Daveed Gartenstein-Ross
Prof. Venable

Spring 2000 Property Outline

I.	INTRODUCTION

A.	Acquisition by Discovery

1.	Johnson v. M’Intosh (Supreme Court 1823).
•	Facts: Dispute over ownership of land. Johnson thought he owned it because the Piankeshaw Indians sold it to him. M’Intosh thought he had acquired it from the US government. The US had purchased the land from the Piankeshaw Indians some years after Johnson had purchased it.
•	Holding: The Indians did not have the right to sell the property.
a.	Marshall creates a kind of title that is less than fee simple. The Native Americans had full title before discovery. Through the process of discovery/conquest/settlement, the full fee simple was split between the Native Americans and the European power (Britain). It is like the landlord/tenant relationship. The landlord doesn’t have the right of possession when he leases the property, but rather owns a different estate on the same property.
b.	Split fee simple explains why the US purchased the land: If fee simple absolute is 100% of ownership, the process of discovery splits it. To get fee simple absolute, the US had to purchase the rest.
c.	Introduces the concept of split fee simple: Only done in the US, and not in other jurisdictions.
•	Chain of title. Most Western countries believe that you have to trace all land back to some grant by the state. That is called a chain of title. Johnson v. M’Intosh establishes that the chain of title in the US comes from discovery.
•	Political implications of Marshall’s decision (especially relating to situation the Cherokees faced).
a.	Marshall’s decision implies that Indians should not be dispossessed: They just have a different estate on the same land.
(1)	Contingent title. The US has contingent title, most likely contingent on rebellion. If the Indians rebel, their rights disappear and the US has the right of possession.
(2)	Legislation. The US can also have full title based on legislation, but it seems that the Indians’ natural rights would constrain that.
b.	Why conquer another country if you wouldn’t have the other country’s title to land?
(1)	Tax
(2)	Gain control over the wastelands (i.e. the commons, not owned by anyone) and the “crown lands” (lands controlled by the previous sovereign). In sparsely populated areas, the wastelands and the crown lands are extremely valuable – the beach, the roads, land to sell to new settlers.
(3)	This principle explains why the Native Americans were treated so badly. They were not farming, and instead moved lightly across the land. There were no specific titles for the Europeans to protect or acknowledge.
c.	What happens if the Native Americans become Christian and organize in communities with political structures? Marshall is thinking of how to help the Cherokees, who were largely Anglicized. He speaks of how generally the conquered are incorporated into the victorious nation. However, he says, the Illinois Indians were “fierce savages” and couldn’t be incorporated into society. He is trying to create rights for Indians who wish to assimilate.
•	Proof that the law that Marshall discusses was followed by the European conquerors
a.	Buganda example. The British recognized the land rights of the Bugandans, who had agriculture, and it was kept intact. The British then found a non-agricultural tribe in Buganda, and auctioned off the land from underneath the herders. This land became Kenya. The difference between the Bugandans and the Kenyans was that the Bugandans had organized agriculture, while the people in Kenya did not. It seems, then, that these laws actually had force to mold the behavior of the discoverers.
b.	Cherokee example: The US could have exterminated the tribe. Instead, they went through a period of negotiation, harassment, illegal raids and complicated jurisdictional maneuvers. They did not force the migration until they had a treaty signed by 17 Cherokees. It was a sham treaty, but it is significant that the migration didn’t happen until they got a sham treaty.

2.	Discovery vs. conquest.
•	Definition of discovery: Discovery entails the finding of hitherto unknown territory, frequently accompanied by a symbolic taking of possession – Encyclopedia of Public International Law.
•	Definition of conquest: Conquest is the taking of possession of enemy territory through force, followed by formal annexation of the defeated territory by the conqueror – Parry & Grant Encyclopedic Dictionary of International Law.

3.	Principle of first in time.
a.	Policy behind first in time: Being first justifies ownership. It dates back to Roman law, and is a persistent notion in property law.
b.	The normative case for first possession is commonly thought to be rather weak – see Morris Cohen.

4.	Property rights are not natural rights.
a.	Natural rights vs. government created rights. There is a difference between natural law (which preexisted organized society) and law developed by humans (i.e. the laws of the government).
b.	International norms prove: The international community does not get up in arms when states fail to respect property rights. Even in the early 19th century, states often took property either without compensation or with minimal compensation.
c.	Inheritance proves: Early on there was no right of inheritance in the US. If a state changed the rule of intestacy, the citizen would have no complaint because inheritance is not a natural right.

5.	Harold Demsetz: “Toward a Theory of Property Rights.”
•	Significance of Demsetz’s article. Demsetz’s article suggests that private property may be a natural right (it was written before the fall of the Berlin Wall, when there was a big theoretical debate over whether private property or state ownership was preferable). The beginning of nearly every law and economics article on property cites Demsetz.
•	Property rights are a means of internalizing externalities: Demsetz discusses externalities which individuals do not take into account when making decisions, because costs are borne by other individuals. Property rights develop as a way of internalizing externalities.
a.	Definition of externality. It is 1) a cost of doing business that is imposed on somebody outside of your enterprise, 2) that cannot be internalized because transaction costs are high.
b.	There are also external benefits. For example, the Empire State Building creates external benefits because it is a beautiful symbol of NYC.
c.	Private property as best means to conserve resources. Demsetz’s theory is that it is easier to prevent degradation of a resource by parceling it out than by governing in common. An individual can select an alternative that will maximize the value of the land. It is difficult, however, for communal owners to reach an agreement that takes into account future costs, and the claims of the present generation will be given an uneconomically large weight in determining the intensity with which the land is worked – thus, people will overuse the common resource.
i.	Individual maximizing his welfare would maximize value for future generations: The logical groups with similar interests are the family and the individual. Demsetz says that communal groups as he believes in (the nuclear family) can manage property, while communal groups that the Cherokee believed in can’t. This shows his cultural biases.
•	Example of externalities: Mill is on plot A, other landowner is on plot B. Land and water pollution flow onto B’s land.
a.	Not necessarily an externality: If we have a functioning legal system, and A and B are able to bargain, then it will not be an externality. B can tell A, “You are discharging water pollution and smoke onto my land. I will sue you in nuisance.” If amount of damages is $10,000 and transaction costs are only  $1,000, it makes sense for B to sue. A must choose to either adopt pollution controls or pay B $10,000. This would then internalize the externality.
b.	High transaction costs create the externality. If there are hundreds of landowners instead of just two, the damage to each person might only be $50 but it might cost $1,000 to bring a lawsuit. This is an externality that won’t be internalized.
•	Demsetz’s case study. He discusses the Indian fur trade, and says that due to there being a limited number of animals, there is an incentive to privatize the land.
a.	Garrett Hardin’s “tragedy of the commons.” People are hunting a specific beaver, and each pelt is worth $100. Every time a hunter catches an animal and sells it, he earns $100. But if he is a co-owner of one thousand animals, he has imposed the cost on all the other owners. His benefit from the pelt is one, while his detriment is only 1/1000. This disparity between benefit and cost that the individual incurs to himself encourages overexploitation of resources.
b.	The Montagnes: Demsetz utilizes Eleanor Leacock’s memoir to describe the Indian group, the Montagnes, who seemed to have created a right to private property in the fur trade where one had not previously existed. His thesis is that man in the “state of nature” will create property rights, which demonstrates that property rights are natural rights.
c.	There are other reasons for the Montagnes creating property rights:
(1)	French trading companies insisted that they set up private property. Montagnes were greatly indebted to the trading companies, so those companies had great influence over them.
(2)	French trappers inter-married among the Montagnes. They suggested that the Montagnes set up this system of private property.
(3)	Canadian government restocked the beavers, and said they would not restock unless the Montagnes set up private property.
•	Demsetz’s argument may be strong even though his proof isn’t.
a.	Logical proof. Demsetz argues that if people are rational, have information, and have to manage a resource, logic tells us that there will be degradation of that resource. If transaction costs are low, they will figure out a way to avoid degradation of that resource by creating private property. The power of that theory is its internal consistency.
b.	Does it apply to the real world? Sometimes it does – in some parts of Africa, pastures are degraded because many people have access to them, while privately owned land is pristine.

