Harris after each reconciliation.\nAlbinger and Harris lived together in Albinger\xe2\x80\x99s home from August 1995 until April\n1998. During this time, Albinger conferred upon Harris a new Ford Mustang\nconvertible, a horse and a dog, in addition to the earrings and ring. Harris gave Albinger\na Winchester hunting rifle, a necklace and a number of other small gifts. Albinger\nreceived a substantial jury award for injuries sustained in a 1991 railroad accident. He\npaid all household expenses and neither party was gainfully employed during their\ncohabitation.\nOn the night of February 23, 1997, during one of the couple\xe2\x80\x99s many separations,\nAlbinger broke into the house where Harris was staying. He stood over Harris\xe2\x80\x99 bed,\nthreatened her with a knife and shouted, \xe2\x80\x9cI\xe2\x80\x99m going to chop your finger off, you better\nget that ring off.\xe2\x80\x9d After severely beating Harris with a railroad lantern, Albinger forcibly\nremoved the ring and departed. Harris sued for personal injuries and the county\nattorney charged Albinger by information with aggravated burglary, felony assault, and\npartner and family member assault. The next month, after another reconciliation,\nHarris requested the county attorney drop all criminal charges in exchange for\nAlbinger\xe2\x80\x99s promise to seek anger management counseling and to pay restitution in the\nform of Harris\xe2\x80\x99 medical expenses and repair costs for damage to her friend\xe2\x80\x99s back door.\nHarris also directed her attorney to request the court dismiss the civil complaint\nwithout prejudice.\nThe parties separated again in late April 1998. Albinger told Harris to \xe2\x80\x9ctake the car, the\nhorse, the dog, and the ring and get the hell out.\xe2\x80\x9d During their last month together,\nHarris ran up approximately $1,000 in telephone charges on Albinger\xe2\x80\x99s credit card.\nHarris had been free to use Albinger\xe2\x80\x99s telephone throughout the relationship, and\nAlbinger paid the bills. Harris moved from Great Falls, Montana to Kentucky, where\n\n\x0c612\n\nProperty\n\nshe now resides. The parties dispute who was responsible for the end of the\nrelationship. No reconciliation followed, marriage plans evaporated and Harris refused\nto return the ring.\nAlbinger filed a complaint on August 31, 1998, seeking recovery of the ring or its\nmonetary value and payment for $1,000 in telephone charges. Harris counterclaimed\nfor damages resulting from the assault of February 23, 1997.\nAt the conclusion of the trial, both parties submitted briefs discussing how the statute\nbarring actions for breach of promise to marry, \xc2\xa7 27-1-602, MCA, impacts an action to\nrecover an engagement ring. The District Court found the ring to be a gift in\ncontemplation of marriage, and reasoned that \xc2\xa7 27-1-602, MCA, did not bar the action\nbecause the case could be decided on common-law principles, as opposed to contract\ntheories. The court implied the existence of a condition attached to the gift of the\nengagement ring. Disregarding allegations of fault for \xe2\x80\x9cbreaking\xe2\x80\x9d the engagement, the\ncourt concluded that the giver is entitled to the return of the ring upon failure of the\ncondition of marriage.\nOn September 2, 1999, the District Court awarded the engagement ring or its\nreasonable value and court costs to Albinger, and denied recovery for the telephone\ncharges. \xe2\x80\xa6 From this judgment, Harris appeals the disposition of the ring and Albinger\ncross-appeals the denial of telephone charges \xe2\x80\xa6.\nDid the District Court err in determining an engagement ring is a conditional gift that\nmay be revoked upon termination of the engagement?\nAlbinger and Harris gave one another numerous gifts of substantial value during their\nengagement. The ring is the only item now in controversy\xe2\x80\xa6.\nLegal ownership of the gift of an engagement ring when marriage plans are called off\nis an issue of first impression in Montana. In 1963, the Legislature barred access to the\ncourts for actions arising from breach of the promise to marry. The District Court\ndetermined that this action brought to recover an antenuptial gift is maintainable,\nnotwithstanding \xc2\xa7 27-1-602, MCA, which states:\n\n\x0cGifts\n\n613\n\nAll causes of action for breach of contract to marry are hereby abolished.\nHowever, where a plaintiff has suffered actual damage due to fraud or\ndeceit or a defendant has been unjustly enriched, the plaintiff may\nmaintain an action for fraud or deceit or unjust enrichment and recover\ntherein only the actual damage proved or for the benefit wrongfully\nobtained or restitution of property wrongfully withheld where such\naction otherwise is maintainable under existing law.\n\xe2\x80\xa6 Albinger argues that the engagement ring was a conditional gift that he could revoke\nwhen the implied condition of marriage failed. Hence, Harris\xe2\x80\x99 refusal to return the ring\nupon demand constituted unjust enrichment. Harris contends she deserves the ring\nbecause Albinger repeatedly beat her, forcibly took the ring back, and was the one who\nfinally ended the engagement by ordering Harris to move out of the residence where\nthey had been living together.\nThe District Court declined to undertake a determination of which party was at fault\nin terminating the engagement. The court cited the following three reasons: 1) judicial\nholdings that fault is an inappropriate concern in matters of family relations; 2)\npragmatic difficulties in discerning fault when the conduct of both parties likely\ncontributes to the failure of a relationship; and, 3) aversion to concepts of legal\n\xe2\x80\x9crightness\xe2\x80\x9d and \xe2\x80\x9cwrongness\xe2\x80\x9d regarding the choice of a marriage partner. We agree, and\naffirm that judicial fault-finding is irrelevant and immaterial in the adjudication of\nmatters of antenuptial gifting under existing law, absent fraud or deceit.\nThe District Court employed the \xe2\x80\x9cconditional gift\xe2\x80\x9d theory advanced by Albinger to\ndetermine present ownership of the disputed engagement ring. The theory holds that\nan implied condition of marriage attaches to the gift of a ring upon initial delivery due\nto the ring\xe2\x80\x99s symbolic association with the promise to marry and, when the condition\nof marriage fails, the incomplete gift may be revoked by the giver. Albinger urges this\nCourt to affirm the District Court\xe2\x80\x99s conclusion that the ownership of an engagement\nring remains with the one who gave the ring when plans to marry are called off.\nOnly in engagement ring cases does precedent from other jurisdictions weigh heavily\nfor conditional gift theory in the absence of an expressed condition. Considering it\n\xe2\x80\x9cunduly harsh and unnecessary\xe2\x80\x9d to require a hopeful suitor to express any condition\n\n\x0c614\n\nProperty\n\nupon which a ring might be premised, many courts stepped in to impute the condition\nof marriage. In practice, courts presume the existence of the implied condition of\nmarriage attaching to an engagement ring in the absence of an expressed intent to the\ncontrary\xe2\x80\xa6.\nABOLITION OF BREACH OF PROMISE ACTIONS\nHistoric breach of promise jurisprudence tended to view an engagement ring as either\na pledge of personal property given to secure a marital promise or as consideration for\nthe contract of marriage. When a contract to marry was abrogated, the jilted lover could\nseek redress in a breach of promise action that sounded in contract law, but availed the\nplaintiff of tort damages. \xe2\x80\x9cThe law allows punitive or vindictive damages to be assessed\nby the jury; and all the circumstances attending the breach before, at the time, and after\nmay be given in evidence in aggravation of damages.\xe2\x80\x9d The plaintiffs were almost\ninvariably women seeking economic relief for themselves, compensation for pregnancy\nand material support for children of the relationship. Whatever \xe2\x80\x9cheart balm\xe2\x80\x9d was\nawarded to assuage lost love, ruined reputation or foreclosed opportunities to marry\nwell \xe2\x80\x9crest[ed] in the sound discretion of the jury.\xe2\x80\x9d\nBy the mid-1930\xe2\x80\x99s, several state legislatures questioned the efficacy of court\n\xe2\x80\x9cinterference with domestic relations\xe2\x80\x9d and passed statutes barring actions for breach\nof promise to marry, alienation of affections, criminal conversation and other\ninappropriate conduct of the \xe2\x80\x9cprivate realm.\xe2\x80\x9d See Rebecca Tushnet, Rules of\nEngagement (1998), 107 Yale Law Journal 2583, 2586-91. Commentators noted all of\nthese actions \xe2\x80\x9cafforded a fertile field for blackmail and extortion by means of\nmanufactured suits in which the threat of publicity is used to force a settlement.\xe2\x80\x9d\n\xe2\x80\x9cThere is good reason to believe that even genuine actions of this type are brought\nmore frequently than not with purely mercenary or vindictive motives [and] that it is\nimpossible to compensate for such damage with what has derisively been called \xe2\x80\x98heart\nbalm.\xe2\x80\x99 \xe2\x80\x9d\nIn the wake of \xe2\x80\x9canti-heart balm\xe2\x80\x9d statutes that barred breach of contract to marry\nactions, courts heard a plethora of legal theories designed to involve them in settling\nantenuptial property disputes while avoiding the language of contract law. The results\nwere mixed. Some courts allowed actions in replevin. Others entertained claims for\n\n\x0cGifts\n\n615\n\nrestitution and unjust enrichment. Out of this legal morass, conditional gift analysis\nemerged as a popular way to resolve acrimonious engagement ring disputes. While\nsome states pursue a fault-based determination for awarding the ring in equity, the\nmodern wave aligns ring disposition with no-fault divorce property disposition and\nfollows a bright-line rule of ring return\xe2\x80\xa6.\nCONDITIONAL GIFT THEORY\nAccording to Montana law, \xe2\x80\x9ca gift is a transfer of personal property made voluntarily\nand without consideration.\xe2\x80\x9d \xe2\x80\xa6 When clear and convincing evidence demonstrates the\npresence of the essential elements of donative intent, voluntary delivery and acceptance,\nthe gift is complete and this Court will not void the transfer when the giver experiences\na change of heart.\nAnother essential element of a gift is that it is given without consideration. A purported\n\xe2\x80\x9cgift\xe2\x80\x9d that is part of the inducement for \xe2\x80\x9can agreement to do or not to do a certain\nthing,\xe2\x80\x9d becomes the consideration essential to contract formation. An exchange of\npromises creates a contract to marry, albeit an unenforceable one. When an\nengagement ring is given as consideration for the promise to marry, a contract is\nformed and legal action to recover the ring is barred by the abolition of the breach of\npromise actions.\n\xe2\x80\xa6 Albinger maintains he held a reversionary interest in the gift of the engagement ring\ngrounded in an implied condition subsequent. Montana law recognizes the transfer of\npersonal property subject to an express or implied condition which must be satisfied\nbefore title vests, as either a contract, or as a gift in view of death. Since actions\nstemming from breach of the contract to marry are barred by our \xe2\x80\x9canti-heart balm\xe2\x80\x9d\nstatute, Albinger urges the Court to adopt a conditional gift theory patterned on the\nlaw relevant to a gift in view of death. Under Montana law, no gift is revocable after\nacceptance except a gift in view of death. While some may find marriage to be the end\nof life as one knows it, we are reluctant to analogize gifts in contemplation of marriage\nwith a gift in contemplation of death. This Court declines the invitation to create a new\ncategory of gifting by judicial fiat.\n\n\x0c616\n\nProperty\n\nGENDER BIAS\n\xe2\x80\xa6 The Montana Legislature made the social policy decision to relieve courts of the\nduty of regulating engagements by barring actions for breach of promise. While not\nexplicitly denying access to the courts on the basis of gender, the \xe2\x80\x9canti-heart balm\xe2\x80\x9d\nstatutes closed courtrooms across the nation to female plaintiffs seeking damages for\nantenuptial pregnancy, ruined reputation, lost love and economic insecurity. During\nthe mid-20th Century, some courts continued to entertain suits in equity for antenuptial\nproperty transfers. The jurisprudence that rose upon the implied conditional gift theory,\nbased upon an engagement ring\xe2\x80\x99s symbolic associations with marriage, preserved a right\nof action narrowly tailored for ring givers seeking ring return\xe2\x80\xa6. The proposed no-fault\nadjudication of a disputed engagement ring also ignores the particular circumstances of\na couple\xe2\x80\x99s decision not to marry.\nConditional gift theory applied exclusively to engagement ring cases, carves an\nexception in the state\xe2\x80\x99s gift law for the benefit of predominately male plaintiffs.\xe2\x80\xa6While\nantenuptial traditions vary by class, ethnicity, age and inclination, women often still\nassume the bulk of pre-wedding costs, such as non-returnable wedding gowns, moving\ncosts, or non-refundable deposits for caterers, entertainment or reception halls.\nConsequently, the statutory \xe2\x80\x9canti-heart balm\xe2\x80\x9d bar continues to have a disparate impact\non women. If this Court were to fashion a special exception for engagement ring\nactions under gift law theories, we would perpetuate the gender bias attendant upon\nthe Legislature\xe2\x80\x99s decision to remove from our courts all actions for breach of\nantenuptial promises.\nENGAGEMENT RING DISPOSITION\nTo preserve the integrity of our gift law and to avoid additional gender bias, we decline\nto adopt the theory that an engagement ring is a gift subject to an implied condition of\nmarriage.\xe2\x80\xa6 We hold that the engagement ring was an unconditional, completed gift\nupon acceptance and remains in Harris\xe2\x80\x99 ownership and control.\n\n\x0cGifts\n\n617\n\nJustice TERRY N. TRIEWEILER concurring [as to the telephone charges] and\ndissenting.\nGender discrimination is a bad thing. I am glad the majority is against it. However, I\nregret that the majority has taken this opportunity to declare their good intentions\nbecause gender equity has about as much to do with this case as banking law. \xe2\x80\xa6\nThe simple fact is that if women are more likely to be the subject of an action to recover\na conditional gift given in anticipation of a marriage which does not occur, it is because\nthey are more frequently the recipient of the gift. Should we just prohibit gifts in\nanticipation of marriage altogether because men are more likely to have to pay for\nthem?\n\xe2\x80\xa6 The District Court found in Finding No. 7 that each time, except for the last time,\nthe couple broke up (and they broke up frequently), the ring was either returned by\nMichelle or taken back by Michael. These findings were fully supported by the evidence.\nFor example, Michael testified as follows:\nQ. Now, when you gave her the engagement ring, were you\ncontemplating that you were going to get married?\nA. That was the whole idea.\nQ. Was there any way in your mind that the engagement ring was just a\nring and she could keep it whether you were married or not?\nA. No\xe2\x80\xa6.\nIt is equally clear from the record that the engagement ring was treated differently by\nthe couple than other gifts which had been given by Michael to Michelle while they\nwere engaged. He testified as follows:\nQ. Okay. Now, you heard her testify, didn\xe2\x80\x99t you, about the other gifts\nyou\xe2\x80\x99d given her?\nA. Yes, I did.\n\n\x0c618\n\nProperty\n\nQ. The 1995 Mustang that cost about $24,000, was that in contemplation\nof getting married?\nA. No.\nQ. Have you ever made any demand that she return that to you?\nA. No.\nQ. How about the diamond earrings that were the Christmas gift? Have\nyou ever made any demands that she return those because they were\ngiven in contemplation of marriage?\nA. No.\nQ. How about the horse?\nA. No.\nQ. Any gift you gave her beside the engagement ring, did you ever\ncontend that those other gifts were made in contemplation of marriage?\nA. No. They were gifts. Those are gifts.\n\xe2\x80\xa6 [A]n older line of cases limited a donor\xe2\x80\x99s recovery of the gift to situations where the\nengagement is dissolved by agreement or unjustifiably broken by the donee. However,\nthe court concluded that the notion of one party being at blame for the termination of\nan engagement is archaic and outdated.\n\xe2\x80\xa6 [E]ither gender can [be] given an engagement ring. For example, in Vigil v. Haber\n(1994), 119 N.M. 9, 888 P.2d 455, the parties exchanged engagement rings. However,\ntheir relationship deteriorated, the couple separated, and following their separation a\nhearing examiner determined that the parties should return the rings they had given\neach other. The plaintiff immediately returned the ring he had along with other of the\ndefendant\xe2\x80\x99s possessions. However, the defendant objected to returning the\nengagement ring that had been given to her. The New Mexico Supreme Court held\nthat the ring was a conditional gift depend[e]nt on the parties\xe2\x80\x99 marriage and should be\nreturned. What if the roles had been reversed and the woman had returned the\nengagement ring given to her but the man had refused to do so? According to this\n\n\x0cGifts\n\n619\n\nCourt, she would not be allowed to recover the engagement ring that she had given to\nher fianc\xc3\xa9, no matter how substantial the value and unfair the result because requiring\nthe return of engagement rings is unfair to women.\nThe second problem with the majority\xe2\x80\x99s assumptions is the assumption that conditional\ngift law as it relates to gifts exchanged in anticipation of marriage only applies to\nwedding rings. It does not. For example, in Pavlicic, a case which disproves the theory\nthat jurisprudence cannot be written in readable prose, the plaintiff was a 75-year-old\nman when the 26-year-old defendant asked for his hand in marriage. While he first\nprotested on the basis of his age, she assured him that she was no longer interested in\n\xe2\x80\x9cyoung fellows\xe2\x80\x9d and prevailed upon him to make the commitment. Over the course of\nthe next four years, she then prevailed upon him to pay the mortgage on her home,\nbuy her two new cars, an engagement ring, a diamond for her mother\xe2\x80\x99s ring, remodel\nher house, and advance her $5000 to purchase a saloon which they could jointly operate.\nThe problem was that after she received the money for the saloon, she disappeared.\nShe was next seen in another town operating Ruby\xe2\x80\x99s bar and married to a man two\nyears her junior.\nAs noted by the Pennsylvania Supreme Court:\nWhen George emerged from the mists and fogs of his disappointment\nand disillusionment he brought an action in equity praying that the\nsatisfaction of the mortgage on Sara Jane\xe2\x80\x99s property be stricken from the\nrecord, that she be ordered to return the gifts which had not been\nconsumed, and pay back the moneys [sic] which she had gotten from\nhim under a false promise to marry.\nThe Pennsylvania Supreme Court held that George\xe2\x80\x99s action was not barred by the\nstate\xe2\x80\x99s \xe2\x80\x9cHeart Balm Act\xe2\x80\x9d and that all gifts, not just the wedding ring, were conditional\ngifts in anticipation of marriage which must be returned or repaid. \xe2\x80\xa6\nThe point is that there is no reason to limit the law of \xe2\x80\x9cconditional gifts\xe2\x80\x9d in anticipation\nof marriage to engagement rings. \xe2\x80\xa6\n\n\x0c620\n\nProperty\n\nNotes and Questions\n1. Would the court rule the same way if a woman had given a man an engagement\nring, or a man had given a man an engagement ring? Compare Lindh v. Surman,\n742 A.2d 643 (Pa. 1999) (adopting the majority no-fault rule requiring return of\nthe ring in any broken engagement).\n2. Does the adoption of a no-fault rule require the mandatory return of the ring in\nevery case? Wouldn\xe2\x80\x99t a no-return rule also be a no-fault rule that distributed the\nlosses differently?\n3. If the dissent is correct, could Albinger have sought the return of his other gifts?\n4. The dissent argues that the anti-heartbalm laws were fully consistent with nofault conditional gift theory, but see Rebecca Tushnet, Rules of Engagement, 107\nYALE L. J. 2583, 2594 (1998):\n[The early post-reform cases like Pavlicic, holding that women had\nto return engagement rings when they were at fault for breaking\nthe engagement,] subtly shifted the justification for antiheartbalm\nlaws in a paternalistic direction. The laws were no longer\nunderstood to protect wholly innocent men who had not\npromised anything to mercenary women; instead, they were\nconstrued to protect men who had foolishly, but willingly, made\nactual promises to marry and who then gave gifts in reliance on a\nwoman\xe2\x80\x99s deceitful promise. Blackmail and extortion disappeared,\nleaving trickery and desire-induced gullibility as the only\nrationales for the rule. Whereas prereform cases had presumed\nthat women were vulnerable to a naturally dominating male\ninfluence, the emerging line of engagement gift cases were\npremised on the view that women could misuse their power over\nlove-blinded men. There was a related shift in the presumed goal\nof a promise-breaker\xe2\x80\x99s deceit: Duplicitous men attempting to get\nsex were replaced as the targets of premarital law by duplicitous\nwomen attempting to get material goods.\n\n\x0cGifts\n\n621\n\nIf the reason for having a unique rule for engagement rings grows out of a\nhistory of sexist views of women, does that support the majority\xe2\x80\x99s conclusion?\n5. Cooper v. Smith, 800 N.E.2d 372 (Ohio Ct. App. 2003), concluded that the\nengagement ring was a conditional gift recoverable without fault, but that other\npremarital gifts to a then-fiancee\xe2\x80\x94including a car, a computer, a tanning bed,\nand horses\xe2\x80\x94were irrevocable inter vivos gifts unless they were expressly\nconditioned on the ocurrence of the marriage, and gifts to ex-fiancee\xe2\x80\x99s mother\nwere also irrevocable:\nThe engagement ring has a special significance because it\nsymbolizes the couple\xe2\x80\x99s promise to marry. As a symbol of the\npromise to marry, what value does the ring have for the donee\nonce the engagement is ended? * Moreover, we realize that a\ndonor proposing to his or her beloved is unlikely to expressly\ncondition the gift of the engagement ring on the occurrence of\nthe marriage. Not only do we realize how unlikely this is, we\nrecognize how unromantic such a requirement would be. Thus,\nbecause of the engagement ring\xe2\x80\x99s symbolic significance, we are\nwilling to imply a condition to the gift of the engagement ring.\nUnless the parties have agreed otherwise, the donor is entitled to\nrecover the engagement ring (or its value) if the marriage does\nnot occur, regardless of who ended the engagement.\nWhile we are willing to imply a condition concerning the\nengagement ring, we are unwilling to do so for other gifts given\nduring the engagement period. Unlike the engagement ring, the\nother gifts have no symbolic meaning. Rather, they are merely\n\xe2\x80\x9ctoken[s] of the love and affection which [the donor] bore for the\n[donee].\xe2\x80\x9d\xe2\x80\xa6 \xe2\x80\x9cMany gifts are made for reasons that sour with the\npassage of time.\xe2\x80\x9d Unfortunately, gift law does not allow a donor\n[Eds.\xe2\x80\x94As a symbol of the promise to marry, what value does the ring have for the donor once the engagement\nis ended?]\n*\n\n\x0c622\n\nProperty\n\nto recover/revoke an inter vivos gift simply because his or her\nreasons for giving it have \xe2\x80\x9csoured.\xe2\x80\x9d\n\xe2\x80\xa6 If we were to imply a condition on gifts given during the\nengagement period, then every gift the donor gave, no matter\nhow small or insignificant, would be recoverable.\xe2\x80\xa6 We believe\nthat the best approach is to treat gifts exchanged during the\nengagement period (excluding the engagement ring) as absolute\nand irrevocable inter vivos gifts unless the donor has expressed an\nintent that the gift be conditioned on the subsequent marriage.\nWhat\xe2\x80\x99s the difference between a gift being \xe2\x80\x9csymbolic\xe2\x80\x9d and a gift being a \xe2\x80\x9ctoken[]\xe2\x80\x9d\nof \xe2\x80\x9clove and affection\xe2\x80\x9d\xe2\x80\x94aren\xe2\x80\x99t those synonyms? Why not then imply the same\nconditions on other premarital gifts?\nDoes it matter that willingness and ability to perform, and not actual\nperformance, is the usual rule for all conditional gifts except for the engagement\nring? This would roughly equate to the older fault rule in broken engagement\ncases. See Curtis v. Anderson, 106 S.W.3d 251 (Tex. Ct. App. 2003) (agreement\nthat fiancee would return ring if marriage did not occur had to be in writing to\nbe enforceable; applying fault rule and finding that donor, as person responsible\nfor calling off marriage, was not entitled to return of engagement ring under\nconditional gift doctrine). But is it actually \xe2\x80\x9cfault\xe2\x80\x9d to break an engagement\nwhere at least one party doesn\xe2\x80\x99t want to get married?\n6. How will this rule affect the behavior of engaged couples in Montana? (Did\nyou know the majority no-fault rule before reading this section?)\n7. Susan and Sarah announce their engagement. Numerous gifts arrive before the\nday of the wedding, some at a \xe2\x80\x9cbridal shower\xe2\x80\x9d and some just before the wedding.\nOn the morning of the wedding, Susan and Sarah call off their engagement.\nWho owns the gifts? (If you think the gifts don\xe2\x80\x99t have to be returned, how\nshould Susan and Sarah split them?) What if Sarah has a stroke and dies the day\nbefore the wedding? If Susan and Sarah marry on Sunday and divorce on\nMonday?\n\n\x0cGifts\n\n623\n\n8. Other odious conditions. Tennessee Div. of the United Daughters of the Confederacy\nv. Vanderbilt Univ., 174 S.W.3d 98 (Tenn. Ct. App. 2005), involved a 1933\ndonation from the UDC of $50,000 to Peabody College. The gift came with the\nexpress condition that a dormitory must be maintained with the inscription\n\xe2\x80\x9cConfederate Memorial Hall.\xe2\x80\x9d In 1979, Peabody College merged into\nVanderbilt University, which in 2002 sought to change the name to repudiate\nthe association with slavery and racial exclusion. The court of appeals found\nthat Vanderbilt could not do so unless it returned the present value of the gift.\nIs that the right result? The court said that it wasn\xe2\x80\x99t within the court\xe2\x80\x99s mandate\n\xe2\x80\x9cto resolve the larger cultural and social conflicts regarding whether and how\nthose who fought for the Confederacy should be honored or remembered.\xe2\x80\x9d A\nconcurring judge commented that a majority of those who fought for the\nConfederacy owned no slaves, and called Vanderbilt\xe2\x80\x99s stance a \xe2\x80\x9cmisperception.\xe2\x80\x9d\n(Query: Is the alleged misperception about what Confederate soldiers fought to\npreserve?)\nWas the problem merely that the court of appeals didn\xe2\x80\x99t find the condition\nodious enough? In fact, the agreement between the UDC and Peabody apparently\ncalled for Peabody to house young women descended from Confederate\nsoldiers for free in the dormitory. Vanderbilt stopped the free housing, with no\nobjection. In the litigation, Vanderbilt argued that the conditions were never\nproperly put in place, but the court of appeals rejected its arguments. Should\nVanderbilt be required either to reinstate the free housing for descendants of\nConfederate soldiers or pay up? (Laws against racial discrimination would make\nthe first alternative impossible.) Ultimately, Vanderbilt changed the name on\nall official documents and the university\xe2\x80\x99s website, but kept \xe2\x80\x9cConfederate\nMemorial Hall\xe2\x80\x9d on the building itself. As you will see, this condition\xe2\x80\x94\napparently destined to persist forever\xe2\x80\x94raises issues of \xe2\x80\x9cdead hand\xe2\x80\x9d control by\npast owners, issues we have seen before and will see again.\n\n\x0c624\n\nProperty\n\nE. Review Problems\n1. Abbie Mills lends her friend Ichabod Crane a book when Ichabod is visiting her\nhome. A week later, she calls Ichabod and tells him to keep the book. Does he\nown the book? At what point did he come to own the book?\n2. Walter Bishop, on his deathbed, tells Olivia Dunham, \xe2\x80\x9cBecause I love you like\na daughter and I want to ensure your financial security, I want you to have my\nhouse in Disturbia City. Continue to rent it out as I have done and you will\nalways have an income.\xe2\x80\x9d He hands her the deed to the house, then dies.\nWalter\xe2\x80\x99s will leaves all his property to Peter Bishop. For the last five years, the\nproperty has been rented to Astrid Farnsworth as a furnished dwelling. Peter\nBishop sues Dunham for possession of the furniture in the house as well as the\nrare book collection stored on the bookshelves of the house. Who owns the\nfurniture, and why? Who owns the rare book collection, and why?\n3. Victoria Grayson hires Amanda Clarke as nanny to her children, Charlotte and\nDaniel Grayson. One day, Clarke praises one of Victoria Grayson\xe2\x80\x99s diamond\nnecklaces. Grayson says, \xe2\x80\x9cYou can have it if Charlotte and Daniel are accepted\ninto Evernight Academy. In the meantime, you can wear it.\xe2\x80\x9d Clarke thanks\nGrayson and wears the necklace thereafter. Right before the Evernight entrance\nresults are released, Grayson fires Clarke, telling her, \xe2\x80\x9cI despise you and I will\nnever do anything for you!\xe2\x80\x9d Clarke leaves, taking the necklace with her. A day\nlater, Charlotte and Daniel are accepted into Evernight. A day after that,\nVictoria Grayson sends a letter to Clarke demanding the return of the necklace.\nWho owns the necklace and why?\n4. Damon and Stefan Salvatore, brothers, owned their family home. They fought,\nand, in an attempt to placate Stefan, Damon executed a deed transferring his\nownership interest in the home to Stefan. Damon went to Stefan\xe2\x80\x99s study and\nhanded him the deed. Stefan dropped the deed (it landed on his desk) and yelled,\n\xe2\x80\x9cYou\xe2\x80\x99ll never buy my forgiveness!\xe2\x80\x9d Then he punched Damon and left town.\nDamon continued to live in the house. Two years later, with Stefan still gone,\nDamon executed a new deed transferring his ownership interest to Elena\n\n\x0cGifts\n\n625\n\nGilbert, who had no idea about the previous deed. Damon handed the deed to\nElena, telling her, \xe2\x80\x9cWith all my family has done to yours, this is the least I can\ndo.\xe2\x80\x9d She thanked him. A year later, Stefan returned. Damon\xe2\x80\x99s first deed was\nstill on Stefan\xe2\x80\x99s desk, albeit very dusty. At that point, Stefan put the deed in his\nsafety deposit box at the bank and thanked Damon for the gesture. Damon\nsaid, \xe2\x80\x9cNo problem.\xe2\x80\x9d Which gift was completed first?\n5. Fox Mulder gives Dana Scully a keychain with an Apollo 11 medallion on it.\nBut when she tries to put her keys on it, the ring doesn\xe2\x80\x99t work. He tells her,\n\xe2\x80\x9cLet me have that fixed for you,\xe2\x80\x9d and she lets him have the keychain.\nAfterwards, he decides that he doesn\xe2\x80\x99t want her to have the keychain. Who\nowns the keychain?\n\n\x0cWills and Intestacy\nLon L. Fuller, Consideration and Form\n41 COLUM. L. REV. 799 (1941)\n\xc2\xa7 2.\n\nThe Evidentiary Function.\xe2\x80\x94The most obvious function of a legal formality is, to\nuse Austin\xe2\x80\x99s words, that of providing \xe2\x80\x9cevidence of the existence and purport of\nthe contract, in case of controversy.\xe2\x80\x9d The need for evidentiary security may be\nsatisfied in a variety of ways: by requiring a writing, or attestation, or the\ncertification of a notary. It may even be satisfied, to some extent, by such a\ndevice as the Roman stipulatio, which compelled an oral spelling out of the\npromise in a manner sufficiently ceremonious to impress its terms on\nparticipants and possible bystanders.\n\n\xc2\xa7 3.\n\nThe Cautionary Function.\xe2\x80\x94A formality may also perform a cautionary or deterrent\nfunction by acting as a check against inconsiderate action. The seal in its original\nform fulfilled this purpose remarkably well. The affixing and impressing of a\nwax wafer-symbol in the popular mind of legalism and weightiness-was an\nexcellent device for inducing the circumspective frame of mind appropriate in\none pledging his future. To a less extent any requirement of a writing, of course,\nserves the same purpose, as do requirements of attestation, notarization, etc.\n\n\xc2\xa7 4.\n\nThe Channeling Function.\xe2\x80\x94... That a legal formality may perform a function not\nyet described can be shown by the seal. The seal not only insures a satisfactory\nmemorial of the promise and induces deliberation in the making of it. It serves\nalso to mark or signalize the enforceable promise; it furnishes a simple and\nexternal test of enforceability. ... The thing which characterizes the law of\ncontracts and conveyances is that in this field forms are deliberately used, and\nare intended to be so used, by the parties whose acts are to be judged by the law.\nTo the business man who wishes to make his own or another\xe2\x80\x99s promise binding,\nthe seal was at common law available as a device for the accomplishment of his\nobjective. In this aspect form offers a legal framework into which the party may\n626\n\n\x0cWills and Intestacy\n\n627\n\nfit his actions, or, to change the figure, it offers channels for the legally effective\nexpression of intention.\nJohn H. Langbein, Substantial Compliance with the Wills Act\n88 HARV.. L. REV. 489 (1975)\nThe Protective Function.\xe2\x80\x94Courts have traditionally attributed to the Wills Act the object\n\xe2\x80\x9cof protecting the testator against imposition at the time of execution.\xe2\x80\x9d The\nrequirement that attestation be made in the presence of the testator is meant \xe2\x80\x9cto\nprevent the substitution of a surreptitious will.\xe2\x80\x9d Another common protective\nrequirement is the rule that the witnesses should be disinterested, hence not motivated\nto coerce or deceive the testator.\nStevens v. Casdorph\n203 W. Va. 450 (1988)\nPER CURIAM: \xe2\x80\xa6\nOn May 28, 1996, [Patricia Eileen Casdorph and Paul Douglas Casdorph] took Mr.\nHomer Haskell Miller to Shawnee Bank in Dunbar, West Virginia, so that he could\nexecute his will.1 Once at the bank, Mr. Miller asked Debra Pauley, a bank employee\nand public notary, to witness the execution of his will. After Mr. Miller signed the will,\nMs. Pauley took the will to two other bank employees, Judith Waldron and Reba\nMcGinn, for the purpose of having each of them sign the will as witnesses. Both Ms.\nWaldron and Ms. McGinn signed the will. However, Ms. Waldron and Ms. McGinn\ntestified during their depositions that they did not actually see Mr. Miller place his\nsignature on the will. Further, it is undisputed that Mr. Miller did not accompany Ms.\nPauley to the separate work areas of Ms. Waldron and Ms. McGinn.\n\n\x0c628\n\nProperty\n\nMr. Miller died on July 28, 1996. The last will and testament of Mr. Miller, which named\nMr. Paul Casdorph as executor, left the bulk of his estate to the Casdorphs. The\nStevenses, nieces of Mr. Miller, filed the instant action to set aside the will. ...4\nThe Stevenses\xe2\x80\x99 contention is simple. They argue that all evidence indicates that Mr.\nMiller\xe2\x80\x99s will was not properly executed. Therefore, the will should be voided. The\nprocedural requirements at issue are contained in W.Va. Code \xc2\xa7 41-1-3 (1997). The\nstatute reads:\nNo will shall be valid unless it be in writing and signed by the testator,\nor by some other person in his presence and by his direction, in such\nmanner as to make it manifest that the name is intended as a signature;\nand moreover, unless it be wholly in the handwriting of the testator, the\nsignature shall be made or the will acknowledged by him in the presence of at least\ntwo competent witnesses, present at the same time; and such witnesses shall subscribe\nthe will in the presence of the testator, and of each other, but no form of attestation\nshall be necessary. (Emphasis added.)\nThe relevant requirements of the above statute calls for a testator to sign his/her will\nor acknowledge such will in the presence of at least two witnesses at the same time,\nand such witnesses must sign the will in the presence of the testator and each other. In\nthe instant proceeding the Stevenses assert, and the evidence supports, that Ms.\nMcGinn and Ms. Waldron did not actually witness Mr. Miller signing his will. Mr. Miller\nmade no acknowledgment of his signature on the will to either Ms. McGinn or Ms.\nWaldron. Likewise, Mr. Miller did not observe Ms. McGinn and Ms. Waldron sign his\nwill as witnesses. Additionally, neither Ms. McGinn nor Ms. Waldron acknowledged to\nMr. Miller that their signatures were on the will. It is also undisputed that Ms. McGinn\nand Ms. Waldron did not actually witness each other sign the will, nor did they\nacknowledge to each other that they had signed Mr. Miller\xe2\x80\x99s will. ...\n\n4 As\n\nheirs, the Stevenses would be entitled to recover from Mr. Miller\xe2\x80\x99s estate under the intestate laws if his will\nis set aside as invalidly executed. ...\n\n\x0cWills and Intestacy\n\n629\n\nOur analysis begins by noting that \xe2\x80\x9cthe law favors testacy over intestacy.\xe2\x80\x9d However,\nwe clearly held in syllabus point 1 of Black v. Maxwell, 131 W. Va. 247, 46 S.E.2d 804\n(1948), that \xe2\x80\x9ctestamentary intent and a written instrument, executed in the manner\nprovided by [W.Va. Code \xc2\xa7 41-1-3], existing concurrently, are essential to the creation\nof a valid will.\xe2\x80\x9d Black establishes that mere intent by a testator to execute a written will\nis insufficient. The actual execution of a written will must also comply with the dictates\nof W.Va. Code \xc2\xa7 41-1-3. The Casdorphs seek to have this Court establish an exception\nto the technical requirements of the statute. In Wade v. Wade, 119 W. Va. 596 (1938),\nthis Court permitted a narrow exception to the stringent requirements of the W.Va.\nCode \xc2\xa7 41-1-3. This narrow exception is embodied in syllabus point 1 of Wade:\nWhere a testator acknowledges a will and his signature thereto in the\npresence of two competent witnesses, one of whom then subscribes his\nname, the other or first witness, having already subscribed the will in the\npresence of the testator but out of the presence of the second witness,\nmay acknowledge his signature in the presence of the testator and the\nsecond witness, and such acknowledgment, if there be no indicia of\nfraud or misunderstanding in the proceeding, will be deemed a signing\nby the first witness within the requirement of Code, 41-1-3, that the\nwitnesses must subscribe their names in the presence of the testator and\nof each other. \xe2\x80\xa6\nWade stands for the proposition that if a witness acknowledges his/her signature on a\nwill in the physical presence of the other subscribing witness and the testator, then the\nwill is properly witnessed within the terms of W.Va. Code \xc2\xa7 41-1-3. In this case, none\nof the parties signed or acknowledged their signatures in the presence of each other.\nThis case meets neither the narrow exception of Wade nor the specific provisions of\nW.Va. Code \xc2\xa7 41-1-3.\nWORKMAN, J., dissenting:\nThe majority once more takes a very technocratic approach to the law, slavishly\nworshiping form over substance. In so doing, they not only create a harsh and\ninequitable result wholly contrary to the indisputable intent of Mr. Homer Haskell\n\n\x0c630\n\nProperty\n\nMiller, but also a rule of law that is against the spirit and intent of our whole body of\nlaw relating to the making of wills.\nThere is absolutely no claim of incapacity or fraud or undue influence, nor any\nallegation by any party that Mr. Miller did not consciously, intentionally, and with full\nlegal capacity convey his property as specified in his will. The challenge to the will is\nbased solely upon the allegation that Mr. Miller did not comply with the requirement\nof West Virginia Code 41-1-3 that the signature shall be made or the will acknowledged\nby the testator in the presence of at least two competent witnesses, present at the same\ntime. The lower court, in its very thorough findings of fact, indicated that Mr. Miller\nhad been transported to the bank by his nephew Mr. Casdorph and the nephew\xe2\x80\x99s wife.\nMr. Miller, disabled and confined to a wheelchair, was a shareholder in the Shawnee\nBank in Dunbar, West Virginia, with whom all those present were personally familiar.\nWhen Mr. Miller executed his will in the bank lobby, the typed will was placed on Ms.\nPauley\xe2\x80\x99s desk, and Mr. Miller instructed Ms. Pauley that he wished to have his will\nsigned, witnessed, and acknowledged. After Mr. Miller\xe2\x80\x99s signature had been placed\nupon the will with Ms. Pauley watching, Ms. Pauley walked the will over to the tellers\xe2\x80\x99\narea in the same small lobby of the bank. Ms. Pauley explained that Mr. Miller wanted\nMs. Waldron to sign the will as a witness. The same process was used to obtain the\nsignature of Ms. McGinn. Sitting in his wheelchair, Mr. Miller did not move from Ms.\nPauley\xe2\x80\x99s desk during the process of obtaining the witness signatures. The lower court\nconcluded that the will was valid and that Ms. Waldron and Ms. McGinn signed and\nacknowledged the will \xe2\x80\x9cin the presence\xe2\x80\x9d of Mr. Miller. ...\nThe majority embraces the line of least resistance. The easy, most convenient answer\nis to say that the formal, technical requirements have not been met and that the will is\ntherefore invalid. End of inquiry. Yet that result is patently absurd. That manner of\nstatutory application is inconsistent with the underlying purposes of the statute. Where\na statute is enacted to protect and sanctify the execution of a will to prevent substitution\nor fraud, this Court\xe2\x80\x99s application of that statute should further such underlying policy,\nnot impede it. When, in our efforts to strictly apply legislative language, we abandon\ncommon sense and reason in favor of technicalities, we are the ones committing the\ninjustice.\n\n\x0cWills and Intestacy\n\n631\n\nQuestions\n1. Wills Act Formalities. The requirements to make a valid will vary from state\nto state, but in general a will must be in writing, signed by the testator, and\nattested by two witnesses. How well do these formalities serve the various\npurposes identified by Fuller and Langbein? Which of them failed in Stevens v.\nCasdorph? How? Why is the court so stringent about enforcing the formalities?\n2. Informal Wills. Whether out of ignorance about the law, skittishness in\nthinking about their own death, or bad advice, people do all kinds of things that\nblatantly fail to qualify as wills under the traditional test. They write chatty emails\nto family members explaining what they want to happen to their property after\ntheir death; they scrawl marginalia on old wills, crossing out specific bequests\nand adding new ones; they leave behind multiple conflicting undated \xe2\x80\x9clast\xe2\x80\x9d wills.\nWhat should courts do in such cases? In one memorably tragic case, Cecil\nGeorge Harris used his pocketknife to scratch the words, \xe2\x80\x9cIn case I die in this\nmess, I leave all to the wife. Cecil Geo Harris." into the fender of a tractor he\nwas fatally pinned under. It was upheld as a valid holographic will: a will that has\nbeen handwritten and signed by the testator. A majority of states recognize\nholographic wills, although their specific requirements vary and an estates\nattorney should never rely on the validity of one. (For example, Maryland\nrecognizes holographic wills only by testators serving in the armed services\nabroad. MD. CODE ESTATES & TRUSTS \xc2\xa7 4-103(a)).\n3. Interpretive Problems. The general interpretive rule for wills is the \xe2\x80\x9cintent of\nthe testator.\xe2\x80\x9d Is there any reason this might be a harder problem for wills than\nfor other types of legal instruments? Consider:\n\xe2\x80\xa2 T\xe2\x80\x99s will leaves \xe2\x80\x9call my property to my daughters A and B.\xe2\x80\x9d Five\nyears after making the will but ten years before his death, T and\nhis wife have another child, C.\n\xe2\x80\xa2 T\xe2\x80\x99s will leaves \xe2\x80\x9cmy red Toyota to my nephew A.\xe2\x80\x9d After making\nthe will, T wrecks the red Toyota and buys a blue Toyota to\nreplace it.\n\n\x0c632\n\nProperty\n\n\xe2\x80\xa2 T\xe2\x80\x99s will leaves $10,000 to A, $10,000 to B, and his antique writing\ndesk to C. After expenses, T\xe2\x80\x99s estate consists of $5,000 in cash\nand the writing desk.\n\xe2\x80\xa2 T\xe2\x80\x99s will leaves his estate equally to his sisters A and B. A dies in\nthe same car accident as T. She leaves behind two children, C and\nD. T has one child of his own, E, from whom he is estranged.\nMaryland Code, Estates and Trusts, \xc2\xa7\xc2\xa7 3-101 to 3-104\n\xc2\xa7 3-101. Order of distribution of net intestate estate\nAny part of the net estate of a decedent not effectively disposed of by his will shall be\ndistributed by the personal representative to the heirs of the decedent in the order\nprescribed in this subtitle.\n\xc2\xa7 3-102. Share of surviving spouse\n(a) In general. -- The share of a surviving spouse shall be as provided in this section.\n(b) Surviving minor child. -- If there is a surviving minor child, the share shall be onehalf.\n(c) No surviving minor child, but surviving issue. -- If there is no surviving minor child,\nbut there is surviving issue, the share shall be the first $ 15,000 plus one-half of the\nresidue.\n(d) No surviving issue, but surviving parent. -- If there is no surviving issue but a\nsurviving parent, the share shall be the first $ 15,000 plus one-half of the residue.\n(e) No surviving issue or parent. -- If there is no surviving issue or parent, the share\nshall be the whole estate. \xe2\x80\xa6\n\xc2\xa7 3-103. Division among surviving issue\nThe net estate, exclusive of the share of the surviving spouse, or the entire net estate if\nthere is no surviving spouse, shall be divided equally among the surviving issue\xe2\x80\xa6\xe2\x80\xa6\n\n\x0cWills and Intestacy\n\n633\n\n\xc2\xa7 3-104. Distribution when there is no surviving issue \xe2\x80\xa6\n(b) Parents and their issue. \xe2\x80\x94 \xe2\x80\xa6 it shall be distributed to the surviving parents equally,\nor if only one parent survives, to the survivor; or if neither parent survives, to the issue\nof the parents, by representation.\n(c) Grandparents and their issue. \xe2\x80\x94 \xe2\x80\xa6\n(d) Great-grandparents and their issue. \xe2\x80\x94 \xe2\x80\xa6\n(e) No surviving blood relative. \xe2\x80\x94 If there is no surviving blood relative entitled to\ninherit under this section, it shall be divided into as many equal shares as there are\nstepchildren of the decedent \xe2\x80\xa6\nNotes and Questions\n1. If you don\xe2\x80\x99t make a will, the state will make one for you. This portion of the\nMaryland Code describes the default inheritance rules for people who die\ndomiciled in Maryland without a will. How well do you think they track people\xe2\x80\x99s\nexpectations about what will happen to their property after they die? In addition\nto total intestacy\xe2\x80\x94dying without a will\xe2\x80\x94the intestacy statute also applies in cases\nof partial intestacy\xe2\x80\x94dying with a will that fails to dispose of all of one\xe2\x80\x99s property.\nHow might that happen?\n\n\x0cLand Transactions\nIn 1250, to transfer ownership of land, the grantor and grantee would physically go to\nthe land. The grantor would physically (or perhaps metaphysically) put the grantee in\npossession by handing over a clod of dirt. The grantee would swear homage to the\ngrantor, and the grantor would swear to defend the grantee\xe2\x80\x99s title. This was a public\nceremony, performed in front of witnesses who could later be called on to recall what\nhad happened if necessary. In contrast, written conveyances\xe2\x80\x94called \xe2\x80\x9ccharters\xe2\x80\x9d\xe2\x80\x94were\ntreated with skepticism; they were considered an inferior form of evidence because of\nthe risk of forgery.\nIn the seven and a half centuries since, this attitude has completely flipped. Now, land\ntransactions are paper transactions: the Statute of Frauds almost always requires a\nwritten conveyance\xe2\x80\x94now called a \xe2\x80\x9cdeed\xe2\x80\x9d\xe2\x80\x94to transfer an interest in real property.\nTransfers by operation of law (primarily through adverse possession and intestacy) are\nvery much the exception. In addition, land transactions are influenced by the common\nlaw\xe2\x80\x99s attitude that land is of distinctive importance, so that parties dealing with it need\nespecial clarity about their rights, and by the fact that land transactions are often highstakes, with hundreds of thousands, millions, or sometimes even billions of dollars at\nissue. This section focuses on the written instruments at the heart of land transactions.\nIt considers when a deed is required, when a deed is effective, how deeds are interpreted,\nand what they promise about the property and the interest being conveyed.\n\nA. The Deed\nIndiana Code Title 32, Art. 21\n\xc2\xa7 32-21-1-1\xe2\x80\x94Requirement of written agreement; agreements or promises covered\n(a) This section does not apply to a lease for a term of not more than three (3) years.\n(b) A person may not bring any of the following actions unless the promise, contract,\nor agreement on which the action is based, or a memorandum or note describing the\n634\n\n\x0cLand Transactions\n\n635\n\npromise, contract, or agreement on which the action is based, is in writing and signed\nby the party against whom the action is brought or by the party\xe2\x80\x99s authorized agent: \xe2\x80\xa6\n(4) An action involving any contract for the sale of land.\n\xc2\xa7 32-21-1-13\xe2\x80\x94Conveyance of land; written deed required\nExcept for a bona fide lease for a term not exceeding three (3) years, a conveyance of\nland or of any interest in land shall be made by a deed that is:\n(1) written; and\n(2) subscribed, sealed, and acknowledged by the grantor \xe2\x80\xa6 or by the grantor\xe2\x80\x99s\nattorney.\nQuestions\n1. What is the difference between these two sections? Why are both necessary?\n2. Consider the following sequence of text messages:\nA: still want apt 4C @ 321 sesame st?\nB: $450,000 ok?\nA: deal. :-) -A\nB: yay! kthx bai\nCan either of the parties treat this as an enforceable contract for the sale of land?\nHarding v. Ja Laur\n315 A.2d 132 (Md. Ct. Spec. App. 1974)\nGILBERT, Judge: ...\nThe bill alleged that a deed had been obtained from the appellant through fraud\npracticed upon her by the agent of Ja Laur Corporation. The bill further averred that\nthe paper upon which the appellant had affixed her signature was \xe2\x80\x9cfalsely and\n\n\x0c636\n\nProperty\n\nfraudulently attached to the first page of a deed identified as the same deed\xe2\x80\x9d through\nwhich the appellee, Ja Laur Corporation, and its assigns, the other appellees, claim title.\n...\nThere is no dispute that the appellant signed some type of paper. Her claim is not that\nher signature was forged in the normal sense, i.e., someone copied or wrote it, but\nrather that the forgery is the result of an alteration. Mrs. Harding alleges that at the time\nthat she signed a blank paper she was told that her signature was necessary in order to\nstraighten out a boundary line. She represents that she did not know that she was\nconveying away her interest in and to a certain 1517 acres of land in Montgomery\nCounty.\nThe parcel of land that was conveyed by the allegedly forged deed is contiguous to a\nlarge tract of real estate in which Ja Laur and others had \xe2\x80\x9ca substantial interest.\xe2\x80\x9d It\nappears from the bill that Mrs. Harding\xe2\x80\x99s land provided the access from the larger tract\nto a public road, so that its value to the appellees is obvious. Mrs. Harding excuses\nherself for signing the \xe2\x80\x9cblank paper\xe2\x80\x9d by averring that she did so at the instigation of an\nattorney, an agent of Ja Laur, who had \xe2\x80\x9cbeen a friend of her deceased husband, and ...\nrepresented her deceased husband in prior business and legal matters, and that under\n[the] circumstances [she] did place her complete trust and reliance in the\nrepresentations made to her ...\xe2\x80\x9d by the attorney. The \xe2\x80\x9cblank paper\xe2\x80\x9d was signed \xe2\x80\x9con or\nabout April 2, 1970.\xe2\x80\x9d Mrs. Harding states that she did not learn of the fraud until the\n\xe2\x80\x9csummer of 1972.\xe2\x80\x9d At that time an audit, by the Internal Revenue Service, of her\ndeceased husband\xe2\x80\x99s business revealed the deed to Ja Laur, and its subsequent\nconveyance to the other appellees.\nIn Smith v. State, 256 A.2d 357, 360 (1970), we said that:\nForgery has been defined as a false making or material alteration, with\nintent to defraud, of any writing which, if genuine, might apparently be\nof legal efficacy or the foundation of a legal liability. More succinctly,\nforgery is the fraudulent making of a false writing having apparent legal\nsignificance. It is thus clear that one of the essential elements of forgery\n\n\x0cLand Transactions\n\n637\n\nis a writing in such form as to be apparently of some legal efficacy and\nhence capable of defrauding or deceiving.\nPerkins, Criminal Law ch. 4, \xc2\xa7 8 (2d ed. 1969) states, at 351:\nA material alteration may be in the form of (1) an addition to the writing,\n(2) a substitution of something different in the place of what originally\nappeared, or (3) the removal of part of the original. The removal may be\nby erasure or in some other manner, such as by cutting off a qualifying\nclause appearing after the signature.\nA multitude of cases hold that forgery includes the alteration of or addition to any\ninstrument in order to defraud. That a deed may be the subject of a forgery is beyond\nquestion.\nThe Bill of Complaint alleges that the signature of Mrs. Harding was obtained through\nfraud. More important, however, to the issue is whether or not the bill alleges forgery.\nIn our view the charge that appellant\xe2\x80\x99s signature was written upon a paper, which paper\nwas thereafter unbeknown to her made a part of a deed, if true, demonstrates that there\nhas been a material alteration and hence a forgery. ...\nWe turn now to the discussion of whether vel non the demurrers of Macro Housing,\nInc. and Montgomery County, the other appellees, should have been sustained. There\nwas no allegation in the bill that their agent had perpetrated the fraud upon Mrs.\nHarding. If they are to be held in the case, it must be on the basis that they are not bona\nfide purchasers without notice. The title of a bona fide purchaser, without notice, is not\nvitiated even though a fraud was perpetrated by his vendor upon a prior title holder. A\ndeed obtained through fraud, deceit or trickery is voidable as between the parties\nthereto, but not as to a bona fide purchaser. A forged deed, on the other hand, is void\nab initio. ...\n[T]he common law rule that a forger can pass no better title than he has is in full force\nand effect in this State. A forger, having no title can pass none to his vendee.\nConsequently, there can be no bona fide holder of title under a forged deed. A forged\ndeed, unlike one procured by fraud, deceit or trickery is void from its inception. The\n\n\x0c638\n\nProperty\n\ndistinction between a deed obtained by fraud and one that has been forged is readily\napparent. In a fraudulent deed an innocent purchaser is protected because the fraud\npracticed upon the signatory to such a deed is brought into play, at least in part, by\nsome act or omission on the part of the person upon whom the fraud is perpetrated.\nHe has helped in some degree to set into motion the very fraud about which he later\ncomplains. A forged deed, on the other hand, does not necessarily involve any action\non the part of the person against whom the forgery is committed. So that if a person\nhas two deeds presented to him, and he thinks he is signing one but in actuality, because\nof fraud, deceit or trickery he signs the other, a bona fide purchaser, without notice, is\nprotected. On the other hand, if a person is presented with a deed, and he signs that\ndeed but the deed is thereafter altered e.g. through a change in the description or\naffixing the signature page to another deed, that is forgery and a subsequent purchaser\ntakes no title.\nIn the instant case, the Bill of Complaint, for the reasons above stated, alleged a forgery\nof the deed by which Ja Laur took title from Mrs. Harding. This allegation, if true,\nrenders that deed a nullity. Ja Laur could not have passed title to the other appellees,\nMacro Housing, Inc. and Montgomery County. Those two appellees would therefore\nhave no title to the land of Mrs. Harding. ...\nQuestions\n1. What is the point of the distinction between forging a deed (sometimes called\n\xe2\x80\x9cfraud in the factum\xe2\x80\x9d) and tricking someone into signing it (\xe2\x80\x9cfraud in the\ninducement\xe2\x80\x9d)? As between the fraudster and the victim, is there a significant\ndifference? What about once third parties get involved?\n2. Mrs. Harding signs a blank piece of paper, which Ja Laur then staples to a deed.\nForgery? What if she signs the same piece of paper after it is stapled to the deed?\nDo the policy reasons for distinguishing forgery from fraud provide a\nconvincing reason to treat these cases differently?\n\n\x0cLand Transactions\n\n639\n\nWalters v. Tucker\n281 S.W.2d 843 (Sup. Ct. Mo. 1955)\nThis is an action to quiet title to certain real estate situate in the City of Webster Groves,\nSt. Louis County, Missouri. Plaintiff and defendants are the owners of adjoining\nresidential properties fronting northward on Oak Street. Plaintiff\xe2\x80\x99s property, known as\n\n\x0c640\n\nProperty\n\n450 Oak Street, lies to the west of defendants\xe2\x80\x99 property, known as 446 Oak Street. The\ncontroversy arises over their division line. Plaintiff contends that her lot is 50 feet in\nwidth, east and west. Defendants contend that plaintiff\xe2\x80\x99s lot is only approximately 42\nfeet in width, east and west. The trial court, sitting without a jury, found the issues in\nfavor of defendants and rendered judgment accordingly, from which plaintiff has\nappealed.\nThe common source of title is Fred F. Wolf and Rose E. Wolf, husband and wife, who\nin 1922 acquired the whole of Lot 13 of West Helfenstein Park, as shown by plat\nthereof recorded in St. Louis County. In 1924, Mr. and Mrs. Wolf conveyed to Charles\nArthur Forse and wife the following described portion of said Lot 13:\nThe West 50 feet of Lot 13 of West Helfenstein Park, a Sub-division in\nUnited States Survey 1953, Twp. 45, Range 8 East, St. Louis County,\nMissouri, \xe2\x80\xa6 .\nPlaintiff, through mesne conveyances carrying a description like that above, is the last\ngrantee of and successor in title to the aforesaid portion of Lot 13. Defendants, through\nmesne conveyances, are the last grantees of and successors in title to the remaining\nportion of Lot 13.\nAt the time of the above conveyance in 1924, there was and is now situate on the tract\ndescribed therein a one-story frame dwelling house (450 Oak Street), which was then\nand continuously since has been occupied as a dwelling by the successive owners of\nsaid tract, or their tenants. In 1925, Mr. and Mrs. Wolf built a 1 1/2-story stucco\ndwelling house on the portion of Lot 13 retained by them. This house (446 Oak Street)\ncontinuously since has been occupied as a dwelling by the successive owners of said\nportion of Lot 13, or their tenants.\nDespite the apparent clarity of the description in plaintiff\xe2\x80\x99s deed, extrinsic evidence was\nheard for the purpose of enabling the trial court to interpret the true meaning of the\ndescription set forth therein. At the close of all the evidence the trial court found that\nthe description did not clearly reveal whether the property conveyed \xe2\x80\x98was to be fifty\nfeet along the front line facing Oak Street or fifty feet measured Eastwardly at right\nangles from the West line of the property \xe2\x80\xa6\xe2\x80\x99; that the \xe2\x80\x98difference in method of\n\n\x0cLand Transactions\n\n641\n\nascertaining fifty feet would result in a difference to the parties of a strip the length of\nthe lot and approximately eight feet in width\xe2\x80\x99; that an ambiguity existed which justified\nthe hearing of extrinsic evidence; and that the \xe2\x80\x98West fifty feet should be measured on\nthe front or street line facing Oak Street.\xe2\x80\x99 The judgment rendered in conformity with\nthe above finding had the effect of fixing the east-west width of plaintiff\xe2\x80\x99s tract at about\n42 feet.\nPlaintiff contends that the description in the deed is clear, definite and unambiguous,\nboth on its face and when applied to the land; that the trial court erred in hearing and\nconsidering extrinsic evidence; and that its finding and judgment changes the clearly\nexpressed meaning of the description and describes and substitutes a different tract\nfrom that acquired by her under her deed. Defendants do not contend that the\ndescription, on its face, is ambiguous, but do contend that when applied to the land it\nis subject to \xe2\x80\x98dual interpretation\xe2\x80\x99; that under the evidence the trial court did not err in\nfinding it contained a latent ambiguity and that parol evidence was admissible to\nascertain and determine its true meaning; and that the finding and judgment of the trial\ncourt properly construes and adjudges the true meaning of the description set forth in\nsaid deed.\n[The plaintiff and defendants introduced dueling survey plats. The one included here\nis the plaintiff\xe2\x80\x99s. North is at the bottom. Note in particular the locations of the two\nhouses and of the driveway. It may help to mark on the plat where the defendant\xe2\x80\x99s\nproposed line would fall.]\nIt is seen that Lot 13 extends generally north and south. It is bounded on the north by\nOak Street (except that a small triangular lot from another subdivision cuts off its\nfrontage thereon at the northeast corner). On the south it is bounded by the Missouri\nPacific Railroad right of way. Both Oak Street and the railroad right of way extend in a\ngeneral northeast-southwest direction, but at differing angles. ...\nBoth plats show a concrete driveway 8 feet in width extending from Oak Street to\nplaintiff\xe2\x80\x99s garage in the rear of her home, which, the testimony shows, was built by one\nof plaintiff\xe2\x80\x99s predecessors in title. The east line of plaintiff\xe2\x80\x99s tract, as measured by the\nJoyce (plaintiff\xe2\x80\x99s) survey, lies 6 or 7 feet east of the eastern edge of this driveway.\n\n\x0c642\n\nProperty\n\nAdmittedly, the driveway is upon and an appurtenance of plaintiff\xe2\x80\x99s property. On the\nElbring (defendants\xe2\x80\x99) plat, the east line of plaintiff\xe2\x80\x99s lot, as measured by Elbring, is\nshown to coincide with the east side of the driveway at Oak Street and to encroach\nupon it 1.25 feet for a distance of 30 or more feet as it extends between the houses.\nThus, the area in dispute is essentially the area between the east edge of the driveway\nand the line fixed by the Joyce survey as the eastern line of plaintiff\xe2\x80\x99s tract. ...\nThe description under which plaintiff claims title, to wit: \xe2\x80\x98The West 50 feet of Lot 13\n\xe2\x80\xa6\xe2\x80\x99, is on its face clear and free of ambiguity. It purports to convey a strip of land 50\nfeet in width off the west side of Lot 13. So clear is the meaning of the above language\nthat defendants do not challenge it and it has been difficult to find any case wherein\nthe meaning of a similar description has been questioned.\nThe law is clear that when there is no inconsistency on the face of a deed and, on\napplication of the description to the ground, no inconsistency appears, parol evidence\nis not admissible to show that the parties intended to convey either more or less or\ndifferent ground from that described. But where there are conflicting calls in a deed,\nor the description may be made to apply to two or more parcels, and there is nothing\nin the deed to show which is meant, then parol evidence is admissible to show the true\nmeaning of the words used.\nNo ambiguity or confusion arises when the description here in question is applied to\nLot 13. The description, when applied to the ground, fits the land claimed by plaintiff\nand cannot be made to apply to any other tract. When the deed was made, Lot 13 was\nvacant land except for the frame dwelling at 450 Oak Street. The stucco house (446\nOak Street) was not built until the following year. Under no conceivable theory can the\nfact that defendants\xe2\x80\x99 predecessors in title (Mr. and Mrs. Wolf) thereafter built the\nstucco house within a few feet of the east line of the property described in the deed be\nconstrued as competent evidence of any ambiguity in the description. ...\nWhether the above testimony and other testimony in the record constitute evidence of\na mistake in the deed we do not here determine. Defendants have not sought\nreformation, and yet that is what the decree herein rendered undertakes to do. It seems\napparent that the trial court considered the testimony and came to the conclusion that\n\n\x0cLand Transactions\n\n643\n\nthe parties to the deed did not intend a conveyance of the \xe2\x80\x98West 50 feet of Lot 13\xe2\x80\x99, but\nrather a tract fronting 50 feet on Oak Street. And, the decree, on the theory of\ninterpreting an ambiguity, undertakes to change (reform) the description so as to\ndescribe a lot approximately 42 feet in width instead of a lot 50 feet in width, as\noriginally described. That, we are convinced, the courts cannot do.\nQuestions\n1. Why does the court apply such a strict integration rule?\n2. The boundary line as enforced by the court comes within inches of the\ndefendants\xe2\x80\x99 house. This does not seem like an ideal state of affairs. (Then again,\nthe defendant\xe2\x80\x99s theory would have drawn the boundary line through the\nplaintiffs\xe2\x80\x99 driveway.) Are there any doctrines that can clean up the messes that\nresult when (by accident or otherwise) strict interpretation of deeds produces\nresults at odds with natural features, structures, or uses of land?\n3. The deed here used three different techniques to describe the land. Start at the\nend. \xe2\x80\x9cUnited States Survey 1953, Twp. 45, Range 8 East, St. Louis County,\nMissouri\xe2\x80\x9d is a reference to a government survey. Townships are standard 36square-mile tracts established by federal government survey; \xe2\x80\x9cTwp. 45, Range\n8 East\xe2\x80\x9d identifies a specific township in Missouri. Next, \xe2\x80\x9cof Lot 13 of West\nHelfenstein Park\xe2\x80\x9d is a reference to the subdivision plat filed by the developer who\nlaid out the neighborhood; the plat is a survey map filed in the county recording\noffice that shows the boundaries of individual parcels. Finally, \xe2\x80\x9cThe West 50\nfeet\xe2\x80\x9d is a (crude attempt at) a metes and bounds description of the property in\nterms of its boundaries. Metes and bounds descriptions may refer to geospatial\ncoordinates (e.g. latitude and longitude as measured by GPS), to natural\nlandmarks (\xe2\x80\x9cMillers\xe2\x80\x99 Creek\xe2\x80\x9d), artificial markers (\xe2\x80\x9cthe survey stake labelled\nG34\xe2\x80\x9d), and distances and directions (\xe2\x80\x9c300 feet along a course at 45\xcb\x9a). How\nprecise are these various means of description? Which of them strike you as\nmost prone to error?\n4. Note that the boundary lines as shown on the survey map are at an angle to the\nnorth-south axis. Does this affect how the court should interpret the deed?\n\n\x0c644\n\nProperty\n\nB. Delivery\nLoughran v. Kummer\n146 A. 534 (Pa. 1929)\nKEPHART, J.\nAppellee, a bachelor 67 years of age, conveyed, for $1, land in Pittsburgh to Mrs.\nKummer, appellant, who was one of his tenants. A bill was filed to set aside this deed;\nthe grounds laid were confidential relationship, undue influence, and impaired\nmentality. Inasmuch as the facts must again be considered, we will mention only such\nas raise the legal question on which the case was decided; we venture no opinion on\nthe other facts.\nThe court below found from the evidence that a deed absolute on its face had been\nexecuted, acknowledged, and delivered to appellant by appellee, on condition that it\nshould not be recorded until the latter\xe2\x80\x99s death; that undoubtedly in his mind this meant\nthat the deed was not to take effect until after his death; and that he, demanding the\nreturn of the deed within a very few days after the delivery, thus revoked it and with\nthat revocation revoked the gift. Appellant deceived appellee when she stated the deed\nhad been destroyed. The excuse given was appellee was worried and she wanted to ease\nhis mind by making him believe that it had been destroyed. \xe2\x80\xa6\nThe question we are asked to consider is whether a deed absolute on its face,\nacknowledged, executed, and delivered under circumstances as here indicated, vested\nsuch title in the grantee as could be revoked for the above reasons. It amounts in\nsubstance to this, that the grantor said the deed should not be recorded until after his\ndeath, and the grantee in accepting the deed took it on that condition. The evidence on\nwhich this finding was based was all oral, and the scrivener and defendant denied any\nsuch condition was imposed when the deed was delivered. All control over the deed\nwas relinquished when it was handed appellant. The presumption must be that at that\ntime it was the intention to pass title. \xe2\x80\x98The general principle of law is that the formal\nact of signing, sealing and delivering is the consummation of the deed, and it lies with\nthe grantor to prove clearly that appearances are not consistent with truth. The\npresumption stands against him, and the burden is on him to destroy it by clear and\n\n\x0cLand Transactions\n\n645\n\npositive proof that there was no delivery and that it was so understood at the time. \xe2\x80\xa6\nWhere we have, as here, a deed, absolute and complete in itself, attacked as being in\nfact otherwise intended, \xe2\x80\xa6 there is a further presumption that the title is in conformity\nwith the deed, and it should not be dislodged except by clear, precise, convincing and\nsatisfactory evidence to the contrary.\xe2\x80\x99 Cragin\xe2\x80\x99s Estate, 117 A. 445 (Pa. 1922).\nThe gift here was executed, and that defendant was not to record it was not of the\nslightest consequence when viewed as against these major actions, delivery and passing\nof title. It was merely a promise the keeping of which lay in good faith, the breach of\nwhich entailed no legal consequences. To have effected the grantor\xe2\x80\x99s purpose, the\nintervention of a third party was absolutely essential. There are circumstances where\nacknowledgment, together with physical possession of the deed in the grantee, does\nnot conclusively establish an intention to deliver, and the presumption arising from\nsigning, sealing, and acknowledging, accompanied by manual possession of the deed\nby the grantee, is not irrebuttable, but this presumption can be overcome only by\nevidence that no delivery was in fact intended and none made. Such evidence is not\npresent in this case. Here the grantor by his own testimony intended the grantee to get\nthe land. The only question was when it was to take effect.\nHere is one of the instances in which the law fails to give effect to the honest intention\nof the parties, for the reason that they have not adopted the proper legal means of\naccomplishing their object. Therefore the legal effect of such delivery is not altered by\nthe fact that both parties suppose the deed will not take effect until recorded, and that\nit may be revoked at any time before record, or by contemporaneous agreements\nlooking to the reconveyance of the property to the grantor or to the third party upon\nthe happening of certain contingent events or the nonperformance of certain\nconditions.\nThe reason for these rules is obvious. It is quite possible to prove in most deliveries\nthat some parol injunction was attached to the formal delivery of the deed; if they are\nto be given the effect her[e] contended, there would be no safety in accepting a deed\nunder most circumstances. It opens the door to the fabrication of evidence that would\ninevitably be appalling and go far toward violating the security of written instruments.\nWe have so held in matters of less import than the conveyance of land. The rule must\n\n\x0c646\n\nProperty\n\nnot be relaxed as to realty. Such conveyances are vastly more important, as they involve\ninstruments of title and ownership which are used as a means of extending credit. Title\nto land ought not to be exposed to the peril of successful attack except where the right\nis clear and undoubted, and whatever may be our desire to recognize circumstances\nargued as unfortunate, we cannot go to the extent of overthrowing principles of law\ngoverning conveyances of real estate that have stood the test of ages.\nIn Cragin\xe2\x80\x99s Estate, supra, the deeds were in a tin box for more than 23 years in an\nenvelope indorsed with the words: \xe2\x80\x98To be recorded upon Mrs. Cragin\xe2\x80\x99s death, if before\nme.\xe2\x80\x99 The deed was in grantee\xe2\x80\x99s possession, and it was urged the delivery was\nconditional. We said that indorsement may have been placed on the envelope for other\nreasons than to defer the transfer of title. In the present case it was evident appellee\ndid not want his relatives to learn of the conveyance. Recording would be necessary to\npass a title examiner\xe2\x80\x99s inspection, but nonrecording did not prevent the title from\npassing. It has been quite generally held that an oral understanding on the delivery of a\ndeed that it should not be recorded will not affect the absolute character of the\nconveyance if free of other conditions. An agreement to deliver a deed in escrow to\nthe person in whose favor it is made, and who is likewise a party to it, will not make\nthe delivery conditional. If delivered under such an agreement, it will be deemed an\nabsolute delivery and a consummation of the execution of the deed. \xe2\x80\xa6\nQuestions\n1. The old phrase is that a deed was effective when it was \xe2\x80\x9csigned, sealed, and\ndelivered.\xe2\x80\x9d But the seal is obsolete, so the principal elements are that it be a\nsufficient writing (discussed above), that it be signed, and that it be delivered.\nDelivery of deeds has much in common with delivery in the law of gifts; it too\ncan be a subtle question. In a famous passage of his landmark 17th-century\ntreatise, Institutes of the Lawes of England, Edward Coke wrote, \xe2\x80\x9cAs a deed may be\ndelivered to a party without words, so may a deed be delivered by words without\nany act of delivery.\xe2\x80\x9d That sounds paradoxical, but Coke continued, \xe2\x80\x9cas if the\nwriting sealed lies upon the table, and the [grantor] says to the [grantee], \xe2\x80\x98Go\nand take up that writing, it is sufficient for you;\xe2\x80\x99 or \xe2\x80\x98it will serve your turn;\xe2\x80\x99 or\n\n\x0cLand Transactions\n\n647\n\n\xe2\x80\x98Take it as my deed;\xe2\x80\x99 or the like words; either is a sufficient delivery.\xe2\x80\x9d Is that\nbetter?\n2. In Wiggill v. Cheney, 597 P.2d 1351 (Utah 1979), Lillian Cheney executed a deed\nto Flora Cheney and put it in a safety deposit box in the names of Lillian Cheney\nand Francis E. Wiggill. Lillian told Francis that his name was on the box, that\non her death he would be granted access to the box, and that \xe2\x80\x9cin that box is an\nenvelope addressed to all those concerned. All you have to do is give them that\nenvelope and that\xe2\x80\x99s all.\xe2\x80\x9d On her death, he gained access to the box, took the\ndeed, and gave it to Flora. Delivery?\n3. There are at least two ways to do delivery \xe2\x80\x9cright.\xe2\x80\x9d One is to sign and hand over\na deed at closing, when all of the necessary parties are in the same room and\ncan execute all of the appropriate documents effectively simultaneously.\nAnother is to use an escrow: a third party who receives custody of the signed\ndeed along with instructions to deliver it to the grantee when appropriate events\nhave taken place. What if the escrow agent disregards her instructions and hands\nover the deed early? Can a grantor who is concerned the transaction will fall\nthrough demand the deed back from the escrow agent?\n4. Loughran is more complicated because the parties intended a conditional gift that\nwould take effect at Loughran\xe2\x80\x99s death, rather than immediately. Grantors often\ntry to put other kinds of conditions on transfers. In Martinez v. Martinez, 678\nP.2d 1163 (N.M. 1984), Delfino and Eleanor Martinez gave their son Carlos\nand his wife Sennie a deed to a property in exchange for assuming a mortgage\nin it. Delfino and Eleanor instructed Carlos and Sennie to take the deed to the\nbank to be held in escrow until Carlos and Sennie had paid off the mortgage,\nbut they recorded it first. Carlos and Sennie had marital difficulties and fell\nbehind on the mortgage; eventually Delfino and Eleanor paid off the balance.\nWho owns the property?\n5. The Loughran court says the parties \xe2\x80\x9chave not adopted the proper legal means\nof accomplishing their object.\xe2\x80\x9d What does it mean? Is there anything they could\nhave done differently that would avoided this mess?\n\n\x0c648\n\nProperty\n\nC. Warranties of Title\nSometimes a buyer discovers a problem with the property they purchased after the\ndeed has been delivered. If this happens, is there anything the buyer can do? It depends\nin part on what type of deed the buyer accepted. Consider the following statute.\nNew York Real Property Law \xc2\xa7 258\nShort forms of deeds and mortgages.\nThe use of the following forms of instruments for the conveyance and mortgage of\nreal property is lawful, but this section does not prevent or invalidate the use of other\nforms:\nDEED WITH FULL COVENANTS.\nStatutory Form A (Individual)\nThis indenture, made the ...... day of ........ nineteen hundred\nand ......,\nbetween .............(insert residence) party of the first part, and .............. (insert residence)\nparty of the second part,\nWitnesseth, that the party of the first part, in consideration of ............ dollars, lawful\nmoney of the United States, paid by the party of the second part, does hereby grant\nand release unto the party of the second part, ........... and assigns forever, all .........\n(description), together with the appurtenances and all the estate and rights of the party\nof the first part in and to said premises,\nTo have and to hold the premises herein granted unto the party of the second\npart, ............ and assigns forever. And said ............ covenants as follows:\nFirst. That said ............ is seized of said premises in fee simple, and has\ngood right to convey the same;\nSecond. That the party of the second part shall quietly enjoy the said\npremises;\n\n\x0cLand Transactions\n\n649\n\nThird. That the said premises are free from incumbrances;\nFourth. That the party of the first part will execute or procure any further\nnecessary assurance of the title to said premises;\nFifth. That said ............ will forever warrant the title to said premises.\nIn witness whereof, the party of the first part has hereunto set his hand and seal the\nday and year first above written\xe2\x80\xa6\nBARGAIN AND SALE DEED.\nStatutory Form C. With Covenant against Grantor. (Individual)\nThis indenture, made the ...... day of ......, nineteen hundred and ......, between .............,\n(insert residence) party of the first part, and ............., (insert residence) party of the\nsecond part:\nWitnesseth, that the party of the first part, in consideration of ............. dollars, lawful\nmoney of the United States, paid by the party of the second part, does hereby grant\nand release unto the party of the second part, ............. and assigns forever, all .............\n(description), together with the appurtenances and all the estate and rights of the party\nof the first part in and to said premises,\nTo have and to hold the above granted premises unto the party of the second\npart, ............. and assigns forever. And the party of the first part covenants that he has\nnot done or suffered anything whereby the said premises have been incumbered in any\nway whatever.\nIn witness whereof, the party of the first part has hereunto set his hand and seal the\nday and year first above written\xe2\x80\xa6.\n\n\x0c650\n\nProperty\n\nQUITCLAIM DEED.\nStatutory Form D. (Individual)\nThis indenture, made the ....... day of ..........., nineteen hundred and .........., between\n..............., (insert residence), party of the first part, and .............., (insert residence), party\nof the second part:\nWitnesseth, that the party of the first part, in consideration of ........... dollars, lawful\nmoney of the United States, paid by the party of the second part, does hereby remise,\nrelease, and quitclaim unto the party of the second part, ............... and assigns forever,\nall (description), together with the appurtenances and all the estate and rights of the\nparty of the first part in and to said premises.\nTo have and to hold the premises herein granted unto the party of the second part,\n............ and assigns forever.\nIn witness whereof, the party of the first part has hereunto set his hand and seal the\nday and year first above written\xe2\x80\xa6.\nNotes and Questions\n1. What is the difference between the first and the second of these deed forms?\nWhy would a grantee ever accept a quitclaim deed?\n2. The \xe2\x80\x9cusual covenants\xe2\x80\x9d that one finds in a general warranty deed (or \xe2\x80\x9cDeed with\nFull Covenants\xe2\x80\x9d per the New York statute) are as follows (though they may be\ncombined in different ways and there is some state to state variation):\n\xe2\x80\xa2 Covenant of seisin\xe2\x80\x94The grantor covenants that he owns the\nestate or interest that he purports to convey.\n\xe2\x80\xa2 Covenant of right to convey\xe2\x80\x94The grantor covenants that he has\nthe power to make the conveyance. This covenant is satisfied if\nthe grantor has title and is under no disability, or if he is acting as\ntrustee or agent for the owner.\n\n\x0cLand Transactions\n\n651\n\n\xe2\x80\xa2 Covenant against encumbrances\xe2\x80\x94The grantor covenants that\nthere are no easements, covenants, mortgages, liens, or other\nencumbrances on the property.\n\xe2\x80\xa2 Covenant of quiet enjoyment\xe2\x80\x94The grantor covenants that the\ngrantee will not be disturbed in possession or enjoyment of the\nproperty by a third party\xe2\x80\x99s lawful assertion of superior title.\n\xe2\x80\xa2 Covenant of general warranty\xe2\x80\x94The grantor covenants that he\nwill defend on behalf of the grantee any lawful claims existing at\nthe date of conveyance, and will compensate the grantee for any\nloss sustained by the assertion of superior title. Note that for all\npractical purposes, this covenant and the covenant of quiet\nenjoyment amount to the same thing.\n\xe2\x80\xa2 Covenant of further assurances\xe2\x80\x94The grantor covenants to\nperform whatever acts are reasonably necessary to perfect the\npurchaser\xe2\x80\x99s title, if it turns out to be imperfect.\nOur next case investigates the scope of these covenants.\nMcMurray v. Housworth\n638 S.E.2d 421 (Ga. Ct. App. 2006)\nPHIPPS, Judge:\nMichael and Deborah Housworth sold a 24-acre tract of land which the purchasers\xe2\x80\x94\nLance and Melanie McMurray, and James and Alberta McMurray\xe2\x80\x94 subdivided into\ntwo tracts. A lake created by a dam is situated on the property. The McMurrays brought\nthis suit against the Housworths for breach of their general warranty of title upon\ndiscovering after purchasing the property that the owner and operator of the dam holds\na floodwater detention easement that burdens the tract. The superior court awarded\nsummary judgment to the Housworths on the ground that this easement is not such\nan encumbrance on the property as breaches the title warranty. We disagree and\nreverse.\n\n\x0c652\n\nProperty\n\nLance and Melanie McMurray purchased one of the twelve-acre parcels from the\nHousworths for $120,000 in 2004. On the same date, James and Alberta McMurray\npurchased the other parcel for the same price. The parcels were conveyed by warranty\ndeeds that contained general warranties of title without any limitations applicable here.\nThe McMurrays informed the Housworths that they were buying the property to build\nsingle-family residences on each parcel.\nApparently, however, the McMurrays failed to discover that recorded within the chain\nof title to their property in 1962 was a \xe2\x80\x9cfloodwater retarding structure\xe2\x80\x9d easement which\nhad been granted to the Oconee River Soil Conservation District. This easement is for\nconstruction, operation, and maintenance of a floodwater retarding structure or dam;\nfor the flowage of waters in, over, upon, or through the dam; and for the permanent\nstorage and temporary detention of any waters that are impounded, stored, or detained\nby the dam. It also reserved in the grantor and his successors the right to use the\neasement area for any purpose not inconsistent with full use and enjoyment of the\ngrantee\xe2\x80\x99s rights and privileges, i.e., it is nonexclusive. After learning of the easement\nfollowing their purchase of the property, the McMurrays demanded that the\nHousworths compensate them for the damages they would suffer as a result of the\nrestrictions thereby placed on their usage.\nBecause the Housworths failed to comply with these demands, the McMurrays brought\nthis suit against them seeking damages for breach of their warranties of title. ...\n1. The McMurrays contend that the superior court erred in analogizing the floodwater\ndetention easement to a public roadway easement or zoning regulation and in thereby\nconcluding that a floodwater detention easement is not the type of easement that\nbreaches a general warranty of title.\n(a) Each of the deeds in this case contained a general warranty of title in which the\ngrantors agreed to \xe2\x80\x9cdefend the right and title to the above described property, unto\n[the grantees], their heirs, assigns, and successors in title, against the claims of all\npersons.\xe2\x80\x9d Under OCGA \xc2\xa7 44-5-62, \xe2\x80\x9c[a] general warranty of title against the claims of\nall persons includes covenants of a right to sell, of quiet enjoyment, and of freedom\nfrom encumbrances.\xe2\x80\x9d \xe2\x80\x9cAn incumbrance has been defined as \xe2\x80\x98Any right to, or interest\n\n\x0cLand Transactions\n\n653\n\nin, land which may subsist in another to the diminution of its value, but consistent with\nthe passing of the fee,\xe2\x80\x99 and this definition . . . encompasses an easement or right of\nway.\xe2\x80\x9d OCGA \xc2\xa7 44-5-63 provides that \xe2\x80\x9c[i]n a deed, a general warranty of title against\nthe claims of all persons covers defects in the title even if they are known to the\npurchaser at the time he takes the deed.\xe2\x80\x9d\n(b) The rule in Georgia, as established in the early case of Desvergers v. Willis, 56 Ga. 515\n(1876), is that the existence of a public road on land, of which the purchaser knew or\nshould have known at the time of the purchase, is not such an encumbrance as would\nconstitute a breach of a general warranty of title. The Desvergers rule is thus an exception\nto the general rule stated in OCGA \xc2\xa7 44-5-63 that a general warranty of title by deed\ncovers even defects known to the purchaser at the time he takes the deed.\nAlthough the Desvergers rule is not uniform throughout the country, it is the majority\nrule. In adopting the rule, the court in Desvergers concluded that a contrary holding\nwould produce a \xe2\x80\x9ccrop of litigation\xe2\x80\x9d that would be \xe2\x80\x9calmost interminable.\xe2\x80\x9d The reason,\nas later explained by the Supreme Court of Iowa in Harrison v. The Des Moines & Ft.\nDodge R. Co., was that the immense number of warranty deeds then in existence rarely\ncontained exceptions as to public roadways because of the universal belief that roadway\naccess was a benefit rather than a burden to land. Therefore, a determination that public\nroadway easements were warranty-breaching encumbrances would have created\ninnumerable liabilities where none had been thought to exist.\nCourts in other states have also based their adoption of the Desvergers rule on the\nbroader ground that where easements are open, notorious, and presumably known to\nthe purchaser at the time of the purchase, that knowledge will exclude the easement\nfrom operation of a title warranty. These courts have reasoned that where the\nencumbrance involves an open and obvious physical condition of the property, the\npurchaser is presumed to have seen it and fixed his price with reference to it. In view,\nhowever, of the Georgia rule that knowledge of a title defect will not exclude it from\noperation of a general warranty of title, creation of an exception for easements for\npublic roadways or other purposes must be based on other grounds. And courts in\nother states have ultimately concluded that public roadway easements should not be\nregarded as encumbrances on the additional ground that \xe2\x80\x9cpublic highways are not\n\n\x0c654\n\nProperty\n\ndepreciative, but, on the contrary, they are highly appreciative, of the value of the lands\non which they constitute an easement, and are a means without which such lands are\nnot available for use, nor sought after in the markets.\xe2\x80\x9d\nFor a number of reasons, we do not find the floodwater detention easement in this\ncase analogous to a public roadway easement. (1) We do not anticipate that we would\nopen the litigation floodgates, so to speak, by holding that a floodwater detention\neasement breaches a general title warranty. (2) Moreover, a floodwater detention\neasement does not benefit the land to which it is subject. Although the property is\nbenefitted by the lake or other body of water that creates the need for the easement (to\nthe extent that the one enhances the value or enjoyment of the other), the easement\nburdens the property by permitting the impoundment of water on it to prevent\nflooding or increased water runoff on other property located downstream. (3) The\nMcMurrays brought this action for damages because of the easement, not the lake. And\neven though the lake is certainly open and obvious, the same cannot necessarily be said\nof the easement. Although the superior court found that the dam is visible on the\nMcMurrays\xe2\x80\x99 property, the McMurrays correctly point out that there is no evidence of\nrecord to support this finding. As argued by the McMurrays, not every lake is created\nby a dam or burdened by a floodwater detention easement. (4) And although the\nMcMurrays\xe2\x80\x99 constructive notice of the easement by reason of its recordation within\ntheir chains of title would provide a compelling reason for exempting the easement\nfrom operation of the warranty deed, OCGA \xc2\xa7 44-5-63 provides otherwise. (5) The\nrecording of the easement certainly renders it binding on the McMurrays insofar as\nconcerns the rights of the easement holder; but the question here is whether the\nexistence of the easement gives rise to a claim against the grantor for breach of the\nwarranty against encumbrances. For these reasons, the superior court erred in\nconcluding that the floodwater detention easement should be excepted from the rule\nof OCGA \xc2\xa7 44-5-63 in view of the exception for public roadways.\n(c) The McMurrays also contend that the superior court erred in equating floodwater\ndetention easements with zoning regulations, which have been held not to breach a\ngeneral warranty of title. Because the floodwater detention easement does not function\nin the same manner as a zoning regulation in all respects, we agree with this contention.\n\n\x0cLand Transactions\n\n655\n\nThe floodwater detention easement does more than impose zoning-type restrictions\non development activities on the property. It also grants the county soil and water\nconservation district rights for the storage and detention of impounded waters on the\nproperty. And it grants the district a right of ingress and egress upon the property.\nEasement rights such as these constitute an interest in property that must be acquired\neither by agreement of the property owner or by condemnation. And although the\neasement does impose limitations on the McMurrays\xe2\x80\x99 use of their property that\nduplicate restrictions imposed under zoning-type regulations applicable to the\nproperty, the two do not appear to be coextensive. ...\nWhere an encumbrance is a servitude or easement which can not be removed at the\noption of either the grantor or grantee, damages will be awarded for the injury\nproximately caused by the existence and continuance of the encumbrance, the measure\nof which is deemed to be the difference between the value of the land as it would be\nwithout the easement and its value as it is with the easement.\nNotes and Questions\n1. Even the general warranty given by the Housworths is subject to significant\nexceptions, including one for public roadways and one for zoning regulations.\nWhat is the point of these exceptions? Did the court correctly interpret those\nunderlying policies as not covering the floodwater detention easement?\n2. The exception for zoning regulations can be tricky. Suppose that the property\nis a vacant lot and that local zoning laws restrict houses to 15 feet in height? Is\nthis an encumbrance? What if the property contains a house 30 feet high?\nWould it make a difference in either case if the restriction came from a private\nneighborhood covenant rather than a public zoning law?\n3. What should the Housworths (or rather, their attorney) have done? Presumably,\nthe Oconee River Soil Conservation District is not interested in terminating its\neasement. Are the Housworths stuck with an unsaleable tract of land?\n\n\x0c656\n\nProperty\n\nD. Disclosure of Defects\nEngelhart v. Kramer\n570 N.W.2d 550 (S.D. 1997)\nGILBERTSON, Justice.\nA $34,800 judgment was rendered against Crystal Kay Kramer based on violation of\nSDCL ch 43-4 and for failure to properly disclose a defect in the home she sold to\nKaren Engelhart. The case was tried without a jury before the Second Judicial Circuit\nCourt. Kramer appeals the award claiming that Engelhart did not show that Kramer\nfailed to meet the required standard in completing the seller\xe2\x80\x99s property disclosure\nstatement. 1 We affirm.\nFACTS AND PROCEDURE\nIn May of 1991, Crystal Kay Kramer purchased a home in Sioux Falls, South Dakota\nfor $35,000. Over the next few years Kramer made several improvements. Four days\nprior to putting the home on the market, in September, 1993, Kramer enlisted the\nsupport of friends and family and began an extensive cleaning of the basement. There\nwere several large cracks in the basement\xe2\x80\x99s cement walls and pieces of various sizes had\nfallen off. They removed old sheet rock and put up wood paneling over the basement\nwalls. The basement project was memorialized by Kramer with several photographs\ndepicting the before, during and after condition of the walls.\nDuring this period Karen Engelhart was searching for a home commensurate with her\nincome level. Engelhart was a first-time home buyer and was assisted by Dorothy Ecker,\na real estate agent. Engelhart viewed Kramer\xe2\x80\x99s home, became interested, and then\ndecided to purchase it.\n\nKramer also argues that the trial court erred in finding Kramer\xe2\x80\x99s actions constituted fraud and deceit. In light\nof our disposition of the case on the disclosure requirement issue, the fraud and deceit issue need not be\naddressed.\n\n1\n\n\x0cLand Transactions\n\n657\n\nKramer was represented by Shirley Ullom, a Century 21 Advantage, Inc. real estate\nagent. Kramer completed the detailed \xe2\x80\x9cproperty condition disclosure statement\xe2\x80\x9d form\nrequired by SDCL 43-4-44. Part two of the form required the seller to disclose certain\nstructural information. Specifically, question 2 asked \xe2\x80\x9cHave you experienced water\npenetration in the basement ... within the past two years?\xe2\x80\x9d Kramer replied, \xe2\x80\x9cSmall amt\nof H20 penetration in NW + NE corners [when it] rains.\xe2\x80\x9d (emphasis added). In\nanswering question 3 \xe2\x80\x9c[a]re there any cracked walls or floors?\xe2\x80\x9d Kramer responded\n\xe2\x80\x9cbasement floor, some spots in basement walls, East bedroom walls.\xe2\x80\x9d Under \xc2\xa7 5,\nMiscellaneous Information, Kramer was required to disclose any additional problems\nthat were not previously mentioned. Kramer offered, \xe2\x80\x9cbasement cement walls have some\ncrumbling, behind paneling, basement floor cracked [and] uneven in spots.\xe2\x80\x9d (emphasis\nadded).\nThe trial court found that Engelhart relied upon, among other things, Kramer\xe2\x80\x99s\ndisclosure statement with regard to the condition of the basement walls and that\nEngelhart believed \xe2\x80\x9csome spots\xe2\x80\x9d and \xe2\x80\x9csome crumbling\xe2\x80\x9d to mean the problems were\nminimal. Kramer allegedly offered to remove the paneling to expose the basement walls\nbut the trial court concluded that the offer was \xe2\x80\x9ca gambit, or a bluff ... without any real\nintention of performing\xe2\x80\x9d and that the typical buyer in Engelhart\xe2\x80\x99s position would be\n\xe2\x80\x9creluctant to remove paneling from someone else\xe2\x80\x99s house.\xe2\x80\x9d Kramer admitted taking\nphotographs before installing the paneling and that showing the photos to a potential\npurchaser would have been easier than removing it. Kramer could not explain why she\ndid not offer the photos.\nEngelhart purchased the property in October 1994. In March of 1995, she discovered\nwater seepage through the south wall of the basement. The paneling was removed and\nwater was discovered running through cracks in the south wall. Also noted were several\nother large cracks, including a large horizontal crack running around the basement.\nEngelhart hired a structural engineer, Chester Quick (Quick) to diagnose the problem.\nQuick issued a report in which he found the basement walls \xe2\x80\x9cvery badly cracked\xe2\x80\x9d and\n\n\x0c658\n\nProperty\n\ntestified that the cement had \xe2\x80\x9cleeched out\xe2\x80\x9d which allowed dirt and water to pass into\nthe basement. 2\nFurther, Quick noted that the concrete was showing \xe2\x80\x9cconsiderable disintegration\nespecially at the south wall\xe2\x80\x9d which was not repairable. He concluded that the\nfoundation had to be replaced and that \xe2\x80\x9cAs bad as [the walls] are cracked they could\ncollapse at any time.\xe2\x80\x9d When asked whether the disclosure statement adequately\ndescribed the condition of the basement Quick testified that, although accurate in part,\n\xe2\x80\x9csome crumbling\xe2\x80\x9d did not adequately describe the damage that existed behind the\npaneling.\nEngelhart brought suit against Kramer based upon misrepresentations made in the\ndisclosure statement. The trial court ruled in favor of Engelhart on failure to comply\nwith South Dakota\xe2\x80\x99s Disclosure Statutes and fraud. Kramer appeals the $34,800 award\nentered against her. \xe2\x80\xa6\nLEGAL ANALYSIS AND DECISION\nWhether Kramer failed to complete the disclosure statement in good faith as required\nby SDCL Ch 43-A?\nIn 1993 the South Dakota legislature enacted specific requirements for disclosures in\ncertain real estate transfers. SDCL \xc2\xa7\xc2\xa7 43-4-38 to -44. SDCL 43-4-38 provides:\nThe seller of residential real property shall furnish to a buyer a completed\ncopy of the disclosure statement before the buyer makes a written offer.\nIf after delivering the disclosure statement to the buyer or the buyer\xe2\x80\x99s\nagent and prior to the date of closing for the property or the date of\npossession of the property, whichever comes first, the seller becomes\nQuick testified that the wall was \xe2\x80\x9ca mixture of sand, cement [which holds the mixture together], and usually\nsome rock, and over time with excess water and cracks the cement \xe2\x80\x98leeches out\xe2\x80\x99 of the mixture and you wind up\nwith nothing but sand and rock.\xe2\x80\x9d\n\n2\n\n\x0cLand Transactions\n\n659\n\naware of any change of material fact which would affect the disclosure\nstatement, the seller shall furnish a written amendment disclosing the\nchange of material fact.\nSDCL 43-4-41 requires that \xe2\x80\x9cThe seller shall perform each act and make each\ndisclosure in good faith.\xe2\x80\x9d SDCL 43-4-40 absolves sellers of liability for defects in\ncertain circumstances by providing:\nExcept as provided in \xc2\xa7 43-4-42, a seller is not liable for a defect or other\ncondition in the residential real property being transferred if the seller\ntruthfully completes the disclosure statement.\n(Emphasis added). The disclosure form mandated by SDCL 43-4-44 establishes that\nbeyond the above obligations, there is no warranty passing from the seller to the buyer:\nTHIS STATEMENT IS A DISCLOSURE OF THE CONDITION\nOF THE ABOVE DESCRIBED PROPERTY.... IT IS NOT A\nWARRANTY OF ANY KIND BY THE SELLER OR ANY AGENT\nREPRESENTING ANY PARTY IN THIS TRANSACTION AND IS\nNOT A SUBSTITUTE FOR ANY INSPECTIONS OR\nWARRANTIES THE PARTIES MAY WISH TO OBTAIN.\n(Capitals in original).\nKramer relies on SDCL 43-4-40 and contends that even if her description of the\nbasement was inadequate or under Kramer\xe2\x80\x99s phraseology, an innocent\nmisrepresentation, that it was truthful nonetheless and therefore no liability should\nattach. It is important to note that in SDCL 43-4-40, the terms \xe2\x80\x9ctruthfully\xe2\x80\x9d and\n\xe2\x80\x9ccomplete\xe2\x80\x9d do not operate independently to the exclusion of the other. A plain reading\nof the terms together evince a more exacting standard than truth alone.\nUntil today, this Court has not addressed the scope of the disclosure statutes at issue.\nOf central concern to our resolution is what is required by the term \xe2\x80\x9cgood faith,\xe2\x80\x9d in\nthe absence of a definition in SDCL 43-4-41, and whether the disclosure of \xe2\x80\x9csome\ncrumbling\xe2\x80\x9d violates that standard? We recognize that the concept of \xe2\x80\x9cgood faith\xe2\x80\x9d may,\n\n\x0c660\n\nProperty\n\nat times, seem as elusive as the \xe2\x80\x9creasonableness\xe2\x80\x9d that is spoken of in the law of torts.\nHowever, there exists several sources from which meaning can be found.\nStatutory guidance can be found at SDCL 2-14-2(13) which states that \xe2\x80\x9cgood faith\xe2\x80\x9d is:\nan honest intention to abstain from taking any unconscientious\nadvantage of another, even through the forms or technicalities of law,\ntogether with an absence of all information or belief of facts which\nwould render the transaction unconscientious;\nBlack\xe2\x80\x99s Law Dictionary 693 (6th ed 1990) offers the following:\nGood faith is an intangible and abstract quality with no technical\nmeaning or statutory definition, and it encompasses, among other things,\nan honest belief, the absence of malice and the absence of design to\ndefraud or to seek an unconscionable advantage.... In common usage\nthis term is ordinarily used to describe that state of mind denoting\nhonesty of purpose, freedom of intention to defraud, and, generally\nspeaking, means being faithful to one\xe2\x80\x99s duty or obligation.\nCase law decided under different contexts has provided additional meaning to the term\n\xe2\x80\x9cgood faith\xe2\x80\x9d to include \xe2\x80\x9chonesty in fact,\xe2\x80\x9d Garrett v. BankWest, Inc., 459 N.W.2d 833,\n841 (S.D.1990) (contractual context; meaning of good faith \xe2\x80\x9cvaries with the context\nand emphasizes faithfulness to an agreed common purpose and consistency with the\njustified expectations of the other party\xe2\x80\x9d), and an \xe2\x80\x9chonest belief in the suitability of the\nactions taken.\xe2\x80\x9d B.W. v. Meade Co., 534 N.W.2d 595, 598 (S.D.1995), (in the context of\nreporting and investigating child abuse). In the case now before us the trial court\nproperly relied upon the definition found in SDCL 2-14-2(13).\nKramer contends that since she described the condition of the basement walls as\nhaving \xe2\x80\x9csome spots\xe2\x80\x9d and \xe2\x80\x9csome crumbling,\xe2\x80\x9d she fulfilled her duty of good faith by\ntruthfully completing the Disclosure Statement. Kramer argues that to hold otherwise\nwould, in effect, result in a strict liability standard on sellers of real estate. We disagree.\nSDCL 43-4-42 provides:\n\n\x0cLand Transactions\n\n661\n\nA transfer that is subject to \xc2\xa7\xc2\xa7 43-4-37 to 43-4-44, inclusive, is not\ninvalidated solely because a person fails to comply with \xc2\xa7\xc2\xa7 43-4-37 to 434-44, inclusive. However, a person who intentionally or who negligently\nviolates \xc2\xa7\xc2\xa7 43-4-37 to 43-4-44, inclusive, is liable to the buyer for the\namount of the actual damages and repairs suffered by the buyer as a\nresult of the violation or failure. A court may also award the buyer costs\nand attorney fees. Nothing in this section shall preclude or restrict any\nother rights or remedies of the buyer.\n(Emphasis added).\nKramer relies on Amyot v. Luchini, 932 P.2d 244 (Alaska 1997), for the proposition that\na disclosure statement can be truthful yet not \xe2\x80\x9cperfect\xe2\x80\x9d and that \xe2\x80\x9cinnocent\nmisrepresentations\xe2\x80\x9d do not violate good faith. However, it must be noted that\nKramer\xe2\x80\x99s representation of the issue to this Court incorrectly assumes that the\nmisrepresentation of the basement walls was found merely innocent by the trial court.\nTo the contrary, the trial court specifically found that the Kramer\xe2\x80\x99s paneling of the\nwalls four days before putting the house on the market was not \xe2\x80\x9csolely for aesthetic\npurposes\xe2\x80\x9d and was completed deliberately 3 in an attempt to hide their true condition.\nKramer\xe2\x80\x99s colorful attempt to characterize her description of the basement as an\ninnocent misrepresentation is inaccurate.\nIn 1993, Alaska enacted residential real property disclosure statement statutes\n(substantially similar to that of South Dakota enacted the same year). Alaska Stat. \xc2\xa7\xc2\xa7\n34.70.010 to 34.70.090 (Michie 1996). 4 The Amyot court stated:\n\nThe trial court relied on Kramer\xe2\x80\x99s deposition and trial testimony in that when she purchased the house \xe2\x80\x9c[t]he\nwalls were crumbling with cracks in places,\xe2\x80\x9d that the residue she had discovered on the basement floor was \xe2\x80\x9cPart\nof the basement wall ... whatever makes up the wall was there in a pile\xe2\x80\x9d and further that Kramer admitted in her\ndisclosure statement that no water ever came in on the south wall.\n\n3\n\nThe Alaska disclosure statutes did not define \xe2\x80\x9cgood faith\xe2\x80\x9d but held that \xe2\x80\x9cgood faith\xe2\x80\x9d envisioned an \xe2\x80\x9chonest\nand reasonable belief.\xe2\x80\x9d Id. at 247. Amyot is distinguishable from the present facts in that the court held an\n\xe2\x80\x9cinnocent misrepresentation\xe2\x80\x9d did not violate the good faith standard. South Dakota does not attach liability in\n\n4\n\n\x0c662\n\nProperty\n\nPrior to the enactment of [the mandatory disclosure statutes], sellers of\nreal property were not required to make any representations about the\nproperty. However, sellers were strictly liable for those representations\nthey made. (Citation omitted.) Under the disclosure statute a seller is\nnow required to make representations about a wide range of the\nproperty\xe2\x80\x99s features and characteristics. We conclude that the legislature\nintended to offset the seller\xe2\x80\x99s increased disclosure responsibilities by the\nlower liability standard for misrepresentations.\nAmyot, 932 P.2d at 246.\nWe agree with the Amyot court and hold that strict liability is not the requisite standard\nunder South Dakota\xe2\x80\x99s disclosure statutes. A plain reading of SDCL 43-4-42 tells us that\nliability will not attach unless an intentional or negligent violation occurs. The legal\nmaxim \xe2\x80\x9cexpressio unius est exlusio alterius\xe2\x80\x9d means \xe2\x80\x9cthe expression of one thing is the\nexclusion of another.\xe2\x80\x9d Black\xe2\x80\x99s Law Dictionary 581 (6th ed.1990). The maxim is a\ngeneral rule of statutory construction. Applying the general rule to SDCL 43-4-42, we\nfind the language \xe2\x80\x9cintentionally or ... negligently\xe2\x80\x9d is exclusive and negates strict liability.\nIt is fair to presume that sellers know the character of the property they convey. At\npresent, when Kramer became aware of Engelhart\xe2\x80\x99s concern over the basement she\ncould have simply shown the pictures of its true condition. Her failure to do so was\nunreasonable and amounts to negligence. SDCL 43-4-42. It must be noted that Kramer\nadmitted taking the photographs before installing the paneling and that showing the\nphotos would have been easier than removing it. Kramer could not explain why she\ndid not offer the photos.\nWe hold that with the adoption of South Dakota\xe2\x80\x99s detailed disclosure statutes the\ndoctrine of caveat emptor has been abandoned in favor of full and complete disclosure\n\nthis context unless the seller\xe2\x80\x99s conduct amounts to an \xe2\x80\x9cintentional or negligent\xe2\x80\x9d violation the disclosure statutes.\nSDCL 43-4-42.\n\n\x0cLand Transactions\n\n663\n\nof defects of which the seller is aware. We are not inferring, as Kramer suggests, that a\nseller must possess the expertise of a structural engineer to pass good faith muster. Nor\nare we suggesting that a seller will be liable for defects of which she is unaware. Those\nclaims are clearly disposed of in the closing section of the mandated disclosure form\nof SDCL 43-4-44:\nThe Seller hereby certifies that the information contained herein is true\nand correct to the best of the Seller\xe2\x80\x99s information, knowledge and belief\nas of the date of the Seller\xe2\x80\x99s signature below.... THE SELLER AND\nTHE BUYER MAY WISH TO OBTAIN PROFESSIONAL ADVICE\nAND INSPECTIONS OF THE PROPERTY TO OBTAIN A TRUE\nREPORT AS TO THE CONDITION OF THE PROPERTY AND\nTO PROVIDE FOR APPROPRIATE PROVISIONS IN ANY\nCONTRACT OF SALE AS NEGOTIATED BETWEEN THE\nSELLER AND THE BUYER WITH RESPECT TO SUCH\nPROFESSIONAL ADVICE AND INSPECTIONS.\n(Capitals in original). It is clear that, as per SDCL \xc2\xa7 43-4-41 and 43-4-44, a seller\xe2\x80\x99s \xe2\x80\x9cgood\nfaith\xe2\x80\x9d is determined under a reasonable person standard.\nAffirmed.\nQuestions\n1. In Lucero v. Van Wie, 598 NW 2d 893 (S.D. 1999), the seller failed to provide\nthe statutorily required disclosure statement, but the contract of sale contained\nthe following clause:\nThe buyer acknowledges that she has examined the premises and\nthe same are in satisfactory condition and they accept the\nproperty in the \xe2\x80\x9cas-is\xe2\x80\x9d condition \xe2\x80\xa6 .\nThis time, the South Dakota Supreme Court held that the buyer could not\nrecover for undisclosed defects in the property; she \xe2\x80\x9centered into an enforceable\ncontract and purchased the property \xe2\x80\x98as is,\xe2\x80\x99 the result of which was to waive\ndisclosure requirements.\xe2\x80\x9d After Lucero, what do you expect happened to real\n\n\x0c664\n\nProperty\n\nestate sales contracts in South Dakota? What do you expect the South Dakota\ncourts will do in cases where the sales contract contains an \xe2\x80\x9cas-is\xe2\x80\x9d clause but\nthe buyer alleges that the seller affirmatively lied about the condition of the\nproperty\xe2\x80\x94e.g., \xe2\x80\x9cNo, the roof has never leaked.\xe2\x80\x9d\n2. In addition to the distinction between unknown defects and defects known to\nthe seller, some courts draw a distinction between latent and apparent defects.\nOnly hidden defects\xe2\x80\x94e.g., rotting support beams in the walls\xe2\x80\x94need to be\ndisclosed, while readily visible defects, or ones that a reasonable inspection\ncould discover\xe2\x80\x94e.g., nonworking plumbing on the second floor\xe2\x80\x94need not.\nThe theory, at least, is that the buyer depends on the seller to tell her about\nconditions she could not reasonably discover herself. But isn\xe2\x80\x99t there a\nconnection between defects the buyer doesn\xe2\x80\x99t know about and defects the seller\ndoesn\xe2\x80\x99t know about, either? Cases like Engelhart are one thing, where the Seller\nliterally plasters (or at least panels) over the problem. But who should bear the\nloss if a previously unknown sinkhole surprises everyone by swallowing up the\nback porch the day after closing? Consider, in this regard, a seller who doesn\xe2\x80\x99t\nknow whether her home\xe2\x80\x99s attic walls contain asbestos insulation, and a buyer\nwhose offer to buy the house is contingent on drilling into the walls to confirm\nthat they do not contain asbestos. If you represented the seller, would you advise\nyour client to accept this contingency?\n3. What kinds of conditions must be disclosed? A leaky roof? A leaky faucet? The\npresence of lead paint on the walls? The fact that a previous inhabitant of the\nhome was gruesomely murdered by a family member? That the homeowner\nregularly gave \xe2\x80\x9cghost tours\xe2\x80\x9d on which she pretended to tourists that the house\nwas haunted? The fact that a registered sex offender lives on the block? The\nfact that there is a municipal garbage dump half a mile away?\n4. In many states, new-home builders are required to give a non-waivable warranty\nof habitability that substantially parallels the warranty of habitability required of\nlandlords. What might account for the decision to hold sellers of new houses to\na higher standard than sellers of existing houses? When should the statute of\nlimitations on breach of warranty claims start running? Should subsequent\n\n\x0cLand Transactions\n\n665\n\npurchasers be able to sue the original builder for breach of the warranty if the\ndefects become apparent only after a resale?\n\nE. Risk of Loss\nBrush Grocery Kart, Inc. v. Sure Fine Market, Inc.\n47 P.3d 680 (Colo. 2002)\nJUSTICE COATS delivered the opinion of the court: ...\nIn October 1992 Brush Grocery Kart, Inc. and Sure Fine Market, Inc. entered into a\nfive-year \xe2\x80\x9cLease with Renewal Provisions and Option to Purchase\xe2\x80\x9d for real property,\nincluding a building to be operated by Brush as a grocery store. Under the contract\xe2\x80\x99s\npurchase option provision, any time during the last six months of the lease, Brush could\nelect to purchase the property at a price equal to the average of the appraisals of an\nexpert designated by each party.\nShortly before expiration of the lease, Brush notified Sure Fine of its desire to purchase\nthe property and begin the process of determining a sale price. Although each party\noffered an appraisal, the parties were unable to agree on a final price by the time the\nlease expired. Brush then vacated the premises, returned all keys to Sure Fine, and\nadvised Sure Fine that it would discontinue its casualty insurance covering the property\nduring the lease. Brush also filed suit, alleging that Sure Fine failed to negotiate the\nprice term in good faith and asking for the appointment of a special master to\ndetermine the purchase price. Sure Fine agreed to the appointment of a special master\nand counterclaimed, alleging that Brush negotiated the price term in bad faith and was\ntherefore the breaching party.\nDuring litigation over the price term, the property was substantially damaged during a\nhail storm. With neither party carrying casualty insurance, each asserted that the other\nwas liable for the damage. The issue was added to the litigation at a stipulated amount\nof $60,000. ... The court then found that under the doctrine of equitable conversion,\nBrush was the equitable owner of the property and bore the risk of loss. It therefore\ndeclined to abate the purchase price or award damages to Brush for the loss.\n\n\x0c666\n\nProperty\n\nBrush appealed the loss allocation, and the court of appeals affirmed on similar\ngrounds. ...\nIn the absence of statutory authority, the rights, powers, duties, and liabilities arising\nout of a contract for the sale of land have frequently been derived by reference to the\ntheory of equitable conversion. This theory or doctrine, which has been described as a\nlegal fiction, is based on equitable principles that permit the vendee to be considered\nthe equitable owner of the land and debtor for the purchase money and the vendor to\nbe regarded as a secured creditor. The changes in rights and liabilities that occur upon\nthe making of the contract result from the equitable right to specific performance. Even\nwith regard to third parties, the theory has been relied on to determine, for example,\nthe devolution, upon death, of the rights and liabilities of each party with respect to the\nland, and to ascertain the powers of creditors of each party to reach the land in payment\nof their claims.\nThe assignment of the risk of casualty loss in the executory period of contracts for the\nsale of real property varies greatly throughout the jurisdictions of this country. What\nappears to yet be a slim majority of states places the risk of loss on the vendee from\nthe moment of contracting, on the rationale that once an equitable conversion takes\nplace, the vendee must be treated as owner for all purposes. Once the vendee becomes\nthe equitable owner, he therefore becomes responsible for the condition of the\nproperty, despite not having a present right of occupancy or control. In sharp contrast,\na handful of other states reject the allocation of casualty loss risk as a consequence of\nthe theory of equitable conversion and follow the equally rigid \xe2\x80\x9cMassachusetts Rule,\xe2\x80\x9d\nunder which the seller continues to bear the risk until actual transfer of the title, absent\nan express agreement to the contrary. A substantial and growing number of\njurisdictions, however, base the legal consequences of no-fault casualty loss on the right\nto possession of the property at the time the loss occurs. This view has found\nexpression in the Uniform Vendor and Purchaser Risk Act, and while a number of\nstates have adopted some variation of the Uniform Act, others have arrived at a similar\nposition through the interpretations of their courts. ...\nIn Wiley v. Lininger, 204 P.2d 1083, [(1949)] where fire destroyed improvements on land\noccupied by the vendee during the multi-year executory period of an installment land\n\n\x0cLand Transactions\n\n667\n\ncontract, we held, according to the generally accepted rule, that neither the buyer nor\nthe seller, each of whom had an insurable interest in the property, had an obligation to\ninsure the property for the benefit of the other. We also adopted a rule, which we\ncharacterized as \xe2\x80\x9cthe majority rule,\xe2\x80\x9d that \xe2\x80\x9cthe vendee under a contract for the sale of\nland, being regarded as the equitable owner, assumes the risk of destruction of or injury\nto the property where he is in possession, and the destruction or loss is not proximately\ncaused by the negligence of the vendor.\xe2\x80\x9d Id. (emphasis added). The vendee in\npossession was therefore not relieved of his obligation to continue making payments\naccording to the terms of the contract, despite material loss by fire to some of the\nimprovements on the property. ... Those jurisdictions that indiscriminately include the\nrisk of casualty loss among the incidents or \xe2\x80\x9cattributes" of equitable ownership do so\nlargely in reliance on ancient authority or by considering it necessary for consistent\napplication of the theory of equitable conversion. Under virtually any accepted\nunderstanding of the theory, however, equitable conversion is not viewed as entitling\nthe purchaser to every significant right of ownership, and particularly not the right of\npossession. As a matter of both logic and equity, the obligation to maintain property\nin its physical condition follows the right to have actual possession and control rather\nthan a legal right to force conveyance of the property through specific performance at\nsome future date. See 17 SAMUEL WILLISTON, A TREATISE ON THE LAW OF\nCONTRACTS \xc2\xa7 50:46, at 457-58 (Richard A. Lord ed., 4th ed. 1990) (\xe2\x80\x9c[I]t is wiser to\nhave the party in possession of the property care for it at his peril, rather than at the\nperil of another.\xe2\x80\x9d).\nThe equitable conversion theory is literally stood on its head by imposing on a vendee,\nsolely because of his right to specific performance, the risk that the vendor will be\nunable to specifically perform when the time comes because of an accidental casualty\nloss. It is counterintuitive, at the very least, that merely contracting for the sale of real\nproperty should not only relieve the vendor of his responsibility to maintain the\nproperty until execution but also impose a duty on the vendee to perform despite the\nintervention of a material, no-fault casualty loss preventing him from ever receiving the\nbenefit of his bargain. Such an extension of the theory of equitable conversion to\ncasualty loss has never been recognized by this jurisdiction, and it is neither necessary\nnor justified solely for the sake of consistency.\n\n\x0c668\n\nProperty\n\nBy contrast, there is substantial justification, both as a matter of law and policy, for not\nrelieving a vendee who is entitled to possession before transfer of title, like the vendee\nin Wiley, of his duty to pay the full contract price, notwithstanding an accidental loss.\nIn addition to having control over the property and being entitled to the benefits of its\nuse, an equitable owner who also has the right of possession has already acquired\nvirtually all of the rights of ownership and almost invariably will have already paid at\nleast some portion of the contract price to exercise those rights. By expressly including\nin the contract for sale the right of possession, which otherwise generally accompanies\ntransfer of title, the vendor has for all practical purposes already transferred the\nproperty as promised, and the parties have in effect expressed their joint intention that\nthe vendee pay the purchase price as promised. ...\nIn the absence of a right of possession, a vendee of real property that suffers a material\ncasualty loss during the executory period of the contract, through no fault of his own,\nmust be permitted to rescind and recover any payments he had already made. ...\nHere, Brush was clearly not in possession of the property as the equitable owner. Even\nif the doctrine of equitable conversion applies to the option contract between Brush\nand Sure Fine and could be said to have converted Brush\xe2\x80\x99s interest to an equitable\nownership of the property at the time Brush exercised its option to purchase, neither\nparty considered the contract for sale to entitle Brush to possession. Brush was, in fact,\nnot in possession of the property, and the record indicates that Sure Fine considered\nitself to hold the right of use and occupancy and gave notice that it would consider\nBrush a holdover tenant if it continued to occupy the premises other than by\ncontinuing to lease the property. The casualty loss was ascertainable and in fact\nstipulated by the parties, and neither party challenged the district court\xe2\x80\x99s enforcement\nof the contract except with regard to its allocation of the casualty loss. Both the court\nof appeals and the district court therefore erred in finding that the doctrine of equitable\nconversion required Brush to bear the loss caused by hail damage.\nNotes and Questions\n1. Why is the risk of loss during the executory period even a thing? Why would\nthe parties leave time between signing a contract of sale and closing? Why not\njust hand over a deed on the spot?\n\n\x0cLand Transactions\n\n669\n\n2. If the grocery store had been damaged by hail during the five-year lease\npreceding the sale, who would have borne the risk of loss? Would it matter\nwhether Brush had taken possession of the property? Who bears the risk of loss\nif Brush owns a grocery store subject to Sure Fine\xe2\x80\x99s mortgage? Does it matter\nwhether Colorado follows the title or lien theory of mortgages?\n\n\x0cMortgages and Foreclosures\nA. Introduction: What is a Mortgage?\nA mortgage is an interest in land. It is not a possessory or usufructary interest: the\nowner of a mortgage has no right to enter or use the property, the way the owner of\nthe fee or an easement owner would. Instead, mortgages exist to secure loans. A\nsecured loan is backed, or \xe2\x80\x9csecured,\xe2\x80\x9d by a specific asset such as a house or a car, which\nthe lender can seize in case of default. An unsecured loan is not secured by any specific\nasset\xe2\x80\x94for example, credit card debt and student loans are unsecured. The borrower\nowes the money, and the lender can go after the borrower\xe2\x80\x99s unsecured assets in case\nof default, but if those assets are too small, the unsecured lender is out of luck. Secured\nloans are generally considered less risky than unsecured loans, for obvious reasons, and\nshould bear lower interest rates (absent some foolery on the part of the lender or\ngovernment intervention into the market, both of which do happen).