6.	Tragedy of the anticommons, suggested by Michelman.
•	Definition of anticommons: Anticommons entails multiple rights to exclude others from a resource owned in common, in contrast to the commons, where there are few rights to exclude others, if any.
•	Causes underconsumption: In contrast to the commons, which encourage overconsumption (see Garrett Hardin’s “tragedy of the commons” thesis), the anticommons lead to underconsumption due to the large number of people who can prevent the resource from being used.

7.	Houston v. Thomas (Fifth Cir. 1991).
•	Facts. Plaintiffs are the Houstons (from Mississippi), and the State of Mississippi is basically a co-plaintiff. Defendants are the Thomases (from Louisiana), and the State of Louisiana is basically co-defendant. The states entered the suit because the subject involves where the boundary is between Mississippi and Louisiana, since both states made contradictory grants to the same land. This was a suit to quiet title by the Houstons.
•	Rules:
a.	Thalweg rule: Boundary between states is determined by the most navigable channel of river (usually but not always the deepest part), based on commercial trade usage.
b.	Doctrine of acquiescence: If one state A exercises sovereignty state B acquiesces, state A gets sovereignty.
c.	Avulsive shift rule: No change in river’s flow pattern, sudden or gradual, affects where the original thalweg was. (In international law, from which this rule is derived, slow changes do change the border, but rapid shifts do not.)
•	Issue: Where was the thalweg in the river? The thalweg determines which land grant was legitimate.
•	Holding: The original island was within Louisiana’s boundaries. Thus, the land goes to the Thomases (from Louisiana).
•	Mississippi’s argument that court should focus on the island itself: Mississippi made an argument that got short shrift. Mississippi said that the island started in Mississippi, then shifted to Louisiana via several floods, but is still the same island. Mississippi would have lost on the thalweg rule anyway. But let’s assume that the original land grant to Mississippi was good, and the island eventually drifted into the territory of Louisiana.
a.	This rule does the least amount of damage to both parties. The owner of Blackacre gets to keep all of Blackacre, while the owner of Stack Island gets to keep all of Stack Island. The only thing that changes is that Blackacre’s navigation rights are burdened a bit.
b.	Hypo: Blackacre’s land is bright blue. The land collapses and falls onto Whiteacre. Now part of the soil of Blackacre is lying on Whiteacre. Who has rights to the land?
c.	Hypo: In a storm, my tree falls onto my neighbor’s land. Who gets the firewood?
•	Blackstonian wedge. Individual buys space on a Cartesian grid, extending from the center of the earth through the property, and infinitely into space.
a.	Problems with the Blackstonian wedge:
(1)	Earthquake hypo. You own a lot in CA. An earthquake shifts all the land to the east. Although your property has shifted, the deeds office tells you, according to the precise longitude and latitude, that your property should be in the old place. If you take the Blackstonian wedge seriously, everything should be moved back to the west because you own the wedge itself and not the land or soil.
(2)	Objects in space. It is difficult to say that you get everything extending into space because the earth isn’t fixed in space – it’s spinning.

B.	Acquisition by Capture

1.	Pierson v. Post (NY 1805).
•	Facts: Post was hunting with dogs, chasing a fox. He was on common land. Pierson shoots the fox and carries it off. Post brought an action for trespass on the case – a form of action for damages or injury resulting from wrongful acts unaccompanied by direct or immediate force, or where the damage is an indirect or secondary consequence of D’s act. It is an indirect interference with the right of Post to hunt the fox, even though Post doesn’t yet own the fox. Lower court found for P.
•	D’s basis for appeal. D argues that P didn’t have enough rights in the fox to sustain an action in trespass on the case.
•	Rule: Mere pursuit vests no property right in hunter. Actual bodily seizure may not be necessary to acquire right to possession of animals – mortal wounding during the pursuit may be sufficient to be deemed possession when hunter continues pursuit.
•	Holding: For D – since P was in mere pursuit, he did not get property rights over the fox.
•	Alternative approaches the court could have taken for defining occupancy in a fox:
a.	Actual corporeal possession
b.	Chasing, maiming, or an “unequivocal intention” to appropriate the animal
c.	Mere pursuit
•	Conflict between custom and precedent. Majority embraces ancient authority. Dissent goes with the practice of hunters. This is a conflict that may recur.
•	Livingston’s dissent. Dogs of imperial nature may create property in wild animals without bodily touch, provided the pursuer be within reach or have a reasonable prospect of success. The purpose is to make sure that the foxes (“pernicious beasts”) are killed. Arguably, the dissent doesn’t ensure that the fox will be killed — the people with better apparatus might miss the fox, and those with “beagles” might need to step in.

2.	Ghen v. Rich (Massachusetts 1881)
•	Facts: P owns whaling ship that killed the whale. Subsequently it washed ashore and D purchased it from Ellis, who found it. This is a libel [cause of action in admiralty] against D to recover the value of the whale.
•	Rule: Court uses norm of whaling industry. If the whaler does all that is possible to do to make the animal his own, that is sufficient for property right. Value of carcass is split between whaler and the subsequent finder.
a.	Policy: The Court accepts his application of custom to law to guarantee that the whaling industry survives.
•	Holding: P was the owner based on local custom.
•	Problem: Decision doesn’t promote the conservation of whales. Many whales wash out to sea. If the rule said that you had to hold fast the whale, less would be lost – people would invest in the technology to hold on to the whales.

3.	Keeble v. Hickeringill (Queen’s Bench 1707)
•	Facts: P had a duck decoy constructed on his own land. D discharged his gun on several occasions to scare off the ducks.
•	Issue: Does a person have a property interest in the wild animals on his own land?
•	Rule: Landowner owns every living thing on his land – there is no difference between attracting wild animals and wild animals wandering onto the property.
a.	The authority for this is the Bible, which states that God gave man dominion over all living things.

4.	Hunting animals outside of your property.
a.	Property rights less absolute than we might think. If somebody walks on Blackacre, the owner can bring a cause of action, but the damages for a claim that somebody was walking on your land would be trivial.
b.	Different local customs. In a pro-hunting jurisdiction, if you don’t want people hunting on your land, you have to post a NO HUNTING sign because presumptively people can go on your land to hunt. In less pro-hunting jurisdictions, the hunter presumptively does not have the right to trespass unless he gets agreement.
c.	Property rights are in relation to other people: Property rights are not to Blackacre – rather, they exist vis-à-vis other people. The owner of Blackacre has a superior right to everybody else while those other people are on Blackacre. It can be the right to exclude other people, the right to put up a NO HUNTING sign, the right to have first claim to an animal on his land.

5.	Responsibility toward the property (i.e. environmental regulations).
a.	No responsibilities toward the property under common law. Until recently with environmental regulations, the state could not interfere with the individual’s property rights. Under the common law, if I own the last stand of redwoods in a county of California, I would have the right to ravage my property.
b.	State does not have a property interest in wild animals. It is regulating, as opposed to claiming a property interest.
•	Example. Woman is shooting ducks and government tells her to stop. She says, fine, you own the ducks, then waits until ducks damage her cornfield. She then files suit against the government for the damage because the government owns them. The government says that they don’t own the ducks, but are regulating her usage. Synthesis of the rules appears in Douglas v. Seacoast Prods., Inc.
c.	Instrumental value in environmental regulations. Environmental regulations don’t preserve the beach because the beach itself has value – rather, they preserve it because it is important to the livelihood of fishermen (intrinsic vs. instrumental value). Even when you preserve something in a pristine state, you only preserve it because it is an exploitable resource. Preserving scenic beauty is an instrumental decision that it trumps another exploitable resource, like cutting down trees.
d.	Problems with view of instrumental values. In 1967 Lynn White wrote an important article in Science magazine called “The Historical Roots of Our Ecological Problems.” He said that the real problem is the Judeo-Christian-Islamic tradition that gives us dominion over the entire world, and doesn’t give nature value in its own right.
•	Monotheism vs. pagan ideals. He contrasted the monotheistic traditions with pagan ideals. The monotheistic traditions created a duality between humankind and nature and insisted that humankind go out and exploit. In pagan traditions, however, there were many gods – each associated with a different physical feature of the land. Before cutting a tree or putting up a dam, they would first placate the spirit protecting it. In monotheism, all of the spirits are put in one place.

6.	Hammonds v. Central Kentucky Natural Gas Co. (Kentucky 1934).
•	Facts: D reinjected gas into an underground reservoir that existed primarily under its own land, but also under P’s land. She brought suit because the gas was placed under her land without her consent.
•	Rules:
(1)	Oil in a well is property of the owner of the well and belongs to him.
(2)	Migratory underground resources are not owned, and only become property when appropriated.
a.	No cause of action if migratory underground resources are taken from your land through extraction on neighboring land. If your neighbor extracts gas from his land that has the effect of taking the gas from your land, you have no cause of action.
b.	Doesn’t apply to non-migratory underground resources. Due to the physical properties of coal, your neighbor could not built a mineshaft into your land horizontally to take your coal.
(3)	If migratory resources are reinjected underground, they cease to be property. The court draws an analogy to wild animals being returned to their natural element.
•	Holding: No trespass. After the gas was reinjected, it was no longer D’s property.
•	Problem with this decision: Inefficient use of underground storage space. Gas company now cannot reinject the gas unless they own the rights to the entire reservoir, or else adjacent owner can build a well and extract it.
a.	Alternative decision: A better decision would be to grant Hammonds a cause of action in trespass, but find that the damages were negligible and the company maintains the right to the resource.
b.	Lone Star Gas Co. v. Murchison. D was in the same position as Hammonds, and decided to sink a well and extract the gas. The court reasoned that stored gas is like a domesticated animal, and Hammonds wasn’t followed in Texas.
•	Tragedy of the commons: The rule for extraction of oil encourages all other landowners to sink wells to exploit the resource.
•	Alternative rule: You cannot extract a migratory resource that will also deplete your neighbors’ reserves.
a.	Encourages measuring in advance: Might have to measure the resource beforehand based on a division of how much land the person owns, and each individual would have to give all neighbors a certain percentage of proceeds
b.	Creates anticommons situation: If measuring weren’t possible, you would have to get everybody’s permission before you started to extract oil

7.	State of Hammonds.
•	Criticized and rejected by a number of other jurisdictions. Other jurisdictions find the analogy to wild animals silly, that reinjected gas or oil has not really escaped, and that in any case it has not been “returned to its natural habitat” by reinjection.
•	Recently overruled in Kentucky – Texas American Energy Corp. v. Citizens Fidelity Bank & Trust Co.

C.	Acquisition by Creation

1.	Policy concerns.
a.	The courts strike a balance, attempting to increase competition via imitation while maintaining the incentives for innovation – they want to encourage imitation, as long as the imitation won’t destroy the incentive to create new ideas products. See article by Douglas G. Baird. Imitation generally increases quality and reduces price of products.
b.	Legislation: Much of the balance is created by copyrights, patents and trademarks (see subpoint 3, below).
c.	Smith v. Chanel, Inc. (9th Cir. 1968): Holds that D can copy the perfume and identify it as the equivalent of Chanel No. 5, because that will yield the fair market price for the good.