\nMost mortgages are residential mortgages. Usually, homebuyers in the U.S. can\xe2\x80\x99t afford\nto pay the entire purchase price of a house at the time they buy it. Instead, they take\nout a loan\xe2\x80\x94a mortgage\xe2\x80\x94to pay the bulk of the purchase price. They will sign a\npromissory note (the note) that creates personal liability for the borrowers if they fail\nto pay, and also sets out the terms of the mortgage such as the repayment period and\nthe interest rate. They will also sign a mortgage, a written instrument that grants the\nlender an interest in their newly purchased land. Usually, this transaction occurs at the\ntime the buyers buy the land, though mortgages can also be refinanced or taken out on\nalready-owned property.\nThe homebuyers are the mortgagors. The lender is the mortgagee. Over time, the buyers\npay off the loan. As they pay off the loan, they build \xe2\x80\x9cequity\xe2\x80\x9d in their homes. Equity\nis the difference between what a home is worth and what the homeowners owe on\ntheir mortgage. 1 As a result of deliberate policy choices, the model residential mortgage\nin the U.S. is for no more than 80% of the value of the house at time of purchase; has\nThis terminology has a historical basis in the \xe2\x80\x9cequity of redemption,\xe2\x80\x9d which was a means by which early\nchancellors protected early mortgagors from abuses by lenders. Over time, the equitable procedures created by\ncourts gave way to legislation establishing rules for how foreclosures could occur.\n\n1\n\n670\n\n\x0cMortgages and Foreclosures\n\n671\n\na fixed interest rate; and amortizes over a period of years, usually twenty or thirty.\nAmortization means that the payments are the same throughout the period of the\nmortgage: at the beginning, most of the payments go to interest on the loan, while over\ntime more and more of the payments go to reduce the loan principal.\nThe mortgagors can transfer the land at will. However, any transfer will not free the\nland from the mortgage (nor will a transfer free them from their contractual promise\nto pay the debt); the mortgage runs with the land. Thus, a sensible transferee will not be\nwilling to pay full value for the land\xe2\x80\x94the fair market value of the land is reduced by\nthe amount of the mortgage. A transferee can either take \xe2\x80\x9csubject to the mortgage,\xe2\x80\x9d\nwhich means that the original mortgagors still owe the debt and the transferee is at risk\nif they don\xe2\x80\x99t pay, or \xe2\x80\x9cassuming the mortgage,\xe2\x80\x9d which means that the new owner agrees\nto pay the mortgage directly. When the purchaser assumes the mortgage, the seller still\nhas a duty to pay the mortgage if the buyer doesn\xe2\x80\x99t, but the seller can pursue the buyer\nfor reimbursement if that happens. However, this all risks some big messes; to avoid\nproblems associated with transfers, many mortgages have \xe2\x80\x9cdue on sale\xe2\x80\x9d clauses, which\nmeans that the full amount of the mortgage comes due (or \xe2\x80\x9caccelerates\xe2\x80\x9d) when the\nmortgagor sells the property. One important feature of a due on sale clause is that it\nenables lenders to reprice loans: if the interest rate has risen since the initial mortgage\nloan, the buyer can\xe2\x80\x99t just assume the existing loan and receive a lower interest rate than\nwould otherwise be available to him.\nSuppose Joan Watson wants to sell her house to Sherlock Holmes. She still owes\n$400,000 on her house; Holmes will be buying it for $500,000. But she doesn\xe2\x80\x99t have\n$400,000 in the bank to pay off her mortgage, which has a due on sale clause. How\ncan she accomplish the sale? The answer is that a series of transactions take place\ntogether. The day of the sale, Holmes will give Watson a check for $500,000 (most of\nwhich will likely come from Holmes\xe2\x80\x99 own new mortgage on the property). Watson\nwill then pay her lender $400,000 and keep $100,000. As you can see, there will be\nsome time at which both Holmes and Watson are relying on the value of the underlying\nproperty\xe2\x80\x94Holmes to get his mortgage and Watson to pay hers off. For this reason,\nreal estate transactions regularly involve the use of multiple third parties, including\nescrow agents, to facilitate and guarantee the sale.\n\n\x0c672\n\nProperty\n\nIf the mortgagors default on the mortgage by failing to pay the appropriate amounts at\nthe appropriate times, the mortgagee can foreclose. Foreclosure can be timeconsuming and expensive, so in some circumstances the mortgagee may accept a \xe2\x80\x9cdeed\nin lieu of foreclosure,\xe2\x80\x9d by which the mortgagor surrenders the property to the\nmortgagee and the mortgagee accepts the deed. However, deeds in lieu of foreclosure\nare relatively rare; most of the time, if a default is not cured and the loan is not modified,\nthe result will be a foreclosure.\nEither by a private sale (nonjudicial foreclosure) or under judicial supervision (judicial\nforeclosure), the mortgagee can have the property sold and apply the proceeds of the\nsale to the amount due on the note. The foreclosure is so called because it forecloses\nthe mortgagee\xe2\x80\x99s ability to get the property back by paying off the mortgage debt; after\nthe foreclosure, it is too late to become current. 1\nIn a number of states, it is possible to avoid judicial foreclosure\xe2\x80\x94which takes more\ntime and money than nonjudicial foreclosure\xe2\x80\x94through the use of a \xe2\x80\x9cdeed of trust,\xe2\x80\x9d\nwhich is recognized in most jurisdictions. Under a deed of trust, the borrower conveys\ntitle to the property to a person to hold in trust to secure the debt. If the borrower\ndefaults, the trustee has the power of sale without needing to go to court. However,\nalmost all states that allow this procedure do impose some procedural safeguards, such\nas notice and public sale. Other than the ability to avoid judicial foreclosure, you can\nexpect a deed of trust to be treated like a mortgage.\nIn addition, there are two different types of secured loans: recourse and nonrecourse\nloans. For a nonrecourse loan, the only way the lender can get its money back in case\nof default is by seizing the asset, and if there\xe2\x80\x99s not enough money to satisfy the debt\nfrom the asset, too bad for the lender. The lender has no \xe2\x80\x9crecourse\xe2\x80\x9d against any of the\nborrower\xe2\x80\x99s other assets. A recourse loan is different: in case of default, the lender can\nseize and sell the asset, and if there\xe2\x80\x99s not enough money to satisfy the debt, the lender\n\nAt common law, the equity of redemption allowed the mortgagor to redeem the property from the mortgagee.\nThis equity of redemption was extinguished by foreclosure sale. In about half of the states, there is also a statutory\nright to redeem the property from the purchaser at a foreclosure sale for a certain period of time. This right is\nrarely used, because most people would already have paid, if they could, before the sale.\n\n1\n\n\x0cMortgages and Foreclosures\n\n673\n\nis now an unsecured creditor for the remaining balance (the deficiency) and can go\nafter any of the borrower\xe2\x80\x99s other assets, such as her bank account. Foreclosure wipes\nout the lender\xe2\x80\x99s interest in the land, which means that the land can then be resold free\nof the lender\xe2\x80\x99s interest. However, with a recourse loan, foreclosure will not wipe out\nthe borrower\xe2\x80\x99s debt, if it is greater than the foreclosure sale amount.\nObviously, lenders ordinarily prefer recourse loans, but will grant nonrecourse loans in\nvarious circumstances. 1 Many businesses can get nonrecourse loans based on their\nassets. Some states bar deficiency judgments for residential mortgages, which makes\nthem nonrecourse loans. Other states bar deficiency judgments unless there is a judicial\nforeclosure, with its greater expense and greater procedural protections for the\nborrower. Still others limit the amount of any deficiency judgment to the difference\nbetween the principal balance and the property\xe2\x80\x99s fair market value at the time of\nforeclosure\xe2\x80\x94this limit recognizes that foreclosed properties often sell for below\nmarket value for a variety of reasons, including buyers\xe2\x80\x99 uncertainty about the true\ncondition of the property and the limited number of potential buyers who bid at\nforeclosure sales. (Historically, the mortgagee is often the only bidder at a foreclosure\nsale. Why would this be true?)\nEven states that allow deficiency judgments generally recognize an exception: if the sale\nprice shocks the conscience, then a deficiency judgment may not be allowed. More\ngenerally, even in the absence of a potential deficiency judgment, the foreclosing entity\nhas a limited duty of good faith to the mortgagor in seeking an acceptable price at the\nsale. However, mere inadequacy of price will not invalidate a sale in the absence of\nfraud, unfairness, or procedural problems that deterred bidding. As a result, very low\nsale prices are sometimes accepted by courts. Compare Moeller v. Lien, 30 Cal. Rptr. 2d\n777 (Ct. App. 1994) (sale at 25% of market value was acceptable where sale was to\nbona fide purchaser and there was no irregularity in the sale procedure), with Murphy\n\nIn fact, the basic idea of a corporation is a way of limiting a lender\xe2\x80\x99s recourse: before the corporate form, if a\nbusiness owner went bust, creditors could go after the owner\xe2\x80\x99s personal assets until they were gone. The\ncorporation allows shareholders/owners to limit their liability to the extent of the corporation\xe2\x80\x99s assets. If a\nperson owned shares of Lehman Brothers, its creditors could make her shares worthless, but they couldn\xe2\x80\x99t make\nher pay Lehman Brothers\xe2\x80\x99 debts.\n\n1\n\n\x0c674\n\nProperty\n\nv. Fin. Dev. Corp., 495 A.2d 1245 (N.H. 1985) (finding that mortgagee violated duty\nto mortgagor when (1) sale was rescheduled and poorly advertised, (2) sale price was\nso low that it wiped out substantial equity for homeowners, and (3) mortgagee quickly\nresold property at substantially higher price).\nOne final introductory point: it is possible to take out a second and even a third\nmortgage. The first mortgage has \xe2\x80\x9cpriority\xe2\x80\x9d over the second mortgage: it will be paid\nfirst at foreclosure. Only if there is money remaining after the first mortgage is paid\noff in full will the holder of the second mortgage be paid. As a result of the greater\nrisk involved in second mortgages, they generally bear higher interest rates than first\nmortgages.\nProblem\nBetty Finn buys a house for $450,000. She puts down $90,000 and takes out a\nmortgage for $250,000 from Heather Chandler, and a second mortgage for\n$110,000 from Veronica Sawyer. When Betty defaults, the house is sold for\n$500,000 at foreclosure. Assuming the amounts due on the mortgages haven\xe2\x80\x99t\nchanged at all, how should the proceeds be distributed? What would the answer\nbe if the house brought $350,000 at foreclosure?\n\nB. Crystals and Mud in Property Law\nWe have skimped on the history of mortgage law, which is a long struggle between\ncreditors and debtors. Mostly, legislatures and courts act to protect debtors, who are\nusually seen as the more vulnerable parties, from sharp dealing by creditors. As rules\nstretch to be more equitable and less hard-edged, pressure grows to create new clear\nrules, which then grow their own exceptions and qualifications.\nCarol Rose describes the legal seesawing in the following excerpt, which has important\nlessons for property law generally:\n\n\x0cMortgages and Foreclosures\n\n675\n\nCarol M. Rose, Crystals And Mud In Property Law\n40 STAN. L. REV. 577 (1988) (excerpts reprinted by permission)\nProperty law, and especially the common law of property, has always been heavily laden\nwith hard-edged doctrines that tell everyone exactly where they stand. Default on\npaying your loan installments? Too bad, you lose the thing you bought and your past\npayments as well. Forget to record your deed? Sorry, the next buyer can purchase free\nof your claim, and you are out on the street. Sell that house with the leak in the\nbasement? Lucky you, you can unload the place without having to tell the buyer about\nsuch things at all.\nIn a sense, hard-edged rules like these\xe2\x80\x94rules that I call \xe2\x80\x98crystals\xe2\x80\x99\xe2\x80\x94are what property is\nall about. If, as Jeremy Bentham said long ago, property is \xe2\x80\x98nothing but a basis of\nexpectation,\xe2\x80\x99 then crystal rules are the very stuff of property: their great advantage, or\nso it is commonly thought, is that they signal to all of us, in a clear and distinct language,\nprecisely what our obligations are and how we may take care of our interests. Thus, I\nshould inspect the property, record my deed, and make my payments if I don\xe2\x80\x99t want to\nlose my home to unexpected physical, legal, or financial impairments. I know where I\nstand and so does everyone else, and we can all strike bargains with each other if we\nwant to stand somewhere else.\nEconomic thinkers have been telling us for at least two centuries that the more\nimportant a given kind of thing becomes for us, the more likely we are to have these\nhard-edged rules to manage it. We draw these ever-sharper lines around our\nentitlements so that we know who has what, and so that we can trade instead of getting\ninto the confusions and disputes that would only escalate as the goods in question\nbecame scarcer and more highly valued.\nAt the root of these economic analyses lies the perception that it costs something to\nestablish clear entitlements to things, and we won\xe2\x80\x99t bother to undertake the task of\nremoving goods from an ownerless \xe2\x80\x98commons\xe2\x80\x99 unless it is worth it to us to do so. What\nmakes it worth it? Increasing scarcity of the resource, and the attendant conflicts over\nit. To use the example given by Harold Demsetz, one of the most notable of the\nmodern economists telling this story, when the European demand for fur hats\n\n\x0c676\n\nProperty\n\nincreased demand for (and scarcity of) fur-bearing animals among Indian hunters, the\nIndians developed a system of property entitlements to the animal habitat. Economic\nhistorians of the American West tell a similar story about the development of property\nrights in various minerals and natural resources. Easy-going, anything-goes patterns of\nappropriation at the outset came under pressure as competition for resources increased,\nand were finally superseded by much more sharply defined systems of entitlement. In\neffect, as our competition for a resource raises the costs of conflict about it, those\nconflict costs begin to outweigh the costs of taking it out of the commons and\nestablishing clear property entitlements. We establish a system of clear entitlements so\nthat we can barter and trade for what we want instead of fighting.\nThe trouble with this \xe2\x80\x98scarcity story\xe2\x80\x99 is that things don\xe2\x80\x99t seem to work this way, or at\nleast not all the time. Sometimes we seem to substitute fuzzy, ambiguous rules of\ndecision for what seem to be perfectly clear, open and shut, demarcations of\nentitlements. I call this occurrence the substitution of \xe2\x80\x98mud\xe2\x80\x99 rules for \xe2\x80\x98crystal\xe2\x80\x99 ones.\nThus, \xe2\x80\xa6 over time, the straightforward common law crystalline rules have been\nmuddied repeatedly by exceptions and equitable second-guessing, to the point that the\nvarious claimants under real estate contracts, mortgages, or recorded deeds don\xe2\x80\x99t know\nquite what their rights and obligations really are. And the same pattern has occurred in\nother areas too. \xe2\x80\xa6\nQuite aside from the wealth transfer that may accompany a change in the rules, then,\nthe change may sharply alter the clarity of the relationship between the parties. But a\nmove to the uncertainty of mud seems disruptive to the very practice of a private\nproperty/contractual exchange society. Thus, it is hardly surprising that we individually\nand collectively attempt to clear up the mud with new crystal rules\xe2\x80\x94as when private\nparties contract out of ambiguous warranties, or when legislatures pass new versions\nof crystalline record systems\xe2\x80\x94only to be overruled later, when courts once again\nreinstate mud in a different form.\xe2\x80\xa6\nEarly common law mortgages were very crystalline indeed. They had the look of\npawnshop transactions and were at least sometimes structured as conveyances: I\nborrow money from you, and at the same time I convey my land to you as security for\n\n\x0cMortgages and Foreclosures\n\n677\n\nmy loan. If all goes well, I pay back my debt on the agreed \xe2\x80\x98law day,\xe2\x80\x99 and you reconvey\nmy land back to me. But if all does not go well and I cannot pay on the appointed day,\nthen, no matter how heartrending my excuse, I lose my land to you and, presumably,\nany of the previous payments I might have made. As the fifteenth century commentator\nLittleton airily explained, the name \xe2\x80\x98mortgage\xe2\x80\x99 derived from the rule that, if the debtor\n\xe2\x80\x98doth not pay, then the land which he puts in pledge \xe2\x80\xa6 is gone from him for ever, and\nso dead.\xe2\x80\x99\nThis system had the advantage of great clarity, but it sometimes must have seemed very\nhard on mortgage debtors to the advantage of scoundrelly creditors. Littleton\xe2\x80\x99s advice\nabout the importance of specifying the precise place and time for repayment, for\nexample, conjures up images of a wily creditor hiding in the woods on the repayment\nday to frustrate repayment; presumably, the unfound creditor could keep the property.\nBut by the seventeenth century, the intervention of courts of equity had changed things.\nBy the eighteenth and nineteenth centuries, the equity courts were regularly giving\ndebtors as many as three or four \xe2\x80\x98enlargements\xe2\x80\x99 of the time in which they might pay\nand redeem the property before the final \xe2\x80\x98foreclosure,\xe2\x80\x99 even when the excuse was lame.\nOne judge explained that an equity court might well grant more time even after the\n\xe2\x80\x98final\xe2\x80\x99 order of \xe2\x80\x98foreclosure absolute,\xe2\x80\x99 depending on the particular circumstances.\nThe muddiness of this emerging judicial remedy argued against its attractiveness. Chief\nJustice Hale complained in 1672 that, \xe2\x80\x98[b]y the growth of Equity on Equity, the Heart\nof the Common Law is eaten out, and legal Settlements are destroyed; . . . as far as the\nLine is given, Man will go; and if an hundred Years are given, Man will go so far, and\nwe know not whither we shall go.\xe2\x80\x99 Instead of a precise and clear allocation of\nentitlements between the parties, the \xe2\x80\x98equity of redemption\xe2\x80\x99 and its unpredictable\nforeclosure opened up vexing questions and uncertainties: How much time should the\ndebtor have for repayment before the equitable arguments shifted to favor the creditor?\nWhat sort of excuses did the debtor need? Did it matter that the property, instead of\ndropping in the lap of the creditor, was sold at a foreclosure sale?\nBut as the courts moved towards muddiness, private parties attempted to bargain their\nway out of these costly uncertainties and to reinstate a crystalline pattern whereby\nlenders could get the property immediately upon default without the costs of\n\n\x0c678\n\nProperty\n\nforeclosure. How about a separate deal with the borrower, for example, whereby he\nagrees to convey an equitable interest to the lender in case of default? Nothing doing,\nsaid the courts, including the United States Supreme Court, which in 1878 stated flatly\nthat a mortgagor could not initially bargain away his \xe2\x80\x98equity of redemption.\xe2\x80\x99 Well, then,\nhow about an arrangement whereby it looks as if the lender already owns the land, and\nthe \xe2\x80\x98borrower\xe2\x80\x99 only gets title if he lives up to his agreement to pay for it by a certain\ntime? This seemed more promising: In the 1890s California courts thought it perfectly\ncorrect to hold the buyer to his word in such an arrangement, and to give him neither\nan extension nor a refund of past payments. By the 1960s, however, they were changing\ntheir minds about these \xe2\x80\x98installment land contracts.\xe2\x80\x99 After all, these deals really had\nexactly the same effect as the old-style mortgages\xe2\x80\x94the defaulting buyer could lose\neverything if he missed a payment, even the very last payment. Human vice and error\nseemed to put the crystal rule in jeopardy: In a series of cases culminating with a default\nby a \xe2\x80\x98willful but repentant\xe2\x80\x99 little old lady who had stopped paying when she mistakenly\nthought that she was being cheated, the California Supreme Court decided to treat\nthese land contracts as mortgages in disguise. It gave the borrower \xe2\x80\x98relief from\nforfeiture\xe2\x80\x99\xe2\x80\x94a time to reinstate the installment contract or get back her past payments.\nWith mortgages first and mortgage substitutes later, we see a back-and-forth pattern:\ncrisp definition of entitlements, made fuzzy by accretions of judicial decisions, crisped\nup again by the parties\xe2\x80\x99 contractual arrangements, and once again made fuzzy by the\ncourts. Here we see private parties apparently following the \xe2\x80\x98scarcity story\xe2\x80\x99 in their\nprivate law arrangements: when things matter, the parties define their respective\nentitlements with ever sharper precision. Yet the courts seem at times unwilling to\nfollow this story or to permit these crystalline definitions, most particularly when the\nrules hurt one party very badly. The cycle thus alternates between crystal and mud.\nNotes and Questions\n1. Bear in mind that crystals don\xe2\x80\x99t just help lenders, and mud doesn\xe2\x80\x99t just help\nborrowers. It all depends on the particulars of the situation. In fact, as you read\nthe materials, consider whether insistence on hard-edged rules might aid\nborrowers under today\xe2\x80\x99s circumstances, and whether this would be justified.\n\n\x0cMortgages and Foreclosures\n\n679\n\n2. Carol Rose later describes the situations in which courts muddy crystalline rules\nas cases involving \xe2\x80\x9cninnies, hard-luck cases, and the occasional scoundrels who\ntake advantage of them.\xe2\x80\x9d As you read through the rest of this chapter, consider\nwhether that is a fair characterization of the parties to the various disputes we\nwill be studying.\n\nC. The Rise of Mortgage Securitization and the Global\nFinancial Crisis of 2008\nIn 2008 the world entered into a global financial crisis that proved to be the worst since\nthe Great Depression of the 1930s. The Global Financial Crisis had many causes, but\ncertainly one precipitating factor was a high default rate in the U.S. home mortgage\nsector, especially mortgages known as subprime mortgages. Several large financial\ninstitutions, and possibly the entire world economic system, were on the brink of\ncollapse in 2008. In the U.S. and many other countries, this collapse was only prevented\nby massive bailouts. In the wake of the crisis, stock markets \xe2\x80\x9cplunged\xe2\x80\x9d, the housing\nmarket \xe2\x80\x9ctanked\xe2\x80\x9d and evictions, foreclosures, and unemployment rose. How exactly did\nall this happen? And what did it have to do with the humdrum world of residential\nmortgages?\nAdam J. Levitin, The Paper Chase: Securitization, Foreclosure,\n\nand the Uncertainty of Mortgage Title\n\n63 DUKE L.J. 637 (2013) (excerpts reprinted by permission)\n\xe2\x80\xa6 II. THE SHIFT IN MORTGAGE FINANCING TO SECURITIZATION\nSecuritization is a relatively recent development in residential mortgage lending.\nResidential mortgages began to be securitized in 1970, but securitization remained a\nrelatively small part of American housing finance prior to the 1980s. In 1979 only 10\npercent of outstanding mortgages by dollar amount were securitized. Instead, mortgage\nlending was primarily a local a\xef\xac\x80air \xe2\x80\xa6 so mortgage loans were rarely transferred.\n\n\x0c680\n\nProperty\n\n\xe2\x80\xa6 By 1983, 20 percent of outstanding mortgages by dollar amount were securitized,\nand a decade later fully half of outstanding mortgages by dollar amount were securitized.\nToday nearly two-thirds of mortgage dollars outstanding are securitized.\nA firm can raise funds on potentially more advantageous terms if it can borrow solely\nagainst its assets, not its assets and liabilities. Securitization enabled such borrowing.\nTo do so, a firm sells assets to a legally separate, specially created entity. The legally\nseparate entity pays for the assets by issuing debt. Because the entity is designed to have\nalmost no other liabilities, the debt it issues will be priced simply on the quality of the\ntransferred assets, without any concern about competing claims to those assets.\nTherefore, ensuring that the assets are transferred and are free of competing claims is\ncentral to securitization.\nAlthough residential-mortgage securitization transactions are complex and vary\nsomewhat depending on the type of entity undertaking the securitization, there is still\na core standard transaction. First, a financial institution (the \xe2\x80\x9csponsor\xe2\x80\x9d or \xe2\x80\x9cseller\xe2\x80\x9d)\nassembles a pool of mortgage loans either made (\xe2\x80\x9coriginated\xe2\x80\x9d) by an a\xef\xac\x83liate of the\nfinancial institution or purchased from una\xef\xac\x83liated third-party originators. Second, the\npool of loans is sold by the sponsor to a special-purpose subsidiary (the \xe2\x80\x9cdepositor\xe2\x80\x9d)\nthat has no other assets or liabilities and is little more than a legal entity with a mailbox.\nThis is done to segregate the loans from the sponsor\xe2\x80\x99s assets and liabilities. Third, the\ndepositor sells the loans to a passive, specially created, single-purpose vehicle (SPV),\ntypically a trust in the case of residential-mortgage securitization. The trustee will then\ntypically convey the mortgage notes and security instruments to a document custodian\nfor safekeeping. The SPV issues certificated debt securities to raise the funds to pay for\nthe loans. As these debt securities are backed by the cash flow from the mortgages,\nthey are called mortgage-backed securities (MBS). \xe2\x80\xa6\nNotes and Questions\n1. You may not feel that you fully understand securitization. It will get clearer with\ntime. Perhaps the most important thing to understand is that the entity that\nclaims to own, and tries to enforce, the mortgage debt in case of default is\nusually not the entity that originated the loan. It\xe2\x80\x99s common to discuss \xe2\x80\x9cbanks\xe2\x80\x9d\n\n\x0cMortgages and Foreclosures\n\n681\n\nand \xe2\x80\x9clenders\xe2\x80\x9d without paying much attention to the details of the actual\nmortgage transactions, and the problem is worsened because the entities\ninvolved are often related and even bear highly similar names. But lawyers often\nneed more precision.\n2. Among other things, non-originator owners can claim that equitable defenses\xe2\x80\x94\nsuch as fraudulent inducement, which was unconscionably common in the runup to the mortgage crisis\xe2\x80\x94are unavailable to homeowners/mortgagors under\nthe \xe2\x80\x9cholder in due course\xe2\x80\x9d doctrine. The holder in due course doctrine is similar\nto the rule, discussed in O\xe2\x80\x99Keeffe v. Snyder, that a good faith purchaser who buys\nproperty from a fraudster acquires good title, even though the fraudster did not\nhave good title. With a mortgage, that means that a homeowner who was\ndeceived into taking a predatory loan, as discussed in the next section, is still\nbound to pay back the loan according to its terms as long as the mortgage was\ntransferred to a holder in due course. See, e.g., Kurt Eggert, Held Up in Due\nCourse: Predatory Lending, Securitization, and the Holder-in-Due-Course Doctrine, 35\nCREIGHTON L. REV. 502 (2002). Recently, some reforms have attempted to\nlimit the holder in due course doctrine, at least with respect to loans with\nspecific bad features.\n3. Another important thing to understand about securitization is that it involves\nthe creation of new property rights from old. Investors in mortgage-backed\nsecurities do not own individual mortgages. Rather, they own the right to\nbenefit from the stream of payments from mortgagors to the trusts that hold\nthe mortgages. This right has been turned into a separate property right through\nthe magic of securitization. But the value of this right is still, as investors\ndiscovered to their sorrow, dependent on the value of the underlying assets.\n\nD. Redlining\nFor much of the 20th century in the United States, many private lenders refused to\nextend mortgage credit\xe2\x80\x94and federal agencies refused to extend or insure mortgage\nloans\xe2\x80\x94on the basis of the racial composition of the neighborhood in which the\n\n\x0c682\n\nProperty\n\nmortgaged property was located. Community activists in the Austin neighborhood of\nChicago coined the term \xe2\x80\x9credlining\xe2\x80\x9d in the 1960s to describe the phenomenon:\nSavings and loan associations, at the time the primary source of\nresidential mortgages, drew red lines around neighborhoods they\nthought were susceptible to racial change and refused to make mortgages\nin those neighborhoods. Using the U.S. Department of Housing and\nUrban Development (HUD) appraisal methodology developed by\nHomer Hoyt from the University of Chicago, these lending institutions\nconsidered racially changing neighborhoods a bad credit risk because\nthey assumed property values would decline. By extension,\nneighborhoods that were not racially changing but in close proximity to\nracially changing neighborhoods were labeled unstable and redlined. The\nresulting limitations on the availability of residential credit became a selffulfilling prophecy as residents found it difficult to get a fair market price\nfor their homes.\nJean Pogge, Reinvestment in Chicago Neighborhoods: A Twenty-Year Struggle, in FROM\nREDLINING TO REINVESTMENT: COMMUNITY RESPONSES TO URBAN\nDISINVESTMENT 133, 134 (Gregory Squires ed., Temple University Press 2011). As we\nwill see, redlining and the foreclosure crisis of 2008 are connected.\n\n1. Redlining\xe2\x80\x99s History\nThe term \xe2\x80\x9credlining\xe2\x80\x9d refers to the practice of lenders, insurers, and government\nagencies of drawing literal red lines on city maps around neighborhoods that were\ncollectively deemed an unacceptable credit risk. This \xe2\x80\x9clocation-based\xe2\x80\x9d discrimination is\ndistinct from discrimination against particular individuals on the basis of race, though\nthe two forms of discrimination often go hand in hand.\nIn the 1980s, historian Kenneth Jackson showed that the practice of redlining could be\ntraced back at least as far as the Home Owners Loan Corporation (HOLC), a federal\nagency created in 1933 to help stem the tide of foreclosures generated by the Great\nDepression. Kenneth T. Jackson, Race, Ethnicity, and Real Estate Appraisal: The Home\nOwners Loan Corporation and the Federal Housing Administration, 6 J. URB. HIST. 419 (1980).\n\n\x0cMortgages and Foreclosures\n\n683\n\nHOLC was largely responsible for introducing and popularizing the type of federallybacked, fully-amortized, long-term residential mortgage loan that is now the norm in\nthe United States. But it also helped to systematize and institutionalize the appraisal\ntheories and methods that gave rise to redlining, even creating what can now be\nrecognized as the earliest extant redlined maps: HOLC\xe2\x80\x99s \xe2\x80\x9cResidential Security Maps,\xe2\x80\x9d\nsuch as the maps of Chicago shown below.\n\n\x0c684\n\nProperty\n\nThe University of Richmond Digital Scholarship Lab\xe2\x80\x99s \xe2\x80\x9cMapping Inequality\xe2\x80\x9d project\nhas recently digitized HOLC\xe2\x80\x99s maps and reports, converted them into standardized\ngeographical data formats, and made the results available on their website:\nhttps://dsl.richmond.edu/panorama/redlining/. The project\xe2\x80\x99s authors explain how\nHOLC\xe2\x80\x99s appraisal methods worked in practice:\nNeighborhoods receiving the highest grade of \xe2\x80\x9cA\xe2\x80\x9d\xe2\x80\x94colored green on\nthe maps\xe2\x80\x94were deemed minimal risks for banks and other mortgage\nlenders when they were determining who should receive loans and which\nareas in the city were safe investments. Those receiving the lowest grade\nof \xe2\x80\x9cD,\xe2\x80\x9d colored red, were considered \xe2\x80\x9chazardous.\xe2\x80\x9d Conservative,\nresponsible lenders, in HOLC judgment, would \xe2\x80\x9crefuse to make loans\nin these areas [or] only on a conservative basis.\xe2\x80\x9d HOLC created area\ndescriptions to help to organize the data they used to assign the grades.\nAmong that information was the neighborhood\xe2\x80\x99s quality of housing, the\nrecent history of sale and rent values, and, crucially, the racial and ethnic\nidentity and class of residents that served as the basis of the\nneighborhood\xe2\x80\x99s grade. These maps and their accompanying\ndocumentation helped set the rules for nearly a century of real estate\npractice.\nRobert K. Nelson, LaDale Winling, Richard Marciano, Nathan Connolly, et al.,\n\xe2\x80\x9cMapping Inequality,\xe2\x80\x9d American Panorama, ed. Robert K. Nelson and Edward L.\nAyers, available at https://dsl.richmond.edu/panorama/redlining [CC-BY-NC-SA\n4.0].\nHistorians and sociologists have long argued over whether the HOLC maps were a\ncause of redlining, or were instead a symptom of the prevailing theories of real estate value\nthat were widespread at the time that HOLC was created. The answer is probably a bit\nof both. HOLC certainly did not invent the practice of valuing real estate on the basis\nof the racial makeup of the neighborhood in which such real estate is located. For\nexample, a leading real estate appraisal textbook from the early 1930s was merely\nrestating conventional wisdom among real estate professionals when it said that \xe2\x80\x9cracial\nheritage and tendencies seem to be of paramount importance\xe2\x80\x9d in influencing land\n\n\x0cMortgages and Foreclosures\n\n685\n\nvalues, and that \xe2\x80\x9cthere is one difference in people, namely race, which can result in a\nvery rapid decline [in real estate values, which] can be partially avoided by segregation.\xe2\x80\x9d\nFREDERICK M. BABCOCK, THE VALUATION OF REAL ESTATE 86, 91 (1932). And\nindeed, HOLC itself did not even engage in redlining, insofar as it actually did most of\nits lending in areas it designated \xe2\x80\x9cdeclining\xe2\x80\x9d or \xe2\x80\x9chazardous.\xe2\x80\x9d However, as Jackson\nargued in his influential book, CRABGRASS FRONTIER: THE SUBURBANIZATION OF\nTHE UNITED STATES 199 (1985), HOLC and its parent agency, the Federal Home Loan\nBank Board (FHLBB), \xe2\x80\x9capplied these notions of ethnic and racial worth to real-estate\nappraising on an unprecedented scale,\xe2\x80\x9d hiring and training armies of appraisers and\nanalysts to use these racial theories of neighborhood value in mapping out and\ncategorizing nearly every residential parcel in over 200 American cities. Those\nprofessionals, the procedures they developed, and the maps they prepared, influenced\nprivate mortgage lenders as well as another New Deal agency of more lasting\nimportance: the Federal Housing Administration (FHA), created in 1934.\nFHA\xe2\x80\x94which still exists today as a division of the department of Housing and Urban\nDevelopment\xe2\x80\x94plays an outsize role in the American residential mortgage market.\nFHA does not itself extend mortgage credit, but instead insures private mortgage loans\nthat meet certain criteria. This mitigates the risk to lenders by allowing them to\npurchase insurance\xe2\x80\x94backed by the full weight of the federal treasury\xe2\x80\x94against losses\narising from non-repayment of residential mortgage loans they originate. Such risk\nreduction, in turn, encourages more lending at lower prices, expanding access to\nmortgage credit. In order to qualify for FHA insurance, a mortgage loan must meet\ncertain underwriting criteria designed by the agency to keep the risk of loss on any\ngiven insured loan within acceptable ranges. The strong demand for FHA insurance\namong mortgage lenders means that the agency\xe2\x80\x99s underwriting criteria exert\ntremendous influence on the availability (and cost) of residential mortgage loans in the\nprivate market.\nFHA\xe2\x80\x99s underwriting criteria are collected in a series of manuals for appraisers, the\nearliest of which were prepared in large part by Frederick Babcock (who wrote the 1932\ntextbook quoted above, and was an early head of FHA\xe2\x80\x99s underwriting division). From\nits inception, FHA included neighborhood racial characteristics among its criteria for\ninsurability. The agency\xe2\x80\x99s manual for 1936 allocated 20% of its location risk rating\n\n\x0c686\n\nProperty\n\npoints to \xe2\x80\x9cProtection from Adverse Influences.\xe2\x80\x9d Among those adverse influences were\n\xe2\x80\x9cinfiltration of business and industrial uses, lower-class occupancy, and inharmonious\nracial groups.\xe2\x80\x9d FHA, UNDERWRITING MANUAL \xc2\xa7 229 (1936). With respect to the latter,\nthe agency instructed as follows:\nThe Valuator should investigate areas surrounding the location to\ndetermine whether or not incompatible racial and social groups are\npresent, to the end that an intelligent prediction may be made regarding\nthe possibility or probability of the location being invaded by such\ngroups. If a neighborhood is to retain stability it is necessary that\nproperties shall continue to be occupied by the same social and racial\nclasses. A change in social or racial occupancy generally leads to\ninstability and a reduction in values\xe2\x80\xa6. Once the character of a\nneighborhood has been established it is usually impossible to induce a\nhigher social class than those already in the neighborhood to purchase\nand occupy properties in its various locations.\nId. \xc2\xa7 233. The head of FHA\xe2\x80\x99s Division of Economics and Statistics instructed staff\nmembers applying these criteria \xe2\x80\x9cto outline blocks with \xe2\x80\x98a considerable number\xe2\x80\x99 of\npopulations commonly associated with low real estate values, such as \xe2\x80\x98Italians or Jews\nin the lower income group,\xe2\x80\x99 as well as those with 10 percent or more \xe2\x80\x98negroes or race\nother than white.\xe2\x80\x99\xe2\x80\x9d Jennifer Light, Discriminating Appraisals: Cartography, Computation, and\nAccess to Federal Mortgage Insurance in the 1930s, 52 TECH. & CULTURE 485, 499 (2011),\nquoting Homer Hoyt, Instructions for Dividing the City into Neighborhoods (n.d.). Staff\nmembers were similarly encouraged to reflect local prejudices in downgrading\nneighborhoods populated by immigrants of other disfavored national origins and their\ndescendants. See generally Jennifer S. Light, Nationality and Neighborhood Risk at the Origins\nof FHA Underwriting, 36 J. URB. HIST. 634 (2010).\nThese FHA evaluations looked not only to current conditions but also to likely future\ndevelopments, on the theory that once a nonwhite resident entered a White\nneighborhood the White residents would relocate to more homogeneously White\nneighborhoods in an accelerating cascade\xe2\x80\x94a phenomenon that came to be known as\n\n\x0cMortgages and Foreclosures\n\n687\n\n\xe2\x80\x9cWhite Flight.\xe2\x80\x9d * Jackson notes that \xe2\x80\x9cIn a March 1939 map of Brooklyn, for example,\nthe presence of a single, non-white family on any block was sufficient to mark that\nentire block black.\xe2\x80\x9d JACKSON, CRABGRASS FRONTIER, supra, at 208-09. FHA\xe2\x80\x99s theory\nof race and home values led it to recommend that deeds to parcels of residential real\nestate include covenants \xe2\x80\x9c[p]rohibit[ing] of the occupancy of properties except by the\nrace for which they are intended.\xe2\x80\x9d FHA, Underwriting Manual \xc2\xa7 284(3)(g) (1936).*\n\xe2\x80\x9cThere are striking similarities between the survey methods and questionnaires used\nby FHA and FHLBB [HOLC\xe2\x80\x99s parent agency], as well as their maps and grading system,\nand it is hard to imagine that the two agencies were not working together.\xe2\x80\x9d Amy Hillier,\nRedlining and the Homeowners\xe2\x80\x99 Loan Corporation, 29 J. URBAN HIST. 394, 403 (2003). But\neven though FHA clearly had access to HOLC\xe2\x80\x99s maps, it also clearly conducted its own\nindependent analyses and even made maps of its own. Indeed, many private lenders of\nthe period were also using similar methods to generate similar maps\xe2\x80\x94the predecessors\nof the maps that became the focus of neighborhood activists in Chicago in the 1960s.\nThus, while the HOLC maps are a vivid illustration of the redlining era, and HOLC\xe2\x80\x99s\ninstitutionalization of race-based neighborhood appraisals did have consequences for\nother players in the mortgage market, it seems that \xe2\x80\x9cHOLC was as much a follower as\n\nIn the mid-20th century, real estate speculators developed a practice of stoking fears of nonwhite neighbors and\nfalling property values among residents of homogeneously White neighborhoods in order to profit from changing\nracial demographics. These speculators often spread rumors that Black families were moving in to a\nneighborhood, hoping to induce White homeowners to sell their homes at a discount out of fear that if they\nwaited until the racial balance of their neighborhood had changed, they would have to accept an even lower price.\nThe speculators often snapped up the homes of these panicky White homeowners for cash and then resold the\nhomes to Black families at a substantial markup\xe2\x80\x94often under onerous financing terms such as installment\ncontracts that Black families were compelled to accept because of their inability to access mortgage credit through\nmainstream channels. This practice, known as \xe2\x80\x9cblockbusting,\xe2\x80\x9d accelerated so-called \xe2\x80\x9cwhite flight\xe2\x80\x9d from urban\nneighborhoods to the suburbs from the late 1950s through the 1980s, and is unlawful under the Fair Housing\nAct. See 42 U.S.C. \xc2\xa7 3204(e); 24 C.F.R. \xc2\xa7 100.85.\n\n*\n\nWe will discuss these racially restrictive deed covenants, held unenforceable as unconstitutional by the Supreme\nCourt in Shelley v. Kraemer, 334 U.S. 1 (1948), in our unit on Restrictive Covenants. In general, they forbade any\nowner of property subject to such a covenant from selling or leasing their property to anybody who was not\nWhite and Christian. Some forbade anyone who was not White and Christian from using the property as a\nresidence, sometimes excepting domestic servants. Such covenants were\xe2\x80\x94until Shelley was decided\xe2\x80\x94enforceable\nin an action by other property owners within the same community for injunctive relief.\n\n*\n\n\x0c688\n\nProperty\n\na leader when it came to neighborhood appraisals.\xe2\x80\x9d Hillier, supra, at 412; see also Louis\nLee Woods, The Federal Home Loan Bank Board, Redlining, and the National Proliferation of\nRacial Lending Discrimination, 1921\xe2\x80\x931950, 38 J. URB. HIST. 1036, 1038 (2012) (\xe2\x80\x9cWhile the\nHOLC did not create racial and socioeconomic lending bias, it certainly helped\nnationalize the practice.\xe2\x80\x9d).\nWhether HOLC was a leader or a follower in tying real estate values and mortgage\navailability to the race of neighborhood residents, there is no dispute that de jure\nredlining was a real phenomenon, nor that the redlining era had a profound and lasting\neffect on the housing stock of the United States, the density of its residential\nneighborhoods, and the segregation of those neighborhoods on the basis of race. FHA\nremoved neighborhood racial characteristics from its underwriting criteria in 1966, and\nthe use of racial criteria by any public or private residential mortgage lending institution\nwas rendered unlawful by the Fair Housing Act of 1968, but three decades of de jure\nredlining had already reshaped the face of American residential neighborhoods. One\nrecent study found that the Black share of population in areas graded \xe2\x80\x9cD\xe2\x80\x9d on HOLC\nmaps grew from 1930 to 1970, as it did in areas graded \xe2\x80\x9cC\xe2\x80\x9d bordering areas graded \xe2\x80\x9cB,\xe2\x80\x9d\ndespite the fact that both \xe2\x80\x9cB\xe2\x80\x9d and \xe2\x80\x9cC\xe2\x80\x9d areas had virtually no Black residents prior to\nthe advent of HOLC and FHA (the authors refer to this phenomenon as \xe2\x80\x9cyellow-lining\xe2\x80\x9d\nin reference to the yellow color-coding of \xe2\x80\x9cC\xe2\x80\x9d-graded areas on HOLC maps). Daniel\nAaronson et al., The Effects of the 1930s HOLC \xe2\x80\x9cRedlining\xe2\x80\x9d Maps, Federal Reserve Bank\nof Chicago Working Paper Series No. WP 2017-12 (Feb. 2019), available at\nhttp://hdl.handle.net/10419/200568. That same study showed that less favorable\nHOLC rankings were correlated with falling homeownership rates, falling home values,\nand rising vacancy rates during the same period, which the authors argue reflects\nhousing disinvestment in redlined and even \xe2\x80\x9cyellow-lined\xe2\x80\x9d neighborhoods. Id.\n\n2. Redlining\xe2\x80\x99s Lasting Impact\nDuring the redlining era, neighborhoods where substantial numbers of nonwhite\npeople lived were often deemed categorically ineligible for FHA-insured loans. And\nbecause federal insurance allowed lenders to offer credit more cheaply, this meant that\nresidents of predominantly White neighborhoods were able to borrow more easily and\ncheaply to buy or improve their homes, while residents of racially mixed or majority-\n\n\x0cMortgages and Foreclosures\n\n689\n\nminority neighborhoods either paid more for mortgage credit or were not able to access\nthe mortgage market at all. In the latter case, those who wanted to buy homes in\nredlined neighborhoods had to purchase under (often usurious) installment contracts\nthat carried high risks of default and forfeiture. This systematic deprivation of access\nto mortgage credit and housing wealth over the course of decades has had long-term\nconsequences, both for individuals and, importantly, for neighborhoods.\nHalf a century after the FHA disavowed redlining, American residential communities\nare still marked by substantial racial segregation. The degree of segregation across HOLC\nboundaries does seem to have diminished somewhat in some areas since the advent of\nthe Fair Housing Act. See Aaronson et al, supra. But that does not mean there has been\nbroad racial residential integration. In many locations the neighborhood lines set down\nby HOLC in the late 1930s bear striking resemblances to boundaries of residential racial\nsegregation in the 21st century. One recent study found that in the aggregate, over 85%\nof neighborhoods graded \xe2\x80\x9cA\xe2\x80\x9d in HOLC maps from the late 1930s were majority-White\nneighborhoods in 2016, while approximately 64% of neighborhoods graded \xe2\x80\x9cD\xe2\x80\x9d in\nthose maps were majority-minority in 2016. See NCRC, HOLC \xe2\x80\x9cREDLINING\xe2\x80\x9d MAPS:\nTHE PERSISTENT STRUCTURE OF SEGREGATION AND ECONOMIC INEQUALITY\n(March 20, 2018), available at https://perma.cc/Z2V5-2R39.\nTo visualize this persistence of residential racial segregation, consider the\nfollowing comparison of HOLC maps from the 1930s with Racial Dot Maps\xe2\x80\x94\nmaps that represent individual residents with dots color-coded by census racial\nclassification\xe2\x80\x94of the same areas in 2010:\n\n\x0c690\n\nProperty\n\nLEGENDS\n\nSources:\nRobert K. Nelson, LaDale Winling, Richard Marciano, Nathan Connolly, et al., \xe2\x80\x9cMapping Inequality,\xe2\x80\x9d American Panorama, ed. Robert\nK. Nelson and Edward L. Ayers, https://dsl.richmond.edu/panorama/redlining/ (CC-BY-NC-SA 4.0)\nRacial Dot Maps, http://demographics.coopercenter.org/racial-dot-map/ Images Copyright, 2013, Weldon Cooper Center for Public\nService, Rector and Visitors of the University of Virginia (Dustin A. Cable, creator). Map data by OpenStreetMap, under CC-BY-SA.\n\nST. LOUIS, MO\n\n\x0cMortgages and Foreclosures\n\n691\n\nDETROIT, MI\n\nBROOKLYN, NY\n\n\x0c692\n\nProperty\n\nDALLAS, TX\n\nDENVER, CO\n\n\x0cMortgages and Foreclosures\n\n693\n\nOAKLAND, BERKELEY, & ALAMEDA, CA\n\nMINNEAPOLIS, MN\n\nIf the era of de jure redlining ostensibly ended no later than the passage of the federal\nFair Housing Act of 1968, why are residential communities largely segregated even now,\nhalf a century later? Scholars have tended to coalesce around three overlapping\n\n\x0c694\n\nProperty\n\nexplanations. See generally Camille Zubrinsky Charles, The Dynamics of Racial Residential\nSegregation, 2 ANN. REV. SOC. 167 (2003).\n1. Racial Wealth Gaps and \xe2\x80\x9cLock-In.\xe2\x80\x9d One explanation may arise from the\nobservation that decades of de jure discrimination and segregation rendered\nBlack home buyers as a group less wealthy than White home buyers as a group,\nand resulted in systematic disparities in the value of housing stock in\nneighborhoods where mainly nonwhite people lived relative to housing stock in\npredominantly White neighborhoods. Since housing is a durable but\ndepreciating asset, over time the unequal allocation of credit and capital\ninvestment generated a disparity of home values that correlated with\nneighborhood racial demographics: predominantly white neighborhoods came\nto be comprised of more valuable homes and wealthier homeowners than\nracially mixed or majority-minority neighborhoods. See generally DOUGLAS\nMASSEY & NANCY A. DENTON, AMERICAN APARTHEID: SEGREGATION AND\nTHE MAKING OF THE UNDERCLASS (1993).\nEven when de jure discrimination ostensibly ended, these consequences of its\nhistory remained, and they would be difficult to change even if one were to\nassume the absence of overt racial bias (by no means a safe assumption).\nBecause (1) wealthier people can afford and tend to prefer more expensive\nhomes, (2) wealth correlates with race, and (3) the value of homes correlates\nwith the racial demographics of the neighborhood in which those homes are\nlocated, segregation may be, in a sense, \xe2\x80\x9clocked in\xe2\x80\x9d: Black homebuyers cannot\nafford to buy into high-value predominantly White neighborhoods, and White\nhomebuyers can afford not to live in lower-value racially diverse or majorityminority neighborhoods, so segregation persists. See DARIA ROITHMAYR,\nREPRODUCING RACISM 93-120 (2014).\nThis explanation, while theoretically sound and grounded in historical\nexperience, does not seem to be the whole story. While racial wealth and income\ngaps are real, and can be traced in part to policy decisions of the redlining era,\nempirical analysis suggests that these gaps are only a modest (though real)\ncontributor to the persistence of residential racial segregation. In particular,\n\n\x0cMortgages and Foreclosures\n\n695\n\nwealth gaps alone do not explain observed levels of exclusion of Black\nhomeowners from predominantly White neighborhoods. See generally Kyle\nCrowder et al., Wealth, Race, and Inter-Neighborhood Migration, 71 AM. SOC. REV.\n72 (2006). Other, overlapping factors must also be playing a role.\n2. Segregation as an Emergent Phenomenon. In the 1970s, the prominent\ngame theorist Thomas C. Schelling (whose insights about cooperation and\nconflict had helped defuse the Cuban Missile Crisis and would later lead to his\nbeing awarded the Nobel Prize in economics) developed a still-influential\nmathematical model of segregation. See Thomas C. Schelling, Dynamic Models of\nSegregation, 1 J. MATHEMATICAL SOC. 143 (1971). This model demonstrated\nhow large systematic discriminatory effects can emerge from the interaction of\nuncoordinated, individual private choices. Moreover, such systematic effects\ncould arise and persist even where individual decisions are motivated by\npreferences far milder than what we might consider overt racial animus or\nhatred. The example Schelling gave was a preference not to live in a\nneighborhood where one is part of a small racial minority:\n\xe2\x80\x9cWhites and blacks may not mind each other\xe2\x80\x99s presence, may\neven prefer integration, but may nevertheless wish to avoid\nminority status. Except for a mixture at exactly 50:50, no mixture\nwill then be self-sustaining because there is none without a\nminority, and if the minority evacuates, complete segregation\noccurs. If both blacks and whites can tolerate minority status but\nthere is a limit to how small a minority the members of either\ncolor are willing to be\xe2\x80\x94for example, a 25% minority\xe2\x80\x94initial\nmixtures ranging from 25% to 75% will survive but initial\nmixtures more extreme than that will lose their minority\nmembers and become all of one color. And if those who leave\nmove to where they constitute a majority, they will increase the\nmajority there and may cause the other color to evacuate.\nEvidently if there are lower limits to the minority status that\neither color can tolerate, and if complete segregation obtains\n\n\x0c696\n\nProperty\n\ninitially, no individual will move to an area dominated by the\nother color. Complete segregation is then a stable equilibrium.\xe2\x80\x9d\nSimulations based on Schelling\xe2\x80\x99s model demonstrate how segregation can\nindeed emerge from such uncoordinated choices and entrench itself once\nestablished. In particular, they demonstrate that if an environment is already\nsegregated, simply removing bias is not enough to desegregate it. You can try such\na simulation for yourself at: Vi Hart & Nicky Case, Parable of the Polygons,\nhttps://ncase.me/polygons/. (This simulation also suggests that cultivating\nwidespread homeowner preferences against racial homogeneity may be one tool\nto promote desegregation).\n3. Private Discrimination. Just as widespread invidious racial discrimination in\nthe allocation of housing and mortgage credit existed long before HOLC was\ncreated, private discrimination did not magically disappear when the Fair\nHousing Act was enacted. When the activists of Austin coined the term\n\xe2\x80\x9credlining,\xe2\x80\x9d they were referring to lines drawn on maps at their local, privately\nowned savings and loan offices, not maps drawn by the federal government\n(though there was a historical and causal relationship between the two).\nSadly, even though the federal Fair Housing Act, analogous state and local laws,\nand associated regulations have long forbidden various discriminatory\nbehaviors with respect to housing, such behaviors persist even today. For\nexample, an ambitious three-year investigation conducted by the newspaper\nLong Island Newsday from 2016 to 2019 demonstrated that in the New York City\nsuburbs of Long Island, real estate agents regularly discriminated against\nnonwhite house hunters compared to White house hunters. Notably, about a\nquarter of the agents investigated steered White house hunters toward more\nhomogeneously White neighborhoods, while steering comparable nonwhite\nhouse hunters toward more mixed or majority-minority neighborhoods. See\nAnn Choi, Bill Dedman, Keith Herbert, & Olivia Winslow, Long Island Divided,\nNEWSDAY (Arthur Browne ed. Nov. 17, 2019), available at\nhttps://perma.cc/KG54-DLF3. Such steering is unlawful under the Fair\nHousing Act and related regulations. See, e.g., 24 C.F.R. \xc2\xa7 100.70(c). Nevertheless,\n\n\x0cMortgages and Foreclosures\n\n697\n\nit clearly persists and\xe2\x80\x94along with other forms of private discrimination\xe2\x80\x94likely\ncontributes to the continued de facto racial segregation of residential\nneighborhoods.\n\n3. Overcoming the Legacy of Redlining\nIf we believe that racially segregated residential neighborhoods are a problem, what is\nthe solution? Consider the following proposals. Do you think they are likely to be\neffective? Might they be counterproductive?\n1. Racial Wealth Gaps and Reparations. If today\xe2\x80\x99s racial wealth and income\ngaps are indeed the product of past discrimination, can we count on these gaps\nto close over time as people in formerly redlined neighborhoods take advantage\nof economic opportunities now available to them? Is the problem simply that\nnot enough time has passed since the redlining era? Is \xe2\x80\x9clock-in\xe2\x80\x9d a phenomenon\nthat might fade away if only we are patient enough?\nIf private housing discrimination were absent, and intergenerational social\nmobility (defined as upward changes in income and wealth from one generation\nto the next) were high, we might expect the passage of time to ameliorate racial\nwealth gaps and thereby reduce residential racial segregation. But as we have\nseen, private housing discrimination persists even half a century after being\noutlawed. And the latest research demonstrates that social mobility in the\nUnited States is not only low, it is negatively correlated with segregation\xe2\x80\x94people who\ngrow up in segregated neighborhoods are less likely to see generational increases\nin income or wealth. See Raj Chetty et al., Where is the Land of Opportunity? The\nGeography of Intergenerational Mobility in the United States, 129 Q. J. ECON. 1553,\n1607-09 (2014) (\xe2\x80\x9c[B]oth blacks and whites living in areas with large African\nAmerican populations have lower rates of upward income mobility\xe2\x80\xa6. [and\nm]ore racially segregated areas have less upward mobility.\xe2\x80\x9d) If this research is\nright, and lock-in will not simply fade away, what more should be done?\nAs we discussed in our unit on Allocation, historical injustices whose effects are\nfelt in the present can be difficult to resolve through litigation. For this reason,\nmany have proposed broader programs of redistribution to address such\n\n\x0c698\n\nProperty\n\ninjustices, and the legacy of redlining is among the targets of such programs.\nIndeed, the Ta-Nehisi Coates article cited after our discussion of Johnson v.\nM\xe2\x80\x99Intosh and Mabo\xe2\x80\x99s Case cites redlining as its primary example of systematic\nracial injustice in the United States that deprived Blacks of opportunities\nafforded to Whites to build intergenerational wealth, calling out for reparations\nas a remedy. Ta-Nehisi Coates, The Case for Reparations, THE ATLANTIC (June\n2014), available at http://www.theatlantic.com/features/archive/2014/05/thecase-for-reparations/361631/.\n2. Tackling Demand-Side Discrimination. If Schelling\xe2\x80\x99s model of segregation\nis correct, real estate professionals like those investigated by Newsday might\nbelieve they have reasons to perpetuate continued residential segregation even\nif those professionals privately deplore (or believe they deplore) segregation and\nracial bias. For example, real estate agents might believe they are faithfully\ncatering to the odious preferences of their house hunting clients when they\npreferentially direct White clients to homogeneously White neighborhoods, or\ndirect nonwhite clients to racially mixed or majority-minority neighborhoods.\nThat is, they may think that homebuyers generally prefer to live among people\nwho look like them.\nThis belief may not be wrong! Consistent with the Schelling model, surveys find\nthat White people tend to express preferences to live in an area where Whites\nare clearly in the majority, while nonwhites are more likely to express\npreferences to live in areas where races are evenly mixed. See, e.g., W. A. V.\nClark, Residential Preferences and Neighborhood Racial Segregation: A Test of the Schelling\nSegregation Model, 28 DEMOGRAPHY 1 (1991). Some house hunters might even\nexplicitly instruct their brokers about the racial demographics they are seeking\nin a new neighborhood. But if real estate agents tailor housing searches to such\nclient preferences\xe2\x80\x94even if the agents themselves abhor racial bias\xe2\x80\x94they may\nbe contributing to continued residential racial segregation. Should professional\nacquiescence to such discriminatory preferences on the part of house hunters\nbe unlawful?\n\n\x0cMortgages and Foreclosures\n\n699\n\nProfessor Lee Ann Fennell thinks so. See Lee Anne Fennell, Searching for Fair\nHousing, 97 B.U. L. REV. 349 (2017). She argues that the law ought to treat such\nhome seekers\xe2\x80\x99 preferences for segregated housing the same way it treats the\nproverbial Mrs. Murphy\xe2\x80\x99s desire to discriminate in her selection of boarders\n(you\xe2\x80\x99ll remember the \xe2\x80\x9cMrs. Murphy exception\xe2\x80\x9d to the Fair Housing Act\xe2\x80\x99s\nprohibitions from our unit on Leasing Real Property). That is, she would allow\nhome seekers to ultimately decide to purchase a home based on the racial\ndemographics of the neighborhood in which the home is located, but she would\nforbid them from publishing those preferences or communicating them to real\nestate professionals, and would prohibit those professionals from soliciting or\ncomplying with such client instructions. Id. at 395-403.\nProfessor Fennell\xe2\x80\x99s proposal is\xe2\x80\x94by her own admission\xe2\x80\x94in tension with\ncurrent understandings of fair housing law. In particular, the Court of Appeals\nfor the Seventh Circuit has opined that real estate brokers who follow their\nhouse-hunting customers\xe2\x80\x99 instructions to limit their search based on the racial\ncomposition of neighborhoods would not violate the Fair Housing Act, even if\nthe result is residential racial segregation, because such brokers would not\nsubject those customers to disparate treatment on the basis of race. Village of\nBellwood v. Dwivedi, 895 F.2d 1521, 1530-31 (7th Cir. 1990). In the court\xe2\x80\x99s view,\nthe Fair Housing Act is designed to protect home buyers from discrimination,\nnot to construct a less segregated society. So long as home buyers are not\nsubjected to disparate treatment, the court said, brokers ought not be held liable.\nHowever, the same opinion affirmed that \xe2\x80\x9ca person who serves as a conduit for\nanother person\xe2\x80\x99s discrimination can, it is true, be guilty of intentional\ndiscrimination, or, what is the same thing, of disparate treatment. \xe2\x80\xa6 And it is\nactionable discrimination, regardless of its effects and notwithstanding the\nmerchant\xe2\x80\x99s own freedom from racial animus.\xe2\x80\x9d Id. On this understanding of the\nlaw, a seller who instructed a broker not to show their home to potential buyers\non the basis of race could still be held liable, as could a broker who complied\nwith such instructions, on grounds that the broker would be subjecting potential\nbuyers to disparate treatment on the basis of race.\n\n\x0c700\n\nProperty\n\nIs the distinction drawn by the Village of Bellwood court consistent with the\njustifications for the Mrs. Murphy exception? Is Professor Fennell\xe2\x80\x99s proposal?\nDo the justifications for the Mrs. Murphy exception apply to a homebuyer\xe2\x80\x99s\nselection of a neighborhood to live in?\n3. Segregation vs. Gentrification. How might residential neighborhoods change\nif more homeowners began valuing racial diversity among their neighbors as a\nmore important factor in deciding where to live? Given the persistent racial gaps\nin wealth and income, and the correlation of housing values with the race of\nneighborhood residents, how might such an increased preference for diversity\nmanifest itself in homeowner behaviors? Who will be in the best position to\nchoose to live in a more integrated neighborhood as demand for such\nneighborhoods increases?\nRecall our discussion of the problem of gentrification in our unit on Leasing\nReal Property. The same dynamics that arise when wealthy tenants suddenly\nbegin leasing residences in a poorer neighborhood can arise when racially\ndiverse or majority-minority neighborhoods get an influx of new investment in\nowner-occupied housing from White home buyers. So long as wealth and race\nare correlated, and housing values tend to drive local costs of living, integrationby-gentrification may perversely have the effect of driving out nonwhite residents\nof diverse neighborhoods who can no longer afford to live there, ultimately\nsimply rearranging the boundary lines of racially segregated neighborhoods.\nAt least, integration-by-gentrification could have that effect. So far, empirical\nevidence is somewhat mixed. Perhaps because displacement is likely to lag\ngentrification, and because it is difficult to distinguish displacement (poorer,\nnonwhite residents being forced out by richer, White newcomers) from\nsuccession (poorer, nonwhite residents leaving at a normal rate and being\nreplaced by richer, White newcomers), researchers disagree on whether\ndisplacement is happening at all in gentrifying neighborhoods, let alone the\nextent to which it is a problem. For a literature review, see Miriam Zuk et al.,\nGentrification, Displacement, and the Role of Public Investment, 33 J. PLANNING LIT. 31,\n36-39 & tbl. 2 (2018).\n\n\x0cMortgages and Foreclosures\n\n701\n\nSetting aside the potential problem of displacement, are segregation and\ngentrification our only options? Can you imagine a mechanism for residential\nracial integration that doesn\xe2\x80\x99t involve gentrification? If the problem is that race,\nwealth, and neighborhood home values are correlated, is there any way to create\nopportunities for poorer homeowners to move into more expensive\nneighborhoods?\n4. Creditworthiness and Community Investment. Like real estate agents who\nbelieve they are satisfying their clients\xe2\x80\x99 preferences, finance professionals\nlooking out for their institutions\xe2\x80\x99 balance sheets might make decisions that have\nthe effect of perpetuating residential racial segregation, even if the professionals\nthemselves privately deplore (or believe they deplore) segregation and racial bias.\nBecause, as discussed above, the value of residential real estate in racially diverse\nor majority-minority neighborhoods tends to be lower than the value of real\nestate in predominantly White neighborhoods, lending officers might well\nreason that loans secured by homes in racially diverse or majority-minority\nneighborhoods are likelier to result in losses for the lender than loans secured\nby real estate in predominantly White neighborhoods. A lending officer who\nsincerely believed this could in good faith tell himself that it would be\nirresponsible to extend credit secured by property in such neighborhoods. But\nwriting off the credit needs of entire neighborhoods on the basis of such\ngeneralizations can be expected to leave many otherwise creditworthy\nborrowers without access to mortgage financing, based solely on the racial\ndemographics of the neighborhood where they live\xe2\x80\x94exactly the harm caused\nby de jure redlining.\nTo counteract this tendency, the Community Reinvestment Act of 1977\n(\xe2\x80\x9cCRA\xe2\x80\x9d), 12 U.S.C. \xc2\xa7 2901 et seq., was enacted to require financial institutions\nto extend credit in all communities where they accept deposits\xe2\x80\x94including lowand moderate-income neighborhoods\xe2\x80\x94consistent with the \xe2\x80\x9csafe and sound\xe2\x80\x9d\noperation of the institution. 12 U.S.C. \xc2\xa7 2903(a)(1). The CRA and its\nimplementing regulations require federally regulated financial institutions to\nreport their lending activities to the federal agency that regulates them. The\nagencies, in turn, must evaluate whether the reporting institutions are adequately\n\n\x0c702\n\nProperty\n\nmeeting the credit needs of the communities they serve, and publish their\nevaluation accompanied by a rating of the institutions\xe2\x80\x99 performance. In addition\nto subjecting financial institutions to public scrutiny, these evaluations are also\nused by federal regulators to determine whether the regulated institution should\nbe granted permission to expand by acquisition, merger, or the opening of new\nbranches and offices.\n\nE. Predatory Lending\nAlong with the actors in the mortgage securitization chain described by Levitin, many\nmortgage loans, particularly subprime loans, were made with the assistance of a\nmortgage broker, who matched borrowers with lenders. As you will see, the broker\xe2\x80\x99s\nincentives did not line up with those of his or her borrower-clients. This led to many\nvulnerable borrowers being taken advantage of, and victims were often targeted based\non their residence in the very same communities that had been subject to redlining.\nThe difference between the redlining era and the period leading up to the foreclosure\ncrisis is that instead of being denied mortgage credit, vulnerable communities were often\nsteered toward mortgage loans that were more expensive and less stable than other,\nmore traditional loans that they could have qualified for. This type of predatory lending\ntargeting minority communities has become known as \xe2\x80\x9creverse redlining.\xe2\x80\x9d\nAs you read the following case, focus on the elements that made these loans bad loans.\nThe discrimination is important, but so is how it was carried out. If you don\xe2\x80\x99t\nunderstand a loan provision, consider whether an average borrower would\xe2\x80\x94and then\nlook it up!\nMcGlawn v. Pennsylvania Human Relations Commission\n891 A.2d 757 (Commonwealth Ct. Penn. 2006)\nThis case involves an issue of first impression: whether the Pennsylvania Human\nRelations Act (Act) extends to a mortgage broker\xe2\x80\x99s predatory lending activities known\n\n\x0cMortgages and Foreclosures\n\n703\n\nas \xe2\x80\x9creverse redlining.\xe2\x80\x9d 2 We affirm the Commission\xe2\x80\x99s holding that the Act prohibits\nreverse redlining. However, we vacate part of the Commission\xe2\x80\x99s award of actual\ndamages and remand for further proceedings.\nRespondent McGlawn and McGlawn, Inc. (Broker) a state-licensed mortgage broker,\nand Respondent Reginald McGlawn (Reginald McGlawn) petition for review of the\ndecision of the Pennsylvania Human Relations Commission (Commission). The\ndecision held Respondents violated Sections 5(h)(4)(loan provision) 3 and 5(h)(8)(i)(real\nestate transaction provision) 4 of the Act by discriminating against Complainants and\nother similar situated persons (collectively, Complainants), in mortgage loan\ntransactions, because of their race and the racial composition of their neighborhoods.\nThe Commission\xe2\x80\x99s final order directed Respondents to (1) cease and desist from\ndiscriminating against African Americans because of their race; (2) pay Complainants\n\nIn United Cos. Corp. v. Sargeant, 20 F.Supp.2d 192 (D.Mass.1998), the United States District Court defined\n\xe2\x80\x9credlining\xe2\x80\x9d as[:]\n2\n\n\xe2\x80\x9cthe practice of denying the extension of credit to specific geographic areas due to the income,\nrace or ethnicity of its residents. The term was derived from the actual practice of drawing a\nred line around certain areas in which credit would be denied. Reverse redlining is the practice\nof extending credit on unfair terms to those same communities.\xe2\x80\x9d\n3\n\nSection 5(h)(4) of the Act, 43 P.S. \xc2\xa7 955(h)(4), makes it unlawful to\n\xe2\x80\x9c[d]iscriminate against any person in the terms or conditions of any loan of money, whether\nor not secured by a mortgage or otherwise for the acquisition, construction, rehabilitation,\nrepair or maintenance of housing accommodation or commercial property because of \xe2\x80\xa6\nrace\xe2\x80\xa6.\xe2\x80\x9d\n\n4\n\nSection 5(h)(8)(i) of the Act, 43 P.S. \xc2\xa7 955(h)(8)(i), makes it an unlawful to[:]\n\xe2\x80\x9c[d]iscriminate in real estate related transactions, as described by and subject to the following: (i)[i]t shall\nbe unlawful for any person or other entity whose business includes engaging in real estate-related\ntransactions to discriminate against any person in making available such a transaction or in the terms\n[or] conditions of such a transaction because of race\xe2\x80\xa6.\xe2\x80\x9d\n\n\x0c704\n\nProperty\n\nactual damages; 6 (3) pay Complainants damages for embarrassment and humiliation; 7\nand (4) pay a civil penalty of $25,000.00. Further, the Commission\xe2\x80\x99s order directed\nBroker to (5) provide employee training to its employees designed to educate them in\ntheir responsibility to treat clients in a non-discriminatory manner consistent with the\nprovisions of the Act; and to (6) develop and implement a record-keeping system\ndesigned to accurately record information about Broker\xe2\x80\x99s charges in all mortgage\ntransactions. 8 The order also required Respondents to report the means of compliance\nand directed the Commission to contact the Department of Banking so that it may take\nsuch licensing action as it deemed appropriate.\nI. BACKGROUND\nA.\nBroker, a corporation which brokers mortgage loans, refinancing and insurance for its\ncustomers, was founded in 1985 by its chief officers, Reginald McGlawn, and his\nbrother, Anthony McGlawn. Reginald McGlawn is Broker\xe2\x80\x99s mortgage loan specialist,\nand Anthony McGlawn is Broker\xe2\x80\x99s insurance specialist. Broker also employs other\nMcGlawn family members.\nBroker specializes in arranging sub-prime mortgage loans for its customers. The prime\nlending market provides credit to those considered good credit risks. The sub-prime\nlending market provides credit to people the financial industry considers enhanced\ncredit risks. These people generally have a flawed credit history or a debt-to-income\n\nThe Commission awarded Complainants actual damages in these amounts: Taylor, $45,770.68; Poindexter,\n$24,447.80; Brunson, $63,996.34; Jackson, $74,875.74; Slaughter, $29,685.46; Jacobs, $47,549.62; Hawkins,\n$41,952.72; Miles, $101,562.81; Watts, $116,298.87; and Norwood, $154,209.11.\n6\n\n7 The\n\nCommission awarded Complainants damages for embarrassment and humiliation in the following amounts:\nTaylor, $25,000.00; Poindexter, $15,000.00; Brunson, $15,000.00; Jackson, $20,000.00; Slaughter, $20,000.00;\nJacobs, $20,000.00; Hawkins, $20,000.00; Miles, $10,000.00; Watts, $20,000.00; and Norwood, $20,000.00.\n\nIn particular, Broker must accurately record the following data for each transaction: (a) the dollar amount and\npercentage of the broker\xe2\x80\x99s fee charged; (b) any other fees paid; (c) the amount and type of the loan; and (d) the\nemployee involved in the transaction. Broker shall submit this information to the Commission on a bi-annual\nbasis for three years.\n\n8\n\n\x0cMortgages and Foreclosures\n\n705\n\nratio outside the range the financial industry considers acceptable for prime credit. As\ndiscussed hereafter, sub-prime interest rates are usually two to three percentage points\nhigher than prime rates.\nIn 1998-2000, Broker arranged sub-prime mortgage loans for Complainants, who own\nreal property in Philadelphia County. Broker is an African American-owned company.\nComplainants are African Americans who reside in predominantly African American\nneighborhoods.\nIn April 2001, Complainant Lucrecia Taylor (Taylor) filed a verified complaint with the\nCommission alleging Broker unlawfully discriminated against her in the terms and\nconditions of a real estate-related transaction and loan of money because of her race\nand the racial composition of her neighborhood, African American. Specifically, Taylor\nalleged Broker targeted her, as an African American, for a mortgage loan transaction\ncontaining predatory and unfair terms in violation of the Act\xe2\x80\x99s loan and real estate\ntransaction provisions. Significantly, Taylor stated her allegations were made not only\non her own behalf, but on behalf of all other similarly situated persons affected by\nBroker\xe2\x80\x99s discriminatory practices. After the pleadings were closed, the Commission\nnotified Taylor and Broker that probable cause existed to credit Taylor\xe2\x80\x99s allegations.\nIn August 2002, Complainant Lynn Poindexter (Poindexter) filed a like complaint\nagainst Broker on behalf of herself and all other similarly situated persons. The\nCommission subsequently found probable cause existed to credit Poindexter\xe2\x80\x99s\nallegations. The Commission consolidated the two cases\xe2\x80\xa6.\nThe Commission was thereafter able to identify other individuals affected by Broker\xe2\x80\x99s\nalleged discriminatory practices\xe2\x80\xa6.\nB.\nIn its decision, the Commission found Broker engaged in predatory brokering activities\nregarding all Complainants. Those actions resulted in unfair and predatory mortgage\nloans. It also found Broker engaged in an aggressive marketing plan targeting African\nAmericans and African American neighborhoods in the Philadelphia area. Nearly all of\n\n\x0c706\n\nProperty\n\nComplainants contacted Broker in response to radio, television and newspaper\nadvertisements.\nBroker\xe2\x80\x99s predatory practices, the Commission noted, included arranging loans\ncontaining onerous terms such as high interest rates, pre-payment penalties, balloon\npayments and mandatory arbitration clauses. In addition, Broker charged\nComplainants high broker fees, undisclosed fees, yield spread premiums and various\nother additional closing costs. Broker\xe2\x80\x99s predatory practices also included falsification\nof information on loan documents, failure to disclose information regarding terms of\nthe loan, and high pressure sales tactics.\n\xe2\x80\xa6 The seminal case prohibiting reverse redlining is Hargraves v. Capital City Mortgage\nCorp., 140 F.Supp.2d 7 (D.D.C.2000). There, the United States District Court adopted\na two-pronged test for discrimination under the FHA [Fair Housing Act] based on\nreverse redlining. First, the plaintiffs must establish the defendant\xe2\x80\x99s lending practices\nand loan terms were predatory and unfair. Hargraves. Second, the plaintiffs must\nestablish that defendant intentionally targeted them because of their race or that the\ndefendant\xe2\x80\x99s lending practices had a disparate impact on the basis of race.\nCiting Hargraves and the opinions of Complainants\xe2\x80\x99 experts, the Commission concluded\nComplainants established a prima facie reverse redlining claim against Broker under\nthe Hargraves test. The Commission rejected Broker\xe2\x80\x99s arguments that (1) it did not\ndiscriminate because it did not arrange loans for non-African Americans on more\npreferable terms, (2) it had a legitimate business necessity for its actions, (3) it is not\nresponsible for the terms and conditions of the loans or the disclosure of information\nrelating to the loans, and (4) all mortgage brokers are predators.\nAs a result, the Commission held Respondents violated the loan provisions and the\nreal estate transaction provisions of the Act by unlawfully discriminating against\nComplainants in the terms and conditions of real estate-related transactions\xe2\x80\xa6 .\n\n\x0cMortgages and Foreclosures\n\n707\n\nIII. SUBSTANTIAL EVIDENCE\nRespondents \xe2\x80\xa6 assert the Commission\xe2\x80\x99s conclusion Broker engaged in reverse\nredlining is not supported by substantial evidence. 14 In particular, Respondents\nmaintain the evidence does not show Broker engaged in predatory lending practices or\ntargeted African Americans.\n\xe2\x80\x9cIt is well settled that the party asserting discrimination bears the burden of proving a\nprima facie case of discrimination.\xe2\x80\x9d \xe2\x80\x9cOnce a prima facie case is established, a rebuttable\npresumption of discrimination arises.\xe2\x80\x9d \xe2\x80\x9cThe burden then shifts to the defendant to\nshow some legitimate, nondiscriminatory reason for its action.\xe2\x80\x9d . . .\nA. Predatory Lending\nRespondents first argue Broker did not engage in predatory or unfair lending practices\nbecause it did not approve Complainants\xe2\x80\x99 loans or lend them the money. Therefore,\nthey were not responsible either for the terms and conditions of Complainants\xe2\x80\x99 loans\nor for the disclosure of information related to the loans. Those responsibilities belong\nto the lending institutions that set the terms and approved the loans.\nThe Commission accepted the testimony of Complainants\xe2\x80\x99 expert witnesses. Michelle\nLewis, President and Chief Executive Officer of Northwest Counseling Service, Inc.\n(Complainants\xe2\x80\x99 first expert), stated that a mortgage broker is significantly involved in\nmaking the loan. The broker is the middleman who creates the loan opportunity. The\nbroker\xe2\x80\x99s customer relies on the broker\xe2\x80\x99s expertise in lending matters and has an\nexpectation that the broker will be able to obtain the best available deal.\nThe Commission also relied on Ira Goldstein, Director of Public Policy and Program\nAssessment for the Reinvestment Fund (Complainants\xe2\x80\x99 second expert), who testified\nthat, in brokered transactions, the broker\xe2\x80\x99s customer--the borrower, never actually\nmeets the lender. As a result, in the borrower\xe2\x80\x99s mind, the broker is the lender.\n\n\xe2\x80\x9cSubstantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a\nconclusion.\xe2\x80\x9d \xe2\x80\x9cFurther, substantial evidence supporting a finding of racial discrimination may be circumstantial\nand based on inferences.\xe2\x80\x9d\n\n14\n\n\x0c708\n\nProperty\n\nComplainants\xe2\x80\x99 second expert also testified that in loan transactions where a yield spread\npremium 17 is used, the broker plays a significant role in establishing the interest rate of\nthe loan.\nAs additional support for its determination, the Commission cited Reginald McGlawn\xe2\x80\x99s\ntestimony. He testified, \xe2\x80\x9c[W]hen people come to us, I provide loans.\xe2\x80\x9d Reginald\nMcGlawn also testified he chooses which lender receives the borrower\xe2\x80\x99s loan\napplication. He also stated he sets the broker fee and gives the borrower the option of\nusing a yield spread premium, which has the effect of increasing the interest rate.\n1.\nThere is substantial evidence to support the Commission\xe2\x80\x99s determination that\nRespondents engaged in brokering activities that resulted in predatory and unfair loans.\n\xe2\x80\xa6 Broker\xe2\x80\x99s activities were a substantial part of the loan transactions at issue. In\nparticular, Broker selected which lender received Complainants\xe2\x80\x99 loan applications.\nBroker was the sole negotiator for Complainants with the ultimate lender. Also, Broker\ninfluenced the ultimate interest rates in loans involving yield spread premiums. Further,\nBroker received substantial sums directly from loan proceeds, such as broker fees and\ninsurance premiums. As the Commission properly concluded, these items are\nconsidered terms of a loan transaction\xe2\x80\xa6.\n2.\nWe next review the Commission\xe2\x80\x99s determination that Respondents\xe2\x80\x99 practices were\npredatory and unfair. \xe2\x80\xa6\n\nIn Taylor v. Flagstar Bank, FSB, 181 F.R.D. 509 (M.D.Ala.1998), the United States District Court defined\n\xe2\x80\x9cyield spread premiums\xe2\x80\x9d as:\n17\n\npayments made by a mortgage lender to a mortgage broker on an \xe2\x80\x9cabove par\xe2\x80\x9d loan brought\nto the lender by the broker. To be \xe2\x80\x9cabove par\xe2\x80\x9d is to be above the going rate, to be above the\nlowest rate that a lender will offer without charging \xe2\x80\x9cdiscount points.\xe2\x80\x9d In crude terms,\ntherefore, the yield spread premium is (allegedly) simply a payment made by the lender to the\nbroker in return for the broker having brought the lender a high interest loan.\n\n\x0cMortgages and Foreclosures\n\n709\n\nIn finding Broker arranged predatory and unfair loans for Complainants, the\nCommission applied the Hargraves definition of \xe2\x80\x9cpredatory lending practices.\xe2\x80\x9d The\nHargraves Court stated predatory lending practices are indicated by loans with\nunreasonably high interest rates and loans based on the value of the asset securing the\nloan rather than the borrower\xe2\x80\x99s capacity to repay it. The Court also recognized\npredatory lending practices include \xe2\x80\x9cloan servicing procedures in which excessive fees\nare charged.\xe2\x80\x9d\nThe Commission also noted the New Jersey Superior Court\xe2\x80\x99s decision in Assocs. Home\nEquity Servs., Inc. v. Troup, 343 N.J.Super. 254, 778 A.2d 529 (2001). The Troup Court\nexplained the term \xe2\x80\x9cpredatory lenders\xe2\x80\x9d refers to those lenders who target certain\npopulations for credit on unfair or onerous terms. Characteristically, predatory loans\ndo not fit the borrower either because the borrower\xe2\x80\x99s needs are not met or because the\nterms are so onerous there is a strong likelihood the borrower will be unable to repay\nthe loan.\nIn determining what lending practices are predatory and unfair, the Commission also\naccepted as credible Complainants\xe2\x80\x99 experts opinions as to what constitutes a predatory\nloan. Complainants\xe2\x80\x99 first expert testified there are a number of loan features which are\ncharacteristic of a predatory loan. They include high interest rates, paying off a low\ninterest mortgage with a high interest mortgage, payment of points, yield spread\npremiums, high broker fees, undisclosed fees, balloon payments, pre-payment penalties,\narbitration clauses and fraud. A predatory and unfair loan may include any combination\nof these characteristics.\nComplainants\xe2\x80\x99 second expert testified that, even assuming a borrower is an enhanced\ncredit risk, the difference in interest rates between a sub-prime and prime market loan\nis usually no greater than three percentage points. Anything higher than a three-point\ndifference is indicative of a predatory loan. This expert also testified predatory loan\npractices include, among other things: flipping (successive refinancing of the same\nloan); hiding critical terms, establishing loan terms the borrower cannot meet; packing\n(including unnecessary products such as insurance policies); charging improper fees for\nitems outside the settlement sheet; creation of false documents; and failing to advise\nborrowers of their rescission rights.\n\n\x0c710\n\nProperty\n\nThe Commission examined the terms of Complainants\xe2\x80\x99 loans and their experiences\nwith Respondents in light of the foregoing. We briefly review the Commission\xe2\x80\x99s\nfindings regarding Complainants Taylor and Poindexter.\nTaylor. Taylor contacted Broker in October 2000 in order to obtain a refinancing loan\nof $10,000.00 to make some emergency home repairs (leaky roof, doors and windows,\nplumbing repair). In 2000, she owed $7,300.00 on her home. Her home mortgage had\na 3% interest rate with a monthly payment of $110.90. Taylor\xe2\x80\x99s sole income source was\nsocial security disability.\nBroker arranged a 30-year mortgage loan for Taylor with Delta Funding Corporation\n(Delta) in the amount of $20,500.00 with a 13.09% interest rate. Taylor was not given\nan opportunity to review any of the documents before signing them. Taylor was told\nto sign the documents.\nThe Commission found Taylor\xe2\x80\x99s loan transaction had several predatory characteristics.\nTaylor\xe2\x80\x99s was charged $4,276.60 in total settlement costs, or approximately 20% of the\nloan. 20 Two days after Taylor signed the loan documents, her uncle reviewed them and\nadvised her to cancel the loan. Taylor called Aaron McGlawn, a Broker employee, and\nstated she did not want the loan. He did not advise Taylor she could legally rescind the\nloan within a three-day period; rather, he told Taylor she could cancel the loan if she\nhad the money to pay the people Broker already paid.\nThe settlement sheet indicates Taylor received $8,902.07. At closing, Reginald\nMcGlawn informed Taylor she owed an additional $1,200.00 fee because of where she\nlived. Anthony McGlawn cashed the check and gave Taylor the money. He then asked\n\nTaylor was charged $440.00 for a broker fee and $410.00 for a yield spread premium. Taylor testified she was\nunaware her loan contained a yield spread premium or that it would raise her interest rate. Her loan also included\na $370.31 charge for a homeowner\xe2\x80\x99s insurance policy even though she was covered by another policy. Taylor was\nunaware of this charge and stated her house was already insured. Taylor\xe2\x80\x99s settlement sheet also reflected charges\nfor debts she did not owe at the time of closing, including a $83.81 water bill and two ambulance bills ($477.50\nand $250.00). Though Broker told Taylor this money would be returned to her, she never received it.\n20\n\n\x0cMortgages and Foreclosures\n\n711\n\nTaylor for the $1,200.00 fee. Taylor paid the fee out of the cash; but she was not given\na receipt. This fee was not reflected on the settlement sheet.\nComplainants\xe2\x80\x99 second expert reviewed Taylor\xe2\x80\x99s loan transaction. He noted several\npredatory characteristics. First, Taylor\xe2\x80\x99s 13.09% interest rate was substantially above\nthe three-point spread between sub-prime and prime loans. The Commission noted\nBroker arranged a loan for Taylor at twice the amount she requested and increased her\ninterest rate from 3% to 13.09%. Such loans are considered to be deceptive and\ndetrimental. 21 In addition, Taylor\xe2\x80\x99s loan included an additional undisclosed $1,200.00\nbroker fee.\nThe Commission found Broker engaged in predatory brokering activities on Taylor\xe2\x80\x99s\nbehalf. These Broker actions resulted in a predatory and unfair refinancing loan. This\nfinding is supported by substantial evidence.\nPoindexter. Poindexter testified by deposition that she acquired her home as a gift\nfrom her grandfather and owned it free and clear. She described the neighborhood as\nbeing African American.\nIn response to a radio advertisement, Poindexter contacted Broker to obtain a small\nloan to pay off her bills; she did not want a mortgage. She eventually met with Reginald\nMcGlawn. Poindexter told him she was going to college and working part time at a\ngrocery store.\nDuring their conversations, Reginald McGlawn informed Poindexter she did not make\nenough money but that he would \xe2\x80\x9ctake care of things.\xe2\x80\x9d Broker subsequently submitted\ndocumentation to Gelt Financial Corporation indicating Poindexter had a second job\nas a receptionist with Ivory Towers, Contractors, Inc. Poindexter stated she did not\n\nIn addition to the higher interest rate, the Commission found Broker\xe2\x80\x99s charges for the homeowners\xe2\x80\x99 policy\nand broker fees to be predatory and unfair. It also found Broker\xe2\x80\x99s refusal to either inform Taylor of her rescission\nrights or permit her to cancel her loan within the three-day rescission period was a predatory practice intended\nto process the loan transaction despite Taylor\xe2\x80\x99s desire to cancel it.\n\n21\n\n\x0c712\n\nProperty\n\nprepare these documents, was never employed by Ivory Towers and was unaware of\nthese documents.\nPoindexter\xe2\x80\x99s settlement sheet indicates her loan was approved for $22,400.00. It listed\na broker fee of $2,240.00 (10% of the loan amount) and a $423.87 charge for a\nhomeowner\xe2\x80\x99s insurance policy. Poindexter\xe2\x80\x99s loan also contained a balloon payment of\n$20,193.79 and a pre-payment penalty. At the time she signed the documents,\nPoindexter was unaware of either the balloon payment or the pre-payment penalty.\nPrior to settlement, Poindexter never discussed the interest rate with Respondents. She\ndid not have time to review the loan documents before signing them.\nThe Commission found Broker engaged in predatory brokering activities regarding\nPoindexter, which resulted in a predatory and unfair loan. This finding is supported by\nsubstantial evidence.\nSimilarly situated persons. The Commission also found Broker engaged in predatory\nbrokering practices on behalf of the eight similarly situated persons (Brunson, Jackson,\nSlaughter, Jacobs, Hawkins, Miles, Watts and Norwood), which resulted in unfair and\npredatory loans. The Commission noted the terms of these individuals\xe2\x80\x99 mortgage loans,\nas well as their factual circumstances, were \xe2\x80\x9cdisturbingly similar\xe2\x80\x9d to those of Taylor\nand Poindexter. These findings are also supported by substantial evidence.\nIn view of the foregoing, we conclude Complainants proved Respondents engaged in\npredatory and unfair lending practices. Respondents\xe2\x80\x99 actions resulted in onerous loans\ncontaining terms of a predatory nature designed to benefit Broker, not Complainants.\nTherefore, Complainants met the first requirement for proving a reverse redlining\nclaim.\nB. Intentional Discrimination\nThe second element of a reverse redlining claim is a showing that the defendant either\nintentionally targeted on the basis of race or that there was a disparate impact on the\nbasis of race. Here, the Commission determined Broker intentionally targeted African\nAmericans and African American neighborhoods. The Commission also found ample\nevidence of disparate impact.\n\n\x0cMortgages and Foreclosures\n\n713\n\n\xe2\x80\xa6 In reverse redlining cases, evidence of the defendant\xe2\x80\x99s advertising efforts in African\nAmerican communities is sufficient to show intentional targeting on the basis of race.\nThe Commission reviewed Broker\xe2\x80\x99s advertisements. On its website, Broker states \xe2\x80\x9c[i]t\nis one of the first African American owned and operated Mortgage and Insurance\nFinancial Services in Philadelphia and the surrounding area.\xe2\x80\x9d Broker\xe2\x80\x99s website also\nstates \xe2\x80\x9c[o]ur primary focus is to assist financially challenged customers in purchasing\nand or refinancing their existing mortgage, as well as providing various types of\ninsurance.\xe2\x80\x9d\nIn addition, Anthony McGlawn, Broker\xe2\x80\x99s co-founder and insurance specialist, testified\nBroker engaged in extensive advertising on radio and television, in the newspapers and\nin the yellow pages. Several of these sources are oriented toward African American\naudiences and readers. Reginald McGlawn also testified the majority of Broker\xe2\x80\x99s\ncustomers are African Americans.\n\xe2\x80\xa6 Complainants also testified the decision to contact Broker was influenced by the\nfact that it was an African American company. For example, both Taylor and\nPoindexter testified this fact played a role in their decisions to use Broker\xe2\x80\x99s services.\nThe record also indicates Broker\xe2\x80\x99s business activities have a disparate impact on\nAfrican American neighborhoods. This can be established by statistical evidence.\nHargraves. The Commission accepted the testimony of Radcliffe Davis, a Commission\ninvestigator (Investigator). In response to Taylor and Poindexter\xe2\x80\x99s complaints,\nInvestigator visited Broker\xe2\x80\x99s office and reviewed 100 customer loan applications for\nthings such as refinancing, debt consolidation and home improvement. Of those 100\napplications, 66 identified the race of the applicant. Of those 66 applicants, 65 were\nAfrican American.\nIn addition, Complainants\xe2\x80\x99 second expert testified he prepared a document mapping\nthe 11 properties involved in this matter. Nine of these properties were in areas that\nhave at least a 90% African American population. The other two areas have a 50-75%\nAfrican American population.\n\n\x0c714\n\nProperty\n\nConsidering the foregoing, the Commission\xe2\x80\x99s conclusion regarding intentional\ndiscrimination is supported by substantial evidence and is in accord with applicable law.\nHargraves. Complainants also established by statistical evidence that Broker\xe2\x80\x99s business\nactivities had a disparate impact on African Americans and African American\nneighborhoods.\nIn sum, Complainants met their burden of establishing a prima facie reverse redlining\nclaim against Broker.\nC. Rebuttal\n\xe2\x80\x9cOnce a prima facie case is established, a rebuttable presumption of discrimination\narises.\xe2\x80\x9d \xe2\x80\x9cThe burden then shifts to the defendant to show some legitimate,\nnondiscriminatory reason for its action.\xe2\x80\x9d In predatory lending cases, the financial\ninstitution may avoid liability by showing its lending practices were legitimate.\nRespondents contend Complainants did not prove Broker\xe2\x80\x99s business activities were\ndiscriminatory because they did not establish Broker made loans to non-African\nAmericans on more preferable terms. This argument was rejected in Hargraves. Citing\nContract Buyers League v. F & F Investment, 300 F.Supp. 210 (N.D.Ill.1969), the Hargaves\nCourt recognized that injustice cannot be permitted merely because it is visited\nexclusively upon African Americans. We adopt this reasoning now.\nRespondents also argue that any mortgage broker which arranges sub-prime loans\ncould be considered a predator. We disagree. The interest rates of Complainants\xe2\x80\x99 loans\nare far in excess of the three-point difference usually separating prime and sub-prime\nloans. In addition, Broker\xe2\x80\x99s high broker fees, undisclosed fees and padded closing costs\nbenefited Broker, not Complainants. These types of loans do not serve the borrower\xe2\x80\x99s\nwants or needs. See In re Barker (broker\xe2\x80\x99s motivation for arranging this type of loan was\nnot to serve borrower\xe2\x80\x99s interest, \xe2\x80\x9cbut to serve its own interest of obtaining a handsome\nbroker\xe2\x80\x99s fee.\xe2\x80\x9d) 251 B.R. at 260. \xe2\x80\x9cSuch self-dealing constitutes a flagrant violation of the\nBroker\xe2\x80\x99s fiduciary duties to the [borrower].\xe2\x80\x9d\nRespondents further argue Broker had no legal obligation to ensure Complainants\ncould repay their loans.\n\n\x0cMortgages and Foreclosures\n\n715\n\nWhether or not a broker must ensure a client\xe2\x80\x99s ability to repay a loan, a broker cannot\nignore circumstances suggesting an inability to repay. Indeed, one of the clearest\nindicators of a predatory and unfair loan is one which exceeds the borrower\xe2\x80\x99s needs\nand repayment capacity.\nOn several occasions, Broker arranged loans in excess of the amounts Complainants\nsought. Moreover, Broker discouraged several Complainants from canceling their loans\nwithin the three-day rescission period. Broker also submitted falsified documents with\nComplainants\xe2\x80\x99 loan applications indicating Complainants possessed greater income or\nassets than they really did. Broker\xe2\x80\x99s disregard of Complainants\xe2\x80\x99 ability to repay their\nloans strongly supports the Commission\xe2\x80\x99s decision to reject the legitimate practice\ndefense.\nRespondents also assert they did not target African Americans or African American\nneighborhoods. Rather, Respondents claim Complainants, who are poor credit risks,\ncame to Broker after being turned down by other brokers.\n\xe2\x80\xa6 [N]early all Complainants contacted Broker in response to one of its radio, television\nor newspaper advertisements targeting individuals with poor credit. Further, Broker\nconcentrated its advertising efforts in the African American media. The Commission\ndid not err in concluding Broker intentionally targeted African Americans for subprime mortgage loans. Hargraves.\nAccordingly, no error is evident in the Commission\xe2\x80\x99s rejection of the Respondents\xe2\x80\x99\nlegitimate practice defense.\n[The court upheld damages constituting the amounts paid to the broker out of the loan\nproceeds for items that only benefited the broker, such as the disclosed and undisclosed\nbroker fees and yield spread premiums. It remanded for further calculation of the\ndamages constituting the difference between the total amount of interest Complainants\nwould be paying as a result of the predatory loans and the total amount of interest they\nwould have paid with a loan at the prevailing mortgage interest rate \xe2\x80\x9crealistically\navailable\xe2\x80\x9d to them given their credit ratings.]\n\n\x0c716\n\nProperty\n\n\xe2\x80\xa6 Here, Complainants\xe2\x80\x99 testified regarding the emotional distress suffered as a result\nof their dealings with Broker. Taylor testified she no longer trusts anyone and does not\nsocialize anymore. She further stated she frequently cries and suffers from anxietyrelated sleep and appetite disturbances. All of these difficulties resulted from her\ndealing with Broker. The Commission awarded her $25,000.00.\nPoindexter also testified she suffers from depression as a result of her dealings with\nBroker. Her self-esteem was shattered and she relives the experience with every\npayment. Poindexter further stated she suffers from headaches and sleeplessness. She\nfeels like she was stabbed in the back by people she trusted. The Commission awarded\nPoindexter $15,000.00.\nThe Commission reviewed each of the similarly situated Complainants\xe2\x80\x99 testimony\nregarding the emotional and physical distress they suffered as a result of their\nexperiences with Broker and awarded each of them damages for humiliation and\nembarrassment.\nGiven the direct evidence of emotional distress as well as the circumstances of fraud,\ndeceit, and betrayal of trust, we conclude the awards for embarrassment and\nhumiliation were within the Commission\xe2\x80\x99s statutory authority. . . .\nNotes and Questions\n1. Some commentary on unaffordable mortgages asks \xe2\x80\x9cwhy would borrowers take\nout loans that were doomed to foreclosure?\xe2\x80\x9d Does the opinion offer any\ninsights into this question? See Oren Bar-Gill, The Law, Economics and Psychology\nof Subprime Mortgage Contracts, 94 CORNELL L. REV. 1073 (2009); see also Jeff\nSovern, Preventing Future Economic Crises Through Consumer Protection Law or How\nthe Truth in Lending Act Failed the Subprime Borrowers, 71 OHIO ST. L.J. 763 (2010)\n(arguing that the explanation of key terms, even in non-predatory loans, was\nsimply insufficient for ordinary borrowers to understand). Here\xe2\x80\x99s another\nquestion: \xe2\x80\x9cwhy would lenders give out loans that were doomed to foreclosure?\xe2\x80\x9d\nAs it turns out, given the collapse of the housing market, most foreclosures do\nnot return enough to the lender to pay back the initial loan.\n\n\x0cMortgages and Foreclosures\n\n717\n\n2. Resistance to helping homeowners at risk of foreclosure often focuses on the\nproblem of \xe2\x80\x9cmoral hazard\xe2\x80\x9d\xe2\x80\x94if people weren\xe2\x80\x99t forced either to pay back the\nloans on the terms on which those loans were granted or to lose their homes,\nsome argued, that would encourage irresponsible borrowing. More broadly:\nwhen we seek to hold one party responsible for harm, we often make another\nparty less responsible. As a result of the subprime mortgage collapse, many\nbanks failed or were bailed out by the federal government. However,\nhomeowners generally were not bailed out.\n3. For some larger context, consider this excerpt from Ta-Nehisi Coates\xe2\x80\x99 The Case\nfor Reparations, Atlantic, May 2014:\nIn 2010, Jacob S. Rugh, then a doctoral candidate at Princeton,\nand the sociologist Douglas S. Massey published a study of the\nrecent foreclosure crisis. Among its drivers, they found an old\nfoe: segregation. Black home buyers\xe2\x80\x94even after controlling for\nfactors like creditworthiness\xe2\x80\x94were still more likely than white\nhome buyers to be steered toward subprime loans. Decades of\nracist housing policies by the American government, along with\ndecades of racist housing practices by American businesses, had\nconspired to concentrate African Americans in the same\nneighborhoods. \xe2\x80\xa6 [T]hese neighborhoods were filled with\npeople who had been cut off from mainstream financial\ninstitutions. When subprime lenders went looking for prey, they\nfound black people waiting like ducks in a pen.\n\xe2\x80\x9cHigh levels of segregation create a natural market for subprime\nlending,\xe2\x80\x9d Rugh and Massey write, \xe2\x80\x9cand cause riskier mortgages,\nand thus foreclosures, to accumulate disproportionately in\nracially segregated cities\xe2\x80\x99 minority neighborhoods.\xe2\x80\x9d\nPlunder in the past made plunder in the present efficient. The\nbanks of America understood this. In 2005, Wells Fargo\npromoted a series of Wealth Building Strategies seminars.\n\n\x0c718\n\nProperty\n\nDubbing itself \xe2\x80\x9cthe nation\xe2\x80\x99s leading originator of home loans to\nethnic minority customers,\xe2\x80\x9d the bank enrolled black public\nfigures in an ostensible effort to educate blacks on building\n\xe2\x80\x9cgenerational wealth.\xe2\x80\x9d But the \xe2\x80\x9cwealth building\xe2\x80\x9d seminars were a\nfront for wealth theft. In 2010, the Justice Department filed a\ndiscrimination suit against Wells Fargo alleging that the bank had\nshunted blacks into predatory loans regardless of their\ncreditworthiness. This was not magic or coincidence or\nmisfortune. It was racism reifying itself. According to The New\nYork Times, affidavits found loan officers referring to their black\ncustomers as \xe2\x80\x9cmud people\xe2\x80\x9d and to their subprime products as\n\xe2\x80\x9cghetto loans.\xe2\x80\x9d\n\xe2\x80\x9cWe just went right after them,\xe2\x80\x9d Beth Jacobson, a former Wells\nFargo loan officer, told The Times. \xe2\x80\x9cWells Fargo mortgage had\nan emerging-markets unit that specifically targeted black\nchurches because it figured church leaders had a lot of influence\nand could convince congregants to take out subprime loans.\xe2\x80\x9d\nIn 2011, Bank of America agreed to pay $355 million to settle\ncharges of discrimination against its Countrywide unit. The\nfollowing year, Wells Fargo settled its discrimination suit for\nmore than $175 million. But the damage had been done. In 2009,\nhalf the properties in Baltimore whose owners had been granted\nloans by Wells Fargo between 2005 and 2008 were vacant; 71\npercent of these properties were in predominantly black\nneighborhoods.\n4. African-American and other minority borrowers were disproportionately\nsteered to expensive subprime loans even though they qualified for cheaper\nconventional loans\xe2\x80\x94high-income African American borrowers were six times\nas likely to get subprime loans as white borrowers with similar incomes.\nHowever, it is not the case, as is sometimes asserted, that unwise loans to\nAfrican-Americans driven by federal mandates for equality in lending were\n\n\x0cMortgages and Foreclosures\n\n719\n\nresponsible for the crash. In fact, institutions subject to federal fair lending\nrules made loans which were less likely to default than loans from institutions\nthat were not subject to such rules. David Min, Faulty Conclusions Based on\nShoddy\nFoundations\n(Feb.\n2011),\nhttps://www.americanprogress.org/issues/economy/reports/2011/02/08/91\n26/faulty-conclusions-based-on-shoddy-foundations/; National Consumer\nLaw Center, Why Responsible Mortgage Lending Is a Fair Housing Issue (Feb.\n2012), https://www.nclc.org/images/pdf/credit_discrimination/fair-housingbrief.pdf.\n5. In recent years, legislatures and regulators have attempted to regulate mortgage\nlending to stamp out the worst origination abuses, such as the yield spread\npremium. Much regulation focuses on the concept of \xe2\x80\x9csuitability\xe2\x80\x9d: loans that\nthe borrowers are likely to be able to repay, rather than loans based merely on\nthe market value of the house. Loans based on the value of property alone,\nwithout sufficient attention to borrower characteristics, encouraged lenders to\nbelieve that they could profit even in case of a default, or sometimes that they\ncould profit even more from default than from payment. In 2014, the\nConsumer Financial Protection Bureau (CFPB) issued rules on high-cost loans\nand homeownership counseling, implementing the Home Ownership and\nEquity\nProtections\nAct\nand\nsubsequent\nadditions.\n(http://www.consumerfinance.gov/regulations/high-cost-mortgage-andhomeownership-counseling-amendments-to-regulation-z-andhomeownership-counseling-amendments-to-regulation-x/) Under these rules,\nloans considered \xe2\x80\x9chigh cost\xe2\x80\x9d are subject to a number of limitations; high cost\nloans are those that specify high interest rates, high fees rolled into the mortgage\namount (as in McGlawn), or prepayment penalties that last more than 36 months\nor exceed more than 2% of the prepaid amount. Under the new rules, for highcost loans, balloon payments are generally banned, with limited exceptions.\nCreditors are prohibited from charging prepayment penalties and financing\npoints and fees. Late fees are restricted to four percent of the payment that is\npast due, and certain other fees are limited or banned. Before a lender gives a\n\n\x0c720\n\nProperty\n\nhigh-cost mortgage, they must confirm with a federally approved counselor that\nthe borrower has received counseling on the advisability of the mortgage.\n6. Whether or not borrowers are seeking high-cost loans, lenders are now subject\nto a rule requiring them to assess a borrower\xe2\x80\x99s ability to repay, though that rule\ndoes not cover home equity lines of credit, timeshare plans, reverse mortgages,\nor temporary loans. The lender must not use a \xe2\x80\x9cteaser\xe2\x80\x9d or introductory interest\nrate to calculate the borrower\xe2\x80\x99s ability to repay; for adjustable-rate mortgages, it\nmust consider ability to repay under the highest possible rate allowed by the\nmortgage. Certain so-called \xe2\x80\x9cplain vanilla\xe2\x80\x9d mortgages\xe2\x80\x94fixed-rate, fully\namortized (with no balloon payments) loans for no longer than 30 years\xe2\x80\x94are\npresumptively acceptable under the regulations. In addition, lenders have to\nmake counseling information available to all borrowers. Although loan\ninformation remains complex, the CFPB has tested different versions of\nmandatory disclosures, trying to find the most understandable ways of\ncommunicating the costs and risks of mortgages to non-lawyers. See CFPB\nFinalizes \xe2\x80\x9cKnow Before You Owe\xe2\x80\x9d Mortgage Forms, Nov. 20, 2013. Take a\nlook at the forms. (http://www.consumerfinance.gov/newsroom/cfpbfinalizes-know-before-you-owe-mortgage-forms/) Now that you have read this\nfar, can you understand them?\n\nF. The Mortgage Crisis\nPredatory lending was a significant contributor to the housing crash of 2007-2008 and\nthe resulting Global Financial Crisis. Many people, whether or not they accept this\nproposition, believe that poor people were taking out the mortgages at issue. However,\nmiddle and high income borrowers took on more mortgage debt than poor people,\nand also contributed most significantly to the increase in defaults after 2007. Manuel\nAdelino, Antoinette Schoar, & Felipe Severino, Loan Originations and Defaults in the\nMortgage Crisis: Further Evidence (NBER Working Paper July 2015),\nhttps://www.nber.org/papers/w21320.\nWhen home prices started to drop and defaults to accumulate, the mortgage-backed\nsecurities that had previously seemed so attractive to investors began to spread the\n\n\x0cMortgages and Foreclosures\n\n721\n\ndamage widely, as payments dried up. The economic impact was multiplied by a variety\nof sophisticated financial instruments that, in the end, amounted to little more than\nbets that U.S. housing prices would never drop. When they did drop, the world\neconomy did as well.\nFrom 1942 to 2005, about 4% of mortgages were delinquent at any given time, and\nabout 1% were in foreclosure. At the peak of the crisis in 2010, up to 15% of mortgages\nwere delinquent, and 4.6% were in foreclosure. Foreclosures Public Data Summary\nJan 2015. As of late 2014, less than 8% of mortgages were delinquent and more than\n3% were in the foreclosure process, or about one million homes. The good news is\nthat most of the still-troubled loans were originated before 2007, and new foreclosures\nare now less one-half of one percent of all mortgages. Still, between 2007 and 2015,\nabout six million homes were sold at foreclosure sales. This foreclosure crisis has\nalready outlasted the foreclosure crisis of the Great Depression.\nEven homeowners who kept up with their payments often found themselves\n\xe2\x80\x9cunderwater\xe2\x80\x9d: owing more than their homes were worth. Nearly one-third of\nmortgaged homes were underwater in 2012, though the number dropped to 15.4% in\nearly 2015. Homes with lower value were more likely to be underwater, contributing\nto income inequality. Michelle Jamrisko, This Is the Housing Chart That Keeps One\nEconomist Up at Night, BLOOMBERGBUSINESS, Jun. 12, 2015. Unsurprisingly,\nunderwater homeowners are substantially more likely to default on their mortgages\nthan homeowners with equity, no matter the size of their monthly payments or their\ninterest rates. Moreover, underwater homeowners who don\xe2\x80\x99t default find it very\ndifficult to sell their homes, and are therefore constrained in where they can take jobs.\nThis is a problem because job mobility historically has been a major contributor to\nimproved economic prospects in the U.S.\nEven when \xe2\x80\x9cstrategic default\xe2\x80\x9d might be in a homeowner\xe2\x80\x99s best interest\xe2\x80\x94where the\nhomeowner is deeply underwater and lives in a non-recourse state, and alternative\nhousing is readily available\xe2\x80\x94Americans remain relatively unlikely to default if they have\nany alternatives. Most borrowers will run up credit card bills, drain retirement savings,\nand put off medical care to avoid default for as long as possible. Tess Wilkinson-Ryan,\nBreaching the Mortgage Contract: The Behavioral Economics of Strategic Default, 64 VAND. L.\n\n\x0c722\n\nProperty\n\nREV. 1547 (2011) (reporting that even though defaulting on a mortgage may be in an\nindividual\xe2\x80\x99s financial self-interest, feelings of moral obligation may prevent or delay\ndefault). Under what circumstances might you counsel a client to engage in a strategic\ndefault? Default will have consequences for the defaulter\xe2\x80\x99s credit score and therefore\npossibly her ability to get other housing or even a job, depending on her location and\nher field of work. But then again, draining her retirement account, possibly only to\npostpone and not avoid foreclosure, will have negative repercussions as well.\n\nG. Foreclosure Abuses\nOne ongoing problem is that the complicated structure of post-securitization mortgage\nlending left responsibility for problems diffuse, and even put incentives in precisely the\nwrong places. Because the trusts that own the mortgages and package them into\nmortgage-backed securities are passive legal vehicles with no employees or activities of\ntheir own, they contracted with mortgage servicers, often divisions of the same banks\nthat initially sponsored the mortgage originators. The basic job is straightforward:\nservicers collect payments from homeowners and pass them along to the trust that\nrepresents the investors. Servicers are also responsible for handling foreclosures. In\nexchange, servicers typically get a small percentage of the value of the outstanding loans\neach year in fees. For a $200,000 loan to a borrower with good credit, a servicer might\ncollect about $50 per month, with income decreasing as the balance of the loan drops.\nServicers also make money from the \xe2\x80\x9cfloat\xe2\x80\x9d \xe2\x80\x94 interest earned during the short time\nthe servicer holds the loan payment.\nIt is standard for servicers to be contractually required to keep paying the trust every\nmonth, even when there\xe2\x80\x99s a default, until there\xe2\x80\x99s a foreclosure. This would seem a\nstrong incentive to do everything possible to help homeowners avoid a default, which\nis usually what investors want. The holder of a mortgage loses an average $60,000 on\na foreclosure, according to figures announced by the federal government.\nBut the systems weren\xe2\x80\x99t set up that way. Among other things, servicers hired very few\npeople with the ability to work with borrowers to find an affordable repayment; they\nwere largely set up to take in money and pass it on. When the crisis hit, they were\noverwhelmed with troubled loans. Further, at the beginning of the foreclosure crisis,\n\n\x0cMortgages and Foreclosures\n\n723\n\nservicers often took the position that they were contractually prohibited from\nnegotiating with borrowers by their agreements with the trusts, which allegedly did not\nallow them to reduce mortgagors\xe2\x80\x99 nominal obligations without the consent of the trust.\n(Recall that the trusts are not functioning companies with humans making day-to-day\ndecisions, so the servicers\xe2\x80\x99 position meant that no one could agree to a renegotiation.)\nSeparately, servicers had incentives that conflicted with borrowers\xe2\x80\x99 and investors\xe2\x80\x99\ninterests. Servicers can charge fees for late payments, title searches, property upkeep,\ninspections, appraisals and legal fees that can total hundreds of dollars each month and\ncan all be charged against a homeowner\xe2\x80\x99s account. Servicers have first dibs on\nrecouping those fees when a foreclosed home is sold, meaning they usually collect\nunless the home is essentially worthless. Moreover, when homeowners tried to catch\nup or make partial payments as they sought a renegotiated loan, servicers applied their\npayments first to the servicers\xe2\x80\x99 own fees rather than to the underlying loan. These fees\ncan be lucrative. In 2010, major servicer Ocwen reported $32.8 million in revenue from\nlate fees alone, representing 9 percent of its total revenue. Professor Levitin, who has\ndone extensive work on the legal and business structures resulting from securitization,\nconcluded that a loan kept in default for a year or two could prove more profitable to\na servicer than a typical healthy, performing loan.\nThe following case involves a trustee rather than a typical servicer, but otherwise it\nprovides a sense of the problems that can arise when participants in the mortgage\ntransaction are indifferent to the welfare of mortgagors.\nKlem v. Washington Mutual Bank\n295 P.3d 1179 (Wash. 2013).\n\xc2\xb6 1 Dorothy Halstien, an aging woman suffering from dementia, owned a home worth\nsomewhere between $235,000 and $320,000. At about the time she developed dementia,\nshe owed approximately $75,000 to Washington Mutual Bank (WaMu), secured by a\ndeed of trust on her home. Because of the cost of her care, her guardian did not have\nthe funds to pay her mortgage, and Quality Loan Services (Quality), acting as the trustee\nof the deed of trust, foreclosed on her home. On the first day it could, Quality sold her\nhome for $83,087.67, one dollar more than she owed, including fees and costs. A notary,\n\n\x0c724\n\nProperty\n\nemployed by Quality, had falsely notarized the notice of sale by predating the notary\nacknowledgment. This falsification permitted the sale to take place earlier than it could\nhave had the notice of sale been dated when it was actually signed.\n\xc2\xb6 2 Before the foreclosure sale, Halstien\xe2\x80\x99s court appointed guardian secured a signed\npurchase and sale agreement from a buyer willing to pay $235,000 for the house.\nUnfortunately, there was not enough time before the scheduled foreclosure sale to\nclose the sale with that buyer. In Washington, the trustee has the discretion to postpone\nforeclosure sales. This trustee declined to consider exercising that discretion, and\ninstead deferred the decision to the lender, WaMu. Despite numerous requests by the\nguardian, WaMu did not postpone the sale. A jury found that the trustee was negligent;\nthat the trustee\xe2\x80\x99s acts or practices violated the Consumer Protection Act (CPA), chapter\n19.86 RCW; and that the trustee breached its contractual obligations. The Court of\nAppeals reversed all but the negligence claim. We reverse the Court of Appeals in part\nand restore the award based upon the CPA. We award the guardian reasonable attorney\nfees and remand to the trial court to order appropriate injunctive relief.\nFACTS\n\xc2\xb6 3 The issues presented require a detailed discussion of the facts. In 1996, Halstien\nbought a house on Whidbey Island for $147,500. In 2004, she borrowed $73,000 from\nWaMu, secured by a deed of trust on her home. That loan was the only debt secured\nby the property, which otherwise Halstien owned free and clear. Unfortunately, by 2006,\nwhen Halstien was 74 years old, she developed dementia. At the time, Halstien\xe2\x80\x99s\ndaughter and her daughter\xe2\x80\x99s boyfriend were living at the home with her.\n\xc2\xb6 4 Washington State\xe2\x80\x99s Adult Protective Services became concerned that Halstien was\na vulnerable adult being neglected at home. After an investigation, protective services\npetitioned the court for the appointment of a professional guardian to protect Halstien.\nThe court granted the petition and Dianne Klem, executive director of Puget Sound\nGuardians, was appointed Halstien\xe2\x80\x99s guardian in January 2007. Klem soon placed\nHalstien in the dementia unit of a skilled nursing facility in Snohomish County.\n\xc2\xb6 5 Halstien\xe2\x80\x99s care cost between $3,000 and $6,000 a month. At the time, Halstien\nreceived about $1,444 a month in income from Social Security and a Teamsters\xe2\x80\x99\n\n\x0cMortgages and Foreclosures\n\n725\n\npension. The State of Washington paid the balance of her care and is a creditor of her\nestate.\n\xc2\xb6 6 Halstien\xe2\x80\x99s only significant asset was her Whidbey Island home, which at the time\nwas assessed by the county at $257,804. WaMu also had an appraisal indicating the\nhome was worth $320,000, nearly four times the value of the outstanding debt. Klem\ntestified that if she had been able to sell the home, she could have improved Halstien\xe2\x80\x99s\nquality of life considerably by providing additional services the State did not pay for.\n\xc2\xb6 7 Selling the home was neither quick nor easy. Even after Halstien was placed in a\nskilled care facility, her daughter still lived in the home (without paying rent) and both\nthe daughter and her brother strongly opposed any sale. The record suggests Halstien\xe2\x80\x99s\nchildren expected to inherit the home and, Klem testified, getting the daughter and her\nfamily to leave \xe2\x80\x9cwas quite a battle.\xe2\x80\x9d Ultimately, Puget Sound Guardians prevailed, but\nbefore it could sell the home, it had to obtain court permission (complicated, apparently,\nby the considerable notice that had to be given to various state agencies and to family\nmembers, and because some of those entitled to notice were difficult to find), remove\nabandoned animals and vehicles, and clean up the property.\n\xc2\xb6 8 During this process Halstien became delinquent on her mortgage. Quality,\nidentifying itself as \xe2\x80\x9cthe agent for Washington Mutual,\xe2\x80\x9d posted a notice of default on\nHalstien\xe2\x80\x99s home on or around October 25, 2007. The notice demanded $1,372.20 to\nbring the note current. The record establishes that the guardianship did not have\navailable funds to satisfy the demand.\n\xc2\xb6 9 A notice of trustee sale was executed shortly afterward by Seth Ott for Quality. The\nnotice was dated and, according to the notary jurat of \xe2\x80\x9cR. Tassle,\xe2\x80\x9d notarized on\nNovember 26, 2007. However, the notice of sale was not actually signed that day. The\nsale was set for February 29, 2008.\n\xc2\xb6 10 This notice of sale was one of apparently many foreclosure documents that were\nfalsely notarized by Quality and its employees around that time. There was considerable\nevidence that falsifying notarizations was a common practice, and one that Quality\nemployees had been trained to do. While Quality employees steadfastly refused to\nspeculate under oath how or why this practice existed, the evidence suggests that\n\n\x0c726\n\nProperty\n\ndocuments were falsely dated and notarized to expedite foreclosures and thereby keep\ntheir clients, the lenders, beneficiaries, and other participants in the secondary market\nfor mortgage debt happy with their work. Ott acknowledged on the stand that if the\nnotice of sale had been correctly dated, the sale would not have taken place until at\nleast one week later.\n\xc2\xb6 11 On January 10, 2008, Puget Sound Guardians asset manager David Greenfield\ncalled Ott in his capacity as trustee. Greenfield explained that Halstien was in a\nguardianship and that the guardianship intended to sell the property. Greenfield initially\nunderstood, incorrectly, that the trustee would postpone the sale if Puget Sound\nGuardians presented WaMu with a signed purchase and sale agreement by February 19,\n2008. Puget Sound Guardians sought, and on January 31, 2008, received, court\npermission to hire a real estate agent to help sell the house.\n\xc2\xb6 12 Unknown to Greenfield, Quality, as trustee, had an agreement with WaMu that it\nwould not delay a trustee\xe2\x80\x99s sale except upon WaMu\xe2\x80\x99s express direction. This agreement\nwas articulated in a confidential \xe2\x80\x9cattorney expectation document\xe2\x80\x9d that was given to the\njury. This confidential document outlines how foreclosures were to be done and billed.\nIt specifically states, \xe2\x80\x9cYour office is not authorized to postpone a sale without\nauthorization from Fidelity or Washington Mutual.\xe2\x80\x9d This agreement is, at least, in\ntension with Quality\xe2\x80\x99s fiduciary duty to both sides and its duty to act impartially. Cox\nv. Helenius, 103 Wash.2d 383, 389, 693 P.2d 683 (1985) (citing GEORGE E.\nOSBORNE, GRANT S. NELSON & DALE A. WHITMAN, REAL ESTATE\nFINANCE LAW \xc2\xa7 7.21 (1979) (\xe2\x80\x9c[A] trustee of a deed of trust is a fiduciary for both\nthe mortgagee and mortgagor and must act impartially between them.\xe2\x80\x9d)). 3\n\xc2\xb6 13 Regardless of what Washington law expected or required of trustees, David Owen,\nQuality\xe2\x80\x99s chief operations officer in San Diego, testified that Quality did what WaMu\ntold it to do during foreclosures. Owen testified that there were two situations where\nQuality would postpone a sale without bank permission: if there was a bankruptcy or\n\nSince then, the legislature has amended the deed of trust act to provide that the trustee owes a duty of good\nfaith to both sides. LAWS OF 2008, ch. 153, \xc2\xa7 1; RCW 61.24.010(4) (effective June 12, 2008).