2.	International News Service v. Associated Press (Supreme Court 1918).
•	Facts: INS and AP are two competing news-gathering companies. AP brought suit to restrain INS from pirating its news. They had been copying news from bulletin boards and distributing it to INS papers.
•	D’s argument: Once the news is published on bulletin boards everybody can use it.
•	Issues:
(1)	Is there property in news itself? [A property interest must be involved, and not just unfair competition, because this is a case in equity. The court believes that in order to maintain a cause of action in equity, it must be upholding a property right.]
(2)	If there is, does it survive at the instant of publication?
(3)	Does D’s admitted course of conduct in appropriating for commercial use matter taken from bulletins or early editions of AP publications constitute unfair competition in trade?
•	Rule: Any civil right of a pecuniary nature is treated as a property right.
a.	Decision attempts to deal with dephysicalization of property. This is a period of great expansion in financial markets. Suddenly people had to start thinking about a bond coupon as a property right. The majority seemed to believe that the case was an easy one for the P, who put time and money into creating something of value. Their only doubt seemed to be in the qualification of news as quasi-property.
b.	Quasi-property. AP’s right in the news is a quasi-property right and not property because AP only has the right to exclude INS, not to exclude the public at large.
c.	Decision is circular because pecuniary rights will often come into conflict. P owns a bed and breakfast with an amazing view. A larger hotel is built that blocks the view. There is now a property dispute and both owners have a pecuniary interest in the outcome.
•	There are three potential kinds of property here:
(1)	The news.
(2)	The text/content. The Court says there is no question that the text could be protected by copyright. But the material is not copyrighted, and INS rewrote most of the articles. They would be willing to accept an injunction that says they cannot publish the text itself, leaving them free to rewrite the stories prior to publication.
(3)	The information.
•	Right to exclude in information. Exclusion is an important part of the right to property because it is too difficult for two people to possess the same thing at the same time. But information is not degraded by multiple users. Information is also infinitely reproducible and it gets more reproducible as technology changes. The reason we grant property rights in information is because there would be no incentive to create a computer program if it would be infinitely copied and the programmers wouldn’t be paid.
a.	Reputational harms: People buy newspapers based on the reputation of the newspaper. Reputation is at stake in this case.
b.	Free-rider problems: Because of its reproducibility and the fact that it has to be disclosed to be acquired, information is subject to free-rider problems. There are strong incentives for people who purchase information to sell it again, thus cutting into the market of the person who created the news.
•	AP didn’t take advantage of statutory copyright.
(1)	Wouldn’t have stopped INS: Even if there were a statutory copyright, only the particular words would have been protected and not the actual information – INS could have rewritten the stories and sold them.
(2)	Not feasible: Too burdensome to send material to copyright office every day.
•	Unfair competition. What would unfair competition be between Starbucks and Dean & Deluca?
a.	Typical unfair competition is passing off your own product as somebody else’s. It particularly applies to substituting your own goods for those of another that has an established reputation, and thus stealing their reputation. If Starbucks writes Dean & Deluca on its coffee, that is considered a deceitful business practice. Here the Court notes that we are reasoning by analogy to the inverse.
b.	Venable’s tuna hypo: Would it be unfair competition if Venable got Star-Kist tuna from the Food Warehouse, soaked off the label, and put on a new label saying “Prof. Venable’s Tuna”? Various unfair competition claims:
(1)	Depriving them of profit at retail. Not a very strong argument. Other stores also buy Star-Kist at wholesale and sell it at retail. Star-Kist obviously doesn’t have a contract with every convenience store in the US – they place their product in the chain of commerce and let it land where it may.
(2)	Depriving them of reputational benefit.
•	Brand loyalty. Prof. Venable deprives Star-Kist of the reputational opportunity to garner brand loyalty to its products. Consumers who eat Star-Kist will be more likely to buy it in the future.
•	Used to bolster Venable’s reputation, and compete with Star-Kist. Reputational damages become a problem when Prof. Venable’s tuna picks up enough popularity to allow him to start making his own product and competing with Star-Kist on a broader scale. Once he starts producing his own, Star-Kist no longer receives a pecuniary benefit from him buying their product at wholesale, and he could potentially cut out a much larger chunk of their market. The court should nip this practice in the bud by granting injunctive relief before he is able to produce his own product.
•	Problems with these arguments. Pathmark doesn’t make its own tuna. It takes other people’s surplus products and re-labels them. This practice is already common
c.	Unfair competition is really about what is fair and what isn’t in business. Demsetz noted, “Harming a competitor by producing superior products may be permitted, while shooting him may not. A man may be permitted to benefit himself by shooting an intruder but be prohibited from selling below a price floor.” Competition is all about hurting the other businesses in legal ways. Absent a statutory rule, you can copy the products and procedures of your competitors.
•	Holmes concurrence: Holmes says that property, a creation of law, does not arise from value, but rather from law. Many exchangeable values may be destroyed without compensation. He suggests that INS can use the article if it gives credit to AP – basically a contractual solution. Thus Holmes believes that the main damages suffered by AP are reputational, and he proposes a solution that will maintain AP’s reputational benefits.
•	Brandeis’s dissent. If we grant a property right in the news to AP, it will hurt INS’s business. If we don’t grant property rights, we will help INS and hurt AP. Brandeis says we should wait for the legislature to pass a law.
a.	However, leaving it to the legislature is essentially a political decision. It determines where the burdens should lie.
b.	Public interest. Brandeis says that in addition to the rights of the news services, the public interest is at stake. Since courts cannot bring public interest into the litigation, Brandeis says that is one reason this should be decided by the legislature.
(1)	Readership. A large majority of newspapers and newspaper readers have to depend on other vehicles than AP. A large percentage rely on INS. The problem is not INS’s unwillingness to collect the news – it is the fact that they’ve been barred from Europe during the First World War.
(2)	Labor rights. As a public interest lawyer, Brandeis was hostile to Pitney’s Lockeian theory of property rights being based in value. Typically, these civil rights of pecuniary value involved business. One of the rights that common law courts had been protecting was the right of businesses to be free from labor organization and picketing. Some courts concluded that any organized labor could be treated as a common law nuisance, and federal courts, using Pitney’s theory, could put an injunction on the organized labor.
c.	It is common for people to reap where they have not sown. That fact alone is insufficient for relief;; if there is no cause of action, the case must fail.
(1)	Example: Souvenir shop owner on Times Square reaps where he has not sown Disney moves in to Times Square.

3.	Protection of intellectual property. Three areas of law deal with the protection of intellectual property:
a.	Copyright protects authors, composers, etc. for creative work, literary work, sound reporting. Copyright law only protects 1. expressions 2. of original ideas.
•	At the time of INS v. AP, there was both statutory and common law copyright. Since then, congress has preempted common law copyright through legislation.
b.	Patents protect any non-obvious invention.
•	Until 1984 computer chips couldn’t be patented, because they were not thought to be non-obvious. In 1984 congress passed a semiconductor protection act to protect computer chips.
c.	Trademarks – protect easily recognizable symbols of goods and services.

4.	Cheney Bros. v. Doris Silk (Second Circuit 1930).
•	Facts: Both P and D are sellers of silk fabrics. D steals P’s successful patterns and P asks the court for protection during the season.
•	Rule: In the absence of some recognized right at common law or under statutes, others may imitate an invention at their pleasure.
•	Limits INS v. AP to its facts: P relied on INS v. AP to argue that his patterns could be seen as property, but the court ruled that INS v. AP is limited to the newspaper industry.
a.	Commentators, however, have suggested that whenever technology jumps ahead of intellectual structure of property law, INS v. AP is revived.