\n\n3\n\n\x0cMortgages and Foreclosures\n\n727\n\nif the debt had been paid. Owen could not remember any time Quality had postponed\na sale without the bank\xe2\x80\x99s permission.\n\xc2\xb6 14 By February 19, 2008, Puget Sound Guardians had a signed purchase and sale\nagreement, with the closing date set for on or about March 28, 2008. This was almost\na month after the scheduled foreclosure sale, but well within the 120 day window a\ntrustee has to hold the trustee\xe2\x80\x99s sale under RCW 61.24.040(6). Quality referred the\nguardians to the bank \xe2\x80\x9cto find out the process for making this happen.\xe2\x80\x9d Klem testified\nQuality \xe2\x80\x9ctold us on two occasions that they unequivocally could not assist us in that\narea, that only the bank could make the decision.\xe2\x80\x9d\n\xc2\xb6 15 Puget Sound Guardians contacted WaMu, which instructed them to send copies\nof the guardianship documents and a completed purchase and sale agreement. Over\nthe next few days, WaMu instructed the guardians to send the same documents to\nWaMu offices in Seattle, Washington, southern California, and Miami, Florida. Klem\ntestified that Puget Sound Guardians called WaMu on \xe2\x80\x9c[m]any occasions,\xe2\x80\x9d and that if\nthe bank ever made a decision, it did not share what it was. The guardian also faxed a\ncopy of the purchase and sale agreement to various WaMu offices on February 19, 21,\n26, 27, and 28. In all, the guardian contacted Quality or WaMu over 20 times in the\neffort to get the sale postponed. Simply put, Quality deferred to WaMu and WaMu was\nunresponsive.\n\xc2\xb6 16 Accordingly, the trustee\xe2\x80\x99s sale was not delayed and took place on February 29,\n2008. Quality, as trustee, sold the Halstien home to Randy and Gail Preston for\n$83,087.67, one dollar more than the amounts outstanding on the loan, plus fees and\ncosts. 4 The Prestons resold the house for $235,000 shortly afterward.\n\xc2\xb6 17 Klem later testified it was \xe2\x80\x9cshocking when we found out that [the home] had\nactually been sold for $83,000\xe2\x80\xa6. Because we trusted that they would sell it for the\nvalue of the home.\xe2\x80\x9d In previous cases where a ward\xe2\x80\x99s home had gone into foreclosure,\nKlem testified, either the trustee had postponed the sale to allow Puget Sound\nGuardians to sell the property or had sold the property for a reasonable price. Klem\n4\n\nAs of trial, Quality had not delivered that one dollar to the Halstien estate.\n\n\x0c728\n\nProperty\n\ntestified that if they had just one more week, it was \xe2\x80\x9cvery possible\xe2\x80\x9d that they could have\nclosed the sale earlier.\n\xc2\xb6 18 In April 2008, represented by the Northwest Justice Project, Puget Sound\nGuardians sued Quality for damages on a variety of theories, including negligence,\nbreach of contract, and violation of the CPA. Later, with permission of the court,\nQuality\xe2\x80\x99s California sister corporation was added as a defendant. Halstien died that\nDecember.\n\xc2\xb6 19 Quality defended itself vigorously on a variety of theories. Initially successfully,\nQuality argued that any cause of action based on the trustee\xe2\x80\x99s duties was barred by the\nfact Klem had not sought an injunction to enjoin the sale. The record suggests that it\nwould have been impossible for the guardianship to get a presale injunction due to the\ntime frame, the need for court approval, and the lack of assets in the guardianship estate.\nWhile Judge Monica Benton dismissed some claims based on the failure of the estate\nto seek an injunction, she specifically found that the negligence, breach of contract, and\nCPA claims could go forward.\n\xc2\xb6 20 The case proceeded to a jury trial. The heart of the plaintiff\xe2\x80\x99s case was the theory\nthat Quality\xe2\x80\x99s acts and practices of deferring to the lender and falsifying dates on\nnotarized documents were unfair and deceptive and that the trustee was negligent in\nfailing to delay the sale. David Leen, an expert on Washington\xe2\x80\x99s deed of trust act,\nchapter 61.24 RCW, testified that it was common for trustees to postpone the sale to\nallow the debtors to pay off the default. He testified that under the facts of this case,\nthe trustee \xe2\x80\x9cwould absolutely have to continue the sale.\xe2\x80\x9d\n\xc2\xb6 21 By contrast, Ott, representing Quality as trustee in this case, testified that he did\nnot take into account whether the house was worth more than the debt when\nconducting foreclosures. When asked why, Ott responded, \xe2\x80\x9cMy job was to process the\nforeclosure \xe2\x80\xa6 according to the state statutes.\xe2\x80\x9d When pressed, Ott explained that he\ncounted the days, prepared the forms, saw they were filed, and nothing more. He\nacknowledged that, prior to 2009, he would sometimes incorrectly date documents. He\ntestified that he had been trained to do that. He also testified that Quality, as trustee,\n\n\x0cMortgages and Foreclosures\n\n729\n\nwould not delay trustee sales without the lender\xe2\x80\x99s permission. And he testified that he\nhad never actually read Washington\xe2\x80\x99s deed of trust statutes. 5\n\xc2\xb6 22 The jury found for the plaintiff on three claims: negligence, CPA, and breach of\ncontract. \xe2\x80\xa6 The jury determined that the damages on all three claims were the same:\n$151,912.33 (the difference between the foreclosure sale price and $235,000)\xe2\x80\xa6.\n\xc2\xb6 24 Quality brought a blunderbuss of challenges to the trial court\xe2\x80\x99s decisions. \xe2\x80\xa6 The\nCourt of Appeals concluded \xe2\x80\xa6 that the evidence was insufficient to uphold the breach\nof contract and CPA claims. \xe2\x80\xa6\nANALYSIS\n\xe2\x80\xa6\nI. CPA CLAIMS\n\xc2\xb6 26 To prevail on a CPA action, the plaintiff must prove an \xe2\x80\x9c(1) unfair or deceptive\nact or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury\nto plaintiff in his or her business or property; (5) causation.\xe2\x80\x9d Hangman Ridge Training\nStables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 780, 719 P.2d 531 (1986). The\nplaintiff argues that both Quality\xe2\x80\x99s historical practice of predating notarized foreclosure\ndocuments and Quality\xe2\x80\x99s practice of deferring to the lender on whether to postpone\nmost sales, satisfies the first element of the CPA. Deciding whether the first element is\nsatisfied requires us to examine the role of the trustee in nonjudicial foreclosure actions.\nA deed of trust is a form of a mortgage, an age-old mechanism for securing a loan. 18\nWilliam B. Stoebuck & John W. Weaver, Washington Practice: Real Estate:\nTransactions \xc2\xa7 17.1, at 253, \xc2\xa7 20.1, at 403 (2d ed. 2004). In Washington, it is a statutorily\nblessed \xe2\x80\x9cthree-party transaction in which land is conveyed by a borrower, the \xe2\x80\x98grantor,\xe2\x80\x99\nto a \xe2\x80\x98trustee,\xe2\x80\x99 who holds title in trust for a lender, the \xe2\x80\x98beneficiary,\xe2\x80\x99 as security for credit\nor a loan the lender has given the borrower.\xe2\x80\x9d If the deed of trust contains the power\nof sale, the trustee may usually foreclose the deed of trust and sell the property without\nThis inspired a juror\xe2\x80\x99s question, \xe2\x80\x9cIf you never read the statute, how did you know you were following it,\nfollowing Washington law?\xe2\x80\x9d Ott responded that he relied on his training. \xe2\x80\xa6\n\n5\n\n\x0c730\n\nProperty\n\njudicial supervision. Id. at 260\xe2\x80\x9361; RCW 61.24.020; RCW 61.12. 090; RCW\n7.28.230(1)\xe2\x80\xa6.\nA. Unfair or Deceptive Acts or Practices\n\xc2\xb6 28 The legislature has specifically stated that certain violations of the deed of trust\nact are unfair or deceptive acts or practices for purposes of the CPA. [The Supreme\nCourt found that this list was not exclusive; other violations could be unfair or\ndeceptive as determined by a common-law, evolutionary process: \xe2\x80\x9c\xe2\x80\x98It is impossible to\nframe definitions which embrace all unfair practices. There is no limit to human\ninventiveness in this field. Even if all known unfair practices were specifically defined\nand prohibited, it would be at once necessary to begin over again\xe2\x80\x99\xe2\x80\x9d (citation omitted).]\n\xe2\x80\xa6\nB. Failure To Exercise Independent Discretion To Postpone Sale\n\xc2\xb6 35 Until the 1965 deed of trust act, there was no provision in Washington law for a\nnonjudicial foreclosure. In 1965, the legislature authorized nonjudicial foreclosure for\nthe first time, subject to strict statutory requirements. Because of the very nature of\nnonjudicial foreclosures, Washington courts have not shied away from protecting the\nrights of the parties. \xe2\x80\xa6\n\xc2\xb6 36 The power to sell another person\xe2\x80\x99s property, often the family home itself, is a\ntremendous power to vest in anyone\xe2\x80\x99s hands. Our legislature has allowed that power\nto be placed in the hands of a private trustee, rather than a state officer, but common\nlaw and equity requires that trustee to be evenhanded to both sides and to strictly follow\nthe law. This court has frequently emphasized that the deed of trust act \xe2\x80\x9cmust be\nconstrued in favor of borrowers because of the relative ease with which lenders can\nforfeit borrowers\xe2\x80\x99 interests and the lack of judicial oversight in conducting nonjudicial\nforeclosure sales.\xe2\x80\x9d We have invalidated trustee sales that do not comply with the act.\n\xc2\xb6 37 As a pragmatic matter, it is the lenders, servicers, and their affiliates who appoint\ntrustees. Trustees have considerable financial incentive to keep those appointing them\nhappy and very little financial incentive to show the homeowners the same solicitude.\nHowever, despite these pragmatic considerations and incentives under our statutory\n\n\x0cMortgages and Foreclosures\n\n731\n\nsystem, a trustee is not merely an agent for the lender or the lender\xe2\x80\x99s successors.\nTrustees have obligations to all of the parties to the deed, including the homeowner.\nRCW 61.24.010(4) (\xe2\x80\x9cThe trustee or successor trustee has a duty of good faith to the\nborrower, beneficiary, and grantor.\xe2\x80\x9d); Cox v. Helenius, 103 Wash.2d 383, 389, 693 P.2d\n683 (1985) ( \xe2\x80\x9c[A] trustee of a deed of trust is a fiduciary for both the mortgagee and\nmortgagor and must act impartially between them.\xe2\x80\x9d) (citing George E. Osborne, Grant\nS. Nelson & Dale A. Whitman, Real Estate Finance LAW \xc2\xa7 7.21 (1979)). In a judicial\nforeclosure action, an impartial judge of the superior court acts as the trustee and the\ndebtor has a one year redemption period. In a nonjudicial foreclosure, the trustee\nundertakes the role of the judge as an impartial third party who owes a duty to both\nparties to ensure that the rights of both the beneficiary and the debtor are protected.\nCox, 103 Wash.2d at 389, 693 P.2d 683. While the legislature has established a\nmechanism for nonjudicial sales, neither due process nor equity will countenance a\nsystem that permits the theft of a person\xe2\x80\x99s property by a lender or its beneficiary under\nthe guise of a statutory nonjudicial foreclosure. 10 An independent trustee who owes a\nduty to act in good faith to exercise a fiduciary duty to act impartially to fairly respect\nthe interests of both the lender and the debtor is a minimum to satisfy the statute, the\nconstitution, and equity, at the risk of having the sale voided, title quieted in the original\nhomeowner, and subjecting itself and the beneficiary to a CPA claim. 11\n\nWashington courts have a long tradition of guarding property from being wrongfully appropriated through\njudicial process. When \xe2\x80\x9ca jury \xe2\x80\xa6 returned a verdict which displeased [Territorial Judge J.E. Wyche] in a suit over\n160 acres of land\xe2\x80\x9d he threatened to set aside their verdict and remarked, \xe2\x80\x9c\xe2\x80\x98While I am judge it takes thirteen men\nto steal a ranch.\xe2\x80\x99\xe2\x80\x9d\n10\n\nWe have not had occasion to fully analyze whether the nonjudicial foreclosure act, ch. 61.24 RCW, on its face\nor as applied, violates article I, section 3 of our state constitution\xe2\x80\x99s command that \xe2\x80\x9c[n]o person shall be deprived\nof life, liberty, or property, without due process of law.\xe2\x80\x9d While article I, section 3 was mentioned in passing in\nKennebec, Inc. v. Bank of the West, 88 Wash.2d 718, 565 P.2d 812 (1977), where we joined other courts in\nconcluding that the Fourteenth Amendment does not bar nonjudicial foreclosures, no independent state\nconstitutional analysis was, or has since been done. Certainly, there are other similar \xe2\x80\x9cself help\xe2\x80\x9d statutes for\ncreditors that are subject to constitutional limitations despite the State\xe2\x80\x99s limited involvement. See, e.g., Culbertson\nv. Leland, 528 F.2d 426 (9th Cir.1975) (innkeeper\xe2\x80\x99s use of Arizona\xe2\x80\x99s innkeeper\xe2\x80\x99s lien statute to seize guest\xe2\x80\x99s\nproperty was under color of law and subject to a civil rights claim). \xe2\x80\x9cMisuse of power, possessed by virtue of\nstate law and made possible only because the wrongdoer is clothed with the authority of state law, is action taken\n\xe2\x80\x98under color of state law.\xe2\x80\x99\xe2\x80\x9d Id. at 428 (quoting United States v. Classic, 313 U.S. 299, 325\xe2\x80\x9326, 61 S.Ct. 1031, 85\n11\n\n\x0c732\n\nProperty\n\n\xc2\xb6 38 The trustee argues that we \xe2\x80\x9cshould not hold that it is unfair and deceptive either\nto honor a beneficiary\xe2\x80\x99s instructions not to postpone a sale without seeking its\nauthorization, or to advise a grantor to contact her lender.\xe2\x80\x9d We note that Quality\ncontends that it did not have a practice of deferring to the lender but merely followed\nits \xe2\x80\x9clegally-mandated respect for its Beneficiary\xe2\x80\x99s instructions\xe2\x80\x9d and asserts that\n\xe2\x80\x9c[s]imply put, no competent Trustee would fail to respect its Beneficiary\xe2\x80\x99s instructions\nnot to postpone a sale without first seeking the Beneficiary\xe2\x80\x99s permission.\xe2\x80\x9d We disagree.\nThe record supports the conclusion that Quality abdicated its duty to act impartially\ntoward both sides.\n\xc2\xb6 39 Again, the trustee in a nonjudicial foreclosure action has been vested with\nincredible power. Concomitant with that power is an obligation to both sides to do\nmore than merely follow an unread statute and the beneficiary\xe2\x80\x99s directions. If the\ntrustee acts only at the direction of the beneficiary, then the trustee is a mere agent of\nthe beneficiary and a deed of trust no longer embodies a three party transaction. If the\ntrustee were truly a mere agent of the beneficiary there would be, in effect, only two\nparties with the beneficiary having tremendous power and no incentive to protect the\nstatutory and constitutional property rights of the borrower.\n\xc2\xb6 40 We hold that the practice of a trustee in a nonjudicial foreclosure deferring to the\nlender on whether to postpone a foreclosure sale and thereby failing to exercise its\nindependent discretion as an impartial third party with duties to both parties is an unfair\nor deceptive act or practice and satisfies the first element of the CPA. Quality failed to\nact in good faith to exercise its fiduciary duty to both sides and merely honored an\nagency relationship with one.\n\nL.Ed. 1368 (1941)); accord Smith v. Brookshire Bros., Inc., 519 F.2d 93, 95 (5th Cir.1975) (exercise of statute\nthat allowed merchant to detain suspected shoplifters subject to civil rights claim); Adams v. Joseph F. Sanson\nInv. Co., 376 F.Supp. 61, 69 (D.C.Nev.1974) (finding Nevada\xe2\x80\x99s landlord lien act violated due process because it\nallowed landlord to seize tenant property without notice); Collins v. Viceroy Hotel Corp., 338 F.Supp. 390, 398\n(N.D. Ill. 1972) (finding Illinois innkeepers\xe2\x80\x99 lien laws, which allowed an innkeeper to seize guest\xe2\x80\x99s property\nwithout notice, violated due process); Hall v. Garson, 430 F.2d 430, 440 (5th Cir. 1970) (exercise of a statute\ngiving a landlord a lien over the tenant\xe2\x80\x99s property gave rise to a civil rights claim against private party).\n\n\x0cMortgages and Foreclosures\n\n733\n\nC. Predating notarizations\n\xc2\xb6 41 Klem submitted evidence that Quality had a practice of having a notary predate\nnotices of sale. This is often a part of the practice known as \xe2\x80\x9crobo-signing.\xe2\x80\x9d Specifically,\nin this case, it appears that at least from 2004\xe2\x80\x932007, Quality notaries regularly falsified\nthe date on which documents were signed.\n\xc2\xb6 42 Quality suggests these falsely notarized documents are immaterial because the\nowner received the minimum notice required by law. This no-harm, no-foul argument\nagain reveals a misunderstanding of Washington law and the purpose and importance\nof the notary\xe2\x80\x99s acknowledgment under the law. A signed notarization is the ultimate\nassurance upon which the whole world is entitled to rely that the proper person signed\na document on the stated day and place. Local, interstate, and international transactions\ninvolving individuals, banks, and corporations proceed smoothly because all may rely\nupon the sanctity of the notary\xe2\x80\x99s seal. This court does not take lightly the importance\nof a notary\xe2\x80\x99s obligation to verify the signor\xe2\x80\x99s identity and the date of signing by having\nthe signature performed in the notary\xe2\x80\x99s presence. Werner v. Werner, 84 Wash.2d 360,\n526 P.2d 370 (1974). As amicus Washington State Bar Association notes, \xe2\x80\x9cThe proper\nfunctioning of the legal system depends on the honesty of notaries who are entrusted\nto verify the signing of legally significant documents.\xe2\x80\x9d While the legislature has not yet\ndeclared that it is a per se unfair or deceptive act for the purposes of the CPA, it is a\ncrime in both Washington and California for a notary to falsely notarize a document.\n\xe2\x80\xa6 A notary jurat is a public trust and allowing them to be deployed to validate false\ninformation strikes at the bedrock of our system. \xe2\x80\xa6\n\xe2\x80\xa6 \xc2\xb6 44 We hold that the act of false dating by a notary employee of the trustee in a\nnonjudicial foreclosure is an unfair or deceptive act or practice and satisfies the first\nthree elements under the Washington CPA.\n\xc2\xb6 45 The trustee argues as a matter of law that the falsely notarized documents did not\ncause harm. The trustee is wrong; a false notarization is a crime and undermines the\nintegrity of our institutions upon which all must rely upon the faithful fulfillment of\nthe notary\xe2\x80\x99s oath. There remains, however, the factual issue of whether the false\nnotarization was a cause of plaintiff\xe2\x80\x99s damages. That is, of course, a question for the\njury. We note that the plaintiff submitted evidence that the purpose of predated\n\n\x0c734\n\nProperty\n\nnotarizations was to expedite the date of sale to please the beneficiary. Given the\nevidence that if the documents had been properly dated, the earliest the sale could have\ntaken place was one week later. [sic] The plaintiff also submitted evidence that with\none more week, it was \xe2\x80\x9cvery possible\xe2\x80\x9d Puget Sound Guardians could have closed the\nsale. This additional time would also have provided the guardian more time to persuade\nWaMu to postpone the sale. But given the trustee\xe2\x80\x99s failure to fulfill its fiduciary duty to\npostpone the sale, there is sufficient evidence to support the jury\xe2\x80\x99s CPA violation\nverdict, and we need not reach whether this deceptive act was a cause of plaintiff\xe2\x80\x99s\ndamages\xe2\x80\xa6.\nNotes and Questions\n1. What, if anything, is the relevance of the sale price of the home to the court\xe2\x80\x99s\ndecision? Why would the bank bid a dollar more than what was owed on the\nloan?\n2. Klem involves a variant on what is known as \xe2\x80\x9crobo-signing\xe2\x80\x9d\xe2\x80\x94the creation of\ndocuments with important legal effects on foreclosure, without sufficient\npersonal knowledge or even understanding by the person signing the document.\nJay Patterson, a forensic accountant who has examined hundreds of mortgage\nloans in bankruptcy or foreclosure, concluded that \xe2\x80\x9c95 percent of these loans\ncontain some kind of mistake,\xe2\x80\x9d from an unnecessary $15 late fee to thousands\nof dollars in fees and charges stemming from a single mistake that snowballed\ninto a wrongful foreclosure. Most of these cases resulted in defaults, but when\nthey were litigated, the facts could be telling. For example, one bankruptcy case,\nIn re Stewart, involved a home in Jefferson Parish, New Orleans. Wells Fargo\nwas the servicer. The debtor fell behind in her payments, and on September 12,\n2005, Wells Fargo agents generated two opinions on the value of the home.\nOpinions require at least minimal inspection of the property. Stewart was\ncharged $125 for each opinion. However, on September 12, 2005, Jefferson\nParish was under an evacuation order due to the devastation then being wrought\nby Hurricane Katrina. These were only two of the numerous fees the\nbankruptcy judge found had been wrongly charged to Stewart.\n\n\x0cMortgages and Foreclosures\n\n735\n\nWhat ought to be done to rein in servicer misbehavior of this sort?\n\nH. Chain of Title Problems\nKlem features a foreclosure sale that did nothing to preserve the equity of the\nhomeowner, as well as backdated documents that changed the time of sale. But\ndocumentation problems go much, much deeper than that evidenced in Klem\xe2\x80\x94perhaps\nto the foundation of land title in the U.S.\nU.S. Bank National Association, trustee vs. Antonio Ibanez\n458 Mass. 637 (2011)\nAfter foreclosing on two properties and purchasing the properties back at the\nforeclosure sales, U.S. Bank National Association (U.S.Bank), as trustee for the\nStructured Asset Securities Corporation Mortgage Pass-Through Certificates, Series\n2006-Z; and Wells Fargo Bank, N.A. (Wells Fargo), as trustee for ABFC 2005-OPT 1\nTrust, ABFC Asset Backed Certificates, Series 2005-OPT 1 (plaintiffs) filed separate\ncomplaints in the Land Court asking a judge to declare that they held clear title to the\nproperties in fee simple. We agree with the judge that the plaintiffs, who were not the\noriginal mortgagees, failed to make the required showing that they were the holders of\nthe mortgages at the time of foreclosure. As a result, they did not demonstrate that the\nforeclosure sales were valid to convey title to the subject properties, and their requests\nfor a declaration of clear title were properly denied.\nProcedural history. On July 5, 2007, U.S. Bank, as trustee, foreclosed on the mortgage of\nAntonio Ibanez, and purchased the Ibanez property at the foreclosure sale. On the\nsame day, Wells Fargo, as trustee, foreclosed on the mortgage of Mark and Tammy\nLaRace, and purchased the LaRace property at that foreclosure sale.\nIn September and October of 2008, U.S. Bank and Wells Fargo brought separate\nactions in the Land Court under G.L. c. 240, \xc2\xa7 6, which authorizes actions \xe2\x80\x9cto quiet or\nestablish the title to land situated in the commonwealth or to remove a cloud from the\ntitle thereto.\xe2\x80\x9d The two complaints sought identical relief: (1) a judgment that the right,\ntitle, and interest of the mortgagor (Ibanez or the LaRaces) in the property was\nextinguished by the foreclosure; (2) a declaration that there was no cloud on title arising\n\n\x0c736\n\nProperty\n\nfrom publication of the notice of sale in the Boston Globe; and (3) a declaration that\ntitle was vested in the plaintiff trustee in fee simple. U.S. Bank and Wells Fargo each\nasserted in its complaint that it had become the holder of the respective mortgage\nthrough an assignment made after the foreclosure sale.\nIn both cases, the mortgagors--Ibanez and the LaRaces--did not initially answer the\ncomplaints, and the plaintiffs moved for entry of default judgment\xe2\x80\xa6 .\nOn March 26, 2009, judgment was entered against the plaintiffs. The judge ruled that\nthe foreclosure sales were invalid because, in violation of G.L. c. 244, \xc2\xa7 14, the notices\nof the foreclosure sales named U.S. Bank (in the Ibanez foreclosure) and Wells Fargo\n(in the LaRace foreclosure) as the mortgage holders where they had not yet been\nassigned the mortgages. The judge found, based on each plaintiff\xe2\x80\x99s assertions in its\ncomplaint, that the plaintiffs acquired the mortgages by assignment only after the\nforeclosure sales and thus had no interest in the mortgages being foreclosed at the time\nof the publication of the notices of sale or at the time of the foreclosure sales. 8\nThe plaintiffs then moved to vacate the judgments. At a hearing on the motions on\nApril 17, 2009, the plaintiffs conceded that each complaint alleged a postnotice,\npostforeclosure sale assignment of the mortgage at issue, but they now represented to\nthe judge that documents might exist that could show a prenotice, preforeclosure sale\nassignment of the mortgages. The judge granted the plaintiffs leave to produce such\ndocuments, provided they were produced in the form they existed in at the time the\nforeclosure sale was noticed and conducted. In response, the plaintiffs submitted\nhundreds of pages of documents to the judge, which they claimed established that the\nmortgages had been assigned to them before the foreclosures. Many of these\n\nIn the third case, LaSalle Bank National Association, trustee for the certificate holders of Bear Stearns Asset\nBacked Securities I, LLC Asset-Backed Certificates, Series 2007-HE2 vs. Freddy Rosario, the judge concluded\nthat the mortgage foreclosure \xe2\x80\x9cwas not rendered invalid by its failure to record the assignment reflecting its status\nas holder of the mortgage prior to the foreclosure since it was, in fact, the holder by assignment at the time of\nthe foreclosure, it truthfully claimed that status in the notice, and it could have produced proof of that status (the\nunrecorded assignment) if asked.\xe2\x80\x9d\n\n8\n\n\x0cMortgages and Foreclosures\n\n737\n\ndocuments related to the creation of the securitized mortgage pools in which the\nIbanez and LaRace mortgages were purportedly included.\nThe judge denied the plaintiffs\xe2\x80\x99 motions to vacate judgment on October 14, 2009,\nconcluding that the newly submitted documents did not alter the conclusion that the\nplaintiffs were not the holders of the respective mortgages at the time of foreclosure.\nWe granted the parties\xe2\x80\x99 applications for direct appellate review.\nFactual background. We discuss each mortgage separately, describing when appropriate\nwhat the plaintiffs allege to have happened and what the documents in the record\ndemonstrate.\nThe Ibanez mortgage. On December 1, 2005, Antonio Ibanez took out a $103,500 loan\nfor the purchase of property at 20 Crosby Street in Springfield, secured by a mortgage\nto the lender, Rose Mortgage, Inc. (Rose Mortgage). The mortgage was recorded the\nfollowing day. Several days later, Rose Mortgage executed an assignment of this\nmortgage in blank, that is, an assignment that did not specify the name of the assignee. 11\nThe blank space in the assignment was at some point stamped with the name of Option\nOne Mortgage Corporation (Option One) as the assignee, and that assignment was\nrecorded on June 7, 2006. Before the recording, on January 23, 2006, Option One\nexecuted an assignment of the Ibanez mortgage in blank.\nAccording to U.S. Bank, Option One assigned the Ibanez mortgage to Lehman\nBrothers Bank, FSB, which assigned it to Lehman Brothers Holdings Inc., which then\nassigned it to the Structured Asset Securities Corporation, 12 which then assigned the\nmortgage, pooled with approximately 1,220 other mortgage loans, to U.S. Bank, as\ntrustee for the Structured Asset Securities Corporation Mortgage Pass-Through\nCertificates, Series 2006-Z. With this last assignment, the Ibanez and other loans were\n\nThis signed and notarized document states: \xe2\x80\x9cFOR VALUE RECEIVED, the undersigned hereby grants,\nassigns and transfers to _______ all beneficial interest under that certain Mortgage dated December 1, 2005\nexecuted by Antonio Ibanez\xe2\x80\xa6.\xe2\x80\x9d\n\n11\n\nThe Structured Asset Securities Corporation is a wholly owned direct subsidiary of Lehman Commercial Paper\nInc., which is in turn a wholly owned, direct subsidiary of Lehman Brothers Holdings Inc.\n\n12\n\n\x0c738\n\nProperty\n\npooled into a trust and converted into mortgage-backed securities that can be bought\nand sold by investors--a process known as securitization.\nFor ease of reference, the chain of entities through which the Ibanez mortgage allegedly\npassed before the foreclosure sale is:\nRose Mortgage, Inc. (originator)\n\xef\x83\xa2\nOption One Mortgage Corporation (record holder)\n\xef\x83\xa2\nLehman Brothers Bank, FSB\n\xef\x83\xa2\nLehman Brothers Holdings Inc. (seller)\n\xef\x83\xa2\nStructured Asset Securities Corporation (depositor)\n\xef\x83\xa2\nU.S. Bank National Association, as trustee for the Structured Asset Securities\nCorporation Mortgage Pass-Through Certificates, Series 2006-Z\nAccording to U.S. Bank, the assignment of the Ibanez mortgage to U.S. Bank occurred\npursuant to a December 1, 2006, trust agreement, which is not in the record. What is\nin the record is the private placement memorandum (PPM), dated December 26, 2006,\na 273-page, unsigned offer of mortgage-backed securities to potential investors. The\nPPM describes the mortgage pools and the entities involved, and summarizes the\nprovisions of the trust agreement, including the representation that mortgages \xe2\x80\x9cwill be\xe2\x80\x9d\nassigned into the trust. According to the PPM, \xe2\x80\x9c[e]ach transfer of a Mortgage Loan\nfrom the Seller [Lehman Brothers Holdings Inc.] to the Depositor [Structured Asset\n\n\x0cMortgages and Foreclosures\n\n739\n\nSecurities Corporation] and from the Depositor to the Trustee [U.S. Bank] will be\nintended to be a sale of that Mortgage Loan and will be reflected as such in the Sale\nand Assignment Agreement and the Trust Agreement, respectively.\xe2\x80\x9d The PPM also\nspecifies that \xe2\x80\x9c[e]ach Mortgage Loan will be identified in a schedule appearing as an\nexhibit to the Trust Agreement.\xe2\x80\x9d However, U.S. Bank did not provide the judge with\nany mortgage schedule identifying the Ibanez loan as among the mortgages that were\nassigned in the trust agreement.\nOn April 17, 2007, U.S. Bank filed a complaint to foreclose on the Ibanez mortgage in\nthe Land Court under the Servicemembers Civil Relief Act (Servicemembers Act),\nwhich restricts foreclosures against active duty members of the uniformed services. 13\nIn the complaint, U.S. Bank represented that it was the \xe2\x80\x9cowner (or assignee) and holder\xe2\x80\x9d\nof the mortgage given by Ibanez for the property. A judgment issued on behalf of U.S.\nBank on June 26, 2007, declaring that the mortgagor was not entitled to protection\nfrom foreclosure under the Servicemembers Act. In June, 2007, U.S. Bank also caused\nto be published in the Boston Globe the notice of the foreclosure sale required by G.L.\nc. 244, \xc2\xa7 14. The notice identified U.S. Bank as the \xe2\x80\x9cpresent holder\xe2\x80\x9d of the mortgage.\nAt the foreclosure sale on July 5, 2007, the Ibanez property was purchased by U.S.\nBank, as trustee for the securitization trust, for $94,350, a value significantly less than\nthe outstanding debt and the estimated market value of the property. The foreclosure\ndeed (from U.S. Bank, trustee, as the purported holder of the mortgage, to U.S. Bank,\ntrustee, as the purchaser) and the statutory foreclosure affidavit were recorded on May\n23, 2008. On September 2, 2008, more than one year after the sale, and more than five\nmonths after recording of the sale, American Home Mortgage Servicing, Inc., \xe2\x80\x9cas\nsuccessor-in-interest\xe2\x80\x9d to Option One, which was until then the record holder of the\nIbanez mortgage, executed a written assignment of that mortgage to U.S. Bank, as\ntrustee for the securitization trust. This assignment was recorded on September 11,\n2008.\n\nAs implemented in Massachusetts, a mortgage holder is required to go to court to obtain a judgment declaring\nthat the mortgagor is not a beneficiary of the Servicemembers Act before proceeding to foreclosure. St.1943, c.\n57, as amended through St.1998, c. 142.\n\n13\n\n\x0c740\n\nProperty\n\nThe LaRace mortgage. On May 19, 2005, Mark and Tammy LaRace gave a mortgage for\nthe property at 6 Brookburn Street in Springfield to Option One as security for a\n$103,200 loan; the mortgage was recorded that same day. On May 26, 2005, Option\nOne executed an assignment of this mortgage in blank.\nAccording to Wells Fargo, Option One later assigned the LaRace mortgage to Bank of\nAmerica in a July 28, 2005, flow sale and servicing agreement. Bank of America then\nassigned it to Asset Backed Funding Corporation (ABFC) in an October 1, 2005,\nmortgage loan purchase agreement. Finally, ABFC pooled the mortgage with others\nand assigned it to Wells Fargo, as trustee for the ABFC 2005-OPT 1 Trust, ABFC\nAsset-Backed Certificates, Series 2005-OPT 1, pursuant to a pooling and servicing\nagreement (PSA).\nFor ease of reference, the chain of entities through which the LaRace mortgage\nallegedly passed before the foreclosure sale is:\nOption One Mortgage Corporation (originator and record holder)\n\xef\x83\xa2\nBank of America\n\xef\x83\xa2\nAsset Backed Funding Corporation (depositor)\n\xef\x83\xa2\nWells Fargo, as trustee for the ABFC 2005-OPT 1, ABFC Asset-Backed\nCertificates, Series 2005-OPT 1\nWells Fargo did not provide the judge with a copy of the flow sale and servicing\nagreement, so there is no document in the record reflecting an assignment of the\nLaRace mortgage by Option One to Bank of America. The plaintiff did produce an\nunexecuted copy of the mortgage loan purchase agreement, which was an exhibit to\nthe PSA. The mortgage loan purchase agreement provides that Bank of America, as\n\n\x0cMortgages and Foreclosures\n\n741\n\nseller, \xe2\x80\x9cdoes hereby agree to and does hereby sell, assign, set over, and otherwise convey\nto the Purchaser [ABFC], without recourse, on the Closing Date \xe2\x80\xa6 all of its right, title\nand interest in and to each Mortgage Loan.\xe2\x80\x9d The agreement makes reference to a\nschedule listing the assigned mortgage loans, but this schedule is not in the record, so\nthere was no document before the judge showing that the LaRace mortgage was among\nthe mortgage loans assigned to the ABFC.\nWells Fargo did provide the judge with a copy of the PSA, which is an agreement\nbetween the ABFC (as depositor), Option One (as servicer), and Wells Fargo (as\ntrustee), but this copy was downloaded from the Securities and Exchange Commission\nwebsite and was not signed. The PSA provides that the depositor \xe2\x80\x9cdoes hereby transfer,\nassign, set over and otherwise convey to the Trustee, on behalf of the Trust \xe2\x80\xa6 all the\nright, title and interest of the Depositor \xe2\x80\xa6 in and to \xe2\x80\xa6 each Mortgage Loan identified\non the Mortgage Loan Schedules,\xe2\x80\x9d and \xe2\x80\x9cdoes hereby deliver\xe2\x80\x9d to the trustee the original\nmortgage note, an original mortgage assignment \xe2\x80\x9cin form and substance acceptable for\nrecording,\xe2\x80\x9d and other documents pertaining to each mortgage.\nThe copy of the PSA provided to the judge did not contain the loan schedules\nreferenced in the agreement. Instead, Wells Fargo submitted a schedule that it\nrepresented identified the loans assigned in the PSA, which did not include property\naddresses, names of mortgagors, or any number that corresponds to the loan number\nor servicing number on the LaRace mortgage. Wells Fargo contends that a loan with\nthe LaRace property\xe2\x80\x99s zip code and city is the LaRace mortgage loan because the\npayment history and loan amount matches the LaRace loan.\nOn April 27, 2007, Wells Fargo filed a complaint under the Servicemembers Act in the\nLand Court to foreclose on the LaRace mortgage. The complaint represented Wells\nFargo as the \xe2\x80\x9cowner (or assignee) and holder\xe2\x80\x9d of the mortgage given by the LaRaces\nfor the property. A judgment issued on behalf of Wells Fargo on July 3, 2007, indicating\nthat the LaRaces were not beneficiaries of the Servicemembers Act and that foreclosure\ncould proceed in accordance with the terms of the power of sale. In June, 2007, Wells\nFargo caused to be published in the Boston Globe the statutory notice of sale,\nidentifying itself as the \xe2\x80\x9cpresent holder\xe2\x80\x9d of the mortgage.\n\n\x0c742\n\nProperty\n\nAt the foreclosure sale on July 5, 2007, Wells Fargo, as trustee, purchased the LaRace\nproperty for $120,397.03, a value significantly below its estimated market value. Wells\nFargo did not execute a statutory foreclosure affidavit or foreclosure deed until May 7,\n2008. That same day, Option One, which was still the record holder of the LaRace\nmortgage, executed an assignment of the mortgage to Wells Fargo as trustee; the\nassignment was recorded on May 12, 2008. Although executed ten months after the\nforeclosure sale, the assignment declared an effective date of April 18, 2007, a date that\npreceded the publication of the notice of sale and the foreclosure sale.\nDiscussion. The plaintiffs brought actions under G.L. c. 240, \xc2\xa7 6, seeking declarations\nthat the defendant mortgagors\xe2\x80\x99 titles had been extinguished and that the plaintiffs were\nthe fee simple owners of the foreclosed properties. As such, the plaintiffs bore the\nburden of establishing their entitlement to the relief sought. To meet this burden, they\nwere required \xe2\x80\x9cnot merely to demonstrate better title \xe2\x80\xa6 than the defendants possess,\nbut \xe2\x80\xa6 to prove sufficient title to succeed in [the] action.\xe2\x80\x9d There is no question that the\nrelief the plaintiffs sought required them to establish the validity of the foreclosure sales\non which their claim to clear title rested.\nMassachusetts does not require a mortgage holder to obtain judicial authorization to\nforeclose on a mortgaged property. With the exception of the limited judicial procedure\naimed at certifying that the mortgagor is not a beneficiary of the Servicemembers Act,\na mortgage holder can foreclose on a property, as the plaintiffs did here, by exercise of\nthe statutory power of sale, if such a power is granted by the mortgage itself.\nWhere a mortgage grants a mortgage holder the power of sale, as did both the Ibanez\nand LaRace mortgages, it includes by reference the power of sale set out in G.L. c. 183,\n\xc2\xa7 21, and further regulated by G.L. c. 244, \xc2\xa7\xc2\xa7 11-17C. Under G.L. c. 183, \xc2\xa7 21, after a\nmortgagor defaults in the performance of the underlying note, the mortgage holder\nmay sell the property at a public auction and convey the property to the purchaser in\nfee simple, \xe2\x80\x9cand such sale shall forever bar the mortgagor and all persons claiming\nunder him from all right and interest in the mortgaged premises, whether at law or in\nequity.\xe2\x80\x9d Even where there is a dispute as to whether the mortgagor was in default or\nwhether the party claiming to be the mortgage holder is the true mortgage holder, the\n\n\x0cMortgages and Foreclosures\n\n743\n\nforeclosure goes forward unless the mortgagor files an action and obtains a court order\nenjoining the foreclosure.\nRecognizing the substantial power that the statutory scheme affords to a mortgage\nholder to foreclose without immediate judicial oversight, we adhere to the familiar rule\nthat \xe2\x80\x9cone who sells under a power [of sale] must follow strictly its terms. If he fails to\ndo so there is no valid execution of the power, and the sale is wholly void.\xe2\x80\x9d\n\xe2\x80\xa6\nOne of the terms of the power of sale that must be strictly adhered to is the restriction\non who is entitled to foreclose. The \xe2\x80\x9cstatutory power of sale\xe2\x80\x9d can be exercised by \xe2\x80\x9cthe\nmortgagee or his executors, administrators, successors or assigns.\xe2\x80\x9d Under G.L. c. 244,\n\xc2\xa7 14, \xe2\x80\x9c[t]he mortgagee or person having his estate in the land mortgaged, or a person\nauthorized by the power of sale, or the attorney duly authorized by a writing under seal,\nor the legal guardian or conservator of such mortgagee or person acting in the name\nof such mortgagee or person\xe2\x80\x9d is empowered to exercise the statutory power of sale.\nAny effort to foreclose by a party lacking \xe2\x80\x9cjurisdiction and authority\xe2\x80\x9d to carry out a\nforeclosure under these statutes is void. See Davenport v. HSBC Bank USA, 275\nMich.App. 344, 347-348 (2007) (attempt to foreclose by party that had not yet been\nassigned mortgage results in \xe2\x80\x9cstructural defect that goes to the very heart of defendant\xe2\x80\x99s\nability to foreclose by advertisement,\xe2\x80\x9d and renders foreclosure sale void).\nA related statutory requirement that must be strictly adhered to in a foreclosure by\npower of sale is the notice requirement articulated in G.L. c. 244, \xc2\xa7 14. That statute\nprovides that \xe2\x80\x9cno sale under such power shall be effectual to foreclose a mortgage,\nunless, previous to such sale,\xe2\x80\x9d advance notice of the foreclosure sale has been provided\nto the mortgagee, to other interested parties, and by publication in a newspaper\npublished in the town where the mortgaged land lies or of general circulation in that\ntown. \xe2\x80\x9cThe manner in which the notice of the proposed sale shall be given is one of\nthe important terms of the power, and a strict compliance with it is essential to the\nvalid exercise of the power.\xe2\x80\x9d See Chace v. Morse, supra (\xe2\x80\x9cwhere a certain notice is\nprescribed, a sale without any notice, or upon a notice lacking the essential\nrequirements of the written power, would be void as a proceeding for foreclosure\xe2\x80\x9d).\n\n\x0c744\n\nProperty\n\nBecause only a present holder of the mortgage is authorized to foreclose on the\nmortgaged property, and because the mortgagor is entitled to know who is foreclosing\nand selling the property, the failure to identify the holder of the mortgage in the notice\nof sale may render the notice defective and the foreclosure sale void. See Roche v.\nFarnsworth, supra (mortgage sale void where notice of sale identified original\nmortgagee but not mortgage holder at time of notice and sale).\nFor the plaintiffs to obtain the judicial declaration of clear title that they seek, they had\nto prove their authority to foreclose under the power of sale and show their compliance\nwith the requirements on which this authority rests. Here, the plaintiffs were not the\noriginal mortgagees to whom the power of sale was granted; rather, they claimed the\nauthority to foreclose as the eventual assignees of the original mortgagees. Under the\nplain language of G.L. c. 183, \xc2\xa7 21, and G.L. c. 244, \xc2\xa7 14, the plaintiffs had the authority\nto exercise the power of sale contained in the Ibanez and LaRace mortgages only if\nthey were the assignees of the mortgages at the time of the notice of sale and the\nsubsequent foreclosure sale. See In re Schwartz, 366 B.R. 265, 269\n(Bankr.D.Mass.2007) (\xe2\x80\x9cAcquiring the mortgage after the entry and foreclosure sale\ndoes not satisfy the Massachusetts statute\xe2\x80\x9d). See also Jeff-Ray Corp. v. Jacobson, 566\nSo.2d 885, 886 (Fla.Dist.Ct.App.1990) (per curiam) (foreclosure action could not be\nbased on assignment of mortgage dated four months after commencement of\nforeclosure proceeding).\nThe plaintiffs claim that the securitization documents they submitted establish valid\nassignments that made them the holders of the Ibanez and LaRace mortgages before\nthe notice of sale and the foreclosure sale. We turn, then, to the documentation\nsubmitted by the plaintiffs to determine whether it met the requirements of a valid\nassignment.\nLike a sale of land itself, the assignment of a mortgage is a conveyance of an interest in\nland that requires a writing signed by the grantor. In a \xe2\x80\x9ctitle theory state\xe2\x80\x9d like\nMassachusetts, a mortgage is a transfer of legal title in a property to secure a debt.\nTherefore, when a person borrows money to purchase a home and gives the lender a\nmortgage, the homeowner-mortgagor retains only equitable title in the home; the legal\ntitle is held by the mortgagee. See Vee Jay Realty Trust Co. v. DiCroce, 360 Mass. 751,\n\n\x0cMortgages and Foreclosures\n\n745\n\n753 (1972), quoting Dolliver v. St. Joseph Fire & Marine Ins. Co., 128 Mass. 315, 316\n(1880) (although \xe2\x80\x9cas to all the world except the mortgagee, a mortgagor is the owner\nof the mortgaged lands,\xe2\x80\x9d mortgagee has legal title to property). Where, as here,\nmortgage loans are pooled together in a trust and converted into mortgage-backed\nsecurities, the underlying promissory notes serve as financial instruments generating a\npotential income stream for investors, but the mortgages securing these notes are still\nlegal title to someone\xe2\x80\x99s home or farm and must be treated as such.\nFocusing first on the Ibanez mortgage, U.S. Bank argues that it was assigned the\nmortgage under the trust agreement described in the PPM, but it did not submit a copy\nof this trust agreement to the judge. The PPM, however, described the trust agreement\nas an agreement to be executed in the future, so it only furnished evidence of an intent\nto assign mortgages to U.S. Bank, not proof of their actual assignment. Even if there\nwere an executed trust agreement with language of present assignment, U.S. Bank did\nnot produce the schedule of loans and mortgages that was an exhibit to that agreement,\nso it failed to show that the Ibanez mortgage was among the mortgages to be assigned\nby that agreement. Finally, even if there were an executed trust agreement with the\nrequired schedule, U.S. Bank failed to furnish any evidence that the entity assigning the\nmortgage--Structured Asset Securities Corporation--ever held the mortgage to be\nassigned. The last assignment of the mortgage on record was from Rose Mortgage to\nOption One; nothing was submitted to the judge indicating that Option One ever\nassigned the mortgage to anyone before the foreclosure sale. Thus, based on the\ndocuments submitted to the judge, Option One, not U.S. Bank, was the mortgage\nholder at the time of the foreclosure, and U.S. Bank did not have the authority to\nforeclose the mortgage.\nTurning to the LaRace mortgage, Wells Fargo claims that, before it issued the\nforeclosure notice, it was assigned the LaRace mortgage under the PSA. The PSA, in\ncontrast with U.S. Bank\xe2\x80\x99s PPM, uses the language of a present assignment (\xe2\x80\x9cdoes\nhereby \xe2\x80\xa6 assign\xe2\x80\x9d and \xe2\x80\x9cdoes hereby deliver\xe2\x80\x9d) rather than an intent to assign in the\nfuture. But the mortgage loan schedule Wells Fargo submitted failed to identify with\nadequate specificity the LaRace mortgage as one of the mortgages assigned in the PSA.\nMoreover, Wells Fargo provided the judge with no document that reflected that the\nABFC (depositor) held the LaRace mortgage that it was purportedly assigning in the\n\n\x0c746\n\nProperty\n\nPSA. As with the Ibanez loan, the record holder of the LaRace loan was Option One,\nand nothing was submitted to the judge which demonstrated that the LaRace loan was\never assigned by Option One to another entity before the publication of the notice and\nthe sale.\nWhere a plaintiff files a complaint asking for a declaration of clear title after a mortgage\nforeclosure, a judge is entitled to ask for proof that the foreclosing entity was the\nmortgage holder at the time of the notice of sale and foreclosure, or was one of the\nparties authorized to foreclose under G.L. c. 183, \xc2\xa7 21, and G.L. c. 244, \xc2\xa7 14. A plaintiff\nthat cannot make this modest showing cannot justly proclaim that it was unfairly denied\na declaration of clear title.\nWe do not suggest that an assignment must be in recordable form at the time of the\nnotice of sale or the subsequent foreclosure sale, although recording is likely the better\npractice. Where a pool of mortgages is assigned to a securitized trust, the executed\nagreement that assigns the pool of mortgages, with a schedule of the pooled mortgage\nloans that clearly and specifically identifies the mortgage at issue as among those\nassigned, may suffice to establish the trustee as the mortgage holder. However, there\nmust be proof that the assignment was made by a party that itself held the mortgage.\nA foreclosing entity may provide a complete chain of assignments linking it to the\nrecord holder of the mortgage, or a single assignment from the record holder of the\nmortgage. The key in either case is that the foreclosing entity must hold the mortgage\nat the time of the notice and sale in order accurately to identify itself as the present\nholder in the notice and in order to have the authority to foreclose under the power of\nsale (or the foreclosing entity must be one of the parties authorized to foreclose under\nG.L. c. 183, \xc2\xa7 21, and G.L. c. 244, \xc2\xa7 14).\nThe judge did not err in concluding that the securitization documents submitted by the\nplaintiffs failed to demonstrate that they were the holders of the Ibanez and LaRace\nmortgages, respectively, at the time of the publication of the notices and the sales. The\njudge, therefore, did not err in rendering judgments against the plaintiffs and in denying\nthe plaintiffs\xe2\x80\x99 motions to vacate the judgments.\n\n\x0cMortgages and Foreclosures\n\n747\n\nWe now turn briefly to three other arguments raised by the plaintiffs on appeal. First,\nthe plaintiffs initially contended that the assignments in blank executed by Option One,\nidentifying the assignor but not the assignee, not only \xe2\x80\x9cevidence[ ] and confirm[ ] the\nassignments that occurred by virtue of the securitization agreements,\xe2\x80\x9d but \xe2\x80\x9care\neffective assignments in their own right.\xe2\x80\x9d But in their reply briefs they conceded that\nthe assignments in blank did not constitute a lawful assignment of the mortgages. Their\nconcession is appropriate. We have long held that a conveyance of real property, such\nas a mortgage, that does not name the assignee conveys nothing and is void; we do not\nregard an assignment of land in blank as giving legal title in land to the bearer of the\nassignment.\nSecond, the plaintiffs contend that, because they held the mortgage note, they had a\nsufficient financial interest in the mortgage to allow them to foreclose. In\nMassachusetts, where a note has been assigned but there is no written assignment of\nthe mortgage underlying the note, the assignment of the note does not carry with it the\nassignment of the mortgage. Rather, the holder of the mortgage holds the mortgage in\ntrust for the purchaser of the note, who has an equitable right to obtain an assignment\nof the mortgage, which may be accomplished by filing an action in court and obtaining\nan equitable order of assignment. [Barnes v. Boardman, 149 Mass. 106, 114, 21 N.E.\n308 (1889)] (\xe2\x80\x9cIn some jurisdictions it is held that the mere transfer of the debt, without\nany assignment or even mention of the mortgage, carries the mortgage with it, so as to\nenable the assignee to assert his title in an action at law\xe2\x80\xa6. This doctrine has not\nprevailed in Massachusetts, and the tendency of the decisions here has been, that in\nsuch cases the mortgagee would hold the legal title in trust for the purchaser of the\ndebt, and that the latter might obtain a conveyance by a bill in equity\xe2\x80\x9d). In the absence\nof a valid written assignment of a mortgage or a court order of assignment, the\nmortgage holder remains unchanged. This common-law principle was later\nincorporated in the statute enacted in 1912 establishing the statutory power of sale,\nwhich grants such a power to \xe2\x80\x9cthe mortgagee or his executors, administrators,\nsuccessors or assigns,\xe2\x80\x9d but not to a party that is the equitable beneficiary of a mortgage\nheld by another.\nThird, the plaintiffs \xe2\x80\xa6 argue that the use of postsale assignments was customary in the\nindustry, and point to Title Standard No. 58(3) issued by the Real Estate Bar\n\n\x0c748\n\nProperty\n\nAssociation for Massachusetts, which declares: \xe2\x80\x9cA title is not defective by reason of \xe2\x80\xa6\n[t]he recording of an Assignment of Mortgage executed either prior, or subsequent, to\nforeclosure where said Mortgage has been foreclosed, of record, by the Assignee.\xe2\x80\x9d To\nthe extent that the plaintiffs rely on this title standard for the proposition that an entity\nthat does not hold a mortgage may foreclose on a property, and then cure the cloud on\ntitle by a later assignment of a mortgage, their reliance is misplaced because this\nproposition is contrary to G.L. c. 183, \xc2\xa7 21, and G.L. c. 244, \xc2\xa7 14. If the plaintiffs did\nnot have their assignments to the Ibanez and LaRace mortgages at the time of the\npublication of the notices and the sales, they lacked authority to foreclose under G.L.\nc. 183, \xc2\xa7 21, and G.L. c. 244, \xc2\xa7 14, and their published claims to be the present holders\nof the mortgages were false. Nor may a postforeclosure assignment be treated as a\npreforeclosure assignment simply by declaring an \xe2\x80\x9ceffective date\xe2\x80\x9d that precedes the\nnotice of sale and foreclosure, as did Option One\xe2\x80\x99s assignment of the LaRace mortgage\nto Wells Fargo. Because an assignment of a mortgage is a transfer of legal title, it\nbecomes effective with respect to the power of sale only on the transfer; it cannot\nbecome effective before the transfer.\nHowever, we do not disagree with Title Standard No. 58(3) that, where an assignment\nis confirmatory of an earlier, valid assignment made prior to the publication of notice\nand execution of the sale, that confirmatory assignment may be executed and recorded\nafter the foreclosure, and doing so will not make the title defective. A valid assignment\nof a mortgage gives the holder of that mortgage the statutory power to sell after a\ndefault regardless whether the assignment has been recorded. Where the earlier\nassignment is not in recordable form or bears some defect, a written assignment\nexecuted after foreclosure that confirms the earlier assignment may be properly\nrecorded. A confirmatory assignment, however, cannot confirm an assignment that\nwas not validly made earlier or backdate an assignment being made for the first time.\nWhere there is no prior valid assignment, a subsequent assignment by the mortgage\nholder to the note holder is not a confirmatory assignment because there is no earlier\nwritten assignment to confirm. In this case, based on the record before the judge, the\nplaintiffs failed to prove that they obtained valid written assignments of the Ibanez and\nLaRace mortgages before their foreclosures, so the postforeclosure assignments were\nnot confirmatory of earlier valid assignments.\n\n\x0cMortgages and Foreclosures\n\n749\n\nFinally, we reject the plaintiffs\xe2\x80\x99 request that our ruling be prospective in its application.\nA prospective ruling is only appropriate, in limited circumstances, when we make a\nsignificant change in the common law. We have not done so here. The legal principles\nand requirements we set forth are well established in our case law and our statutes. All\nthat has changed is the plaintiffs\xe2\x80\x99 apparent failure to abide by those principles and\nrequirements in the rush to sell mortgage-backed securities.\nConclusion. For the reasons stated, we agree with the judge that the plaintiffs did not\ndemonstrate that they were the holders of the Ibanez and LaRace mortgages at the time\nthat they foreclosed these properties, and therefore failed to demonstrate that they\nacquired fee simple title to these properties by purchasing them at the foreclosure sale.\nJudgments affirmed.\nCORDY, J. (concurring, with whom Botsford, J., joins).\nI concur fully in the opinion of the court, and write separately only to underscore that\nwhat is surprising about these cases is not the statement of principles articulated by the\ncourt regarding title law and the law of foreclosure in Massachusetts, but rather the\nutter carelessness with which the plaintiff banks documented the titles to their assets.\nThere is no dispute that the mortgagors of the properties in question had defaulted on\ntheir obligations, and that the mortgaged properties were subject to foreclosure. Before\ncommencing such an action, however, the holder of an assigned mortgage needs to\ntake care to ensure that his legal paperwork is in order. Although there was no apparent\nactual unfairness here to the mortgagors, that is not the point. Foreclosure is a powerful\nact with significant consequences, and Massachusetts law has always required that it\nproceed strictly in accord with the statutes that govern it. As the opinion of the court\nnotes, such strict compliance is necessary because Massachusetts is both a title theory\nState and allows for extrajudicial foreclosure.\nThe type of sophisticated transactions leading up to the accumulation of the notes and\nmortgages in question in these cases and their securitization, and, ultimately the sale of\nmortgaged-backed securities, are not barred nor even burdened by the requirements of\nMassachusetts law. The plaintiff banks, who brought these cases to clear the titles that\nthey acquired at their own foreclosure sales, have simply failed to prove that the\n\n\x0c750\n\nProperty\n\nunderlying assignments of the mortgages that they allege (and would have) entitled\nthem to foreclose ever existed in any legally cognizable form before they exercised the\npower of sale that accompanies those assignments. The court\xe2\x80\x99s opinion clearly states\nthat such assignments do not need to be in recordable form or recorded before the\nforeclosure, but they do have to have been effectuated\xe2\x80\xa6.\nNotes and Questions\n1. In a \xe2\x80\x9ctitle\xe2\x80\x9d theory state like Massachusetts, the mortgagee in theory has legal\ntitle to the property, though the mortgagee holds it in trust for the mortgagor,\nwho has equitable title. The alternative \xe2\x80\x9clien\xe2\x80\x9d theory holds that legal title\nremains in the mortgagor, and the mortgage is merely a lien on the property.\nDoes the difference between title theory and lien theory make any difference in\nthis case? (Because of the mortgagor\xe2\x80\x99s equitable title in title theory states, the\ngeneral modern answer is that there is no difference in the governing legal\nprinciples, but the reasoning may vary from state to state.) What about the fact\nthat the foreclosure was done through a nonjudicial power of sale\xe2\x80\x94should that\nmake a difference?\n2. One of the reasons the court gives for its judgment is that, in Massachusetts,\nassignment in blank isn\xe2\x80\x99t allowed for an interest in land. Why might the\nlegislature make such a rule? This is not the rule in all states, but amazingly the\noriginators didn\xe2\x80\x99t pay much attention to state by state variations.\n3. Who owns the houses at issue, after the opinion? What steps should the banks\ntake now? What is the effect of Massachusetts\xe2\x80\x99 recording statute on a scenario\nin which a third party buys the property at the foreclosure sale and records?\n4. Consider the following excerpt from Paul McMorrow, A new act in foreclosure\ncircus, BOSTON GLOBE (January 14, 2011):\nAccording to the real estate tracker the Warren Group, there have\nbeen more than 44,000 residential foreclosures recorded in\nMassachusetts since 2006. In the majority of those cases, the\nforeclosing bank turned around and re-sold the seized property.\n\n\x0cMortgages and Foreclosures\n\n751\n\nSo there are now tens of thousands of Massachusetts residents\nliving in homes that, until relatively recently, belonged to\nsomebody else.\n\xe2\x80\xa6 I took a random sample of 30 foreclosure deeds from Chelsea\n(one of the cities hit hardest by foreclosures) since the beginning\nof 2006. Of those 30 foreclosure cases, 10 had paperwork on file\nwith the Registry of Deeds that raised the sort of chain-ofcustody concerns at the heart of the Ibanez decision. In one case,\nno mortgage was on file with the registry. Another showed no\npaperwork assigning the note to a mortgage servicer. In other\ncases, mortgage originators didn\xe2\x80\x99t sign off on documents\ntransferring the notes into mortgage pools, or transfer paperwork\nwas filed after a foreclosure occurred. All of the properties have\nsince been re-sold.\nThat\xe2\x80\x99s not to say any of those foreclosures will or should be\noverturned in court. But it is an indication of how pervasive\nsloppy record-keeping was, and how many foreclosures could be\nchallenged on technical grounds based on the recent SJC decision.\nAnd it presents a series of terrible questions to anyone who\nbought a foreclosed house from a big bank. Among them: Is my\nmortgage valid? Will I be able to refinance or sell my home? Do\nI even really own my house?\nHow would you go about answering McMorrow\xe2\x80\x99s questions for a client?\n5. Consider also Abigail Field, Lawyers\xe2\x80\x99 Carelessness Was Key to the Mortgage Mess,\nDAILYFINANCE (Feb. 1, 2011):\nThe Ibanez case highlighted a basic, non-due-diligence problem\ntoo -- one that, according to bankruptcy and legal-aid attorneys I\nspeak with, is occurring across the country. The banks\xe2\x80\x99 lawyers\ncan\xe2\x80\x99t produce complete sets of securitization contracts even after\nbeing given the specific opportunity to do so. In various cases,\n\n\x0c752\n\nProperty\n\nthe banks have submitted unsigned drafts. They\xe2\x80\x99ve submitted\nsigned copies of some contracts, but not even drafts of others.\nAnd they\xe2\x80\x99ve submitted contracts without their exhibits, like a list\nof the mortgages being securitized.\nEvery corporate deal I was ever involved with resulted in \xe2\x80\x9cclosing\nsets,\xe2\x80\x9d a series of binders containing every contract with each\nexhibit. \xe2\x80\xa6 [A] key part of the value lawyers add is keeping the\ndocuments in good order and accessible to their clients when\nneeded.\nSo, the issue of partial deal documents that came to light in Ibanez\nand continues to crop up elsewhere means one of three things:\n1. Securitization deals were so carelessly done that, despite all the\nproper documents being created, closing sets don\xe2\x80\x99t exist.\n2. Securitization deals were so carelessly done that not all the\nproper documents were created (such as lists of the mortgages\ninvolved) and so closing sets don\xe2\x80\x99t exist.\n3. All the documents and closing sets are fine, and the big banks\nhave grown so incompetent they can\xe2\x80\x99t give their foreclosure\nattorneys deal documents that they do have or could get from\ntheir securitization counsel.\nI\xe2\x80\x99m not sure which of these is worst.\nWhat should the banks\xe2\x80\x99 lawyers have done with the documents they had available\nto use in the foreclosure process?\n6. Review the alleged chain of title for the Ibanez/US Bancorp mortgage. US\nBancorp took the mortgage from a now-bankrupt subsidiary of the nowbankrupt firm Lehman Brothers. Getting an assignment from Lehman may be\ndifficult or even impossible. Among other things, because Lehman is bankrupt,\nit may not transfer assets out of its estate to particular creditors without going\n\n\x0cMortgages and Foreclosures\n\n753\n\nthrough extensive proceedings that are designed to be fair to all the creditors.\nRegardless, an assignment from Lehman would be insufficient: there is still the\nundocumented Option One-Lehman transfer. It might be simplest for US\nBancorp to go straight to Option One and ask for an assignment. But US\nBancorp didn\xe2\x80\x99t buy the mortgage from Option One. There is no contractual\nrelationship between those two entities and thus no duty on Option One to do\neverything necessary to ensure that US Bancorp has good title. Even if US\nBancorp asks Option One for an assignment, Option One likely regarded the\nmortgage as sold to Lehman many years back and may not have appropriate\nrecords. Furthermore, Option One may consider any attempt to assign a\nmortgage that was already sold to Lehman to be legally risky; it will certainly\nwant US Bancorp to indemnify it and likely to pay extra for the privilege of\ngetting the assignment. This problem is not confined to loans that passed\nthrough Lehman (though there were a great many that did)\xe2\x80\x94many companies\ninvolved in the mortgage bubble have entered bankruptcy or changed\nownership, making documentation of the assignments all but impossible.\n7. Given that the mortgages were concededly in default, is there any reason to\ninsist on the formalities in cases like this? After all, the one thing we know is\nthat the homeowners weren\xe2\x80\x99t paying what they owed. See, e.g., Editorial, The\nPolitics of Foreclosure, WALL ST. J. (Oct. 9, 2010). But see Miller v. Homecomings\nFinancial, LLC, 881 F. Supp. 2d 825, 832 (S.D.Tex. 2012) (\xe2\x80\x9cBanks are neither\nprivate attorneys general nor bounty hunters, armed with a roving commission\nto seek out defaulting homeowners and take away their homes in satisfaction of\nsome other bank\xe2\x80\x99s deed of trust.\xe2\x80\x9d); David A. Dana, Why Mortgage \xe2\x80\x9cFormalities\xe2\x80\x9d\nMatter, 24 LOY. CONSUMER L. REV. 505 (2012) (given the importance of the\nhome, and of the rule of law, formalities matter, and may also deter future\ncareless lending).\n8. Sometimes the sloppiness in record-keeping led to truly astonishing errors. In\na random audit on WaMu Mortgage Pass-Through Certificates, Mortgage Loan\nTrusts, one loan was found in 6 different trusts, another loan was found in five\ntrusts\xe2\x80\x99 original SEC loan level data, 39 were listed in 3 trusts, and 503 were listed\nin two separate trusts. The most extreme example, a New York condo, appeared\n\n\x0c754\n\nProperty\n\nin 6 different trusts from May through November 2006. Gary Victor Dubin,\nSecuritized\nDistrust\n(Mar.\n15,\n2012),\nhttps://deadlyclear.wordpress.com/2012/03/15/securitized-distrust/.\n9. Occasionally, evidence of these careless procedures appears in official title\nrecords. Recall that, in order to move the mortgage from its originator to its\nultimate holder, an assignment was required\xe2\x80\x94usually more than one, with a\nchain going from the originator, to the sponsor who lent the originator money\nto make the loan, to the depositor that funded the sponsor, to the trust that\nultimately held the mortgages as assets underlying the mortgage-backed\nsecurities it issued. Who exactly is the assignee in this record from Nassau\nCounty, New York?\n\n\x0cMortgages and Foreclosures\n\n755\n\n10. The toxic brew of carelessness, unprecedented volume of foreclosures, and\ndisregard for the rights of borrowers has finally begun to attract judicial\nattention. A bankruptcy judge recently identified\n\xe2\x80\x9ca general willingness and practice on Wells Fargo\xe2\x80\x99s part to create\ndocumentary evidence, after\xe2\x80\x90the\xe2\x80\x90fact, when enforcing its claims,\nWHICH IS EXTRAORDINARY. Moreover, [the Wells Fargo\nemployee\xe2\x80\x99s] testimony does not stop at describing manufactured\nmortgage assignments. \xe2\x80\xa6 [T]he \xe2\x80\x9cassignment team\xe2\x80\x9d included\npeople tasked with endorsing notes [from other entities to Wells\nFargo]\xe2\x80\xa6 Frankly, it does not appear that [the Wells Fargo\nemployee] understood the difference between preparing\nlegitimate assignments and indorsements by Wells Fargo and\nimproper assignments and indorsements to Wells Fargo.\xe2\x80\x9d\nIn re Carrsow-Franklin, No. 10\xe2\x80\x9020010 (S.D.N.Y. Bkcy. Jan. 29, 2015) (emphasis\nin original). What responsibility do lawyers have to train employees in charge\nof tasks with such legal relevance?\nNote on Subsequent Purchasers\nBevilacqua v. Rodriguez, 460 Mass. 762, 955 N.E.2d 884 (2011), dealt with property\nowners with defective title resulting from Ibanez-style foreclosure problems earlier in\nthe chain. In other words, the mortgagee (or, realistically, its representative/putative\nrepresentative) had foreclosed in a manner held unlawful by Ibanez, then had sold the\nhouse again to a new buyer. The Massachusetts high court held that the new buyers\ncould not clear title under the Massachusetts \xe2\x80\x9ctry title\xe2\x80\x9d procedure, which is a way that\nan owner can quiet title and establish which of competing claims is valid. However,\nthe court ruled, that procedure is only available to people who can plausibly claim to\nbe owners. In Bevilacqua, the chain of title had been broken by the unsuccessful\nforeclosure before the purchase, and so the new buyer couldn\xe2\x80\x99t bring a plausible claim.\nThis is not a terribly surprising result: if someone records a deed to the Brooklyn Bridge,\nthen brings a try title claim to confirm her ownership, title to the bridge is not conveyed\nmagically even if the true owner fails to show up.\n\n\x0c756\n\nProperty\n\nThe Bevilacqua court left open the possibility that owners/lenders could try to put the\nchain of title back together and conduct a new, valid foreclosure, though this will\ncertainly prove complicated in practice, as the notes above suggest. Another possibility\nis to track down the old preforeclosure owner (who is still the owner because of the\nIbanez problem) and obtain a quitclaim deed from her. If you represented an old owner\nin this situation, what would you counsel? What if you represented a new buyer?\nIs it fair to strip the new buyer of title, when the buyer is unlikely to have any\nresponsibility (or even much understanding of) the shoddy recording practices that\ncaused the problem? How else should we resolve the problem? Bevilacqua/his title\ninsurer will have a claim against the seller, but we still need to know who gets the\nhouse\xe2\x80\x94you should be able to see similarities from our discussion of stolen property.\n\nI. An Additional Puzzle Piece: The Mortgage and the Note\nAs previously discussed, what we conventionally call a \xe2\x80\x9cmortgage\xe2\x80\x9d actually has two\nparts. The \xe2\x80\x9cnote\xe2\x80\x9d is the borrower\xe2\x80\x99s promise to repay the debt: the note is governed by\ncontract law, or more specifically commercial law. The note specifies the terms of the\ndebt, including late fees and how interest is calculated. It can be replaced by a \xe2\x80\x9cLost\nNote Affidavit,\xe2\x80\x9d but that\xe2\x80\x99s supposed to be for special circumstances. The \xe2\x80\x9cmortgage\xe2\x80\x9d\nis the interest in land associated with the loan. It is a lien, governed by real estate law.\nThe mortgage is the thing that should be filed and recorded. The mortgage is what\ngives the lender the right to take the collateral (the house) if the note isn\xe2\x80\x99t paid by the\nborrower.\nWhy split things up in this way? It seems to offer more opportunities for things to go\nwrong. Is there a reason not to put the two documents together and require the\n\xe2\x80\x9cmortgage\xe2\x80\x9d to contain all the terms of the debt? What happens if the ownership of\nthe two legal interests, and custody of the two documents, becomes separated? The\nstandard rule is that \xe2\x80\x9c[t]he note is the cow and the mortgage the tail. The cow can\nsurvive without a tail, but the tail cannot survive without the cow.\xe2\x80\x9d Best Fertilizers of\nAriz., Inc. v. Burns, 571 P.2d 675, 676 (Ariz. Ct. App. 1977), rev\xe2\x80\x99d on other grounds, 570\nP.2d 179 (Ariz. 1977) (quoting Professor Chester Smith). That is, the note is the real\n\n\x0cMortgages and Foreclosures\n\n757\n\ndebt; a mortgage with no associated note is worthless. However, a note with no\nassociated mortgage is just an unsecured loan.\nBecause of this, the law does not favor separation of the note and the mortgage, and\nworks very hard to impute a relationship between them that makes the mortgage\nenforceable. The Restatement (Third) of Property (Mortgages) states that \xe2\x80\x9cin general a\nmortgage is unenforceable if it is held by one who has no right to enforce the secured\nobligation.\xe2\x80\x9d As a result, if the mortgagee transfers the mortgage to A and the note to\nB, neither can foreclose unless A can foreclose on B\xe2\x80\x99s behalf. Thus, the Restatement\nconcludes,\nThe [necessary] trust or agency relationship may arise from the terms of\nthe assignment, from a separate agreement, or from other circumstances.\nCourts should be vigorous in seeking to find such a relationship, since\nthe result is otherwise likely to be a windfall for the mortgagor and the\nfrustration of B\xe2\x80\x99s expectation of security.\nSee also Eaton v. Federal National Mortgage Association, 462 Mass. 569 (2012)\n(mortgage foreclosure may only be carried out by one who holds the mortgage and also\neither holds the note or acts on behalf of the note holder).\nMost of our discussion, and most of the litigation over chain of title, has focused on\nproblems with the mortgages, not the notes. It seems undeniable, however, that there\nare similar if not worse issues with the notes (and MERS never purported to track\nnotes). Some have argued that transfers of the notes are governed by the Uniform\nCommercial Code\xe2\x80\x99s provisions for negotiable instruments, not by state foreclosure\nstatutes. See, e.g., Dale A. Whitman & Drew Milner, Foreclosing on Nothing: The Curious\nProblem of the Deed of Trust Foreclosure Without Entitlement to Enforce the Note, 66 ARK. L.\nREV. 21 (2013). A number of states seem to agree that the mortgagor has nothing to\ncomplain about if she\xe2\x80\x99s in default, and that she lacks standing to challenge ownership\nof the note. If the wrong claimant takes the property, the right claimant can sue.\nThe contrary position relies on relativity of title: peaceable possessors have legitimate\nrights until someone proves better title. Just because a possessor doesn\xe2\x80\x99t have a right\nto be on the property doesn\xe2\x80\x99t mean that she can be ejected by someone with no better\n\n\x0c758\n\nProperty\n\nclaim. See Tapscott v. Lessee of Cobbs, 11 Gratt. 172, 52 Va. 172 (1854); see also\nYvanova v. New Century Mortgage Corp., No. S218973 (Cal. Feb. 18, 2016) (borrower\nhas standing to sue for wrongful foreclosure when the foreclosing party allegedly didn\xe2\x80\x99t\nown the note and deed of trust; \xe2\x80\x9c[t]he borrower owes money not to the world at large\nbut to a particular person or institution, and only the person or institution entitled to\npayment may enforce the debt by foreclosing on the security\xe2\x80\x9d).\n\nJ. What Now?\nDespite all these flaws in the system, shouldn\xe2\x80\x99t the borrowers just have paid? After all,\nif they hadn\xe2\x80\x99t defaulted, they wouldn\xe2\x80\x99t have entered into the resulting hellscape.\nEven if you excuse the victims of fraud from this claim\xe2\x80\x94and there were many\xe2\x80\x94it is\nimportant to remember that the mortgage contract is not just an agreement that the\nhome may be sold upon a default on the loan. It\xe2\x80\x99s an agreement that if the homeowner\ndefaults on the loan, the mortgagee may sell the property following the required legal\nprocedure. A mortgage loan involves a bundle of rights, including procedural rights.\nThese rights have a price: for example, loans in judicial foreclosure states have\nhistorically been more expensive than loans in nonjudicial foreclosure states. When\nthe lender (or someone claiming rights as successor of the lender) ignores the rights,\nit\xe2\x80\x99s getting something it hasn\xe2\x80\x99t paid for.\nEntirely separately, we might want people to be able to renegotiate their deals when\nrenegotiation makes everyone better off\xe2\x80\x94but with the system the way it is, that\xe2\x80\x99s\nproven extremely difficult. Procedural protections provide both time and negotiating\nleverage.\nFor an eye-opening account by one young lawyer of the messy process of seeking a\nloan modification for a borrower, see Wajahat Ali, Could It Be That the Best Chance\nTo Save a Young Family from Foreclosure Is a 28-Year-Old Pakistani American\nPlayright-Slash-Attorney Who Learned Bankruptcy Law on the Internet?,\nMcSweeney\xe2\x80\x99s (Jan. 2010), http://www.mcsweeneys.net/articles/could-it-be-that-thebest-chance-to-save-a-young-family-from-foreclosure-is-a-28-year-old-pakistaniamerican-playright-slash-attorney-who-learned-bankruptcy-law-on-the-internet.\n\n\x0cMortgages and Foreclosures\n\n759\n\nEssentially, Ali could never get the same answer twice from the servicer; it repeatedly\ndenied receiving documents supporting his clients\xe2\x80\x99 request for modification; it denied\nmodifications based on completely mistaken premises; and it didn\xe2\x80\x99t even tell him or his\nclients when it finally did grant a modification, leaving them expecting foreclosure. It\ntook multiple threats to file bankruptcy, which would have automatically stayed a\nforeclosure, to induce the servicer to respond.\nFederal bank regulators signed settlements in March 2011 with 14 loan servicers, who\npromised further internal investigations, remediation for some who were harmed, and\na halt to the filing of false documents. The servicers claimed to have ended this\nbehavior in late 2010. Reuters examined a large number of foreclosure filings and\nconcluded that, to the contrary, robo-signing was ongoing. In February 2012 the\nservicers promised to stop again. There\xe2\x80\x99s very little indication that they\xe2\x80\x99ve stopped.\nHowever, the major servicing companies did enter into a $25 billion settlement with\nfederal and many state officials that was supposed to compensate homeowners for\nservicing errors and require better behavior going forward. In response, property\nprofessor Mark Edwards wrote:\nLet\xe2\x80\x99s say I hire an armed gang to expel you from your house. My gang\nremoves all of your belongings, changes the locks, and warns you that\nyou\xe2\x80\x99d better not try to come back. I then sell your house to someone\nelse. You might have called the police, but the armed gang I hired\nactually are the police. You might have gone to court to stop me, but\nthe court is on my side, because I deliberately mislead the courts. Now\nlet\xe2\x80\x99s say I did the same thing thousands and thousands of times to other\npeople as well. And you can prove it. I\xe2\x80\x99d be in pretty big trouble,\nwouldn\xe2\x80\x99t I? \xe2\x80\xa6.\n[The settlement provides for] $1500 to $2000 per home\xe2\x80\xa6. $1500-2000\nis less than the legal expenses banks incur when a foreclosure is\nchallenged. It\xe2\x80\x99s less than title insurance on homes worth over $200K.\nWhy would regulators agree to a settlement of this magnitude? What were the\nalternatives?\n\n\x0c760\n\nProperty\n\nMortgage crisis-related disputes continue. For example, in March 2015, the\nDepartment of Justice\xe2\x80\x99s U.S. Trustee Program (USTP), which oversees bankruptcy\nestates, entered into a national settlement agreement with JPMorgan Chase Bank N.A.\nrequiring Chase to pay more than $50 million to over 25,000 homeowners who are or\nwere in bankruptcy. Among other things, Chase acknowledged that it filed more than\n50,000 payment change notices that were improperly signed, under penalty of perjury,\nby persons who had not reviewed the accuracy of the notices.\nIn 2013, the Consumer Finance Protection Bureau issued national rules on mortgage\nservicing standards. Except for smaller servicers, mortgage servicers must make goodfaith efforts to contact borrowers by the 36th day of delinquency and tell them about\nloss mitigation options, such as short sales and loan modifications. By day 45, servicers\nmust send written notice of these options and the name of a contact person. Servicers\nmay only begin foreclosures if a homeowner is over 120 days delinquent, and a\nborrower\xe2\x80\x99s pending loss mitigation application precludes the initiation of a foreclosure.\nIf the foreclosure has been initiated when a borrower submits a loss mitigation\napplication, the servicer may not move for final judgment or sale as long as the\napplication is complete 37 days before the sale. Servicers may not \xe2\x80\x9cdouble-track\xe2\x80\x9d\xe2\x80\x94\npursue mitigation measures with a borrower while also continuing the foreclosure\nprocess. If the servicer denies the borrower\xe2\x80\x99s application, it must give specific reasons\nand afford a right of appeal. Mortgage Servicing Rules Under the Real Estate\nSettlement Procedures Act (Regulation X), 78 Fed. Reg. 10696 (codified at 12 C.F.R.\n\xc2\xa71024) (2013).\nAs a result of changes in foreclosure procedures and servicer behavior, the average\ntime between the beginning of a foreclosure and its end has increased substantially. In\n2007, a foreclosure in New York took less than 300 days, while it took 1089 days by\nthe end of 2012. California, which more commonly uses the speedier nonjudicial\nforeclosure process, experienced a more than doubled time of 347 days. RealtyTrak,\n(2013),\n2013\nShort\nSale\nTrends\nhttp://www.slideshare.net/fullscreen/RealtyTrac/2013-short-sale-trends/1.\nWhat are the possible benefits of delay for homeowners? What about the possible\nrisks? In some cases, servicers initiate foreclosures but do not complete them, leading\n\n\x0cMortgages and Foreclosures\n\n761\n\nto so-called \xe2\x80\x9czombie foreclosures.\xe2\x80\x9d Completing the foreclosure would make the\nmortgagee the legal owner of the property, subject to property taxes and to the duty to\navoid creating a nuisance condition on the property. In markets with many empty\nhouses, the mortgagee may well wish to avoid this outcome, because it won\xe2\x80\x99t be able\nto sell the house quickly or otherwise recoup its maintenance costs. In addition, when\npeople believe that they will soon be kicked out, they tend not to maintain the property,\nand some even deliberately inflict damage. However, the mortgagors are often unaware\nof their continuing legal duties, and abandon the property in the belief that the\nforeclosure will occur, exposing themselves to unforeseen liability and their\ncommunities to further deterioration of the tax base and the physical condition of\nhomes. Is there anything law could do to mitigate the problem of such \xe2\x80\x9czombie\nforeclosures\xe2\x80\x9d?\nVarious programs have attempted to help homeowners at risk of foreclosure, with\ngenerally modest results. The federal government set up the Home Affordable\nModification Program (HAMP), which was supposed to keep four million\nhomeowners in their homes by reducing interest rates and extending repayment times,\nthough not by forgiving principal. Six years later, under 900,000 homeowners were\nparticipating in modifications. Servicers rejected four million applications, or 72% of\nrequests. The main culprits were the fact that the program was voluntary, and that the\nservicers were allowed to run the process on their own. In 38% of cases, the servicers\nclaimed that the borrowers failed to supply all the paperwork or to make the first\nmodified payment. Office of the Special Inspector General for the Troubled Asset\nRelief Program (SIGTARP), Quarterly Report to Congress (July 29, 2015). Not all of\nthat paperwork was actually absent. In 2014, SIGTARP found that the employees of\none servicer piled so many unopened Federal Express packages from homeowners\ncontaining their HAMP supporting documents into one room that eventually the floor\nbuckled. SIGTARP also found that this servicer denied homeowners from HAMP en\nmasse, without reviewing their applications at all.\nIncompetence plays a large role, but that incompetence also may redound to the benefit\nof servicers: in one case, for example, a servicer delayed responding to a HAMP\nmodification request four times over nearly two years, adding $40,000 in interest, fees,\nand costs to the amount the borrower allegedly owed. The servicer first mistakenly\n\n\x0c762\n\nProperty\n\ndenied a modification because it inexplicably decided that the borrower didn\xe2\x80\x99t live at\nthe residence. Then it mistakenly denied a modification as unaffordable because it\ninexplicably used the wrong figures to calculate the borrower\xe2\x80\x99s income despite\nextensive documentation of the correct figures. Then it mistakenly denied a\nmodification because the borrower allegedly had too much money in the bank to\nqualify; this money was in fact the amount the borrower had set aside in escrow to pay\nthe mortgage, as directed by the court-appointed referree. The servicer also maintained\nthat the borrower hadn\xe2\x80\x99t submitted complete documentation for his modification\napplication, though when the referree directed a representative of the servicer to appear\nat a hearing, the representative (who had just testified to her personal knowledge of\nthis incompleteness) was able to pull up the full application on her laptop. Finally, the\nservicer denied a modification as unaffordable, without further explanation of how it\ncalculated affordability. See US Bank N.A. v Sarmiento, 121 A.D.3d 187 (N.Y. App.\nDiv. 2014). The court found that the servicer\xe2\x80\x99s lack of good faith disqualified it from\nclaiming the additional amount owed. As the lawyer for the borrower, how would you\nhave dealt with two years of delay by the servicer?\nIn the absence of further federal legislation, states may have more options in dealing\nwith foreclosure abuses, because foreclosure procedure is a state-law matter. See\nCENTER FOR RESPONSIBLE LENDING AND CONSUMERS UNION, CLOSING THE GAPS:\nWHAT STATES SHOULD DO TO PROTECT HOMEOWNERS FROM FORECLOSURE (May\n2013). The most effective programs seem to be those that require mandatory\nmediation between the mortgagee and the homeowner before a foreclosure can\nproceed. The most effective of those require the mortgagee to send a representative\nwith (1) authority to negotiate a modification and (2) proof of the chain of title to the\nmortgage. Why do you think that voluntary programs, under which homeowners are\nentitled to mediation but must affirmatively request it, are less effective than mandatory\nprograms? What effects will requiring proof of the chain of title have on the parties\xe2\x80\x99\nnegotiations? If you were an attorney for a servicer, what would you ask for from\nhomeowners in return for a modification that left them with the ability to stay in their\nhomes?\nMassachusetts law now prohibits a creditor from publishing notice of an intended\nforeclosure sale for many residential mortgages unless the creditor \xe2\x80\x9chas first taken\n\n\x0cMortgages and Foreclosures\n\n763\n\nreasonable steps and made a good faith effort to avoid foreclosure.\xe2\x80\x9d MASS. GEN. LAWS\nch. 244 \xc2\xa735B. The creditor must calculate the relative benefits of foreclosure and\nmodification, and must offer the borrower a modified mortgage loan with an affordable\npayment (if the net present value of such a loan exceeds the anticipated recovery from\nforeclosure) or notify the borrower that he is not eligible for a modification and provide\nthe borrower with copies of the creditor\xe2\x80\x99s net present value and affordable payment\nanalyses. One might think that no law would be required to require creditors to\nmaximize their profits from a loan, but creditors didn\xe2\x80\x99t want to engage in individualized\ndeterminations. Is the Massachusetts model a good one?\nIn New York, the courts implemented a requirement that lawyers filing for foreclosure\nhad to certify that they had taken \xe2\x80\x9creasonable\xe2\x80\x9d measures to verify the accuracy of\ndocuments submitted to the court, under penalty of sanctions. The month before this\nrequirement went into place, roughly 100-200 foreclosures were filed each day. The\nnext month, no more than 5 foreclosures were filed on any given day, with the\nexception of one day in which 22 foreclosures were filed. Amazingly, this requirement\nreplaced a previous order requiring attorneys for foreclosing entities to certify that to\nthe best of their knowledge there weren\xe2\x80\x99t any false statements of fact or law in their\ndocuments.\nNew York\xe2\x80\x99s system also includes pre-foreclosure conferences; although they are\nvoluntary, they are encouraged, and the courts presently get 80% of foreclosure\ndefendants to show up for a pre-foreclosure conference session. Thus, there is a real\nrisk that someone will challenge the foreclosure documents if they\xe2\x80\x99re not in order. In\norder to make such programs work, it is important to convince homeowners that there\nis some hope\xe2\x80\x94many have engaged in futile attempts to get a modification before. If\nthey aren\xe2\x80\x99t encouraged, many of them believe that the judicial procedure is just another\nrunaround. Is the New York model a good one?\n\nK. Concluding Thoughts\nThe history of mortgages includes many episodes in which financial and legal\ninnovations hurt borrowers by undercutting the various protections they traditionally\ncould depend on, such as clarity in knowing who they were dealing with in a loan\n\n\x0c764\n\nProperty\n\ntransaction. In the most recent iteration of the cycle, the same financial and legal\ninnovations created systematic trouble on the lender side. This too is a property story:\nthe securitized pools (a new kind of property distinct from the property rights in the\nunderlying mortgages) helped create the moral hazard that led brokers to make bad\nloans and stick the mortgage-backed security buyers with toxic junk. The investors in\nthe securities were unwilling or unable, or sometimes both, to examine individual loans\nand instead invested on the theory that enough loans in the pool would pay off to justify\nthe investment, so they didn\xe2\x80\x99t pay enough attention to the quality of the individual\nunderlying loans. Is it possible to split property up in so many ways that the new rights\nbecome dangerous instead of productive?\nFinally: Frederic Bastiat wrote, \xe2\x80\x9cWhen plunder becomes a way of life for a group of\nmen living together in society, they create for themselves in the course of time a legal\nsystem that authorizes it and a moral code that glorifies it.\xe2\x80\x9d Does his claim help explain\nMERS? What about Johnson v. M\xe2\x80\x99Intosh?\n\n\x0cRecording Acts\nFamed con artist George C. Parker specialized in selling the Brooklyn Bridge. Parker\nand other con artists working in New York around the start of the 20th century would\nconvince victims that they stood to make a fortune charging tolls. Unfortunately, the\nbuyers obtained nothing, no matter how fancy the paperwork Parker offered them,\nbecause Parker did not own the bridge. Nemo dat quod non habet was the Latin motto of\nthe common law: \xe2\x80\x9cNo man can give what he does not have.\xe2\x80\x9d Parker, having no title,\ncould give none to his buyers.\nToday, \xe2\x80\x9cI\xe2\x80\x99ve got a bridge to sell you\xe2\x80\x9d is a punchline: only an incredible rube, we like to\nbelieve, could be so gullible as to think that a man in the street with a \xe2\x80\x9cBridge for Sale\xe2\x80\x9d\nsign is actually its owner. But the problem arises even in less dramatic cases. Suppose\nDorothy Dupe is scheduled to buy Blackacre on Wednesday from Sadie Scamalot.\nWhat if on Tuesday Scamalot sells Blackacre to Charles Clueless first? Then on\nWednesday before the \xe2\x80\x9csale,\xe2\x80\x9d Scamalot is no longer the owner of Blackacre, and under\nnemo dat, Dupe owns nothing after the \xe2\x80\x9csale.\xe2\x80\x9d Sometimes, equity would intervene to\nprotect a second buyer who lacked notice of the prior sale\xe2\x80\x94but such doctrines have\nserious risks for Clueless, who may have no idea that Scamalot is about to turn around\nand \xe2\x80\x9csell\xe2\x80\x9d Blackacre again.\nThe heart of the problem here is that Clueless and Dupe don\xe2\x80\x99t know enough about\npotential conflicting claims to Blackacre. Dupe can\xe2\x80\x99t find Clueless to confirm that she\nshould be dealing with him rather than with Scamalot, and Clueless can\xe2\x80\x99t find Dupe to\nwarn her off from buying something Scamalot no longer owns. Recording systems try\nto prevent some of these messes by making available better information about who\nowns what. If Clueless recorded his interest in Blackacre by making it a matter of public\nrecord, then it becomes reasonable to treat Dupe as having constructive notice of Clueless\xe2\x80\x99s\nclaim of ownership: even if she didn\xe2\x80\x99t check the records, she should have. Conversely,\nif Clueless fails to record, there is much less Dupe can do to protect herself, so it\nbecomes reasonable to let Dupe take title free and clear of Clueless\xe2\x80\x99s claim. Thus, the\nsystem gives Clueless a strong incentive to record and gives Dupe a strong incentive to\ncheck the records. As a result, there are good records of people\xe2\x80\x99s property claims.\n765\n\n\x0c766\n\nProperty\n\nClueless and Dupe never get into this mess in the first place, and Scamalot\xe2\x80\x99s scheme\nfails.\nRecording systems are useful even in the absence of fraud; they create the trust and\ncertainty needed to make land transactions common and reliable. Most home sales\ntoday happen between people who do not otherwise know each other and don\xe2\x80\x99t\notherwise expect to transact again. How can the buyer be sure the seller is really the\nowner? A recording system provides the answer. Perhaps more importantly, a\nrecording system gives lenders sufficient assurance that they\xe2\x80\x99ll be able to recover\nsomething in case of a loan default; with that security, they are willing to loan more and\nat lower rates.\nFor this and other reasons, a recording system can be a vital part of a large-scale,\nmodern economy. According to the New York Times, for example, the absence of a\nfunctioning recording system in Greece \xe2\x80\x9cscares off foreign investors; makes it hard for\nthe state to privatize its assets, as it has promised to do in exchange for bailout money;\nand makes it virtually impossible to collect property taxes.\xe2\x80\x9d Suzanne Daley, Who Owns\nThis Land? In Greece, Who Knows?, NEW YORK TIMES (May 26, 2013). Clear title is often\nimportant for access to government services and even water and electricity\nconnections: otherwise it\xe2\x80\x99s not clear where the checks and bills should go.\nThe materials in this section work through real property recording systems from the\noutside in. First, another excerpt from a previously encountered article by Carol Rose\ntraces some recurring themes in the history of recording law. Second, Argent Mortgage\nCo. v. Wachovia Bank N.A. considers the main variations of real property recording\nsystems under state recording acts, many of which create additional incentives to record\nquickly by creating a \xe2\x80\x9crace\xe2\x80\x9d to the recording office. Third, Hartig v. Stratman examines\nthe process of searching title records: what must a reasonable buyer do to confirm that\nthere are no conflicting claims? Board of Education of Minneapolis v. Hughes then illustrates\nthe kinds of messes that can arise even with a reasonably well-functioning recording\nsystem. Next, we briefly examine how the shoddy recordkeeping that was the hallmark\nof the mortgage crisis has infiltrated real property recording systems through the\nvehicle of MERS: a private, computerized recordkeeping system created by financial\ninstitutions to facilitate assignments of mortgages while circumventing the public\n\n\x0cRecording Acts\n\n767\n\nrecording system. A Note on Informal Title finishes by considering some of the\nsystemic advantages that have been claimed for well-functioning public recording\nsystems, and some of the empirical evidence for and against those claims.\nCarol M. Rose, Crystals And Mud In Property Law\n40 STAN. L. REV. 577 (1988)\n(excerpts reprinted by permission)\n\xe2\x80\xa6 In establishing recording systems, legislatures have lent support to private parties\xe2\x80\x99\nefforts to sharpen the definition of their entitlements. The raison d\xe2\x80\x99etre of such systems\nis to clarify and perfectly specify landed property rights for the sake of easy and smooth\ntransfers of land.\nBut the Anglo-American recording system in fact has been a saga of frustrated efforts\nto make clear who has what in land transfers. Common law transfers of land required\na certain set of formalities between the parties, but thereafter, conflicting claims were\nsettled by the age-old principle, \xe2\x80\x98first in time, first in right.\xe2\x80\x99 Thus, on Tuesday I might\nsell my farm to you, and on Wednesday I might wrongfully purport to sell it once again\nto innocent Farmer Brown. Poor Farmer Brown remains landless even though he knew\nnothing about the prior sale to you and indeed had no way of knowing about it. This\noutcome was hardly satisfactory from a property rights perspective. \xe2\x80\x98First in time, first\nin right\xe2\x80\x99 may work well enough in a community where everyone knows all about\neveryone else\xe2\x80\x99s transactions, but outside that context, the doctrine does little to put\npeople on notice of who owns what, and the opportunities for conflicting claims are\nendless.\nBut the efforts to remedy this flaw have gone through new cycles of certainty and\nuncertainty. Henry VIII attempted\xe2\x80\x94without great success\xe2\x80\x94to establish public\nregistration of land claims through the Statute of Enrollments in 1536. Versions of the\nStatute resurfaced in Massachusetts\xe2\x80\x99 1640 recording act and in other seventeenth and\neighteenth century colonial recording acts, all of which were much more widely (though\nstill somewhat irregularly) applied than their Henrician model had been.\nHenry\xe2\x80\x99s Statute and its original American counterparts reflected an emphatically\ncrystalline view of property. Their literal language suggests that they were versions of\n\n\x0c768\n\nProperty\n\nwhat has come to be called a \xe2\x80\x98race\xe2\x80\x99 statute) the first purchaser to record (the winner of\nthe \xe2\x80\x98race\xe2\x80\x99 to the registry) can hold his title against all other claimants, whether or not\nhe was in fact the first to purchase. In such a system, the official records become an\nunimpeachable source of information about the status of land ownership; the law\ncounts the record owner, and only the record owner, as the true owner. The purchaser\ncan buy in reliance on the records without fear of divestment by some unknown\ninterloper, and without the need to make some cumbersome extra-record search for\nsuch potential interlopers.\nThis system was too crystalline to last. The characters to muck up this crystalline system\n[are] ninnies, hard-luck cases, and the occasional scoundrels who take advantage of\nthem. What are we to do, for example, with the silly fellow who buys an interest in\nproperty but simply forgets to record? Or with the more conscientious one who does\nattempt to record his interest, but whose records wind up in the wrong book? Or with\nthe lost soul whose impeccably correct filing is dropped behind the radiator by the\nneglectful clerk? Some courts take a hard line, perhaps concluding that the first owner\nwas in a better position than our innocent outsider\xe2\x80\x94that is, the next purchaser\xe2\x80\x94to\ndetect and correct the flaws in the records. But our sympathies for the luckless\nunrecorded owner put pressure on the recording system that would divest him in favor\nof the later-arriving outsider.\nOur sympathies are all the greater when the outsider is not so innocent after all. What\nshall we do, say, when the unrecorded first buyer is snookered out of his claim by a\nlater purchaser who knows perfectly well that the land had already been sold? Shall we\nallow this nasty second buyer to perfect a claim simply because he carefully follows the\nofficial recording rules? This thought was too much for the courts of equity, and too\nmuch for American legislatures as well. By the early nineteenth century, the British\nequity courts had imported an element of non-record \xe2\x80\x98notice\xe2\x80\x99 into what had initially\nbeen a \xe2\x80\x98race\xe2\x80\x99 system. Under these doctrines, the later purchaser could take free of the\nprior claims only if he did not know about those prior claims, either from the records\nor from non-record facts that should put him \xe2\x80\x98on notice.\xe2\x80\x99 American legislatures\nfollowed this move to such a degree that, at present, only a handful of states maintain\na race system with any rigor. The other states deny the subsequent claim of the person\nwho had or should have had notice of the earlier claim.\n\n\x0cRecording Acts\n\n769\n\nThis development means mud: What \xe2\x80\x98should\xe2\x80\x99 a purchaser know about, anyway? To be\nsure, if someone is living on the land, perhaps the potential purchaser should make a\nfew inquiries about the occupant\xe2\x80\x99s status. But what if the \xe2\x80\x98occupant\xe2\x80\x99s\xe2\x80\x99 acts are more\nambiguous, consisting of, say, shovelling some manure onto the contested land? Well,\nsaid one court, a buyer should have asked about the source of all that manure\xe2\x80\x94and\nsince he didn\xe2\x80\x99t, and thus did not find out about the manure shoveller\xe2\x80\x99s prior but\nunrecorded claim, the later buyer did not count as an innocent; his title was a nullity.\nWith the emergence of this judicial outlook, the crystalline idea of the recording system\nhas come full cycle back to mud. To be sure, the recording system can give one a fair\nguess about the legal status of any given property. But by the end of the last century,\nas a Massachusetts court put it, \xe2\x80\x98it would be seldom that a case could occur where some\nstate of facts might not be imagined which, if it existed, would defeat a title.\xe2\x80\x99 Thus, the\ntest of a title\xe2\x80\x99s \xe2\x80\x98marketability\xe2\x80\x99 became a question of whether the title was subject to\n\xe2\x80\x98reasonable\xe2\x80\x99 doubt\xe2\x80\x94a matter, of course, for the discretion of the court. In the\nmeantime, a whole title insurance industry sprang up to calm the fears of would-be\npurchasers who wanted to avoid questions about which doubts were reasonable and\nwhich were not. It is this industry, in a sense, that once again makes crystals out of the\nrecording system\xe2\x80\x99s mud; and according to the reformers, it is this industry that now\nstands in the way of a more rational method of cleaning up the mess once and for all.\nYet one must wonder whether cleaning up the mess might not just repeat the cycle of\nmud/crystal/mud. One of the most popular suggestions for reform is the so-called\n\xe2\x80\x98Torrens\xe2\x80\x99 system, named for someone who thought that shipping registry methods\ncould be used beneficially in real estate. In this system, all claims on a given property\xe2\x80\x94\nsales, liens, easements, etc.\xe2\x80\x94are first registered and then incorporated in a certificate.\nTorrens registration echoes eerily the colonial \xe2\x80\x98race\xe2\x80\x99 statutes: No unregistered claim\ncounts, and the owner\xe2\x80\x99s certificate for a given property acts as the complete record of\neverything that anyone might claim.\nWell, perhaps not everything: Government liens, fraudulent transactions, and,\naccording to some courts, even simple errors or neglect in registration can produce\nunregistered claims that count. Hence this neo-race system provides no complete relief\nfrom the recording system\xe2\x80\x99s mud. Even after we look at the Torrens certificate, we still\n\n\x0c770\n\nProperty\n\nhave to be on the lookout for the G-men, the forgers, and the ninnies who neglected\nto register their claims properly. Not a lot of mud, to be sure, but just wait. In some\njurisdictions with a long history of Torrens registration, courts have in effect\nreestablished a \xe2\x80\x98notice\xe2\x80\x99 system, defeating the interest of one who registers his claim\nwhen he knows about a prior unregistered one\xe2\x80\x94or merely when he should have known\nabout the prior claim. This practice, of course, means that the registry and certificate\nno longer count as the complete source of information about a property\xe2\x80\x99s title status.\nThe most striking aspect of these developments is that first the title recording acts, and\nlater the registration systems, represented deliberate choices to establish crystaline rules\nfor the sake of simplicity and ease of land sales and purchases. People who failed to\nuse the records or registries were supposed to lose their claims, no matter how innocent\nthey might have been, and no matter how nastily their opponents might have behaved.\nYet these very crystalline systems have drifted back into mud through the importation\nof equitable ideas of notice\xe2\x80\x94only to be replaced by new crystalline systems in the form\nof private contract or public legislation\xe2\x80\xa6.\nLet us suppose that we have a system for the clarification of property titles. Might we\nhave a tendency to overuse the system, so that in the end it becomes so hopelessly\nbogged down in detail that the purpose of clarity is defeated? Certainly our traditional\nland records have this quality. Some early cases permitted only fee interests to be\nrecorded, but it was the very attractiveness of the system that created pressure to allow\nthe recordation of other interests; liens, for example, or easements. Indeed, some\nclaims may be in the records even though they are not legally recordable. Then too,\nmany claims are recorded and just stay put over time, and sometimes even conflict with\nother recorded claims. The layers of these recorded but unextinguished claims can grow\nso thick that it hardly seems worth the time to go back and check them all. So, in a\nsense, we treat our clarifying systems\xe2\x80\x94in this case the recording mechanisms\xe2\x80\x94as a\nkind of \xe2\x80\x98commons.\xe2\x80\x99 The resulting system overload, in turn, creates a certain disgust\nwith the lush proliferation of records. In fact, one of our current recording reforms\nwould simply extinguish claims that have not been asserted during a given period.\nThus, the very attractiveness of making clear one\xe2\x80\x99s claims by recording them defeats\nthe purpose of the system, that is, to clarify all claims against a given property. One\n\n\x0cRecording Acts\n\n771\n\nsees the same pattern in the excessively long contracts that attempt to specify all\npossible contingencies and that no one actually reads; however comforting it might be\nto \xe2\x80\x98have it in writing,\xe2\x80\x99 it really isn\xe2\x80\x99t worth the effort to nail down everything, and the\noverly precise contract may wind up being just as opaque as\xe2\x80\x94and perhaps even more\narbitrary than\xe2\x80\x94the one that leaves adjustments to the contingencies of future relations.\nThe trouble, then, is that an attractively simple legal device draws in too many users, or\ntoo complex a set of uses. And that, of course, is where the simple rule becomes a\nbooby trap. It is this booby trap aspect of what seems to be clear, simple rules\xe2\x80\x94that\nscenario of disproportionate loss by some party-that seems to drive us to muddy up\ncrystal rules with the exceptions and the post hoc discretionary judgments.\nArgent Mortgage Co. v. Wachovia Bank N.A.\n52. So. 3d 796 (Dist. Ct. App. 2010)\nGRIFFIN, J.\nArgent Mortgage Company, LLC [\xe2\x80\x9cArgent\xe2\x80\x9d] appeals the trial court\xe2\x80\x99s entry of judgment\nin favor of Wachovia Bank National Association, as Trustee Under Pooling and\nServicing Agreement Dated as of November 1, 2004, Asset Backed Pass\xe2\x80\x93Through\nCertificates Series 2004\xe2\x80\x93WWF1 [\xe2\x80\x9cWachovia\xe2\x80\x9d]. Argent argues that the trial court erred\nby finding that the mortgage now owned by Wachovia has priority over Argent\xe2\x80\x99s\nmortgage. We reverse.\nOn August 31, 2004, Gene M. Burkes and Ann Burkes [\xe2\x80\x9cthe Burkes\xe2\x80\x9d] as\nborrower/mortgagor and Olympus Mortgage Company as lender/mortgagee executed\na mortgage [\xe2\x80\x9cthe Olympus Mortgage\xe2\x80\x9d] on real property as security for a $90,000.00\nloan. The Olympus Mortgage was recorded on January 5, 2005. Subsequently, the\nOlympus Mortgage was assigned to Wachovia. As a result of default, Wachovia filed a\ncomplaint to foreclose the Olympus Mortgage and to enforce lost loan documents.\nWachovia joined Argent as a defendant, alleging that Argent might claim some interest\nin or lien upon the subject property by virtue of a recorded mortgage.\nOn December 10, 2004, the Burkes as borrower/mortgagor and Argent as\nlender/mortgagee executed a mortgage [\xe2\x80\x9cthe Argent Mortgage\xe2\x80\x9d] as security for a\n\n\x0c772\n\nProperty\n\n$65,000.00 loan on the same real property that is the subject of the Olympus Mortgage.\nThe Argent Mortgage was recorded on January 31, 2005. Subsequently, Wells Fargo\nBank became the owner of the Argent Mortgage. An action to foreclose the Argent\nMortgage was initiated as a result of default.\n[Argent and Wachovia filed cross motions for summary judgment.] Ultimately, the trial\ncourt deemed \xe2\x80\x9cthe Florida statutes on recordation,\xe2\x80\x9d namely sections\n695.01 and 695.11, Florida Statutes, \xe2\x80\x9cto be of the race-notice variety,\xe2\x80\x9d found that the\nOlympus Mortgage should have priority over the Argent Mortgage, and entered a\npartial final judgment in favor of Wachovia.\nOn appeal, \xe2\x80\xa6 Argent asserts that section 695.01, Florida Statutes, alone determines\nwhich mortgage has priority, that section 695.01 is, and, for over a century, has been\nrecognized to be a \xe2\x80\x9cnotice\xe2\x80\x9d statute, not a \xe2\x80\x9crace-notice\xe2\x80\x9d statute and that, under section\n695.01, the Argent Mortgage has priority over the Olympus Mortgage.\nWachovia acknowledges that section 695.01, Florida Statutes, is a \xe2\x80\x9cnotice\xe2\x80\x9d type of\nrecording statute. However, Wachovia contends that amendments made to section\n695.11, Florida Statutes, have converted Florida into a \xe2\x80\x9crace-notice\xe2\x80\x9d state.\nAs an initial matter, it bears explaining that recording statutes are classified into three\ncategories: race, notice, and race-notice. These can generally be described as follows:\n\xe2\x80\xa2 Under a race recording statute, a subsequent mortgagee of real property will prevail\nagainst a prior mortgagee of the said real property if the subsequent mortgage is\nrecorded before the prior mortgage.\n\xe2\x80\xa2 Under a notice recording statute, a subsequent mortgagee of real property for value\nand without notice (actual and constructive) of a prior mortgage of the said real\nproperty will prevail against the prior mortgagee.\n\xe2\x80\xa2 Under a race-notice recording statute, a subsequent mortgagee of real property for\nvalue and without notice (actual and constructive) of a prior mortgage of the said\nreal property will prevail against the prior mortgagee if the subsequent mortgage is\nrecorded before the prior mortgage.\n\n\x0cRecording Acts\n\n773\n\nImportantly, under either a notice or a race-notice recording statute, the subsequent\nmortgagee cannot be without constructive notice if the prior mortgage has been\nrecorded as of the time of execution of the subsequent mortgage.\nApplication of each type of recording statute to the undisputed facts here yields the\nfollowing results:\n\xe2\x80\xa2 Wachovia prevails under a race recording statute because the Olympus Mortgage\nwas recorded before the Argent Mortgage;\n\xe2\x80\xa2 Argent prevails under a notice recording statute because it is a subsequent\nmortgagee for value and did not have notice of the Olympus Mortgage at the time\nof execution of the Argent Mortgage; and\n\xe2\x80\xa2 Wachovia prevails under a race-notice recording statute because, although Argent\nis a subsequent mortgagee for value and did not have notice of the Olympus\nMortgage at the time of execution of the Argent Mortgage, the Olympus Mortgage\nwas recorded before the Argent Mortgage.\nCommentators appear uniformly to categorize section 695.01 as a \xe2\x80\x9cnotice\xe2\x80\x9d type of\nrecording statute. See 2\xe2\x80\x9326 RALPH E. BOYER, FLORIDA REAL ESTATE\nTRANSACTIONS \xc2\xa7 26.02 (Matthew Bender & Co., Inc. 2010) (\xe2\x80\x9cFlorida has a notice type\nrecording statute, the primary function of which is to protect subsequent purchasers\n(which for purposes of this discussion includes mortgagees and creditors who are\nwithin the statute\xe2\x80\x99s protection) against claims arising from prior unrecorded\ninstruments ....\xe2\x80\x9d).\nFlorida courts over time have described and applied Florida\xe2\x80\x99s recording statute in a\nmanner that is consistent with a \xe2\x80\x9cnotice\xe2\x80\x9d type of recording statute. [citing cases]\nFlorida\xe2\x80\x99s approach to the problem was succinctly described by the Florida Supreme\nCourt in Van Eepoel Real Estate Co. v. Sarasota Milk Co., 100 Fla. 438, 129 So. 892, 895\n(1930):\n[I]t is generally held, in states having recording statutes similar to ours,\nthat if A conveys lands to B, a bona fide purchaser for value, who does\n\n\x0c774\n\nProperty\n\nnot go into possession and who failed to record his deed until after A\nconveys the same land to C, a second bona fide purchaser for value\nwithout notice of B\xe2\x80\x99s interest, and B then records his deed before C\nrecords his, the title of C shall nevertheless prevail as between C and B,\nbecause it is the fault of B that he did not immediately record his deed,\nthereby permitting C to deal with the property and part with his\nconsideration without knowledge of B\xe2\x80\x99s interest. So B is estopped and\nthe equities are with C.\nSection 695.01, notwithstanding, the trial court accepted Wachovia\xe2\x80\x99s argument that a\n1967 amendment to a different statute, section 695.11, Florida Statutes, entitled,\n\xe2\x80\x9cInstruments deemed to be recorded from time of filing\xe2\x80\x9d converted Florida from a\n\xe2\x80\x9cnotice\xe2\x80\x9d to a \xe2\x80\x9crace-notice\xe2\x80\x9d jurisdiction. * The earliest version of section 695.11 dates\nback to 1885. Examination of the language of the 1906, 1920, and 1935 iterations\nof section 695.11, make clear that this statute was intended to provide a mechanism for\ndetermining the time at which an instrument was deemed to be recorded. Nothing in\nthe case law suggests that section 695.11 modifies section 695.01. \xe2\x80\xa6 3\nWachovia relies on an earlier opinion of this Court, Rice v. Greene, 941 So.2d 1230 (Fla.\n5th DCA 2006), in support of its contention that Florida has a race-notice type of\nrecording statute. In Rice, this Court \xe2\x80\xa6 found:\n\n[Eds.\xe2\x80\x94Section 695.11 reads, \xe2\x80\x9cAll instruments which are authorized or required to be recorded in the office of\nthe clerk of the circuit court of any county in the State of Florida, \xe2\x80\xa6 and which are filed for recording on or\nafter the effective date of this act, shall be deemed to have been officially accepted by the said officer, and\nofficially recorded, at the time she or he affixed thereon the consecutive official register numbers \xe2\x80\xa6 and at such\ntime shall be notice to all persons. The sequence of such official numbers shall determine the priority of\nrecordation. An instrument bearing the lower number in the then-current series of numbers shall have priority\nover any instrument bearing a higher number in the same series.\xe2\x80\x9d]\n\n*\n\n3 Case\n\nlaw confirms that the purpose of section 695.11 is to determine the time at which an instrument is deemed\nto be recorded and to serve as notice. [citing cases] Section 695.11 has an important purpose to determine the\npriority between judgment liens. [citing cases] Because a certified copy of a judgment must be recorded in order\nto create a lien on real property, a judgment that is recorded earlier in time, namely one that bears a lower official\nregister number, will win priority.\n\n\x0cRecording Acts\n\n775\n\nIn other words, an unrecorded deed is not good or effectual in law or\nequity against creditors or subsequent purchasers for valuable\nconsideration who are without notice of the transaction.\nTherefore, because Mr. Greene had no notice of the earlier warranty deed\nbetween Mr. Rice and Mrs. Schwartz and paid valuable consideration for the\nproperty, Mr. Greene\xe2\x80\x99s recording of his warranty deed before Mr. Rice gives Mr.\nGreene priority to the property.\nId. at 1232 (emphasis added). According to Wachovia, this language proves that\npriority in recording is key. Notably, however, Rice does not mention section\n695.11 and recording was not an issue. The subsequent purchaser in Rice (Mr. Greene)\nhad priority to the property under a notice type of recording statute because he paid\nvalue for the property and did not have notice (actual or constructive) of the earlier\nwarranty deed at the time of the conveyance. The fact that Mr. Greene\xe2\x80\x99s deed was\nrecorded before Mr. Rice\xe2\x80\x99s does not affect the outcome under a notice type of\nrecording statute. Although a portion of the sentence in Rice, on which Wachovia relies,\nmentions recording, in that case, it was superfluous.\nWe conclude that Florida is, and remains, a \xe2\x80\x9cnotice\xe2\x80\x9d jurisdiction, and notice controls\nthe issue of priority. Since Argent is a subsequent mortgagee for value and did not have\nnotice of the Olympus Mortgage at the time of execution of the Argent Mortgage, the\nArgent Mortgage has priority over the Olympus Mortgage. As such, the trial court erred\nby entering partial summary final judgment in favor of Wachovia on the issue of\npriority.\nQuestions\n1. Who would have won in Argent if Argent had recorded on January 3 instead of\non January 31? What about in a race jurisdiction? In a race-notice jurisdiction?\n2. Who would have won in Argent if the Burkes had disclosed the existence of the\nOlympus Mortgage to Argent on December 6? On December 16? What about\nin a race jurisdiction? In a race-notice jurisdiction?\n\n\x0c776\n\nProperty\n\n3. What kind of recording acts are the three state statutes listed below? Explain\nhow the categorization\xe2\x80\x94race, notice, or race-notice\xe2\x80\x94follows from the text of\nthe statute.\nFLA. STAT. \xc2\xa7 695.01\nNo conveyance, transfer, or mortgage of real property, or of any interest therein, nor\nany lease for a term of 1 year or longer, shall be good and effectual in law or equity\nagainst creditors or subsequent purchasers for a valuable consideration and without\nnotice, unless the same be recorded according to law \xe2\x80\xa6 .\nN.C. STAT. \xc2\xa7 47-18\nNo (i) conveyance of land, or (ii) contract to convey, or (iii) option to convey, or (iv)\nlease of land for more than three years shall be valid to pass any property interest as\nagainst lien creditors or purchasers for a valuable consideration from the donor,\nbargainer or lesser but from the time of registration thereof in the county where the\nland lies\xe2\x80\xa6 .\nALASKA STAT. \xc2\xa7 40.17.080\n\xe2\x80\xa6 A conveyance of real property in the state, other than a lease for a term of less than\none year, is void as against a subsequent innocent purchaser in good faith for valuable\nconsideration of the property or a part of the property whose conveyance is first\nrecorded. \xe2\x80\xa6\nHartig v. Stratman\n729 N.E.2d 237 (2000)\nSHARPNACK, Chief Judge: \xe2\x80\xa6\nMelvin and Louise Stratman are the owners of real property located at 2208 E. Walnut\nSt. in Evansville, Indiana. The property next door, at 2210 E. Walnut St., is owned by\n[Timothy] Hartig. The instant dispute centers around a shared driveway that is located\non both parcels of property, with the majority of the driveway being on Hartig\xe2\x80\x99s\nproperty.\n\n\x0cRecording Acts\n\n777\n\nThe record of title to Hartig\xe2\x80\x99s property discloses that Hartig purchased the property\nfrom Sean Holmes on September 28, 1995. Holmes in turn purchased the property\nfrom John Connell on May 31, 1994. On the same day that Connell sold the property\nto Holmes, Connell entered into a written easement agreement with the Stratmans\nregarding the shared driveway. The agreement gave the Stratmans a perpetual easement\nover the portion of the driveway that is located upon the parcel at 2210 E. Walnut St.\nand gave the property owners at 2210 E. Walnut St. a perpetual easement over the\nportion of the driveway that is located upon the Stratman parcel. The Stratman-Connell\neasement agreement was recorded in the Vanderburgh County Recorder\xe2\x80\x99s Office on\nJune 8, 1994, at 2:25 p.m. The deed transferring the property at 2210 E. Walnut Street\nfrom Connell to Holmes was also recorded on June 8, 1994, but it was recorded one\nminute earlier, at 2:24 p.m. It is undisputed that when Holmes sold the property to\nHartig, he did not inform Hartig about the existence of the driveway easement\nagreement.\nThereafter, on February 13, 1998, the Stratmans filed a complaint alleging that Hartig\nwas blocking the driveway and refusing to allow them to use it. [The Stratmans claimed\na prescriptive easement to use the driveway; the court dismissed their complaint.] Then,\non August 26, 1998, the Stratmans filed a \xe2\x80\x9cSecond Paragraph of Amended Complaint,\xe2\x80\x9d\nasserting the right to use the driveway by virtue of the Connell-Stratman easement\nagreement. Thereafter, Hartig filed a motion for summary judgment, which the trial\ncourt denied on June 29, 1999. \xe2\x80\xa6\nB.\nHartig next contends that he is entitled to summary judgment because the ConnellStratman driveway easement agreement was recorded outside his chain of title and\ntherefore not binding on him. Indiana\xe2\x80\x99s recording statute provides:\nEvery conveyance or mortgage of lands or of any interest therein \xe2\x80\xa6\nshall be recorded in the recorder\xe2\x80\x99s office \xe2\x80\xa6 ; and every conveyance [or]\nmortgage \xe2\x80\xa6 shall take priority according to the time of the filing thereof,\nand such conveyance [or] mortgage \xe2\x80\xa6 shall be fraudulent and void as\nagainst any subsequent purchaser, \xe2\x80\xa6 or mortgagee in good faith and for\na valuable consideration, having his deed [or] mortgage \xe2\x80\xa6 first recorded.\n\n\x0c778\n\nProperty\n\nInd. Code \xc2\xa7 32-1-2-16. The purpose of this statute is to provide protection to\nsubsequent purchasers and mortgagees. This protection is derived from the fact that a\nlandowner will not be deemed to have constructive notice of adverse claims that appear\noutside the chain of title.\nTo determine the chain of title, the prospective purchaser must go to the recorder\xe2\x80\x99s\noffice and search through the grantor index, beginning with the person who received\nthe grant of land from the United States and continuing until the conveyance of the\ntract in question. The particular grantor\xe2\x80\x99s name is not searched thereafter.\nHere, when Hartig conducted a title search of the property at 2210 E. Walnut St., he\nwould have discovered the conveyance to Connell. Next, Hartig would have discovered\nthe conveyance from Connell to Holmes that was recorded on June 8, 1994, at 2:24\np.m. Hartig would not have discovered the Connell-Stratford [Ed: presumably\n\xe2\x80\x9cConnell-Stratman\xe2\x80\x9d] easement agreement that was recorded one minute later, however,\nbecause Connell\xe2\x80\x99s name would not have been searched after the conveyance to Holmes\nwas discovered. Therefore, the easement agreement is not within Hartig\xe2\x80\x99s chain of title\nand he cannot be deemed to have constructive notice of its existence. Accordingly, we\nhold that the trial court erred in denying Hartig\xe2\x80\x99s motion for summary judgment with\nrespect to the issue of the driveway easement agreement.\nQuestions\n1. Morse v. Curtis, 2 N.E. 929 (Mass. 1885), explained,\nIf [a title examiner] can start with an owner who is known to have\na good title \xe2\x80\xa6 he is obliged to run through the index of grantors\nuntil he finds a conveyance by the owner of the land in question.\nAfter such conveyance the former owner becomes a stranger to\nthe title, and the examiner must follow down the name of the\nnew owner to see if he has conveyed the land, and so on. It would\nbe a hardship to require an examiner to follow in the index of\ngrantors the name of every person who at any time, through,\nperhaps, a long chain of title, was the owner of the estate.\n\n\x0cRecording Acts\n\n779\n\nDoes this policy persuasively justify Hartig?\n2. In some jurisdictions today, title records are indexed not only by grantors\xe2\x80\x99 and\ngrantees\xe2\x80\x99 names, but also by unique numerical identifiers for every parcel of real\nproperty in the jurisdiction. For example, in New York City all recorded\ninstruments conveying an interest in real property are indexed by reference to\nthe Borough, Block, and Lot (\xe2\x80\x9cBBL\xe2\x80\x9d) numbers on city tax maps. See Automated\nCity Register Information System (http://a836-acris.nyc.gov); New York City\nDepartment of Finance Digital Tax Maps (http://gis.nyc.gov/taxmap/). If\nHartig had arisen in a jurisdiction that maintained such a \xe2\x80\x9ctract index,\xe2\x80\x9d would\nthe result have been any different? See Andy Assocs., Inc. v. Bankers Trust Co.,\n49 N.Y.2d 13, 399 N.E.2d 1160, 424 N.Y.S.2d 139 (1979).\n3. Suppose the Stratmans reason as follows: Hartig bought without notice, so we\nlost to him, but we can fix the notice problem going forward. We\xe2\x80\x99ll put up a big\nsign on our front yard at 2208 E. Walnut St. reading, \xe2\x80\x9cWe own a driveway\neasement across 2210 E. Walnut St.