5.	Persona as property.
•	Celebrity’s “right of publicity” widely recognized as a property interest – Elvis Presley Intl. Memorial Found. v. Crowell.
•	Purposes of property rights in one’s persona:
(1)	Fairness: “One may not reap where another has sown nor gather where another has strewn,” as stated in Elvis Presley Intl. Memorial Found. v. Crowell, applying the words of INS v. AP to the celebrity context.
(2)	Incentive: The law should provide incentives for individuals to undertake activities the public values – Zacchini.
•	Broad right of publicity that includes name, likeness and other aspects of identity: Midler v. Ford Motor Co. (Bette Midler stated good cause of action by alleging that Ford Motor Co. had hired a singer to perform in a voice and style similar to hers), Vanna White v. Samsung Electronics America, Inc. (Vanna White had a cause of action against a firm that created a robot resembling her), Tom Waits successfully sued Fritos for impersonating his voice in a radio ad in 1990. (unreported)

6.	Moore v. Regents of the University of California (California 1990).
•	Facts: P was undergoing treatment and, unknown to him, the UCLA Medical Center patented a strain of cells that came from his body. P had unique genetic characteristics that were appropriate for scientific research. He didn’t give any consent for the use of his cells for this purpose.
•	Rule: Individual does not have property right or interest in his cells.
a.	Conversion tort isn’t necessary: Disclosure obligations are sufficient to protect the patient.
b.	Conflicts with other precedent: This may conflict with the celebrity cases (see above).
•	Policy concerns.
(1)	Social benefits of medicine and the biotechnology industry.
(2)	Patient’s rights and individual autonomy.
(3)	These two policy concerns seemingly conflict in this case.
•	Background on the cause of action.
a.	Conversion is a cause of action with respect to chattels. You’d allege conversion if your chattels ended up in somebody else’s hands and the other individual exercised property rights over it to your exclusion.
(1)	Example: If D has a cow you lost, cannot sue for theft or trespass because you don’t know how he got it. Conversion is basically a strict liability cause of action. Don’t need to know how the cow got into his hands – only need to prove that he has the cow and you want it back.
b.	Trover meant that somebody had come into possession of your personal property and converted it to his ownership.
c.	Forced sales: Trover and conversion are basically forced sales. It doesn’t matter if D lawfully purchased the property – P’s cow is in his hands and if trover or conversion lie, P gets damages.
d.	Replevin: Cause of action if P just wants his property back, as opposed to damages.
e.	Chart of the causes of action

Real property cause of action	Chattel cause of action	Remedy	
Trespass	Trover or conversion	Damages	
Ejectment	Replevin	Put owner back in possession	

•	How conversion as cause of action affects biotechnology industry: Majority’s concern is that even though UCLA medical school took the spleen, anyone who purchased cells might be liable to Moore for trover and conversion.
•	D’s argument: UC says it isn’t Moore’s cells that are valuable; it is the research that they put into turning his spleen cells into a lymphokine producing factory.
•	Dissent: Dissent’s argument is that just because Moore couldn’t patent his cell line doesn’t mean that it wasn’t his property in the first place. Just because I can’t sell my genetic information or my kidney doesn’t mean I don’t have property rights in it.
•	Alternative remedies: If every subsequent researcher might be liable for trover or conversion, why not create a new cause of action?
(1)	P could maintain an action with respect to the University of California, but not against any of the subsequent researchers. This approach applies Hofeldian analysis. Moore’s relationship vis-à-vis UC is right and duty, while relative to subsequent users of his cells it may be no right and privilege.
(2)	Court can rule that the cells were not the doctor’s to take, but also not Moore’s to sell in a market transaction. They can limit Moore’s property rights but nevertheless acknowledge and protect them through a cause of action for conversion. In turn, the court could ease the impact on medical research through an appropriately tailored measure of damages – royalties, a percentage of profits, or a lump sum.
a.	Legislature may be more appropriate forum because creating this property right could be a dangerous step. Justice Arabian argues in Moore that the ramifications of recognizing a property interest in body tissues are immense, and the legislature is more competent than the court to deliberate such a change.
•	The morality issue. The court and dissent make meta-arguments about any transactions in human tissue being wrong. But there are already markets for human tissue (blood, sperm, etc). They analogize this to slavery, which involved ownership of people.
(1)	Does that mean you can’t have ownership rights in people?
(2)	Does ownership of body parts/human tissue necessarily involve or raise the specter of chattel slavery?
(3)	Habendum clause in marriage. The habendum clause in marriage uses the same language as a general warranty deed. Marriage is a mutual exchange of property rights in persons and doesn’t lead to the degradation of slavery. What about professional athletes being traded from one team to another? Aren’t they just being bought and sold?
•	Hypo: If the Regents of the University of California have the right to exploit Moore’s unique DNA sequence, they have the right to control the spleen cells that produce unique lymphokines. Could the Regents now turn to Moore and assert the right to exclude him from producing lymphokines in his lymph nodes because they have the rights to his DNA, and thus extract a royalty from him?
a.	His best argument would be that they patented the process by which his cloned cells produce lymphokines in a test tube, not produce lymphokines in his lymph nodes.

7.	Patenting plants.
•	Can now patent plant species. In 1970 a federal statute called the Plant Variety Protection Act was passed, enabling seed and pharmaceutical companies to patent plant varieties. Farmers can grow these plants but cannot sell seeds to neighbors – if they do, they violate the company’s intellectual property rights. This has prompted pharmaceutical companies and agribusiness to go throughout the world looking for unique seeds so they can patent them in the US.
a.	Tumeric example. University of Mississippi researchers patented tumeric, then went back to India and said that farmers couldn’t use it without paying them a royalty.
•	Non-patent registration. The government of Thailand, concerned about what was happening in India, passed draft legislation that would enable all traditional healers to register their uses of indigenous herbs and seeds. The US stated that this process of registration would violate the trade agreement that protects intellectual property rights and hamper medical research into these substances.
•	Commentary from Indian newspaper. An article from an Indian newspaper states that they need a Plant Variety Protection Act similar to America’s in order to protect themselves from the theft of plant variety. This is the rush to privatize resources, similar to Hammonds. The response of India, Thailand and Brazil was that if the Americans are going to appropriate the information in the seeds, we should appropriate them first.
•	Commons for plants. There could be a commons regime for plant varieties. Monsanto could go overseas and get all the seeds they’d like. They couldn’t, however, prevent somebody else from doing that.
a.	Threatens innovation: A commons would be fine competition wise, but perhaps people wouldn’t invest as much in creating new species of plants that could be beneficial.