\xe2\x80\x9d True or false: if the Stratmans do this,\nanyone who buys the house from Hartig takes with notice of the easement and\nis therefore bound by it. Would it make a difference if Hartig v. Stratman had\nnever been litigated and reduced to judgment?\n4. In Hartig, the Connell-Stratford deed was outside Hartig\xe2\x80\x99s chain of title because\nit was recorded too late: after Connell was no longer the record owner. Deeds\ncan also be recorded too early: before the grantor is the record owner. How\ncould that happen? Suppose that the Bluth Corporation is building a subdivision\non land in Sudden Valley that it is purchasing from the federal government.\nAlthough the contract of sale with the government has been signed, the delivery\nof the actual deed to Bluth has been delayed for complex bureaucratic reasons.\nYou represent the Devon Bank, which is financing the development with a loan\nto Bluth, which will be secured with a mortgage on the land. The bank\xe2\x80\x99s\nmanager proposes that the bank go through with the loan and protect its interest\nby recording the mortgage immediately and ensuring that Bluth records the\ndeed from the government as soon as it issues. Is this a good idea?\n\n\x0c780\n\nProperty\n\n5. Who is a \xe2\x80\x9cpurchaser \xe2\x80\xa6 for a valuable consideration\xe2\x80\x9d entitled to the protection\nof a recording act? In Hood v. Webster, 2 N.E.2d 43 (N.Y. 1936), Florence Hood\nexecuted a deed to a farm to her brother-in-law William Hood in 1913; the deed\nwas escrowed and was to be delivered to William at Florence\xe2\x80\x99s death. In 1928,\nFlorence executed and delivered another deed to the same farm, this time to her\nnephew, Howard Webster. Howard\xe2\x80\x99s deed recited that it was given for \xe2\x80\x9cOne\nDollar and other good and valuable consideration.\xe2\x80\x9d Florence died in 1933. Held:\nthe \xe2\x80\x9crecital was not enough to put [Howard] into the position of purchaser[] for\na valuable consideration.\xe2\x80\x9d Is this right? What if the deed had recited that it was\ngiven for \xe2\x80\x9cTen Billion Dollars and other good and valuable consideration?\xe2\x80\x9d\nWhat if Howard had testified that the farm was worth $20,000 and he had given\nFlorence $1,000 in cash? The dissent argued that the record showed that\nWilliam had reneged on a promise to pay Florence $200 a month for life, and\nthat Howard had \xe2\x80\x9ccome to live with [Florence] and help her on the farm\xe2\x80\x9d when\nshe executed the deed to him. Do these facts affect your view of the case?\nBoard of Education of Minneapolis v. Hughes\n136 N.W. 1095 (Minn. 1912)\nBUNN, J.\nAction to determine adverse claims to a lot in Minneapolis. \xe2\x80\xa6 The trial resulted in a\ndecision in favor of plaintiff, and defendants appealed from an order denying a new\ntrial.\nThe facts are not in controversy and are as follows: On May 16, 1906, Carrie B. Hoerger,\na resident of Faribault, owned the lot in question, which was vacant and subject to\nunpaid delinquent taxes. Defendant L. A. Hughes offered to pay $25 for this lot. His\noffer was accepted, and he sent his check for the purchase price of this and two other\nlots bought at the same time to Ed. Hoerger, husband of the owner, together with a\ndeed to be executed and returned. The name of the grantee in the deed was not\ninserted; the space for the same being left blank. It was executed and acknowledged by\nCarrie B. Hoerger and her husband on May 17, 1900 [Ed: presumably 1906], and\ndelivered to defendant Hughes by mail. The check was retained and cashed. Hughes\n\n\x0cRecording Acts\n\n781\n\nfilled in the name of the grantee, but not until shortly prior to the date when the deed\nwas recorded, which was December 11, 1910. On April 27, 1909, Duryea & Wilson,\nreal estate dealers, paid Mrs. Hoerger $25 for a quitclaim deed to the lot, which was\nexecuted and delivered to them, but which was not recorded until December 21, 1910.\nOn November 19, 1909, Duryea & Wilson executed and delivered to plaintiff a\nwarranty deed to the lot, which deed was filed for record January 27, 1910. It thus\nappears that the deed to Hughes was recorded before the deed to Duryea & Wilson,\nthough the deed from them to plaintiff was recorded before the deed to defendant.\nThe questions for our consideration may be thus stated: (1) Did the deed from Hoerger\nto Hughes ever become operative? (2) If so, is he a subsequent purchaser whose deed\nwas first duly recorded, within the language of the recording act?\nThe decision of the first question involves a consideration of the effect of the delivery\nof a deed by the grantor to the grantee with the name of the latter omitted from the\nspace provided for it, without express authority to the grantee to insert his own or\nanother name in the blank space. It is settled that a deed that does not name a grantee\nis a nullity, and wholly inoperative as a conveyance, until the name of the grantee is\nlegally inserted. \xe2\x80\xa6[T]he deed to defendant Hughes was not operative as a conveyance\nuntil his name was inserted as grantee. [But] Hughes had implied authority from the\ngrantor to fill the blank with his own name as grantee, and \xe2\x80\xa6 when he did so the deed\nbecame operative.\nWhen the Hughes deed was recorded, there was of record a deed to the lot from\nDuryea & Wilson to plaintiff, but no record showing that Duryea & Wilson had any\ntitle to convey. The deed to them from the common grantor had not been recorded.\nWe hold that this record of a deed from an apparent stranger to the title was not notice\nto Hughes of the prior unrecorded conveyance by his grantor. He was a subsequent\npurchaser in good faith for a valuable consideration, whose conveyance was first duly\nrecorded; that is, Hughes\xe2\x80\x99 conveyance dates from the time when he filled the blank\nspace, which was after the deed from his grantor to Duryea & Wilson. He was,\ntherefore, a \xe2\x80\x98subsequent purchaser,\xe2\x80\x99 and is protected by the recording of his deed before\nthe prior deed was recorded. The statute cannot be construed so as to give priority to\na deed recorded before, which shows no conveyance from a record owner. It was\n\n\x0c782\n\nProperty\n\nnecessary, not only that the deed to plaintiff should be recorded before the deed to\nHughes, but also that the deed to plaintiff\xe2\x80\x99s grantor should be first recorded.\nOur conclusion is that the learned trial court should have held on the evidence that\ndefendant L. A. Hughes was the owner of the lot.\nQuestions\n1. The deed from Duryea & Wilson to the plaintiff is called a \xe2\x80\x9cwild deed.\xe2\x80\x9d Why?\nDraw a diagram of the conveyances in Hughes, noting which of them were\nrecorded. What would someone searching the title to the property have found?\nPut another way, what went wrong here? Whose fault was it? What can or\nshould a recording system do about it?\n2. What kind of recording act does Minnesota have, according to Hughes? How\ncan you tell? Would the result have been different under either of the other\ntypes of recording acts?\n3. What result if Hughes had filled in his name on the blank deed when he received\nit from Hoerger in 1906 rather than when he recorded it in 1910?\n4. Clerical Errors. What result if a deed as delivered to the clerk reads \xe2\x80\x9cBolan\xe2\x80\x9d\nbut the clerk enters it in the indexes under \xe2\x80\x9cBolen?\xe2\x80\x9d Under \xe2\x80\x9cNolan?\xe2\x80\x9d Long ago,\ncourts would invoke the doctrine of idem sonans (Latin for \xe2\x80\x9csounds the same\xe2\x80\x9d)\nto hold that subsequent purchasers would be on notice of an instrument that\nhad been indexed under a name that was different from the name on the\ninstrument itself, but close enough to identify the party phonetically. This rule\nobviously protects the prior interest at the cost of some potential unfairness to\nthe subsequent purchaser, and more recently idem sonans has been significantly\nweakened by states that once enforced it. See, e.g., Nat\xe2\x80\x99l Packing Corp. v.\nBelmont, 547 N.E.2d 373 (Ohio Ct. App. 1988).\nBut what if the clerk neglects to index a deed at all? What if the clerk drops the\ndeed behind the radiator and forgets about it? In such a case, should a\nsubsequent purchaser be deemed on notice of the instrument? If not, is there\n\n\x0cRecording Acts\n\n783\n\nany way for the recording party to be secure against subsequent purchasers in\nsuch circumstances?\n5. In 2008, the New York Daily News \xe2\x80\x9cstole\xe2\x80\x9d the Empire State Building by recoding\na phony deed to it in New York City\xe2\x80\x99s recording system. The deed purported\nto transfer ownership of the building to \xe2\x80\x9cNelots Properties L.L.C.\xe2\x80\x9d; it bore a\nfake notary stamp and purported to be \xe2\x80\x9cwitnessed\xe2\x80\x9d by Fay Wray, the actress\nwho starred in King Kong. Clerks made no attempt to verify any of the\ninformation on the deed, which was duly recorded. Should they have?\n6. Tax protesters\xe2\x80\x94people who challenge the authority of government to collect\ntaxes\xe2\x80\x94sometimes record multi-million-dollar \xe2\x80\x9cliens\xe2\x80\x9d against the houses of local\ntax officials and government lawyers. Unlike a typical judgment lien, which\narises from a judgment of a court of competent jurisdiction, these \xe2\x80\x9cliens\xe2\x80\x9d arise\nfrom the actions of \xe2\x80\x9ccommon law courts\xe2\x80\x9d established by the protesters\nthemselves. What effect does recording one of these \xe2\x80\x9cliens\xe2\x80\x9d have? What can the\nvictims do about it? How might a state government deal with the general\nproblem of fraudulent recording?\nAdam J. Levitin, The Paper Chase: Securitization, Foreclosure,\n\nand the Uncertainty of Mortgage Title\n\n63 DUKE L.J. 637 (2013) (excerpts reprinted by permission)\nSECURITIZATION-ERA MORTGAGE TITLE SYSTEMS\n\xe2\x80\xa6MERS [Mortgage Electronic Registration Systems, Inc.] is a private, contractual\nsuperstructure that is grafted onto the public land-recordation system. Financial\ninstitutions that are members of MERS register the loans they service (but do not\nnecessarily own) with the MERS System electronic database. Each loan receives a\nunique identifier known as a MERS Identification Number (MIN). The MIN is\nsometimes stamped on the note or sometimes simply recorded in the lender\xe2\x80\x99s own\nrecords. MERS is then inserted in the local land records as the mortgagee, instead of\nthe actual lender. Sometimes this involves an assignment of the mortgage from the\nlender to MERS, but the more prevalent arrangement has MERS recorded as the\noriginal mortgagee, thereby obviating any recordation of assignments. MERS serves as\n\n\x0c784\n\nProperty\n\nthe mortgagee of record, but only as a nominee for the actual lender and supposedly\nfor its successors and assigns. The language included in MERS mortgages is that MERS\nis acting \xe2\x80\x9csolely as nominee for Lender and Lender\xe2\x80\x99s successors and assigns.\xe2\x80\x9d MERS\nclaims no beneficial interest whatsoever in the loan.\nMERS\xe2\x80\x99s goal is to immobilize mortgage title through a common-agency structure by\nacting as nominee for the lender and those subsequent transferees of the lender that\nare members of MERS. Although legal title remains in MERS\xe2\x80\x99s name, subsequent\ntransfers are supposed to be tracked in MERS\xe2\x80\x99s database.\nThus, MERS aims to achieve the priority and enforcement benefits of public\nrecordation while tracking beneficial ownership title in its own database. MERS\xe2\x80\x99s\noperation has two important implications. First, instead of paying county recordation\nand transfer fees, financial institutions pay only for MERS membership and MERS\ntransaction fees. MERS thus o\xef\xac\x80ers potential cost savings in the securitization process\nthrough the avoidance of local recording fees. Second, MERS\xe2\x80\x99s electronic database,\nnot the county land records, represents the main evidentiary source for determining\nwho is currently the real party in interest on a mortgage.\nIn theory, MERS\xe2\x80\x99s database tracks two distinct characteristics: the identity of the party\nwith the rights to service the mortgage (often an agent for the trustee for the trust\ncreated for the ultimate beneficial owners of the mortgage loan) and the legal title to\nmortgages (for example, the trustee for the trust created for the ultimate beneficial\nowners of the mortgage). MERS\xe2\x80\x99s publicly available records do not track chain of title.\nIt is impossible for outsiders to determine if transfers were made in the MERS system\nand when. Instead, MERS publicly tracks only the current servicer and sometimes the\ncurrent beneficial owner of a loan.\nA major problem with MERS as a title system is that it is not accurate and reliable in\nterms of what it reports. MERS\xe2\x80\x99s members are nominally required to report transfers\nof mortgage servicing rights to MERS, but MERS does not actually compel reporting\nof servicing-rights transfers, and there is little incentive to be punctual with reporting.\nIndeed, the lack of record validation combined with voluntary reporting has led a\n\n\x0cRecording Acts\n\n785\n\nfederal judge to describe MERS as \xe2\x80\x9cthe Wikipedia of land registration systems.\xe2\x80\x9d Not\nsurprisingly, the information in the MERS database is often inaccurate or incomplete.\nMERS does not even formally require any reporting of legal title to the mortgages,\nmuch less of transfers of legal title; any information about legal title is supplied through\nstrictly voluntary reporting. \xe2\x80\xa6\nMERS\xe2\x80\x99s database functions as a do-it-yourself private mortgage recordation system.\nHistorically, MERS itself has had only around fifty employees who perform corporate\nand technology support functions. Employees of MERS\xe2\x80\x99s members carry out most of\nthe tasks done in MERS\xe2\x80\x99s name, including the making of entries in the MERS database.\nThese employees of MERS\xe2\x80\x99s members are listed as assistant secretaries or vice\npresidents of MERS, but they have no actual employment relationship with MERS.\nThere are over twenty thousand of these \xe2\x80\x9ccorporate signing o\xef\xac\x83cers.\xe2\x80\x9d Accordingly, a\ntransfer of either servicing or legal title in the MERS system involves nothing more\nthan an employee of a MERS member entering the transfer in the MERS database.\nA transfer within the MERS system involves voluntary self-reporting and nothing more\nand therefore fails to incentivize timely, accurate reporting. There are no formalities to\na transfer in the MERS system. As a result, MERS may not in fact know who its\nprincipal is within the common-agency arrangement at any given point in time because\nMERS is relying on reporting from its members.\nNotes and Questions\n1. According to Donald J. Kochan, public recording serves a number of important\npurposes:\nRecording creates a network of information supporting a\nnetwork of transactions. Property recording systems offer\ninformation to a number of constituencies, including: (1) owners,\nacting as sellers or as borrowers; (2) lenders, including mortgage\nproviders; (3) other providers of capital; (4) buyers; (5)\nleaseholders; (6) title insurance companies; (7) governmental\nentities, such as police, regulators, and taxing authorities; and (8)\n\n\x0c786\n\nProperty\n\nother parties who may need to interact with the property at some\ntime and know who the law deems to have ownership of the\nproperty. Recording allows all of these market and legal\nparticipants to connect. It is imperative that we recognize the\nvariety of market players that use and benefit from the recording\nstatutes and from the existence of reliable, verifiable records of\nownership.\nIt is not just the owner and the most immediate lender that care\nabout proper recording. Those who wish to invest in, contract\nwith, lease from, or provide capital to property owners demand\nthe existence of a recording system so that they can identify the\nownership interests associated with the property, including\ndetermining whether and to what extent that property is\nencumbered by a mortgage. So, too, do prospective buyers of\nproperty require a verifiable repository of title information to\nguide their purchasing decisions. These other players must be\nable to discover the limits on title with a level of clarity. Similarly,\nthose who wish to provide loans secured by property or to make\nother capital investments in property need assurances that the\nowner owns the property that he says he owns and that the\nsystem reflects all competitive claims to or liens on title.\n\xe2\x80\xa6 At the very least, fragmentation of interests by securitization\nmakes ownership interests in real property harder to identify,\nnecessitating the existence of an accurate and complete means for\ntracking and recording these interests. \xe2\x80\xa6 [Securitization] is an\nimportant financial mechanism for the efficient provision of\ncapital and should not be sacrificed in an effort to resolve the\nmortgage crisis or to prevent future crises. In fact, it is difficult\nto see the provision of loans in today\xe2\x80\x99s financial system without\nsome reliance on securitization.\n\n\x0cRecording Acts\n\n787\n\nTo make securitization effective, the loan-granting institution\ntypically assigns its rights in both the note and the mortgage,\nsometimes to different parties. Due to transfers to the secondary\nmarket, securitization, and multiple assignments of notes and\nmortgages, it can become difficult to trace all of the steps along\nthe way. This flurry of activity\xe2\x80\x94and the number and variety of\nparticipants involved\xe2\x80\x94can lead to problems in the chain of title\nand identifying who ultimately and currently holds the\nenforceable note and mortgage interests against the property\nowner. These problems are especially evident when the\nformalities of transfer, such as required endorsements of notes,\nare not satisfied and when the transfers are not recorded in some\ncentral repository.\nDonald J. Kochan, Certainty of Title: Perspectives after the Mortgage Foreclosure Crisis\non the Essential Role of Effective Recording Systems, 66 ARK. L. REV. 267 (2013).\nCould MERS fulfill the functions of recording in such a system? What would\nneed to change?\n2. Along with the \xe2\x80\x9cWikipedia\xe2\x80\x9d characterization of MERS as freely editable, a\nReuters investigation used a different metaphor: \xe2\x80\x9cMERS has served in effect as\nan instant teller machine for mortgage assignments. Servicers simply have their\nown employees sign the needed documents as MERS officials.\xe2\x80\x9d At least one\nbank has sued another bank for allegedly assigning the first bank\xe2\x80\x99s mortgages to\nitself using MERS.\n3. Recall the mortgage documentation problems in Ibanez. Why were large\ninstitutions so cavalier about record-keeping, particularly regarding public\nrecords that provide assurance of title and priority? Fannie Mae is a\ngovernment-backed, now government-run institution that bought many\nmortgages. A 2006 internal Fannie Mae investigation explained:\nFannie Mae\xe2\x80\x99s position is that it does not need to appear in the\nland records in order to have the benefit of the security provided\n\n\x0c788\n\nProperty\n\nby the mortgage\xe2\x80\xa6. [T]he transfer of an obligation secured by a\nsecurity interest also transfers the security interest. Thus, the\ntransfer of the promissory note, which is the obligation, also\ntransfers the mortgage, which is the security interest. Once the\nnote is sold to Fannie Mae, the mortgage also transfers, despite\nthe fact that the servicer, lender, or MERS\xe2\x80\x99 name appears in the\nland records. Borrowers thus cannot determine the chain of\nowners from public records\xe2\x80\xa6.\nFannie Mae believes that lost note affidavits are the servicer\xe2\x80\x99s\nresponsibility and can not be effectively reviewed under the\ncurrent system. Fannie Mae has delegated the execution of lost\nnote affidavits to servicers. It does not believe that it is in a\nposition to make a subjective call as to whether a servicer has lost\na note\xe2\x80\xa6. Fannie Mae views such an investigation as unnecessary\nbecause document custodians are responsible for retaining\nmortgage documents and must bear an expense if they are unable\nto locate mortgage documents. For these reasons, Fannie Mae\nbelieves that servicers are not likely to state that the notes are lost, stolen\nor missing if they in fact are not. (emphasis added)\nCan you spot the problem here? One entity, Lender Processing Services, at one\npoint had a price list for \xe2\x80\x9crecreating\xe2\x80\x9d mortgage-related documents. A lost note\naffidavit was $12.95, as was a note allonge (a document that is supposed to be\nstapled to the original note documenting a transfer); an intervening assignment\nto fill a gap in the record chain of title was $35, and \xe2\x80\x9crecreating\xe2\x80\x9d an entire file\nwas $95.\nAn important point to remember here is that recording usually only matters\nwhen there\xe2\x80\x99s a bona fide purchaser contesting ownership. As long as the\noriginator didn\xe2\x80\x99t sell the mortgage twice, an unrecorded interest is still valid\nagainst the mortgagor, assuming the claimant can prove that it owns the interest.\nThat may be a faulty assumption, but Fannie Mae figured that risk was low.\n\n\x0cRecording Acts\n\n789\n\nNote on Recording Systems and Informal Title\nUp to a billion people worldwide are squatters, living on land they have no legal right\nto occupy, usually on the outskirts of cities. They\xe2\x80\x99re vulnerable to eviction or at least\nextortion from officials who take advantage of their lack of legal rights. Moreover, the\ninfluential economist Hernando De Soto has argued that record title would help poor\npeople enter the formal economy by giving them clear ownership of assets. Poor people\nare often highly entrepreneurial, but face great barriers entering the formal economy\xe2\x80\x94\nand thus their efforts may lead to fines and jail rather than to wealth. As owners, they\xe2\x80\x99d\nhave better incentives to invest in improving their land; they could also pledge their\nland to lenders in order to raise capital to start legitimate businesses; and they might\neven be able to get insurance in case of disaster. See HERNANDO DE SOTO, THE\nMYSTERY OF CAPITAL: WHY CAPITALISM TRIUMPHS IN THE WEST AND FAILS\nEVERYWHERE ELSE (2000). In the U.S., about 70% of new business credit comes from\nusing title to other assets, such as homes, as collateral. The likelihood of being able to\nrecover from these identifiable assets is the foundation of much willingness to lend.\nDe Soto argues that: \xe2\x80\x9cProperty is much more than a body of norms. It is also a huge\ninformation system that processes raw data until it is transformed into facts that can\nbe tested for truth, and thereby destroys the main catalysts of recessions and panics\xe2\x80\x94\nambiguity and opacity.\xe2\x80\x9d Hernando de Soto, Toxic Assets Were Hidden Assets, WALL ST.\nJ., Mar. 25, 2009. Legal title and a robust recording system provides reliable information.\nDe Soto\xe2\x80\x99s views have been highly influential, but also controversial. Record title might\nhelp for specific situations, but the government first has to decide to give the title to\nthe people who are living on the land, and that generally requires formally dispossessing\nsomeone else\xe2\x80\x94often someone wealthy who will fight back. De Soto favors squatters\xe2\x80\x99\nrights, and his argument depends in many ways on the same foundation as adverse\npossession. However, if the \xe2\x80\x9clegal\xe2\x80\x9d owners\xe2\x80\x99 title was unjustly acquired\xe2\x80\x94which is often\nthe case\xe2\x80\x94then squatters\xe2\x80\x99 rights can also be founded on theories of labor or first in\ntime.\nDoes formalizing title work? The evidence is mixed. De Soto\xe2\x80\x99s ideas were adopted as\npart of land title reform in Peru. In a six-year period, more than 1.2 million households,\ncontaining 6.3 million people, received title to the properties they were living on. Using\n\n\x0c790\n\nProperty\n\nsimilar areas that weren\xe2\x80\x99t subject to reform as controls, Erica Field determined that\nlabor force participation increased and child labor decreased. Apparently, many\nsquatter families try to run a small business out of their house so they can safeguard\nthe homestead at the same time; with legal title, that\xe2\x80\x99s no longer necessary. However,\nthere was not much evidence of increased access to credit, contrary to de Soto\xe2\x80\x99s\npredictions. See Erica Field, Entitled to Work: Urban Property Rights and Labor Supply in\nPeru, 122 Q.J. ECON. 1561 (2007). By contrast, in Thailand, the size of loans obtained\nfrom banks by farmers with formalized property was more than 50% larger than loans\nto farmers without record title. Results from around the world are ambiguous; formal\ntitle sometimes seems to spur investment, and sometimes it doesn\xe2\x80\x99t. See CLAUDIA R.\nWILLIAMSON, THE TWO SIDES OF DE SOTO: PROPERTY RIGHTS, LAND TITLING, AND\nDEVELOPMENT, ANNUAL PROCEEDINGS OF THE WEALTH AND WELL-BEING OF\nNATIONS 95 (2011).\nMoreover, it\xe2\x80\x99s important not to make the overgeneralized claim that \xe2\x80\x9cstrong\xe2\x80\x9d or \xe2\x80\x9cclear\xe2\x80\x9d\nproperty rights are necessary for economic development. It should already be clear to\nyou that Western property rights vary a lot and can be subject to lots of their own\nuncertainties, from the acts required to possess a previously unowned resource to the\nboundaries of an intellectual property right. England industrialized while its property\nlaw was highly unclear. What\xe2\x80\x99s needed is sufficient certainty to go forward, not perfect\ncertainty\xe2\x80\x94and that certainty can come from various sources, including but not limited\nto formal law.\nThe first Chinese law focusing specifically on property rights did not become effective\nuntil 2007. China\xe2\x80\x99s unprecedented real estate development during the prior two\ndecades thus occurred without any published law of real estate; investors committed\nhundreds of billions of dollars without assurance of what they would own even if all\nwent well. See GREGORY M. STEIN, MODERN CHINESE REAL ESTATE LAW (2012). In\nShenzhen, an economic powerhouse of a city with over 10 million residents, half of\nthe buildings have no legal titles. Instead, professionals have developed practices and\nnetworks, including government officials (with a bit of bribery thrown in), that facilitate\ntransactions even among strangers. See Shitong Qiao, Planting Houses in Shenzhen: A Real\nEstate Market without Legal Titles, 29 CAN. J.L. & SOC. 253 (2013). Qiao quotes an official\nat the Shenzhen Real Estate Ownership Registration Center: \xe2\x80\x9cNobody cares whether\n\n\x0cRecording Acts\n\n791\n\nthey have legal titles or not. You say they are illegal: dare you void the contracts? \xe2\x80\xa6\nThere is a huge amount of transactions\xe2\x80\x94you say farmers cannot sell, it is illegal\n[because the Chinese government owns all rural land], but they do it privately with little\nado. Are you to tell them whether it is legal or illegal?\xe2\x80\x9d Another quote from a senior\nofficial: \xe2\x80\x9c[I]t is a war against the people that cannot be won.\xe2\x80\x9d Facts on the ground\nmatter. On the other hand, China has also repeatedly suffered from conflicts,\nsometimes violent, between developers who claim government sanction and squatters\nwho assert that their actual possession should be respected.\nAt a minimum, record title can be useless without an overall well-functioning legal\nsystem. If corruption is a nation\xe2\x80\x99s problem, title won\xe2\x80\x99t solve that by itself. In addition,\nexpropriation by the wealthy or well-connected is an enduring problem. Without\ncareful implementation of a titling system, it\xe2\x80\x99s the already-powerful who end up with\nlegal title\xe2\x80\x94either initially, or when the formal system\xe2\x80\x99s property taxes start to kick in.\nA De Soto-type titling program in Cambodia led to fires and forced evictions of slum\ndwellers, followed by transfers of newly valuable inner-city land to wealthy developers.\nSee John Gravois, The de Soto Delusion, SLATE, Jan. 29, 2005. Older programs to provide\ntitle to members of Indian tribes, supposedly to help them integrate into the broader\nU.S. economy, suffered from similar problems. See Ezra Rosser, Anticipating de Soto:\nAllotment of Indian Reservations and the Dangers of Land-Titling, in HERNANDO DE SOTO\nAND PROPERTY IN A MARKET ECONOMY (D. Benjamin Barros ed., 2010).\nIf De Soto is right, the U.S. may have turned its back on his insights by inflicting serious\ndamage on our land recording system and investing too much in financial instruments\nfor which no centralized records are available. Even without the mortgage crisis, in the\nU.S., not everyone has record title, especially in low-income communities where\nproperty often transfers by intestate inheritance. In Louisiana, for example, an\nestimated 15% of the homeowners who applied for federal housing assistance after\nHurricane Katrina\xe2\x80\x94approximately 20,000 homeowners\xe2\x80\x94lacked clear record title.\nThis problem affected many homeowners concentrated in the low-income\nneighborhoods of New Orleans Parish and is one reason they received smaller amounts\nof help than many other, better-off neighborhoods. In Texas, about one out of five\nlow-income households applying for hurricane recovery assistance had at least one title\nissue impeding their ability to access assistance. See Heather Way, Informal Homeownership\n\n\x0c792\n\nProperty\n\nin the United States and the Law, 29 ST. L. U. PUB. L. REV. 113 (2009); see also Jane E.\nLarson, Informality, Illegality, and Inequality, 20 YALE L. & POL\xe2\x80\x99Y REV. 137 (2002)\n(discussing large-scale squatter communities in Texas); Zoe Loftus-Farren, Tent Cities:\nAn Interim Solution to Homelessness and Affordable Housing Shortages in the United States, 99\nCALIF. L. REV. 1037 (2011). Should the U.S. consider schemes for titling people or\ncommunities presently without record title?\nProblems\n1. Peter and Nathan Petrelli are the record owners of land in Disturbia. They hold\nthe land as joint tenants. Peter conveys his interest to Angela Petrelli, who pays\nfair market value for it. Angela gives her interest to her granddaughter Claire\nBennet, who records. Peter and Nathan then sell the land to Matt Parkman,\nwho doesn\xe2\x80\x99t know anything about Peter\xe2\x80\x99s earlier conveyance to Angela. Matt\nrecords. Disturbia\xe2\x80\x99s recording statute reads in relevant part as follows: \xe2\x80\x9cEvery\nconveyance is void as against any subsequent purchaser of the same property,\nor any part thereof, in good faith and for a valuable consideration, whose\nconveyance is first duly recorded.\xe2\x80\x9d Who owns what, and why?\n2. Peter Bishop and Olivia Dunham are the record owners of Fringeacre as joint\ntenants with right of survivorship. Bishop and Dunham grant Bishop\xe2\x80\x99s father,\nWalter Bishop, an easement to pasture his cows on Fringeacre. Walter does not\nrecord the easement. Later, Dunham gives her interest in Fringeacre as a gift\nto Astrid Farnsworth, who does not know about Walter Bishop\xe2\x80\x99s easement, and\nwho records. When Dunham subsequently dies, Peter Bishop sells Fringeacre\nto Philip Broyles, who had seen Walter\xe2\x80\x99s cows grazing on the property; when\nBroyles asked Peter about the cows, Peter said, \xe2\x80\x9cYeah, I let my dad do that.\xe2\x80\x9d\nBroyles records. The relevant recording statute is: \xe2\x80\x9cNo conveyance or mortgage\nof an interest in land is valid against any subsequent purchaser for value without\nnotice thereof, unless it is recorded.\xe2\x80\x9d Who owns what, and why? How, if at all,\nwould the answer change if the recording statute read, \xe2\x80\x9cEvery unrecorded\nconveyance of an interest in land shall be void as against any subsequent\npurchaser in good faith and for a valuable consideration whose conveyance shall\nbe first duly recorded\xe2\x80\x9d?\n\n\x0cRecording Acts\n\n793\n\n3. Damon Salvatore conveys Blackacre to Bonnie Bennet. Salvatore subsequently\nconveys Blackacre to Caroline Forbes for valuable consideration. Forbes lacks\nknowledge of the deed to Bennet. Bennet records, then Forbes records.\nThereafter, Forbes sells the western half of Blackacre to Jeremy Gilbert, and the\neastern half back to Salvatore. Who owns Blackacre and why? Answer with\nrespect to each of the following laws (Hint: first identify what type of statute\nthis is):\na. \xe2\x80\x9cNo conveyance or mortgage of an interest in land is valid against any\nsubsequent purchaser for value without notice thereof, whose\nconveyance is first recorded.\xe2\x80\x9d\nb. \xe2\x80\x9cNo conveyance or mortgage of an interest in land is valid against any\nsubsequent purchaser for value without notice thereof, unless it is\nrecorded.\xe2\x80\x9d\nc. \xe2\x80\x9cNo conveyance or mortgage of an interest in land is valid against any\nsubsequent purchaser whose conveyance is first recorded.\xe2\x80\x9d\n\n\x0cEminent Domain\nWe have seen that property may be transferred by gift, by will or intestate succession,\nby sale, and by foreclosure of a security interest. We now address a final mechanism by\nwhich property may change hands. Eminent domain is the inherent power of the\nstate to transfer title of private property into state hands. In the United States, when\nthe government \xe2\x80\x9ctakes\xe2\x80\x9d land in this manner, it must pay the owner \xe2\x80\x9cjust\ncompensation.\xe2\x80\x9d This is a constitutional requirement, as the Takings Clause of the Fifth\nAmendment provides: \xe2\x80\x9cnor shall private property be taken for public use, without just\ncompensation.\xe2\x80\x9d This brief constitutional provision encompasses three distinct issues\nthat we will deal with in this chapter (though not in this order): (1) has there been a\n\xe2\x80\x9ctaking\xe2\x80\x9d of private property? (2) Is the taking for \xe2\x80\x9cpublic use\xe2\x80\x9d; and (3) has \xe2\x80\x9cjust\ncompensation\xe2\x80\x9d been provided?\nPrecedent under the Takings Clause regulates the manner in which the state directly\nexercises its eminent domain power. As we will see, however, the clause also limits the\nability of the state to regulate. Property owners sometimes challenge property\nregulations as being so onerous that it is as if the state has appropriated property and\ncompensation is therefore due. Much of the Supreme Court\xe2\x80\x99s takings caselaw concerns\nthese so-called \xe2\x80\x9cregulatory takings,\xe2\x80\x9d which we will address in a future chapter.\n\nA. Rationales\nThe power to take property is recognized (but not granted) by the Constitution and\nlong historical practice, but what justifies it? Simply calling it an attribute of sovereignty\ndoes not provide a reason for its use. Property ownership usually encompasses the right\nto say no. If I want to ship a mobile home across your field, but we don\xe2\x80\x99t agree on a\nprice, it\xe2\x80\x99s my duty to stay out. I cannot declare your property mine in exchange for a\njudicially determined measure of \xe2\x80\x9cjust compensation.\xe2\x80\x9d What makes the state different?\nOne traditional explanation concerns the transaction costs of government enterprises.\nIn a normal market, buyers can choose from among competing sellers. If houses in\ntown A are too expensive, you can look for one in town B, and if you are priced out of\nthe market, so be it. The state is often more constrained. Imagine a planned road that\n794\n\n\x0cEminent Domain\n\n795\n\nwill connect two cities. Building the road requires assembling multiple, connected\nparcels. The number of plausible routes is finite, and increasingly constrained as plans\nprogress. Owners along the planned route therefore may hold out for higher sale\nvalues, knowing the state has few alternatives. The absence of a functioning market\ndepletes the social surplus of the road and may kill the project altogether. Eminent\ndomain enables the government to engage in projects like these without the risk that a\nsingle property owner might exercise a veto. * Of course private entities sometimes\nundertake large projects. Why might they succeed despite lacking the eminent domain\npower? For one argument, see Daniel B. Kelly, The \xe2\x80\x9cPublic Use\xe2\x80\x9d Requirement in Eminent\nDomain Law: A Rationale Based on Secret Purchases and Private Influence, 92 CORNELL L.\nREV. 1, 5 (2006) (\xe2\x80\x9c[T]akings for the benefit of private parties are generally\nunnecessary\xe2\x80\x94even if a private project potentially also has a public benefit\xe2\x80\x94because\nprivate parties can avoid the holdout problem using secret buying agents. These\nundisclosed agents overcome the holdout problem by purchasing property without\nrevealing the identity of the assembler or the nature of the assembly project to existing\nowners.\xe2\x80\x9d).\nA second question concerns the requirement of compensation. Why do you think it is\nrequired? Fairness? Perhaps, but life is unfair. Moreover, we have insurance to protect\nagainst life\xe2\x80\x99s calamities. Why couldn\xe2\x80\x99t we insure against government takings? Might the\nanswer have something to do with the nature of government action? Unlike forces of\nnature, it is susceptible to outside influence. Can you think of other rationales? For a\ndiscussion, see Steve P. Calandrillo, Eminent Domain Economics: Should \xe2\x80\x9cJust Compensation\xe2\x80\x9d\nBe Abolished, and Would \xe2\x80\x9cTakings Insurance\xe2\x80\x9d Work Instead?, 64 OHIO ST. L.J. 451 (2003).\nIf the government did not have a duty to compensate, how would its behavior change?\n\nCourts sometimes also require property owners to bear an intrusion in exchange for money. For example,\nprivate condemnation statutes allow landlocked owners to obtain access to public roads so long as they pay\ncompensation. Likewise, recall that Boomer required nuisance plaintiffs to accept a de facto servitude on their land\nupon payment of permanent damages by the defendant cement plant. Both situations may be described as\ninvolving high transaction costs either in the form of bilateral monopoly or problems of coordinating numerous\nparties.\n*\n\n\x0c796\n\nProperty\n\nFinally, no discussion of the Takings clause is complete without acknowledging its links\nto the institution of American slavery. As Tonja Jacobi, Sonia Mittal, and Barry R.\nWeingast summarize in Creating A Self-Stabilizing Constitution: The Role of the Takings\nClause, 109 NW. U. L. REV. 601, 621-622 (2015):\nOne of the deepest divides that faced the Constitutional Convention was\nslavery. Southern slaveholders exhibited considerable anxiety over a\nconstitution that might affect their \xe2\x80\x9cproperty.\xe2\x80\x9d During the Convention,\ndebate on key questions of structure and process was repeatedly\npostponed until structural protections for slaveholders were agreed\nupon. \xe2\x80\xa6 Madison\xe2\x80\x99s inclusion of the Takings Clause reflected his desire\nto protect two specific minority groups--landowners and slaveholders-whose support was necessary to pass the Constitution but who, in\nMadison\xe2\x80\x99s view, would increasingly be left unprotected by the\nmajoritarian political process enshrined in the Constitution. In 1787,\nlandowners and slaveholders were very powerful, but Madison feared\ntheir power would diminish over time as they became a minority, and he\ncrafted the Takings Clause with their future protection in mind. \xe2\x80\xa6\nFor Madison, the Takings Clause established an absolute requirement\nthat the government compensate the landowner if it were to order a slave\nfreed. Madison expected that slaveholders and landowners would\nincreasingly find themselves a minority over time and that without\nadditional protection\xe2\x80\x94or what he occasionally called \xe2\x80\x9cauxiliary\nprecautions\xe2\x80\x9d\xe2\x80\x94both groups would be continually subject to\nexpropriation at the hands of a growing, landless majority. The Takings\nClause fits in this category of auxiliary precautions. By restricting\nlegislative control over the individual rights of landowners and\nslaveholders, the Clause helped to lower the stakes in politics on an\nongoing basis for two important groups whose support was necessary to\nsecure the Constitution\xe2\x80\x99s adoption and ongoing success. Considered in\nthis light, the Takings Clause complements a range of other\ncountermajoritarian features of the Constitution\xe2\x80\x94such as bicameralism,\n\n\x0cEminent Domain\n\n797\n\nequal representation in the Senate, and the taxation and customs\nclauses\xe2\x80\x94to lower the stakes for slaveholders and landowners.\n\nB. \xe2\x80\x9cPublic Use\xe2\x80\x9d\nThe Fifth Amendment declares that if private property is taken \xe2\x80\x9cfor public use\xe2\x80\x9d\ncompensation is required. What function does the term \xe2\x80\x9cpublic use\xe2\x80\x9d play in the clause?\nOne could read the phrase as descriptive, i.e., as describing situations in which the\ngovernment takes property via eminent domain (as opposed to taking it via the exercise\nof other powers, like taxation or punishment for a criminal offense). Under that\nreading, the only limit to the state\xe2\x80\x99s taking authority is its willingness to pay (and the\noperation of other Constitutional requirements, like Equal Protection, Due Process, or\nthe like). The Supreme Court takes a different view. Its precedent treats the term \xe2\x80\x9cfor\npublic use\xe2\x80\x9d as a substantive limitation to the takings power, albeit not a strong one.\nKelo v. City of New London, Conn.\n545 U.S. 469 (2005)\nJustice STEVENS delivered the opinion of the Court.\nIn 2000, the city of New London approved a development plan that, in the words of\nthe Supreme Court of Connecticut, was \xe2\x80\x9cprojected to create in excess of 1,000 jobs, to\nincrease tax and other revenues, and to revitalize an economically distressed city,\nincluding its downtown and waterfront areas.\xe2\x80\x9d In assembling the land needed for this\nproject, the city\xe2\x80\x99s development agent has purchased property from willing sellers and\nproposes to use the power of eminent domain to acquire the remainder of the property\nfrom unwilling owners in exchange for just compensation. The question presented is\nwhether the city\xe2\x80\x99s proposed disposition of this property qualifies as a \xe2\x80\x9cpublic use\xe2\x80\x9d\nwithin the meaning of the Takings Clause of the Fifth Amendment to the Constitution.\nI\nThe city of New London (hereinafter City) sits at the junction of the Thames River and\nthe Long Island Sound in southeastern Connecticut. Decades of economic decline led\na state agency in 1990 to designate the City a \xe2\x80\x9cdistressed municipality.\xe2\x80\x9d In 1996, the\n\n\x0c798\n\nProperty\n\nFederal Government closed the Naval Undersea Warfare Center, which had been\nlocated in the Fort Trumbull area of the City and had employed over 1,500 people. In\n1998, the City\xe2\x80\x99s unemployment rate was nearly double that of the State, and its\npopulation of just under 24,000 residents was at its lowest since 1920.\nThese conditions prompted state and local officials to target New London, and\nparticularly its Fort Trumbull area, for economic revitalization. To this end, respondent\nNew London Development Corporation (NLDC), a private nonprofit entity\nestablished some years earlier to assist the City in planning economic development, was\nreactivated. In January 1998, the State authorized a $5.35 million bond issue to support\nthe NLDC\xe2\x80\x99s planning activities and a $10 million bond issue toward the creation of a\nFort Trumbull State Park. In February, the pharmaceutical company Pfizer Inc.\nannounced that it would build a $300 million research facility on a site immediately\nadjacent to Fort Trumbull; local planners hoped that Pfizer would draw new business\nto the area, thereby serving as a catalyst to the area\xe2\x80\x99s rejuvenation. After receiving initial\napproval from the city council, the NLDC continued its planning activities and held a\nseries of neighborhood meetings to educate the public about the process.\xe2\x80\xa6 Upon\nobtaining state-level approval, the NLDC finalized an integrated development plan\nfocused on 90 acres of the Fort Trumbull area.\nThe Fort Trumbull area is situated on a peninsula that juts into the Thames River. The\narea comprises approximately 115 privately owned properties, as well as the 32 acres\nof land formerly occupied by the naval facility (Trumbull State Park now occupies 18\nof those 32 acres). The development plan encompasses seven parcels. Parcel 1 is\ndesignated for a waterfront conference hotel at the center of a \xe2\x80\x9csmall urban village\xe2\x80\x9d\nthat will include restaurants and shopping. This parcel will also have marinas for both\nrecreational and commercial uses. A pedestrian \xe2\x80\x9criverwalk\xe2\x80\x9d will originate here and\ncontinue down the coast, connecting the waterfront areas of the development. Parcel\n2 will be the site of approximately 80 new residences organized into an urban\nneighborhood and linked by public walkway to the remainder of the development,\nincluding the state park. This parcel also includes space reserved for a new U.S. Coast\nGuard Museum. Parcel 3, which is located immediately north of the Pfizer facility, will\ncontain at least 90,000 square feet of research and development office space. Parcel 4A\nis a 2.4\xe2\x80\x93acre site that will be used either to support the adjacent state park, by providing\n\n\x0cEminent Domain\n\n799\n\nparking or retail services for visitors, or to support the nearby marina. Parcel 4B will\ninclude a renovated marina, as well as the final stretch of the riverwalk. Parcels 5, 6,\nand 7 will provide land for office and retail space, parking, and water-dependent\ncommercial uses.\nThe NLDC intended the development plan to capitalize on the arrival of the Pfizer\nfacility and the new commerce it was expected to attract. In addition to creating jobs,\ngenerating tax revenue, and helping to \xe2\x80\x9cbuild momentum for the revitalization of\ndowntown New London,\xe2\x80\x9d the plan was also designed to make the City more attractive\nand to create leisure and recreational opportunities on the waterfront and in the park.\nThe city council approved the plan in January 2000, and designated the NLDC as its\ndevelopment agent in charge of implementation. The city council also authorized the\nNLDC to purchase property or to acquire property by exercising eminent domain in\nthe City\xe2\x80\x99s name. The NLDC successfully negotiated the purchase of most of the real\nestate in the 90\xe2\x80\x93acre area, but its negotiations with petitioners failed. As a consequence,\nin November 2000, the NLDC initiated the condemnation proceedings that gave rise\nto this case.\nII\nPetitioner Susette Kelo has lived in the Fort Trumbull area since 1997. She has made\nextensive improvements to her house, which she prizes for its water view. Petitioner\nWilhelmina Dery was born in her Fort Trumbull house in 1918 and has lived there her\nentire life. Her husband Charles (also a petitioner) has lived in the house since they\nmarried some 60 years ago. In all, the nine petitioners own 15 properties in Fort\nTrumbull\xe2\x80\x944 in parcel 3 of the development plan and 11 in parcel 4A. Ten of the\nparcels are occupied by the owner or a family member; the other five are held as\ninvestment properties. There is no allegation that any of these properties is blighted or\notherwise in poor condition; rather, they were condemned only because they happen\nto be located in the development area.\nIn December 2000, petitioners brought this action in the New London Superior Court.\nThey claimed, among other things, that the taking of their properties would violate the\n\xe2\x80\x9cpublic use\xe2\x80\x9d restriction in the Fifth Amendment. After a 7\xe2\x80\x93day bench trial, the Superior\n\n\x0c800\n\nProperty\n\nCourt granted a permanent restraining order prohibiting the taking of the properties\nlocated in parcel 4A (park or marina support). It, however, denied petitioners relief as\nto the properties located in parcel 3 (office space).\nAfter the Superior Court ruled, both sides took appeals to the Supreme Court of\nConnecticut. That court held, over a dissent, that all of the City\xe2\x80\x99s proposed takings\nwere valid. It began by upholding the lower court\xe2\x80\x99s determination that the takings were\nauthorized by chapter 132, the State\xe2\x80\x99s municipal development statute. That statute\nexpresses a legislative determination that the taking of land, even developed land, as\npart of an economic development project is a \xe2\x80\x9cpublic use\xe2\x80\x9d and in the \xe2\x80\x9cpublic interest.\xe2\x80\x9d\nNext, relying on cases such as Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984),\nand Berman v. Parker, 348 U.S. 26 (1954), the court held that such economic\ndevelopment qualified as a valid public use under both the Federal and State\nConstitutions.\nFinally, adhering to its precedents, the court went on to determine, first, whether the\ntakings of the particular properties at issue were \xe2\x80\x9creasonably necessary\xe2\x80\x9d to achieving\nthe City\xe2\x80\x99s intended public use and, second, whether the takings were for \xe2\x80\x9creasonably\nforeseeable needs.\xe2\x80\x9d The court upheld the trial court\xe2\x80\x99s factual findings as to parcel 3,\nbut reversed the trial court as to parcel 4A, agreeing with the City that the intended use\nof this land was sufficiently definite and had been given \xe2\x80\x9creasonable attention\xe2\x80\x9d during\nthe planning process.\nThe three dissenting justices would have imposed a \xe2\x80\x9cheightened\xe2\x80\x9d standard of judicial\nreview for takings justified by economic development. Although they agreed that the\nplan was intended to serve a valid public use, they would have found all the takings\nunconstitutional because the City had failed to adduce \xe2\x80\x9cclear and convincing evidence\xe2\x80\x9d\nthat the economic benefits of the plan would in fact come to pass.\nWe granted certiorari to determine whether a city\xe2\x80\x99s decision to take property for the\npurpose of economic development satisfies the \xe2\x80\x9cpublic use\xe2\x80\x9d requirement of the Fifth\nAmendment.\n\n\x0cEminent Domain\n\n801\n\nIII\nTwo polar propositions are perfectly clear. On the one hand, it has long been accepted\nthat the sovereign may not take the property of A for the sole purpose of transferring\nit to another private party B, even though A is paid just compensation. On the other\nhand, it is equally clear that a State may transfer property from one private party to\nanother if future \xe2\x80\x9cuse by the public\xe2\x80\x9d is the purpose of the taking; the condemnation of\nland for a railroad with common-carrier duties is a familiar example. Neither of these\npropositions, however, determines the disposition of this case.\nAs for the first proposition, the City would no doubt be forbidden from taking\npetitioners\xe2\x80\x99 land for the purpose of conferring a private benefit on a particular private\nparty. Nor would the City be allowed to take property under the mere pretext of a\npublic purpose, when its actual purpose was to bestow a private benefit. The takings\nbefore us, however, would be executed pursuant to a \xe2\x80\x9ccarefully considered\xe2\x80\x9d\ndevelopment plan. The trial judge and all the members of the Supreme Court of\nConnecticut agreed that there was no evidence of an illegitimate purpose in this case.\xe2\x80\xa6\nOn the other hand, this is not a case in which the City is planning to open the\ncondemned land\xe2\x80\x94at least not in its entirety\xe2\x80\x94to use by the general public. Nor will the\nprivate lessees of the land in any sense be required to operate like common carriers,\nmaking their services available to all comers. But although such a projected use would\nbe sufficient to satisfy the public use requirement, this \xe2\x80\x9cCourt long ago rejected any\nliteral requirement that condemned property be put into use for the general public.\xe2\x80\x9d\n[Midkiff, 467 U.S.] at 244. Indeed, while many state courts in the mid\xe2\x80\x9319th century\nendorsed \xe2\x80\x9cuse by the public\xe2\x80\x9d as the proper definition of public use, that narrow view\nsteadily eroded over time. Not only was the \xe2\x80\x9cuse by the public\xe2\x80\x9d test difficult to\nadminister (e.g., what proportion of the public need have access to the property? at\nwhat price?), but it proved to be impractical given the diverse and always evolving needs\nof society.\xe2\x80\xa6 Thus, in a case upholding a mining company\xe2\x80\x99s use of an aerial bucket line\nto transport ore over property it did not own, Justice Holmes\xe2\x80\x99 opinion for the Court\nstressed \xe2\x80\x9cthe inadequacy of use by the general public as a universal test.\xe2\x80\x9d Strickley v.\nHighland Boy Gold Mining Co., 200 U.S. 527, 531 (1906). We have repeatedly and\nconsistently rejected that narrow test ever since.\n\n\x0c802\n\nProperty\n\nThe disposition of this case therefore turns on the question whether the City\xe2\x80\x99s\ndevelopment plan serves a \xe2\x80\x9cpublic purpose.\xe2\x80\x9d Without exception, our cases have\ndefined that concept broadly, reflecting our longstanding policy of deference to\nlegislative judgments in this field.\nIn Berman v. Parker, 348 U.S. 26 (1954), this Court upheld a redevelopment plan\ntargeting a blighted area of Washington, D. C., in which most of the housing for the\narea\xe2\x80\x99s 5,000 inhabitants was beyond repair. Under the plan, the area would be\ncondemned and part of it utilized for the construction of streets, schools, and other\npublic facilities. The remainder of the land would be leased or sold to private parties\nfor the purpose of redevelopment, including the construction of low-cost housing.\nThe owner of a department store located in the area challenged the condemnation,\npointing out that his store was not itself blighted and arguing that the creation of a\n\xe2\x80\x9cbetter balanced, more attractive community\xe2\x80\x9d was not a valid public use. Writing for a\nunanimous Court, Justice Douglas refused to evaluate this claim in isolation, deferring\ninstead to the legislative and agency judgment that the area \xe2\x80\x9cmust be planned as a whole\xe2\x80\x9d\nfor the plan to be successful. The Court explained that \xe2\x80\x9ccommunity redevelopment\nprograms need not, by force of the Constitution, be on a piecemeal basis\xe2\x80\x94lot by lot,\nbuilding by building.\xe2\x80\x9d The public use underlying the taking was unequivocally affirmed:\n\xe2\x80\x9cWe do not sit to determine whether a particular housing project is or is\nnot desirable. The concept of the public welfare is broad and inclusive....\nThe values it represents are spiritual as well as physical, aesthetic as well\nas monetary. It is within the power of the legislature to determine that\nthe community should be beautiful as well as healthy, spacious as well as\nclean, well-balanced as well as carefully patrolled. In the present case, the\nCongress and its authorized agencies have made determinations that take\ninto account a wide variety of values. It is not for us to reappraise them.\nIf those who govern the District of Columbia decide that the Nation\xe2\x80\x99s\nCapital should be beautiful as well as sanitary, there is nothing in the\nFifth Amendment that stands in the way.\xe2\x80\x9d\nIn Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984), the Court considered a\nHawaii statute whereby fee title was taken from lessors and transferred to lessees (for\n\n\x0cEminent Domain\n\n803\n\njust compensation) in order to reduce the concentration of land ownership. We\nunanimously upheld the statute and rejected the Ninth Circuit\xe2\x80\x99s view that it was \xe2\x80\x9ca\nnaked attempt on the part of the state of Hawaii to take the property of A and transfer\nit to B solely for B\xe2\x80\x99s private use and benefit.\xe2\x80\x9d Reaffirming Berman\xe2\x80\x99s deferential approach\nto legislative judgments in this field, we concluded that the State\xe2\x80\x99s purpose of\neliminating the \xe2\x80\x9csocial and economic evils of a land oligopoly\xe2\x80\x9d qualified as a valid\npublic use. Our opinion also rejected the contention that the mere fact that the State\nimmediately transferred the properties to private individuals upon condemnation\nsomehow diminished the public character of the taking. \xe2\x80\x9c[I]t is only the taking\xe2\x80\x99s\npurpose, and not its mechanics,\xe2\x80\x9d we explained, that matters in determining public\nuse.\xe2\x80\xa6\nViewed as a whole, our jurisprudence has recognized that the needs of society have\nvaried between different parts of the Nation, just as they have evolved over time in\nresponse to changed circumstances.\xe2\x80\xa6 For more than a century, our public use\njurisprudence has wisely eschewed rigid formulas and intrusive scrutiny in favor of\naffording legislatures broad latitude in determining what public needs justify the use of\nthe takings power.\nIV\nThose who govern the City were not confronted with the need to remove blight in the\nFort Trumbull area, but their determination that the area was sufficiently distressed to\njustify a program of economic rejuvenation is entitled to our deference. The City has\ncarefully formulated an economic development plan that it believes will provide\nappreciable benefits to the community, including\xe2\x80\x94but by no means limited to\xe2\x80\x94new\njobs and increased tax revenue. As with other exercises in urban planning and\ndevelopment, the City is endeavoring to coordinate a variety of commercial, residential,\nand recreational uses of land, with the hope that they will form a whole greater than\nthe sum of its parts. To effectuate this plan, the City has invoked a state statute that\nspecifically authorizes the use of eminent domain to promote economic development.\nGiven the comprehensive character of the plan, the thorough deliberation that\npreceded its adoption, and the limited scope of our review, it is appropriate for us, as\nit was in Berman, to resolve the challenges of the individual owners, not on a piecemeal\n\n\x0c804\n\nProperty\n\nbasis, but rather in light of the entire plan. Because that plan unquestionably serves a\npublic purpose, the takings challenged here satisfy the public use requirement of the\nFifth Amendment.\nTo avoid this result, petitioners urge us to adopt a new bright-line rule that economic\ndevelopment does not qualify as a public use. Putting aside the unpersuasive suggestion\nthat the City\xe2\x80\x99s plan will provide only purely economic benefits, neither precedent nor\nlogic supports petitioners\xe2\x80\x99 proposal. Promoting economic development is a traditional\nand long-accepted function of government. There is, moreover, no principled way of\ndistinguishing economic development from the other public purposes that we have\nrecognized. In our cases upholding takings that facilitated agriculture and mining, for\nexample, we emphasized the importance of those industries to the welfare of the States\nin question\xe2\x80\xa6. It would be incongruous to hold that the City\xe2\x80\x99s interest in the economic\nbenefits to be derived from the development of the Fort Trumbull area has less of a\npublic character than any of those other interests. Clearly, there is no basis for\nexempting economic development from our traditionally broad understanding of\npublic purpose.\nPetitioners contend that using eminent domain for economic development\nimpermissibly blurs the boundary between public and private takings. Again, our cases\nforeclose this objection. Quite simply, the government\xe2\x80\x99s pursuit of a public purpose\nwill often benefit individual private parties.\xe2\x80\xa6 The owner of the department store in\nBerman objected to \xe2\x80\x9ctaking from one businessman for the benefit of another\nbusinessman,\xe2\x80\x9d referring to the fact that under the redevelopment plan land would be\nleased or sold to private developers for redevelopment. Our rejection of that\ncontention has particular relevance to the instant case: \xe2\x80\x9cThe public end may be as well\nor better served through an agency of private enterprise than through a department of\ngovernment\xe2\x80\x94or so the Congress might conclude. We cannot say that public\nownership is the sole method of promoting the public purposes of community\nredevelopment projects.\xe2\x80\x9d\nIt is further argued that without a bright-line rule nothing would stop a city from\ntransferring citizen A\xe2\x80\x99s property to citizen B for the sole reason that citizen B will put\nthe property to a more productive use and thus pay more taxes. Such a one-to-one\n\n\x0cEminent Domain\n\n805\n\ntransfer of property, executed outside the confines of an integrated development plan,\nis not presented in this case. While such an unusual exercise of government power\nwould certainly raise a suspicion that a private purpose was afoot, the hypothetical cases\nposited by petitioners can be confronted if and when they arise. They do not warrant\nthe crafting of an artificial restriction on the concept of public use.\nAlternatively, petitioners maintain that for takings of this kind we should require a\n\xe2\x80\x9creasonable certainty\xe2\x80\x9d that the expected public benefits will actually accrue. Such a rule,\nhowever, would represent an even greater departure from our precedent.\xe2\x80\xa6 The\ndisadvantages of a heightened form of review are especially pronounced in this type of\ncase. Orderly implementation of a comprehensive redevelopment plan obviously\nrequires that the legal rights of all interested parties be established before new\nconstruction can be commenced. A constitutional rule that required postponement of\nthe judicial approval of every condemnation until the likelihood of success of the plan\nhad been assured would unquestionably impose a significant impediment to the\nsuccessful consummation of many such plans.\nJust as we decline to second-guess the City\xe2\x80\x99s considered judgments about the efficacy\nof its development plan, we also decline to second-guess the City\xe2\x80\x99s determinations as\nto what lands it needs to acquire in order to effectuate the project.\xe2\x80\xa6\nIn affirming the City\xe2\x80\x99s authority to take petitioners\xe2\x80\x99 properties, we do not minimize the\nhardship that condemnations may entail, notwithstanding the payment of just\ncompensation. We emphasize that nothing in our opinion precludes any State from\nplacing further restrictions on its exercise of the takings power. Indeed, many States\nalready impose \xe2\x80\x9cpublic use\xe2\x80\x9d requirements that are stricter than the federal baseline.