8.	Hofeldian analysis of property.
a.	For every right there is a corresponding obligation. Hofeld’s analysis of property relationships:

Self	Others	
Right	Duty	
Privilege	No right	
Power	Liability	

b.	Right of exclusion: If I have the right to exclude, others have a duty not to trespass. If the patent office gives me the exclusive right to the use of tumeric, all others now have a duty not to use it. If the owner of an enterprise has a property right, then he imposes on all non-owners certain obligations or duties. For example, the owner of a factory may have a right not only to possession and inclusion, but also a right to the value of the property undiminished. This imposes a duty on everyone else in the world not to decrease the value of the property (i.e. by picketing).
c.	Privilege and no right. For the purposes of the labor movement then and biodiversity today, Hofeld says that there are property rights better described as privileges. Privilege don’t create in others a duty, but rather a non-right (an absence of right). These property rights can differ depending upon the relationship:
(1)	Relationship with non-owner. If A and B co-own Blackacre and C is a potential trespasser, then A and B together or separately have all the rights. That imposes on C the duty not to trespass.
(2)	Relationship with co-owner. If A has a right then B has a duty. But co-owners both have the right to possession. A’s right of possession doesn’t create a duty in B not to trespass. This is where Hofeld’s idea was quite brilliant – he said that there was a different kind of property right called a privilege. A’s privilege of possession gives rise in B to an absence of right to exclusion. If B has no right of exclusion, that means that A has no duty not to trespass. They have to share.
(3)	Hofeld’s analysis in the labor context. If the owner of a factory has a privilege rather than a right, then the workers who are picketing don’t have a duty – they have a non-right. By having a non-right, they cannot be excluded from picketing.
(4)	Hofeld’s analysis in the context of biodiversity. We can let Monsanto go to the Brazilian rainforest and develop all the plants they want. But they have a privilege to use the germplasm of the Amazon rainforest, which gives the people who are not using it a non-right.
d.	Power and liability. A power is the ability to induce a legal change in someone else’s rights.
(1)	Power of attorney. If A gives B a power of attorney, B can enter into a contract on behalf of A. That means that B can change A’s rights and responsibilities.
(2)	Property context. In the property context, power and liability are much more common and powerful concepts. If you had, for example, a lease that had a unilateral power on the part of your landlord to evict you, then the landlord can change your interests.

II.	SUBSEQUENT POSSESSION: ACQUISITION BY FIND AND ADVERSE POSSESSION	

A.	Acquisition by Find
1.	Different causes of action at the common law.
a.	Trover: P waives insists that the D be subjected to a forced purchase of the chattel (money in exchange for D’s continued possession).
b.	Replevin: P sues for the return of the chattel itself.
c.	In modern times, all of these causes of action have been simplified. However, it is sometimes worthwhile to think about trover, replevin and ejectment as archetypes.

2.	Armory v. Delamirie (King’s Bench 1722). Finder’s right is superior to all but the true owner.
•	Facts: P was a chimney sweeper’s boy who found a jewel and brought it to D goldsmith’s shop. D’s apprentice took the stone under pretense of weighing it. P brought an action in trover against the master.
•	Issue: Whether the finder of lost property has enough property rights in the thing that an action can be supported.
•	Rule: The title of the finder is good against all the world except for the true owner.
•	Policy reason: Otherwise we would have a class of things with no owner. Anybody would have the right to take goods from the finder, causing anarchy.
•	True owner’s return. If true owner returns, he can bring a cause of action against the finder for the money that the finder recovered from the goldsmith.
a.	True owner has no cause of action against the goldsmith once the goldsmith has paid the P – see The Winkfield (“The wrongdoer, having once paid full damages to the bailee, has an answer to any action by the bailor”).
•	Irrelevant if P did not lawfully come into possession of the property: Anderson v. Gouldberg – P’s possession of property only needs to be lawful against D, not against the whole world.
•	Hypo: Should the true owner receive $50 from the finder if that’s what the finder received for a cubic zirconium that was only worth $1?
a.	Owner’s argument: The owner’s property right is greater than the finder’s and thus he should get the $50 generated by the property.
b.	Finder’s argument: It’s only worth $1 to the owner, and that’s all the owner should get.

3.	Hannah v. Peel (King’s Bench 1945). Conveyance of land includes real property, but not chattels.
•	Facts: D never lived in the house and never occupied it. The P found a brooch in the house and handed it over to the police. D offered P a reward for the brooch but P refused it, maintaining his right to possession against all but the rightful owner.
•	Rules:
(1)	Finder of chattel has right to possession against everyone.
(2)	The owner of land owns the real property (attached to the land), but not chattels.
•	Holding: Brooch is awarded to the finder.
•	Potential problems. May encourage theft (i.e. before the new owner moves in, chattels left behind by old owner may be taken). Another question is what the real property rule has to do with chattels that are on the ground.
•	Cases cited in Hannah v. Peel:
a.	Bridges v. Hawkesworth. P had picked up a parcel with £65 from the floor of a firm. P asked D to keep the money until owner appeared to claim it, but no owner appeared.
i.	Holding: Notes were never in the custody of D, nor were they within the protection of his home, so nothing takes the case out of the general rule of law that the money belongs to the finder.
b.	South Staffordshire. Pool cleaner found two rings, not belonging to the company he worked for. Dispute over who the rings should belong to.
i.	Ruling: The company owned the rings because they had brought the workers in to clean the pool – different than Bridges, because in Bridges all of the public could come into the place. South Staffordshire also discusses the agency relationship between the company and the worker.
ii.	Hannah v. Peel’s take on South Staffordshire. Judge Birkett in Hannah v. Peel disagrees with the headnotes for South Staffordshire. He says that the principle on which this case is decided is found in Pollock and Wright: “The possession of land carries with it in general, by our law, possession of everything which is attached to or under that land, and in the absence of a better title elsewhere, the right to possess it also.” Birkett says that the rule in South Staffordshire isn’t inconsistent with the rule in Bridges or Armory v. Delamirie. The rings were embedded in the pool, so could be considered attached to or under the land, whereas in the other cases the chattels were free roaming.
iii.	Rule that possession of land carries with it everything attached to or under the land. Trees are attached to the land and conveyed as part of the real property. If you convey a plot of farmland that is forested, and a portion of the forest is cut down, you would convey the standing trees but not the logs because the logs are personal property. This isn’t a rule about personal property or chattels at all – it is really a tautology. Land is real property, which carries with it everything attached to or under (which is also real property). Hence: Possession of real property carries with it possession of real property.
c.	Elwes v. Brigg Gas Co. P leases the property to mine company for 99 years, with a reservation (holding back) on the mine and mineral rights. Dispute over boat found in the land.
i.	Holding: The court holds that P has lawful rights to the boat even though he’d given surface rights, because he owned the minerals underneath the land. The boat underground is treated like a mineral.