\nSome of these requirements have been established as a matter of state constitutional\nlaw, while others are expressed in state eminent domain statutes that carefully limit the\ngrounds upon which takings may be exercised. As the submissions of the parties and\ntheir amici make clear, the necessity and wisdom of using eminent domain to promote\neconomic development are certainly matters of legitimate public debate. This Court\xe2\x80\x99s\nauthority, however, extends only to determining whether the City\xe2\x80\x99s proposed\ncondemnations are for a \xe2\x80\x9cpublic use\xe2\x80\x9d within the meaning of the Fifth Amendment to\nthe Federal Constitution. Because over a century of our case law interpreting that\n\n\x0c806\n\nProperty\n\nprovision dictates an affirmative answer to that question, we may not grant petitioners\nthe relief that they seek.\xe2\x80\xa6\nJustice KENNEDY, concurring.\n\xe2\x80\xa6. This Court has declared that a taking should be upheld as consistent with the Public\nUse Clause, U.S. Const., Amdt. 5, as long as it is \xe2\x80\x9crationally related to a conceivable\npublic purpose.\xe2\x80\x9d Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 241 (1984). This\ndeferential standard of review echoes the rational-basis test used to review economic\nregulation under the Due Process and Equal Protection Clauses. The determination\nthat a rational-basis standard of review is appropriate does not, however, alter the fact\nthat transfers intended to confer benefits on particular, favored private entities, and\nwith only incidental or pretextual public benefits, are forbidden by the Public Use\nClause.\nA court applying rational-basis review under the Public Use Clause should strike down\na taking that, by a clear showing, is intended to favor a particular private party, with\nonly incidental or pretextual public benefits, just as a court applying rational-basis\nreview under the Equal Protection Clause must strike down a government classification\nthat is clearly intended to injure a particular class of private parties, with only incidental\nor pretextual public justifications.\xe2\x80\xa6\nA court confronted with a plausible accusation of impermissible favoritism to private\nparties should treat the objection as a serious one and review the record to see if it has\nmerit, though with the presumption that the government\xe2\x80\x99s actions were reasonable and\nintended to serve a public purpose. [Justice Kennedy went on to observe that the trial\ncourt made findings that supported the conclusion \xe2\x80\x9cthat benefiting Pfizer was not \xe2\x80\x98the\nprimary motivation or effect of this development plan\xe2\x80\x99\xe2\x80\x9d.] .\xe2\x80\xa6This case, then, survives\nthe meaningful rational-basis review that in my view is required under the Public Use\nClause.\xe2\x80\xa6\n\xe2\x80\xa6. There may be private transfers in which the risk of undetected impermissible\nfavoritism of private parties is so acute that a presumption (rebuttable or otherwise) of\ninvalidity is warranted under the Public Use Clause. This demanding level of scrutiny,\n\n\x0cEminent Domain\n\n807\n\nhowever, is not required simply because the purpose of the taking is economic\ndevelopment.\xe2\x80\xa6\nJustice O\xe2\x80\x99CONNOR, with whom THE CHIEF JUSTICE, Justice SCALIA, and\nJustice THOMAS join, dissenting.\n\xe2\x80\xa6. Under the banner of economic development, all private property is now vulnerable\nto being taken and transferred to another private owner, so long as it might be\nupgraded\xe2\x80\x94i.e., given to an owner who will use it in a way that the legislature deems\nmore beneficial to the public\xe2\x80\x94in the process. To reason, as the Court does, that the\nincidental public benefits resulting from the subsequent ordinary use of private\nproperty render economic development takings \xe2\x80\x9cfor public use\xe2\x80\x9d is to wash out any\ndistinction between private and public use of property\xe2\x80\x94and thereby effectively to\ndelete the words \xe2\x80\x9cfor public use\xe2\x80\x9d from the Takings Clause of the Fifth Amendment.\nAccordingly I respectfully dissent.\xe2\x80\xa6\n\xe2\x80\xa6.Where is the line between \xe2\x80\x9cpublic\xe2\x80\x9d and \xe2\x80\x9cprivate\xe2\x80\x9d property use? We give\nconsiderable deference to legislatures\xe2\x80\x99 determinations about what governmental\nactivities will advantage the public. But were the political branches the sole arbiters of\nthe public-private distinction, the Public Use Clause would amount to little more than\nhortatory fluff. An external, judicial check on how the public use requirement is\ninterpreted, however limited, is necessary if this constraint on government power is to\nretain any meaning.\nOur cases have generally identified three categories of takings that comply with the\npublic use requirement, though it is in the nature of things that the boundaries between\nthese categories are not always firm. Two are relatively straightforward and\nuncontroversial. First, the sovereign may transfer private property to public\nownership\xe2\x80\x94such as for a road, a hospital, or a military base. Second, the sovereign\nmay transfer private property to private parties, often common carriers, who make the\nproperty available for the public\xe2\x80\x99s use\xe2\x80\x94such as with a railroad, a public utility, or a\nstadium. But \xe2\x80\x9cpublic ownership\xe2\x80\x9d and \xe2\x80\x9cuse-by-the-public\xe2\x80\x9d are sometimes too\nconstricting and impractical ways to define the scope of the Public Use Clause. Thus\nwe have allowed that, in certain circumstances and to meet certain exigencies, takings\nthat serve a public purpose also satisfy the Constitution even if the property is destined\n\n\x0c808\n\nProperty\n\nfor subsequent private use. See, e.g., Berman v. Parker, 348 U.S. 26 (1954); Hawaii Housing\nAuthority v. Midkiff, 467 U.S. 229 (1984).\xe2\x80\xa6\n\xe2\x80\xa6. We are guided by two precedents about the taking of real property by eminent\ndomain. In Berman, we upheld takings within a blighted neighborhood of Washington,\nD.C. The neighborhood had so deteriorated that, for example, 64.3% of its dwellings\nwere beyond repair. It had become burdened with \xe2\x80\x9covercrowding of dwellings,\xe2\x80\x9d \xe2\x80\x9clack\nof adequate streets and alleys,\xe2\x80\x9d and \xe2\x80\x9clack of light and air.\xe2\x80\x9d Congress had determined\nthat the neighborhood had become \xe2\x80\x9cinjurious to the public health, safety, morals, and\nwelfare\xe2\x80\x9d and that it was necessary to \xe2\x80\x9celiminat[e] all such injurious conditions by\nemploying all means necessary and appropriate for the purpose,\xe2\x80\x9d including eminent\ndomain. Mr. Berman\xe2\x80\x99s department store was not itself blighted. Having approved of\nCongress\xe2\x80\x99 decision to eliminate the harm to the public emanating from the blighted\nneighborhood, however, we did not second-guess its decision to treat the\nneighborhood as a whole rather than lot-by-lot.\nIn Midkiff, we upheld a land condemnation scheme in Hawaii whereby title in real\nproperty was taken from lessors and transferred to lessees. At that time, the State and\nFederal Governments owned nearly 49% of the State\xe2\x80\x99s land, and another 47% was in\nthe hands of only 72 private landowners. Concentration of land ownership was so\ndramatic that on the State\xe2\x80\x99s most urbanized island, Oahu, 22 landowners owned 72.5%\nof the fee simple titles. The Hawaii Legislature had concluded that the oligopoly in land\nownership was \xe2\x80\x9cskewing the State\xe2\x80\x99s residential fee simple market, inflating land prices,\nand injuring the public tranquility and welfare,\xe2\x80\x9d and therefore enacted a condemnation\nscheme for redistributing title.\xe2\x80\xa6\nIn moving away from our decisions sanctioning the condemnation of harmful property\nuse, the Court today significantly expands the meaning of public use. It holds that the\nsovereign may take private property currently put to ordinary private use, and give it\nover for new, ordinary private use, so long as the new use is predicted to generate some\nsecondary benefit for the public\xe2\x80\x94such as increased tax revenue, more jobs, maybe\neven esthetic pleasure. But nearly any lawful use of real private property can be said to\ngenerate some incidental benefit to the public. Thus, if predicted (or even guaranteed)\npositive side effects are enough to render transfer from one private party to another\n\n\x0cEminent Domain\n\n809\n\nconstitutional, then the words \xe2\x80\x9cfor public use\xe2\x80\x9d do not realistically exclude any takings,\nand thus do not exert any constraint on the eminent domain power.\xe2\x80\xa6\nJustice THOMAS, dissenting.\nLong ago, William Blackstone wrote that \xe2\x80\x9cthe law of the land ... postpone[s] even public\nnecessity to the sacred and inviolable rights of private property.\xe2\x80\x9d 1 Commentaries on\nthe Laws of England 134\xe2\x80\x93135 (1765) (hereinafter Blackstone). The Framers embodied\nthat principle in the Constitution, allowing the government to take property not for\n\xe2\x80\x9cpublic necessity,\xe2\x80\x9d but instead for \xe2\x80\x9cpublic use.\xe2\x80\x9d Amdt. 5. Defying this understanding,\nthe Court replaces the Public Use Clause with a \xe2\x80\x9c \xe2\x80\x98[P]ublic [P]urpose\xe2\x80\x99 \xe2\x80\x9d Clause (or\nperhaps the \xe2\x80\x9cDiverse and Always Evolving Needs of Society\xe2\x80\x9d Clause (capitalization\nadded)), a restriction that is satisfied, the Court instructs, so long as the purpose is\n\xe2\x80\x9clegitimate\xe2\x80\x9d and the means \xe2\x80\x9cnot irrational.\xe2\x80\x9d This deferential shift in phraseology\nenables the Court to hold, against all common sense, that a costly urban-renewal project\nwhose stated purpose is a vague promise of new jobs and increased tax revenue, but\nwhich is also suspiciously agreeable to the Pfizer Corporation, is for a \xe2\x80\x9cpublic use.\xe2\x80\x9d\nI cannot agree. If such \xe2\x80\x9ceconomic development\xe2\x80\x9d takings are for a \xe2\x80\x9cpublic use,\xe2\x80\x9d any\ntaking is, and the Court has erased the Public Use Clause from our Constitution, as\nJustice O\xe2\x80\x99CONNOR powerfully argues in dissent. I do not believe that this Court can\neliminate liberties expressly enumerated in the Constitution and therefore join her\ndissenting opinion. Regrettably, however, the Court\xe2\x80\x99s error runs deeper than this.\nToday\xe2\x80\x99s decision is simply the latest in a string of our cases construing the Public Use\nClause to be a virtual nullity, without the slightest nod to its original meaning. In my\nview, the Public Use Clause, originally understood, is a meaningful limit on the\ngovernment\xe2\x80\x99s eminent domain power. Our cases have strayed from the Clause\xe2\x80\x99s\noriginal meaning, and I would reconsider them.\xe2\x80\xa6\nThe consequences of today\xe2\x80\x99s decision are not difficult to predict, and promise to be\nharmful. So-called \xe2\x80\x9curban renewal\xe2\x80\x9d programs provide some compensation for the\nproperties they take, but no compensation is possible for the subjective value of these\nlands to the individuals displaced and the indignity inflicted by uprooting them from\ntheir homes. Allowing the government to take property solely for public purposes is\nbad enough, but extending the concept of public purpose to encompass any\n\n\x0c810\n\nProperty\n\neconomically beneficial goal guarantees that these losses will fall disproportionately on\npoor communities. Those communities are not only systematically less likely to put\ntheir lands to the highest and best social use, but are also the least politically\npowerful.\xe2\x80\xa6\n\xe2\x80\xa6. In the 1950\xe2\x80\x99s, no doubt emboldened in part by the expansive understanding of\n\xe2\x80\x9cpublic use\xe2\x80\x9d this Court adopted in Berman, cities \xe2\x80\x9crushed to draw plans\xe2\x80\x9d for downtown\ndevelopment. B. Frieden & L. Sagalyn, Downtown, Inc. How America Rebuilds Cities\n17 (1989). \xe2\x80\x9cOf all the families displaced by urban renewal from 1949 through 1963, 63\npercent of those whose race was known were nonwhite, and of these families, 56\npercent of nonwhites and 38 percent of whites had incomes low enough to qualify for\npublic housing, which, however, was seldom available to them.\xe2\x80\x9d Public works projects\nin the 1950\xe2\x80\x99s and 1960\xe2\x80\x99s destroyed predominantly minority communities in St. Paul,\nMinnesota, and Baltimore, Maryland. In 1981, urban planners in Detroit, Michigan,\nuprooted the largely \xe2\x80\x9clower-income and elderly\xe2\x80\x9d Poletown neighborhood for the\nbenefit of the General Motors Corporation. J. Wylie, Poletown: Community Betrayed\n58 (1989). Urban renewal projects have long been associated with the displacement of\nblacks; \xe2\x80\x9c[i]n cities across the country, urban renewal came to be known as \xe2\x80\x98Negro\nremoval.\xe2\x80\x99\xe2\x80\x9d Pritchett, The \xe2\x80\x9cPublic Menace\xe2\x80\x9d of Blight: Urban Renewal and the Private\nUses of Eminent Domain, 21 Yale L. & Pol\xe2\x80\x99y Rev. 1, 47 (2003). Over 97 percent of\nthe individuals forcibly removed from their homes by the \xe2\x80\x9cslum-clearance\xe2\x80\x9d project\nupheld by this Court in Berman were black. Regrettably, the predictable consequence of\nthe Court\xe2\x80\x99s decision will be to exacerbate these effects.\xe2\x80\xa6\nNotes and Questions\n1. If the state pays compensation and bears the political costs, what is wrong with\ntaking from A and giving to B? Suppose the state wants land to be used for a\nparticular purpose. Is it sensible to require the state to conduct operations or\nmight turning them over to private actors enhance efficiency? Or is a \xe2\x80\x9cpublic\nuse\xe2\x80\x9d requirement more about policing local political processes, deterring\ncorruption or special interest capture? If so, is this an efficient mechanism?\n2. Kelo provoked a strong public reaction and a flurry of state legislative activity\ndesigned to control abuses of eminent domain. By 2009, 43 states had enacted\n\n\x0cEminent Domain\n\n811\n\neminent domain restrictions. Does this mean that democracy works? Are there\nadvantages to the Supreme Court\xe2\x80\x99s setting limits on eminent domain? Compare\nAlberto B. Lopez, Revisiting Kelo and Eminent Domain\xe2\x80\x99s \xe2\x80\x9cSummer of Scrutiny\xe2\x80\x9d, 59\nALA. L. REV. 561, 565 (2008) (\xe2\x80\x9c[P]ost-Kelo legislation symbolizes the\ngovernment\xe2\x80\x99s effort to remedy the breach of the public\xe2\x80\x99s trust caused by Kelo\nregardless of one\xe2\x80\x99s substantive view of those legislative measures. Furthermore,\nthe robust post-Kelo legislative response is a testament to the strength of one of\nthe core principles of our government\xe2\x80\x94federalism.\xe2\x80\x9d), with Ilya Somin, The\nLimits of Backlash: Assessing the Political Response to Kelo, 93 MINN. L. REV. 2100,\n2105 (2009) (\xe2\x80\x9cOnly seven states that had recently engaged in significant\nnumbers of economic development and blight condemnations have enacted\npost-Kelo legislative reforms with any real teeth.\xe2\x80\x9d). Can one\xe2\x80\x99s answer be\nindependent of one\xe2\x80\x99s prior views on the legitimate uses of eminent domain?\n3. As Justice Thomas\xe2\x80\x99s dissent notes, one criticism of the eminent domain power\nhas been that it has been used in either a discriminatory or racially\ndisproportionate manner. Which way does this consideration cut in Kelo? After\nall, the practice of labeling of minority communities as \xe2\x80\x9cblighted\xe2\x80\x9d is a matter of\nhistorical record. Might the Court\xe2\x80\x99s approval of eminent domain\xe2\x80\x99s use on Kelo\xe2\x80\x99s\nfacts improve the politics of eminent domain law by making clear that anyone\ncould be on the receiving end of a condemnation? And to the extent the\nproblem with eminent domain is discriminatory application, why isn\xe2\x80\x99t the\nConstitution\xe2\x80\x99s Equal Protection Clause a preferable safeguard? Or does the\nhistory cited by Justice Thomas answer that question?\n4. Most of the affected homeowners in New London negotiated a purchase price\nwith the New London Development Corporation (NLDC). For her part, Kelo\nreportedly turned down a purchase offer that would have netted her a $22,000\nprofit on her home. The decision to litigate, while not letting her keep her\nproperty, did lead to a higher purchase price. The public outcry in the wake of\nthe Kelo ruling led to favorable settlements for the holdout landowners. For\nexample,\n\n\x0c812\n\nProperty\n\nKelo agreed in June 2006 to sell for $442,000 ($392,000 plus a\npay-off of her $50,000 mortgage); not too bad for a place she had\npurchased in August 1997 for $53,500, and NLDC had appraised\nfor condemnation at $123,000 in November 2000. She only sold\nthe lot. Avner Gregory, the same preservationist who had\nrefurbished the house after moving it from its original location to\nthe site where Kelo found it, relocated the house a second time\nto a vacant parcel with a pre-existing foundation, in a modest\nneighborhood several miles away, on the other side of the\nAmtrak rail line from Fort Trumbull. A plaque identifies the\nhouse as \xe2\x80\x9cThe Kelo House.\xe2\x80\x9d\nGeorge Lefcoe, Jeff Benedict\xe2\x80\x99s Little Pink House: The Back Story of the Kelo Case, 42\nCONN. L. REV. 925, 954-55 (2010) (footnotes omitted). In 2009 Pfizer\nannounced it would leave New London to cut costs, taking its jobs to its facility\nin Groton, Connecticut. Patrick McGeehan, \xe2\x80\x9cPfizer to Leave City That Won\nLand-Use Case,\xe2\x80\x9d New York Times, p. A1 (November 13, 2009), available at\nhttp://www.nytimes.com/2009/11/13/nyregion/13pfizer.html?_r=0.\n\nC. Eminent Domain Operations\nLocal governments carry out condemnations in a variety of ways. There is no standard\neminent domain regime. Some states require some sort of pre-condemnation activity\n(e.g., formal findings that a condemnation is necessary or efforts to negotiate with the\nlandowner); others do not. Some jurisdictions require the condemning authority to\ninitiate a judicial action; others allow an administrative procedure, giving the landowner\nthe right to challenge the taking in court. Some states provide for expedited procedures,\n\xe2\x80\x9cquick take\xe2\x80\x9d provisions, either as an independent cause of action or by motion within\nan ongoing proceeding. 13 POWELL ON REAL PROPERTY \xc2\xa7 79F.06.\nIn Illinois, for example, the condemning authority files an eminent domain action in\nthe circuit court for the county of the property. The complaint details: \xe2\x80\x9c(i) the\ncomplainant\xe2\x80\x99s authority in the premises, (ii) the purpose for which the property is\nsought to be taken or damaged, (iii) a description of the property, and (iv) the names\n\n\x0cEminent Domain\n\n813\n\nof all persons interested in the property as owners or otherwise, as appearing of record,\nif known.\xe2\x80\x9d 735 ILL. COMP. STAT. ANN. 30/10-5-10. Either the condemning authority\nor the property owner may request a jury trial. Expedited procedures (called a \xe2\x80\x9cquick\ntake\xe2\x80\x9d procedure) are also available upon motion. Id. \xc2\xa7 30/20-5-5.\n\nD. Just Compensation\nWhat is just compensation? The standard approach is fair market value. See, e.g., 735\nILL. COMP. STAT. ANN. \xc2\xa7 30/10-5-60 (\xe2\x80\x9c[T]he fair cash market value of property in a\nproceeding in eminent domain shall be the amount of money that a purchaser, willing,\nbut not obligated, to buy the property, would pay to an owner willing, but not obliged,\nto sell in a voluntary sale.\xe2\x80\x9d). This amount may include costs directly attributable to the\ncondemnation. See id. \xc2\xa7 30/10-5-62 (providing for compensation of reasonable\nrelocation costs).\nEvidentiary difficulties aside, the fair market value metric potentially understates the\nvalue of the home from the perspective of the property owner in at least three ways.\nFirst, fair market value ignores subjective values. A property owner often values it more\nthan the market (as reflected by the fact that it has not yet been sold for the market\nprice). If the property is a home, it may have high sentimental value (e.g., if it is where\none raised children) or offer idiosyncratic amenities that cannot be easily duplicated but\nare not reflected in market price (e.g., proximity to friends, work, etc.). Second, eminent\ndomain is a forced transaction. The landowner may experience the transaction as a\nviolation of personal autonomy. Third, to the extent the project produces a surplus,\nthe displaced landowner does not get a share. In other words, suppose five lots are\neach individually worth $10,000, but they can be assembled into a park that confers\n$100,000 of benefits on the surrounding area. The owners of the condemned lots do\nnot share in the surplus, they still receive only $10,000. See, e.g., 735 ILL. COMP. STAT.\nANN. \xc2\xa7 30/10-5-60 (\xe2\x80\x9cIn the condemnation of property for a public improvement, there\nshall be excluded from the fair cash market value of the property any appreciation in\nvalue proximately caused by the improvement and any depreciation in value\nproximately caused by the improvement\xe2\x80\x9d).\n\n\x0c814\n\nProperty\n\nWhat happens when only part of a parcel is taken? The general approach is to allow\ncompensation for the effect of the severance on the land retained by the condemnee.\nImagine O owns Blackacre and Whiteacre as one parcel with a combined value of\n$100,000. If Blackacre is taken for a fair market value of $50,000, and the severance\nleaves Whiteacre worth only $40,000, O is entitled to compensation for the lost\n$10,000. Note, however, that if O owned only Whiteacre, and its value was reduced by\n$10,000 due to the next-door condemnation of Blackacre, O would receive nothing.\n13 POWELL ON REAL PROPERTY \xc2\xa7 79F.04.\nWhat if a partial taking enhances the value of the remainder? See, e.g., 735 ILL. COMP.\nSTAT. ANN. \xc2\xa7 30/10-5-55 (\xe2\x80\x9cIn assessing damages or compensation for any taking or\nproperty acquisition under this Act, due consideration shall be given to any special\nbenefit that will result to the property owner from any public improvement to be\nerected on the property.\xe2\x80\x9d); Illinois State Toll Highway Auth. v. Am. Nat. Bank & Trust\nCo. of Chicago, 642 N.E.2d 1249, 1255 (Ill. 1994) (\xe2\x80\x9c[S]pecial benefits are any benefits\nto the property that enhance its market value and are not conjectural or speculative.\xe2\x80\x9d).\nThis mix of rules leads to results that may strike you as unfair. Imagine a government\nproject to build a subway station, and three affected landowners, Alice, Bob, and\nCharles. Alice\xe2\x80\x99s parcel is condemned in its entirety; half of Bob\xe2\x80\x99s land is condemned;\nand Charles\xe2\x80\x99s land is untouched. Suppose further that the transit station leads to a\ndoubling in the property values of the surrounding land. On these facts, Alice receives\nthe pre-project value of her land. Bob receives nothing (assuming the appreciation of\nhis retained half matches the pre-project value of the condemned portion); and Charles\nreceives a windfall. Is there any way to avoid these difficulties?\nHolders of future interests are also entitled to compensation. See generally 2 NICHOLS\nON EMINENT DOMAIN \xc2\xa7 5.02; see, e.g., CAL. CODE CIV. PROC. \xc2\xa7 1265.420 (\xe2\x80\x9cWhere\nproperty acquired for public use is subject to a life tenancy, upon petition of the life\ntenant or any other person having an interest in the property, the court may order any\nof the following: (a) An apportionment and distribution of the award based on the\nvalue of the interest of life tenant and remainderman; (b) The compensation to be used\nto purchase comparable property to be held subject to the life tenancy; (c) The\ncompensation to be held in trust and invested and the income (and, to the extent the\n\n\x0cEminent Domain\n\n815\n\ninstrument that created the life tenancy permits, principal) to be distributed to the life\ntenant for the remainder of the tenancy; (d) Such other arrangement as will be equitable\nunder the circumstances.\xe2\x80\x9d).\n\n\x0cPart V: Use\nTwo neighboring owners may wish to make use of their land in ways that are\nincompatible: use by one would interfere with or prevent use by the other. For example,\nit would be difficult for me to operate a daycare center next door to your\nslaughterhouse, or for you to grow soybeans in the shadow of my office towers, or for\neither of us to enjoy a single-family home across the street from an oil refinery.\nProperty law regulates these types of competing uses in various ways. The common\nlaw of nuisance purports to set standards by which one owner can prevent the desired\nuse of another. Owners can agree among themselves to regulate their uses, and have\nthose agreements enforced not only between themselves but between all subsequent\nowners of the affected land. Such private land use restrictions are known as servitudes.\nOne type of servitude\xe2\x80\x94an easement\xe2\x80\x94provides one owner a right to use the other\xe2\x80\x99s\nland. Another type of servitude\xe2\x80\x94a restrictive covenant\xe2\x80\x94provides one owner the right\nto prevent neighboring landowners from using their land in particular ways. Covenants\ncan even be used to bind entire communities in mutual and reciprocal schemes of\nprivately regulated land uses: the common-interest community.\nGovernments are also heavily involved in regulating potentially conflicting land uses,\nenacting zoning schemes to confine potentially conflicting uses to separate areas of\ntheir jurisdiction, and imposing restrictions on the legal uses of property, though the\nscope of this power is limited by the Takings Clause of the Fifth Amendment to the\nfederal Constitution.\nIn each of these systems for regulating incompatible uses, disputes will lead to someone\nhaving their wishes fulfilled, and someone else finding their desires frustrated. As you\nread these chapters, pay attention to how each of these legal doctrines picks winners\nand losers, how they set the conditions according to which some uses can receive more\nfavorable treatment than others, and most importantly, how they allocate the power to\ndecide when a particular condition for favoring or disfavoring a particular use is\nsatisfied.\n\n816\n\n\x0cNuisance\n\xe2\x80\x9cThere is perhaps no more impenetrable jungle in the entire law than\nthat regarding the word \xe2\x80\x98nuisance.\xe2\x80\x99 \xe2\x80\x9d\n\xe2\x80\x94W. Page Keeton et al., PROSSER AND KEETON ON TORTS \xc2\xa7 86 (5th ed.\n1984).\nPeople want to use land for different things. We\xe2\x80\x99ve already seen how the resulting\nconflicts provide a rationale for property rights. In the so-called tragedy of the\ncommons, for example, each cattle owner has an incentive to use the pasture for\ngrazing before someone else beats him or her to it. The race to consume leaves the\npasture depleted and everyone worse off. Property rights are one, but by no means the\nonly, mechanism for addressing the problem, as an individual owner may have the\nnecessary incentive to ensure that the plot is not overconsumed. Likewise property\nrights enable owners to manage their holdings free from external interference. The\nfarmer may plant her corn even though her neighbor wishes a hotel were there. And\nproperty rights facilitate the reconciliation of incompatible interests without outside\nintervention. Determining whether Blackacre is better off as a hotel or a farm might be\na hard call for an outside regulator. But with enough money, the would-be hotelier may\nsimply buy out the farmer (or vice versa).\nThis hardly exhausts the universe of potential dispute. As we have already seen,\ndisputes may emerge within property boundaries. One joint tenant may want to use a\npond for irrigation; the other, fishing. Property law provides another set of\nmanagement mechanisms for this kind of disagreement\xe2\x80\x94e.g. partition actions\xe2\x80\x94that\nwe studied in our unit on concurrent interests. Likewise the law of leaseholds has its\nown set of doctrines for managing the inevitable battles of the landlord/tenant\nrelationship.\nHere we are interested in conflicts that arise between neighboring property owners.\nThe collision is not within an ownership interest (as with cotenants) but between such\ninterests. My lifelong dream of operating the world\xe2\x80\x99s smokiest factory may be\n817\n\n\x0c818\n\nProperty\n\nincompatible with my neighbor\xe2\x80\x99s desire for odorless living. We each own our respective\nland. What then?\nOne solution is to engage in private governance. We might strike a deal, and the law of\nservitudes lets us bind our successors in ownership to the arrangement. Alternatively,\nthe state might resolve our dispute via regulation\xe2\x80\x94the government may declare my\nfacility illegal via zoning law or air quality regulation, effectively picking a winner\nbetween competing interests.\nThe law of nuisance takes a different tack. It also involves picking a winner, but turns\nthe choice over to a court. The court\xe2\x80\x99s role, however, is not explicitly regulatory. Rather,\nit is there to determine whether the complained-of act is contrary to someone else\xe2\x80\x99s\nproperty rights. Stated another way, if my factory is a nuisance, your property rights\nalready preclude its operation. The nuisance action merely clarifies that I violated your\nproperty rights (and that my property rights did not include the right to use my land in\nthe way I had). In essence, the court is determining whether a boundary has been\ncrossed. But from another perspective, nuisance looks a lot like regulation. A judicial\nregulator (rather than a politically accountable agency) takes a look at the facts and\ndecides whose interests ought to prevail. We might look at nuisance questions from\neither view, which complicates the doctrine.\n\nA. The Problem of Nuisance Definition\n\xe2\x80\x9cA private nuisance is a nontrespassory invasion of another\xe2\x80\x99s interest in the private use\nand enjoyment of land.\xe2\x80\x9d RESTATEMENT (SECOND) OF TORTS \xc2\xa7 821D (1979). What\ndoes that mean? Nuisance law is a history of courts trying to come to grips with a fairly\nvague exhortation. Judges sometimes invoke the maxim sic utere tuo ut alienum non laedas.\n\xe2\x80\x9c[O]ne must so use his own rights as not to infringe upon the rights of another. The\nprinciple of sic utere precludes use of land so as to injure the property of another.\xe2\x80\x9d Cline\nv. Dunlora S., LLC, 726 S.E.2d 14, 17 (Va. 2012).\nThat\xe2\x80\x99s intuitive, but unhelpful. Back to the factory versus the home. If my ownership\nof land includes the right to emit smoke, I interfere with my neighbor\xe2\x80\x99s ability to enjoy\nher home. But if her property right includes the ability to shut me down, then her\n\n\x0cNuisance\n\n819\n\npreferred property use interferes with my ability to use my property as I see fit. The\nharms are reciprocal. Appeals to sic utere beg the question. That said, there is something\nintuitively appealing about the maxim, and perhaps you have a strong intuition (based\non what?) that factories \xe2\x80\x9ccause\xe2\x80\x9d harm in a way that homes do not. How far do\nintuitions of harm go? What if, instead of using my property, I prefer to let it fall into\ndisuse? Does this passive act cause harm?\nPuritan Holding Co. v Holloschitz\n372 N.Y.S.2d 500 (Sup. Ct. 1975)\nWALTER M. SCHACKMAN, J.\nPlaintiff owns a small apartment building, recently renovated, on West 93rd Street in\nManhattan, almost directly across the street from a building owned by the defendant.\nThe latter building has been abandoned. Plaintiff claims the defendant has created a\nnuisance by not properly caring for her property and claims it has suffered damages as\na result. Defendant did not appear in the action and an inquest was held before the\ncourt.\nThe uncontroverted proof at trial was that defendant\xe2\x80\x99s building had deteriorated,\nbecome unsightly and been taken over by derelicts. The building\xe2\x80\x99s condition has caused\na deterioration in values on the block. A real estate expert testified that the depreciation\nin value of plaintiff\xe2\x80\x99s property since the abandonment of defendant\xe2\x80\x99s building was\n$30,000 to $35,000. He further stated it would be impossible for plaintiff to obtain a\nmortgage because of the condition of the defendant\xe2\x80\x99s property. The question for the\ncourt is whether the failure of the defendant to supervise her abandoned property\nconstitutes the maintenance of a private nuisance.\nAn excellent definition of nuisance appears in 4 ALR3d 908: \xe2\x80\x9cThe nuisance doctrine\noperates as a restriction upon the right of an owner of property to make such use of it\nas he pleases. In legal phraseology the term \xe2\x80\x98nuisance\xe2\x80\x99 is applied to that class of wrongs\nwhich arises from the unreasonable, unwarrantable, or unlawful use by a person of his\nown property, and which produces such material annoyance, inconvenience,\ndiscomfort or hurt that the law will presume a consequent damage. It is so\ncomprehensive that it has been applied to almost all wrongs which have interfered with\n\n\x0c820\n\nProperty\n\nthe rights of the citizen in his person, property, the enjoyment of his property, or his\ncomfort. It has been said that the term \xe2\x80\x98nuisance\xe2\x80\x99 is incapable of an exact and exhaustive\ndefinition which will fit all cases, because the controlling facts are seldom alike, and\neach case stands on its own footing.\xe2\x80\x9d\nThe court has made a search of the reported cases in New York and has been unable\nto find any similar to the case at bar. However, it has been held that \xe2\x80\x9cevery person who\nsuffered actual damages, whether direct or consequential, from a nuisance, might\nmaintain an action for his own particular injury.\xe2\x80\x9d (Lansing v Smith, 4 Wend 9.) There are\nnumerous cases where property owners, adjacent to or in the vicinity of a nuisance,\nwere entitled to damages. Examples are: where a tire shop emitted offensive odors and\nfumes; the discharge of large quantities of dust; an open burning operation by a city in\na landfill area and blasting operations.\nIn considering whether an activity is a nuisance, the court must be mindful of the\nlocation and surroundings as well as other circumstances. An activity which occurs in\na particular location and surroundings may be reasonable, while the same activity in\nanother location and in other surroundings may be a nuisance.\nWest 93rd Street is in the West Side Urban Renewal area which has recently seen a\nmarked upward trend in real estate values. Annually there are thousands of buildings\nabandoned throughout New York City. Some buildings abandoned and left in disrepair\nin certain deteriorating neighborhoods of the city may not constitute a nuisance.\nHowever, here a building has been abandoned in a location where property owners are\ntrying to maintain and upgrade the housing standards. Defendant has clearly violated\nsection C26-80.0 of the Administrative Code of the City of New York which requires\nthat vacant buildings must be either continuously guarded or sealed. The court is of the\nopinion that defendant\xe2\x80\x99s actions constitute a nuisance.\nThe court is not unmindful of the fact that given the number of abandonments,\nestimated by the Housing and Development Administration of the City of New York\nat approximately 12,000 units per year, and the further fact that the city does not have\nthe funds to force the owners to maintain these properties, a decision in favor of\nplaintiff herein could result in a multiplicity of lawsuits. However, one bad building\n\n\x0cNuisance\n\n821\n\nmay eventually destroy an entire neighborhood. The courts have a duty to examine\neach situation independently.\nPlaintiff has provided sufficient proof that defendant\xe2\x80\x99s building is, in its present\ncondition, a nuisance. It is entitled to the difference between the market value of the\nbuilding before and after the nuisance. Plaintiff\xe2\x80\x99s expert has testified that the difference\nin value is $30,000 to $35,000. The court finds in favor of the plaintiff in the sum of\n$30,000.\nNotes and Questions\n1. How much should it matter that the defendant independently violated a local\nregulation?\n2. If Holloschitz does not go too far, how much freedom should courts have to\njudge land uses? Are there any metrics that would both provide judicial\ndiscretion as well as contain it? We will examine several approaches below, but\nthe question underscores the problem of unclear boundaries in nuisance law. A\nlot of property doctrine exists to help us determine the scope of property rights\nwithout asking a judge. The metes and bounds in a deed tell us what is a trespass.\nThe adverse possession limitations period lets expectations settle. Title\nrecording gives notice of competing interests. And so on. When push comes to\nshove, litigation may be necessary to resolve disputed boundaries, but in most\ncases there are ways to determine them without the aid of a court. By contrast,\nthe boundaries clarified by nuisance law are harder to ascertain ex ante in part\nbecause nuisance is more a flexible standard than a bright-line rule. What\nmeasures short of litigation are available to people like the plaintiff here? To be\nsure, the law cannot anticipate every possible conflict between property owners.\nThere is therefore something to be said for ex post determinations of what is a\nreasonable use of land. Is this reason enough to use nuisance law to supplement\nregulatory and zoning schemes?\n3. Aesthetics. Courts generally reject nuisance claims based on aesthetic harm,\nbut that reluctance may be eroding. Rattigan v. Wile, 841 N.E.2d 680, 683 (Mass.\n2006) (\xe2\x80\x9cWe conclude in this appeal that activities on one\xe2\x80\x99s property that create\n\n\x0c822\n\nProperty\n\nor maintain unreasonable aesthetic conditions for neighbors are actionable as a\nprivate nuisance.\xe2\x80\x9d); id. at 689-90 (arguing that the modern trend is to allow such\nclaims). Courts also sometimes consider aesthetic harm as part of the larger\nnuisance analysis. Sowers v. Forest Hills Subdivision, 294 P.3d 427, 430 (Nev.\n2013) (\xe2\x80\x9c[W]e hold that the aesthetics of a wind turbine alone are not grounds\nfor finding a nuisance. However, we conclude that a nuisance in fact may be\nfound when the aesthetics are combined with other factors, such as noise,\nshadow flicker, and diminution in property value.\xe2\x80\x9d).\n4. What if a building became dilapidated because its owner could not afford\nupkeep? If so, does Holloschitz hint at nuisance\xe2\x80\x99s potential to serve as a tool of\nexclusion of poor people? What other activities (or groups) might the law target?\nSee generally Alfred L. Brophy, Integrating Spaces: New Perspectives on Race in the\nProperty Curriculum, 55 J. LEGAL EDUC. 319, 331-33 (2005) (discussing attempts\nto use nuisance law as a tool of racial discrimination); John Copeland Nagle,\nMoral Nuisances, 50 EMORY L.J. 265, 276-94 (2001) (discussing range of activities\ntargeted by nuisance plaintiffs). For commentary on the disability rights\nimplications of a recent nuisance suit between neighbors, see David Perry,\nFlowers v Gopal-Rich folks try to declare autistic boy a \xe2\x80\x9cPublic Nuisance\xe2\x80\x9d, (September\n23, 2015), http://www.thismess.net/2015/09/flowers-v-gopal-rich-folks-tryto.html. Could the mere presence of a sex offender in a residential community\nof families with young children be considered a nuisance? Some public nuisance\nordinances deem repeated 911 calls a nuisance; what effect might such property\nlaw rules have on victims of domestic violence? See Emily Werth, The Cost of\nBeing \xe2\x80\x9cCrime Free\xe2\x80\x9d: Legal and Practical Consequences of Crime Free Rental Housing and\nNuisance\nProperty\nOrdinances\n(Aug.\n2013)\nhttp://povertylaw.org/sites/default/files/files/housing-justice/cost-of-beingcrime-free.pdf.\n5. Nuisance and Trespass. Does the difference between nuisance and trespass\nturn on the nature of the particular right of ownership involved (i.e., use versus\npossession)? On whether the injury to the plaintiff resulted from a physical\ninvasion of the plaintiff\xe2\x80\x99s property (i.e., quare clausum fregit)? Consider the\nfollowing historical discussion:\n\n\x0cNuisance\n\n823\n\nHistorically, trespass and nuisance were two distinct commonlaw classes of injury involving real property. 9 R. Powell, Real\nProperty (1999) \xc2\xa7 64.01[1], p. 64\xe2\x80\x935; 4 Restatement (Second),\nTorts, \xc2\xa7 821D, comment (a) (1979). A defendant who invaded a\nplaintiff\xe2\x80\x99s possession was a trespasser; a defendant who interfered\nwith a plaintiff\xe2\x80\x99s use and enjoyment of his property by acts done\nelsewhere than on the plaintiff\xe2\x80\x99s land was subject to a claim of\nnuisance.\nThis ancient distinction between trespass and nuisance, on the\nbasis of whether an invasion of a plaintiff\xe2\x80\x99s land was direct or\nindirect, is not followed by more recent cases. Instead, recent case\nlaw treats trespass cases as involving acts that interfere with a\nplaintiff\xe2\x80\x99s exclusive possession of real property and nuisance\ncases as involving acts interfering with a plaintiff\xe2\x80\x99s use and\nenjoyment of real property. In other words, the distinction no\nlonger rests on the means by which the invasion is effected but,\ninstead, on the nature of the right with which the tortfeasor\ninterferes. When viewed in this way, claims of nuisance may\ninclude an instance of trespass in that a physical entry onto land\npossessed exclusively by another also may affect, in the abstract,\nthe possessor\xe2\x80\x99s use and enjoyment of the land.\nBoyne v. Town of Glastonbury, 955 A.2d 645, 652-53 (Conn. App. 2008)\n(successive citations to POWELL and the Restatement omitted); see also, e.g., Cook\nv. DeSoto Fuels, Inc., 169 S.W.3d 94, 103 (Mo. Ct. App. 2005) (\xe2\x80\x9c[Plaintiffs\xe2\x80\x99]\nallegations that [defendant] caused gasoline to enter their property can\nconstitute a claim for both trespass and nuisance because that contamination\ninvolves a direct physical invasion that interferes with both the right to\npossession and the use and enjoyment of property.\xe2\x80\x9d); Maryland Heights\nLeasing, Inc. v. Mallinckrodt, Inc., 706 S.W.2d 218 (Mo. Ct. App. 1985)\n(complaint of low-level radiation emissions stated claim for nuisance and\ntrespass).\n\n\x0c824\n\nProperty\n\nB. Adjudicating Nuisance\nAlthough some acts are treated as per se nuisances (typically illegal activities) courts\nmust generally engage in contextual assessments of harm to determine whether a\nnuisance exists in fact (also referred to as a nuisance per accidens).\nSans v. Ramsey Golf & Country Club, Inc.\n149 A.2d 599 (N.J. 1959)\nFRANCIS, J.\nAn injunction was issued by the Chancery Division of the Superior Court against\ndefendant Ramsey Golf and Country Club, Inc., barring the further use of the men\xe2\x80\x99s\nand women\xe2\x80\x99s third tees of its golf course. The Appellate Division affirmed .\xe2\x80\xa6\nThe issue presented is a novel one. The facts which created it are not seriously in\ndispute. The physical setting which forms its background is the product of the ingenuity\nof a real estate developer.\n[The defendant operated a residential and country club development with a nine-hole\ngolf course.] The development tract contained three small lakes, one of which, called\nMirror Lake, became the water hazard hole about which this controversy centers.\xe2\x80\xa6\nIn 1949 the plaintiffs, husband and wife, purchased a lot in the development. Naturally,\nthey were aware of the existence of the golf course, and they became members of the\nclub. They commenced construction of a home on the lot in 1950, after which they\nacquired two adjoining parcels. One side of their property adjoins the fairway of the\nsecond hole. The rear line of the three lots is near Mirror Lake but does not run to the\nwater. It is separated from the edge of the lake by a strip of land varying in width from\n11 to 40 feet, which is owned by the golf club.\nIn 1948 the present third women\xe2\x80\x99s tee was built. Its location was designed to create a\nshort par 4 water hole.\xe2\x80\xa6 [T]he tee had been in continuous use since its installation,\nalthough the plaintiff Ralph Sans testified that he did not notice it until 1950 when his\nhome was being built. Subsequently, apparently in 1949, a separate men\xe2\x80\x99s tee was built\nfor this hole about 30 feet farther from the northerly edge of the lake. The purpose\n\n\x0cNuisance\n\n825\n\nwas to lengthen the water hazard for the men. Both tees are on golf club property.\nAccording to Sans, the men\xe2\x80\x99s tee is \xe2\x80\x98roughly\xe2\x80\x99 50 to 60 feet from the southerly corner\nof the rear of his house; the women\xe2\x80\x99s tee is closer.\nIn order to reach the third tees from the second green, the golfers walk along the 11 to\n40-foot-wide path (owned by defendant and described above) separating plaintiffs\xe2\x80\x99 rear\nlawn from the lake.\nPlaintiffs moved into their new home in June or July of 1951, and have lived there since\nthat time. They have two children, who were 10 and 11 years of age when the case was\nheard. As the membership of the club grew, play on the golf course increased, and the\nplayers\xe2\x80\x99 use of the third tees and the path to reach them became annoying and\nburdensome to plaintiffs. They began to complain to defendant\xe2\x80\x99s officials, and\nthereafter and until this suit was brought, they sought to effect the relocation of the\ntees to the north of the northerly line of the lake. Such a change is feasible. In fact,\nwhen a stay of the restraint issued by the trial court was denied, a new temporary tee\nwas built and has been in use pending the determination of this appeal. The objection\nof defendant to adopting it permanently is that an attractive short par 4 water hole is\ntransformed into an ordinary par 3 one on a nine-hole course which already has three\npar 3 holes.\nPlaintiffs\xe2\x80\x99 complaint charged defendant and its members with trespassing on their land\nby using the pathway along the lake in walking to the ladies\xe2\x80\x99 and men\xe2\x80\x99s tees in question.\nThis contention was abandoned when it appeared that plaintiffs did not own the strip\nand that, although National had not conveyed it to defendant in the original 1945 deed,\na transfer had been made by deed in 1955. Other allegations, however, in company\nwith the issues appearing in the pretrial order, were deemed by the trial court to present\na claim that the location of the tees and the manner and incidents of their use by\ndefendant and its members constituted a private nuisance as to plaintiffs. The trial was\nconducted on the latter basis.\nProof was adduced that in the golf season play begins on the third tees as early as 6\nA.M. and continues throughout the day until twilight. On week-ends and holidays the\n\n\x0c826\n\nProperty\n\nactivity is more intense. Sans spoke of an \xe2\x80\x98endless stream of golfers\xe2\x80\x99 using the path just\nin back of his house.\xe2\x80\xa6\nWhen Sans bought his first lot in 1949, the one on which his home was later\nconstructed, he did not see the tee or tees in question. And there is no proof that\nanyone called them to his attention. It does appear that a certain brochure respecting\nthe development had been given to him. A similar one was introduced in evidence. It\ncontained what appeared to be an aerial color view of the tract, including the course.\nAlthough the tees were indicated, none was depicted on plaintiffs\xe2\x80\x99 side of the lake.\nWhen an inquiry was made on cross-examination as to whether he did not know that\nhe was \xe2\x80\x98buying a piece of property immediately adjacent to the golf course,\xe2\x80\x99 he\nanswered: \xe2\x80\x98No, we did not buy a piece adjacent to the golf course. We had a choice of\nthree lots on that end and we bought the lot away from the golf course.\xe2\x80\x99 And as has\nbeen indicated, he testified further that he did not see a tee in the rear of his lots until\nsome time in 1950 when his home was being erected.\nAccording to plaintiffs, the constant movement of the players to and from the tee in\nclose proximity to their rear lawn and house was accompanied by a flow of\nconversation which became annoying and burdensome to them. It awakened them and\ntheir children as early as 7 in the morning and it pervaded their home all day long until\ntwilight. Moreover, they have a consciousness that everything they say in or around the\nhouse can be heard out on the path and so they are \xe2\x80\x98under a constant strain and\nconstant tension.\xe2\x80\x99 They \xe2\x80\x98never feel relaxed or free at home\xe2\x80\x99; \xe2\x80\x98(w)e never know when\nthere is someone in our back yard.\xe2\x80\x99 Occasionally, a low hook or slice or heeled shot of\na golfer carries upon their lawn. Then, by means of a trespass, the ball is retrieved.\nSometimes it is played from that position. Apparently there are no out-of-bounds\nstakes in the area. The combination of difficulties makes it impossible to sit outside\nand \xe2\x80\x98enjoy supper.\xe2\x80\x99\nAt times there are as many as 12 persons waiting to use the ladies\xe2\x80\x99 and men\xe2\x80\x99s tees. On\na short course containing three par 3 holes, such backing up of playing groups,\nparticularly at a 260-yard water hole, might well be expected. This gathering adds to the\nconversation, and the voices can be heard in the house. While silence is the\nconventional courtesy when a golfer is addressing his ball and swinging, the ban is\n\n\x0cNuisance\n\n827\n\nrelaxed between shots, and presumably the nature of the comments depends in some\nmeasure upon the success or failure of the player in negotiating the hazardous water.\nBut an even more serious objection involves plaintiffs\xe2\x80\x99 children. They have no freedom\nof play on their back lawn. Golfers tell them not to play there and constantly admonish\nthem to be quiet. If they move their activities to the north side of the property, they\nare endangered by balls being driven on the second fairway. This exposure has\nconstantly worried Mrs. Sans. The children have a dog. On one occasion they were\ncavorting in the rear of the house and the dog was barking. A golfer instructed them\nto keep it quiet, and when they were unable to do so he walked on plaintiffs\xe2\x80\x99 property\nand knocked the animal unconscious with a club-even though one of the children\npleaded with him not to do it. Complaint about the incident to one of defendant\xe2\x80\x99s\nofficials met with the response that \xe2\x80\x98The dog had no right to be there.\xe2\x80\x99 At times the\nplayers allow their own dogs to accompany them around the course, and they have\nattacked plaintiffs\xe2\x80\x99 dog when it was on the rear lawn.\nThe resident members of the club have the common right to use the lakes for fishing\nand boating. Plaintiffs have an aluminum boat in the lake immediately to the rear of\ntheir house. If the children take the boat out, the golfers at these tees order them off\nthe water. They cannot fish with safety from the banks to the rear of the house for the\nsame reason, and because of the danger of being struck by golf balls. Even in the winter,\nwhen children were ice skating there, golfers were hitting balls over their heads to the\nthird fairway.\xe2\x80\xa6\nDefendant recognized the danger, and at times during the winter the tee was closed off\nto avoid possible injury to the skaters. When this happened the hole was played from\nthe other side of the lake-presumably in a manner similar to that followed since the\ninjunction in this case.\nOn the basis of the evidence, which stands without substantial dispute, plaintiffs claim\nthat the third tees in their present location constitute a private nuisance and that their\nuse should be enjoined. Defendant denies that the facts in their total impact warrant\nthat conclusion. Further, it claims that plaintiffs bought their lots, built their home and\nmoved into the area with full knowledge of the existence and use of the golf course\n\n\x0c828\n\nProperty\n\nand therefore assumed any annoyances and inconveniences incident to the playing of\nthe game.\nThe circumstances here are unique. A situation where a person buys or builds a home\nadjoining a wholly independent, unrelated and existing conventional type golf course\nis quite dissimilar. The basic theme of this development was residence. The recreational\nfacilities, including the golf course were subordinate. Their purpose and existence were\nto make the area a desirable one in which to dwell. Note the ecstatic exclamations of\nthe developer\xe2\x80\x99s brochures:\n\xe2\x80\x98The perfect home location; * * * a millionaire\xe2\x80\x99s paradise for moderate\nincome families; * * * Ramsey Country Club Estates is the culmination\nof a ten year search for the perfect home location * * *. Each approved\npurchaser will automatically receive a share representing proportionate\nownership in the Country Club and all its properties. The Club will own\nthe impressive $100,000. ivy covered stone mansion for its club house.\nHere will be the center of social life for this unusual new community * *\n*. Owner-members of the Ramsey Country Club will own for their\nexclusive use the new 9-hole golf course * * * (the record contains no\nexplanation of how the associate members-non-owners of property in\nthe development-happened to be admitted to the club. Sans understood\nthat membership was to be limited to property owners.), spacious sand\nbathing beaches, three picturesque lakes for canoeing, boating and\nfishing * * * complete facilities for the enjoyment of all winter sports * *\n*. Residents will enjoy swimming, canoeing, fishing, ice-skating in the\ncomfort and safety of their own private community. * * * This\nmagnificent club house and its grounds-all of these wonderful\nrecreational facilities-will be shared, owned and enjoyed by a selected\ngroup of families who will live luxuriously in these unusual and\nincomparable surroundings for less than the cost of a small city\napartment.\xe2\x80\x99 (Emphasis added, insertion ours.)\nThe plaintiffs may justly assert that these comments add equitable strength to their\nposition in the present controversy. The brochure given to them before they became\n\n\x0cNuisance\n\n829\n\npurchasers in 1949 portrayed the layout of the course; the greens were numbered and\nthe tees were indicated. As has been pointed out, no tee appeared on their side of\nMirror Lake. No suggestion is made that any representative of the developer or of\ndefendant apprised them of any such tee. And it is not shown on the detailed map on\nfile in the county clerk\xe2\x80\x99s office. In the factual context, the element of reliance by the\nSans cannot be overlooked.\nThus the heart of the project was and is the home. The pastime facilities were intended\nto be no more than an aid to the enjoyment of the home, as the veins facilitate the\nfunctions of the heart. An avoidable and readily curable ailment in one vein should not\nbe permitted to impair the central organ. Especially is this true when the remedy calls\nfor a comparatively simple adjustment which will not materially impair the physical\nstructure in its entirety.\nThe essence of a private nuisance is an unreasonable interference with the use and\nenjoyment of land. The elements are myriad. The law has never undertaken to define\nall of the possible sources of annoyance and discomfort which would justify such a\nfinding. Pollock, Torts (1887), 260, 261. Litigation of this type usually deals with the\nconflicting interests of property owners and the question of the reasonableness of the\ndefendant\xe2\x80\x99s mode of use of his land. The process of adjudication requires recognition\nof the reciprocal right of each owner to reasonable use, and a balancing of the\nconflicting interests. The utility of the defendant\xe2\x80\x99s conduct must be weighed against\nthe quantum of harm to the plaintiff. The question is not simply whether a person is\nannoyed or disturbed, but whether the annoyance or disturbance arises from an\nunreasonable use of the neighbor\xe2\x80\x99s land or operation of his business. Prosser, Torts\n(2d ed. 1955), 410. As the Court of Appeals of Ohio put it in Antonik v. Chamberlain,\n81 Ohio App. 465, 78 N.E.2d 752, 759 (1947):\n\xe2\x80\x98The law of nuisance plys between two antithetical extremes: The\nprinciple that every person is entitled to use his property for any purpose\nthat he sees fit, and the opposing principle that everyone is bound to use\nhis property in such a manner as not to injure the property or rights of\nhis neighbor.\xe2\x80\x99\n\n\x0c830\n\nProperty\n\nDefendant\xe2\x80\x99s members have the right to the ordinary and expected use of the golf\ncourse. Plaintiffs have the correlative right to the enjoyment of their property. The\nelement of reciprocity must be emphasized because the parties\xe2\x80\x99 interests stem from a\ncommon source and are more mutually interdependent than in the usual case. The\nAppellate Division properly suggests the pertinent inquiry to be \xe2\x80\x98whether defendant\xe2\x80\x99s\nactivities materially and unreasonably interfere with plaintiffs\xe2\x80\x99 comforts or existence,\n\xe2\x80\x98not according to exceptionally refined, uncommon, or luxurious habits of living, but\naccording to the simple tastes and unaffected notions generally prevailing among plain\npeople.\xe2\x80\x9d\nIn the unusual circumstances of this case, the activities of defendant are manifestly\nincompatible with the ordinary and expected comfortable life in plaintiffs\xe2\x80\x99 home and\nthe normal use of their property. The evaluation of the conflicting equities must be\nmade in the factual framework presented. And any relief granted must result from a\nreasonable accommodation of those equities to each other in the light of the evaluation.\nIn our judgment, the facts considered in their totality demonstrate that plaintiffs\xe2\x80\x99\ninterests are paramount and demand reasonable protection. The trial court and the\nAppellate Division felt that a proper balance of equitable convenience could be\nachieved by requiring defendant to relocate the ladies\xe2\x80\x99 and men\xe2\x80\x99s third tees. Such relief,\nin our opinion, does not represent a burden disproportionate to the travail which would\nbe suffered by plaintiffs and their family through the perpetuation of the present\nmethod of play on the course.\nJudgment affirmed.\nNotes and Questions\n1. Why does Sans conclude that the \xe2\x80\x9cconflicting equities\xe2\x80\x9d favor the plaintiff?\n2. Threshold harms. One way courts avoid getting too involved in nuisance cases\nis by requiring significant harm before engaging in the balancing of equities.\nRESTATEMENT (SECOND) OF TORTS \xc2\xa7 821F (1979) (\xe2\x80\x9cThere is liability for a\nnuisance only to those to whom it causes significant harm, of a kind that would\nbe suffered by a normal person in the community or by property in normal\ncondition and used for a normal purpose.\xe2\x80\x9d);\n\n\x0cNuisance\n\n831\n\nBefore plaintiffs may recover the injury to them must be\nsubstantial. By substantial invasion is meant an invasion that\ninvolves more than slight inconvenience or petty annoyance. The\nlaw does not concern itself with trifles. Practically all human\nactivities, unless carried on in a wilderness, interfere to some\nextent with others or involve some risk of interference, and these\ninterferences range from mere trifling annoyances to serious\nharms. Each individual in a community must put up with a certain\namount of annoyance, inconvenience or interference, and must\ntake a certain amount of risk in order that all may get on together.\nBut if one makes an unreasonable use of his property and thereby\ncauses another substantial harm in the use and enjoyment of his,\nthe former is liable for the injury inflicted.\nWatts v. Pama Mfg. Co., 256 N.C. 611, 619, 124 S.E.2d 809, 815 (1962) (citing\n4 RESTATEMENT (FIRST) OF THE LAW OF TORTS \xc2\xa7 822, cmts. g & j).\n3. Restatement standards. The Restatement (Second) of Torts standard for a\nprivate nuisance is an activity that invades another\xe2\x80\x99s interest in the use and\nenjoyment of land where the invasion is either \xe2\x80\x9c(a) intentional and unreasonable,\nor (b) unintentional and otherwise actionable under the rules controlling liability\nfor negligent or reckless conduct, or for abnormally dangerous conditions or\nactivities.\xe2\x80\x9d RESTATEMENT (SECOND) OF TORTS \xc2\xa7 822 (1979). We will focus on\nthe first prong, intentional conduct that a court nonetheless finds unreasonable.\nSection 826 sets forth two tests. The invasion is unreasonable if \xe2\x80\x9cthe gravity of\nthe harm outweighs the utility of the actor\xe2\x80\x99s conduct\xe2\x80\x9d or if \xe2\x80\x9cthe harm caused by\nthe conduct is serious and the financial burden of compensating for this and\nsimilar harm to others would not make the continuation of the conduct not\nfeasible.\xe2\x80\x9d *\n\nThe Restatement likewise provides standards for assessing the gravity of the harm to the plaintiff, including\nfactors like degree, duration, character, ability to avoid, and nature of the plaintiff\xe2\x80\x99s activity (e.g., social value and\nlocal suitability). \xc2\xa7 827. As the list indicates, they leave room for subjective interpretation. Likewise, the\n*\n\n\x0c832\n\nProperty\n\n4. \xe2\x80\x9cComing to\xe2\x80\x9d a nuisance. One way to adjudicate between competing interests\nis through first-in-time, first-in-right principles. Generally, whether the plaintiff\ncame to the nuisance (i.e., acquired its property interest after the commencement\nof the allegedly unreasonable activity by the defendant) is treated as a factor to\nbe considered in balancing the equities, and not as a bar to a nuisance suit. Why\ndo you think that is? Are there circumstances in which you think coming to a\nnuisance ought to bar a suit? Likewise, compliance with zoning ordinances is a\nnon-dispositive factor in the defendant\xe2\x80\x99s favor.\n5. Idiosyncratic harms. The harm giving rise to nuisance liability must be \xe2\x80\x9cof a\nkind that would be suffered by a normal person in the community or by\nproperty in normal condition and used for a normal purpose.\xe2\x80\x9d RESTATEMENT\n(SECOND) OF TORTS \xc2\xa7 821F (1979). This creates difficulty for a range of\nasserted, but unproven, harms. See, e.g., San Diego Gas & Electric Co. v.\nSuperior Court, 55 Cal. Rptr. 2d 724, 752 (1996) (rejecting nuisance claim based\non fear of powerline electromagnetic fields). What about technological change?\nAmerican law generally rejects the notion that one has a right to light from\nadjacent properties. But what if one has a solar
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