4.	McAvoy v. Medina (1866). Mislaid property.
•	Facts: D was a barber and P found a pocketbook on a table. Dispute over whose property it is.
•	Issue: Whether the property was lost or mislaid.
•	Rule: Lost versus mislaid. It wasn’t lost property because it was placed there and never recovered – mislaid as opposed to lost. The distinction turns on the intention of the loser of the property, but it is obviously a bad rule because it requires us to look into the state of mind of a person who isn’t there.
•	Context of barber shops in the 19th century: At the time, you did everything in barbershops, so there was an element of trust – barber would hold the property until the person who lost it came back. The person placing the purse in the barbershop was something like a bailment.
a.	Bailment basically occurs when one person delivers property to another person for issues of trust. I deliver a broken appliance to the repairman trusting that he will return it. The coat check room is another example of a bailment. The person who leaves his property with another is called the bailor, and the person who takes it is called the bailee. The person who lost the property is considered at common law to be the bailor, and the finder the bailee.
b.	Obligations of a bailment. Obligations of a bailment are higher than those of a license. Is it fair to treat the finder of lost property the same way we treat the repairman who takes my appliances? At common law, different levels of obligation are required. The level of care required in a bailment depended on who benefited from it:
(1)	If a bailment was solely to benefit the bailee (i.e. you lend a casebook to a friend and only the friend benefits), the standard of care is that the bailee owes a duty of great care, and even the slightest negligence will give rise to a cause of action.
(2)	If bailment benefits both parties (i.e. I take my laundry to a dry cleaner), at common law the standard of care was ordinary care.
(3)	If only the bailor benefits (gratuitous bailment), the standard of care was very low and only gross negligence would violate that standard of care. The finder is entering a gratuitous bailment. There was, however, strict liability for misdelivery, even in the case of a finder. If you receive property in a bailment, you can’t deliver it to the wrong person.
•	Michael v. First Chicago Corp. (Illinois 1985): “A finder of property acquires no rights in mislaid property.”

B.	Acquisition by Adverse Possession

1.	Requirements of adverse possession. Possession must be:
a.	Open and notorious.
b.	Hostile or under a claim of right.
c.	Uninterrupted and continuous.
d.	Actual.

2.	Open and notorious.
•	It goes to constructive notice. We don’t care if the initial owner actually had notice – all we care about is that the adverse possessor gave notice to the world such that any reasonable owner would have had notice.

3.	Hostile or under a claim of right. This typically goes to the idea that the original owner didn’t provide permission.
•	Mindset of adverse possessor. Mannillo discusses the three views on adverse possessor’s mindset in relation to hostility (objective standard, good faith standard, aggressive trespass standard). The best view is that the intention of the trespasser is irrelevant. The hostility requirement should speak only to the fact that the adverse possession is not permissive.
•	Permission always defeats hostility of the trespass, and thus prevents adverse possession.
a.	Hypo: A travels through Blackacre to get to the main highway. What should the owner of Blackacre do with his gate? If he closes the gate, A’s use of the road becomes adverse and A may get an easement by way of adverse possession. But if he opens the gate, A will likely get an easement by prescription. The most effective choice is always pursuing the claim rather than playing games with the gate.
•	Exclusivity. Possession can’t be shared with the original owner.

4.	Uninterrupted and continuous.
•	Either reflects the policy that owner should get as much notice as possible, or that each trespass gives rise to a new cause of action. If a trespasser comes onto land, leaves and returns, then it is a new cause of action.

5.	Actual.
•	Limits amount of land adversely possessed. An adverse possessor not under written claim of title who only possesses part of the land only gets adverse possession to that part, not the whole – Van Valkenburgh.

6.	Policy considerations underlying the doctrine of adverse possession.
a.	Efficient use of resources.
b.	Quieting title. Law should reflect what people actually think the relationship with their neighbors is, rather than abstract lines in government offices. If you think the boundaries are in a certain place and you act as though they are there, abstract lines in the government office shouldn’t alter that relationship.
c.	Enforce people’s expectations. Holmes’s psychological argument is that property means more to the person who’s actually using it.
d.	Estoppel. When neighbors are using the wrong boundary and have an oral agreement to use the wrong boundary, both parties are estopped from making a claim that it should be switched to the real boundary.

7.	Van Valkenburgh v. Lutz (NY 1952). Adverse possessor who only occupies part of the land without a written claim of title is not entitled to the whole.
•	Facts: Yonkers is being developed from an agricultural area to an urban area. The Lutzes buy a couple of lots in Yonkers – 14 and 15. There is also a triangular tract, which they use to cross to their own land, which is comprised of lots 19, 20, 21 and 22. Conflict began between the Lutzes and Van Valkneberghs. Van Valkenburghs buy the triangular tract and try to get the Lutzes out. The Lutzes agree to leave but say that they have a right to access through the lot.
•	Procedural history: The Van Valkenburghs put up a fence and Lutz bring an action for interference, winning on prescriptive easement. Lutz realizes that he could have tried to claim complete title to the land via adverse possession. The Van Valkenburghs sued Lutz again, this time for delivery of possession. Lutz’s defense is that they had acquired title of the premises via adverse possession.
•	Issue: When the adverse possessor only takes possession of part of the land that he claims, is he entitled to the whole?
•	Holding: Lutz was not entitled to possession of the whole because he only occupied part of the land, not the entirety of it.
a.	Most commentators will say that the majority in Van Valkenburgh was wrong, because the way to make use of the entirety of a parcel of land is not by cultivating every foot. Rather, the best use is often made by leaving some trees in place and some land untouched.
•	Adverse possession statute (adverse possession is heavily statutorily based):
a.	§34: “An action … cannot be maintained by a party other than the people.” (Here “the people” refers to the state.) “… unless the P was seized or possessed of the premises within 15 years before the commencement of the action.”
•	Seised: To be seised means to have seisin, which is possession of real property under claim of freehold estate. Closely related is disseisin – disposition, deprivation of possession, usurpation of the right of seisin and possession.
•	Hypo: A purchases Blackacre but never moves onto it. He doesn’t have actual possession of it. 15 years pass. B moves onto Blackacre adversely and one year later A brings an action for delivery of possession. B does not acquire the land through adverse possession – to possess is only one thing you can do to be seised. If a person with title never moves onto the land, he is seised even though he didn’t have actual possession of it.
•	Hypo: A purchases Blackacre and never moves in, but shortly after the purchase B moves in adversely. 15 years pass (requisite years for the statute). Now A brings an action for ejectment. A is seised in the first hypo, but not in this one. The action that causes A not to be seised is the entering of the adverse possessor, even though A is the holder of fee simple.
b.	§38: For the purpose of constituting an adverse possession, by a person claiming a title founded upon a written instrument or a judgment or decree, land is deemed to have been possessed and occupied in either of the following cases:
(1)	Where it has been usually cultivated or improved.
(2)	Where it has been protected by substantial inclosure.
(3)	Where, although not inclosed, it has been used as a supply of fuel or of fencing timber, either for the purposes of husbandry or for the ordinary use of the occupant.
a.	§38 also deals with partial improvements in the case of written claim of title: Where a known farm or single lot has been partially improved, the portion of the farm or lot that has been left not cleared or not inclosed, according to the usual course and custom for the adjoining country, is deemed to have been occupied for the same length of time as the part improved an cultivated.

8.	Mannillo v. Gorski (NJ 1969).
•	Facts: In 1946, one of D’s sons made changes to the house which encroached on plaintiffs’ land by 15 inches. D contends that she has title to the land by adverse possession. P says she doesn’t because it wasn’t hostile.
•	Holding. Court says they won’t give title to the adverse possessor, but also won’t tell the encroacher to tear down the structure. They’ll tell the trespasser to purchase the encroached-upon land at a reasonable price. The court demands a reasonable price because the parties are locked into a bilateral monopoly – the encroached-upon party shouldn’t be able to demand $1 million. The encroacher will probably pay just below what it would cost to tear down the structure.
•	State of mind: If adverse possession is driven by the statute of limitations expiring, we shouldn’t need to inquire into the state of mind of adverse possessor. Additionally, adverse possession law is about enforcing the expectations parties have with regard to the way they’ve been relating to the land and each other. Courts, however, sometimes get caught up in an unnecessary debate about how to satisfy hostility. Although hostility simply means that the adverse possessor doesn’t have permission, Mannillo discusses the three different mental state requirements that courts have adopted:
(1)	Objective standard: This standard, adopted in Mannillo, is preferable for the above reasons. It holds that state of mind is irrelevant so long as adverse possessor doesn’t have permission, and true owner is on notice.
(2)	Good faith standard: Must be honest belief of ownership.
(3)	Aggressive trespass standard: Adverse possessor must think he does not own the property, but intends to take it.

9.	Howard v. Kunto (Washington 1970). Continuity and tacking.
•	Facts: The case derives from errors in surveying. Entire lots were misplaced. The Kuntos’ deed is to the plot next door to their house. Every deed is off by one lot. The Howards deeded the Moyers’ land to the Moyers, in exchange for the Moyers deeding the Kuntos’ land to the Howards. One of the underlying motivations of the judge is not strictly applying doctrine –the Howards have to lose this case because they’re in the wrong.
•	Options for reasonable neighbors:
(1)	Transfer the land. The most reasonable thing would be for the Howards to execute a deed transferring the land on which the Moyers’ house is to the Moyers, and in return the Moyers could transfer the house and land that the Kuntos are living in to the Kuntos, etc. The problem is that we don’t know who lives to the east of the Howards, and the Kuntos may end up with two plots of land if nobody is to the west of them.
(2)	Enter a single lawsuit to quiet title together, each to the land they possess.
•	Issues:
(1)	Continuity issue: Trial court held that the defendants failed to prove continuity of possession because they only lived there during the summer.
(2)	Issue of tacking. May a person who receives record title to track A under the mistaken belief that he is entitled to track B and occupies track B, getting it from his immediate predecessors, tack on their occupancy?
•	Holding:
(1)	Continuity. The way to show possession of a summer house is by possessing it in the summer – don’t need to possess it all year round. Continuity occurs by possessing the property in the way it is best possessed for its intended use – i.e. in the summers if it is a summer house.
(2)	Tacking. Tacking is very limited doctrinally to special circumstances. We call those circumstances the existence of privity.
a.	If we want adverse possessor 2 to be able to tack his possession to that of adverse possessor 1, we would say that adverse possessors 1 and 2 are in privity. The typical circumstances are summed up by the court: “This state follows the rule that a purchaser may tack the adverse use of its predecessor in interest to that of his own where the land was intended to be included in the deed between them, but was mistakenly omitted from the description.”
b.	Doctrinally, courts focus on the deed to determine whether to count adverse possessor 1 and adverse possessor 2 as the same person. If the deed is transferred to a subsequent owner, then the adverse possession has gone along with that.
•	Policies:
(1)	Provide notice to the original owner
(2)	Reward diligence by adverse possessor
(3)	Court also examines the underlying equities in making its decision

10.	O’Keeffe v. Snyder (NJ 1980). Adverse possession of chattels.
•	Facts: O’Keefe claims paintings in question were stolen in 1946 from a gallery. She did not tell anybody about them because she didn’t want to upset gallery owner. O’Keefe did not report the stolen paintings until 1972. In 1975, O’Keefe learned that the paintings were in a NY gallery owned by Snyder, who had bought the paintings from Ulrich Frank, who traces the possession of the paintings to his father.
•	Thief can never get title.
a.	Hypo. Frank was the thief. Georgia O’Keeffe knew that Frank was the thief and where the paintings were. She waits 15 years while Frank has the stolen paintings. Frank, confident that the statute of limitations for replevin has expired, consigns the paintings to the gallery. Now Georgia O’Keeffe decides to sue the gallery for replevin. The court says, “Ms. O’Keeffe, you knew where the paintings were. The statute of limitations has expired.” The court turns to Frank and says a thief never gets title. Who should the court award the paintings to?
b.	Court’s conundrum: The statute of limitations tells you when a P can no longer maintain an action for possession, but doesn’t tell you when title passes. Effectively, it may grant title to the wrongdoer or the wrongdoer’s successor. A thief can never pass good title to another person. To get out of this, the court discusses the discovery rule. They say that it applies to an action in replevin for personal property. We want people who purchase personal property to inquire into the validity of its title, and we want owners who lose personal property to diligently look for it. We don’t want the statute of limitations to run against people whose personal property is hidden.
(1)	Constructive knowledge requirement. The statute of limitations shouldn’t run against a person whose personal property is stolen until they know or have constructive knowledge of where the property is. A cause of action will not accrue until the injured party discovers or should have discovered facts that form the basis of a cause of action.
(2)	Diligence requirement. Georgia O’Keeffe can’t prevent the statute of limitations from running by putting her hands over her eyes and pretending that she doesn’t know where her painting is. The statute of limitations accrues when she knows or should have known through due diligence the identity of the possessor.
(a)	Suppose the painting is reported being bought and sold in a registry in Chicago while she is in NY. Even if she doesn’t know that her painting is being sold in Chicago, if it is in a registry then she should have known.
(b)	What happens if the wrongful possessor hides the property? Where chattel is fraudulently concealed, the statute of limitations is tolled. The idea is to put all the appropriate incentives on the original owners to diligently look for the property and for the purchasers of possibly stolen property to look into its providence.

III.	SYSTEM OF ESTATES IN LAND AND FUTURE INTEREST

A.	Definitions and Overview
1.	An estate in land is a right someone has vis-à-vis another person with regard to the land. Ownership of land is a bundle of rights.

2.	The various fees and interests.
•	Fee simple absolute: The fee simple absolute is the most important and common fee, and it is the largest estate possible to possess in our common law. In layman’s terms, it means complete ownership. It potentially lasts forever and is freely alienable.
•	Reversion: If I own Blackacre in fee simple absolute and grant it to Jeremy for 5 years, it should be obvious that I’ve retained something. I’ve retained a future interest called a reversion.
•	Future interests are presently existing: A future interest doesn’t come into existence five years from now; rather, a reversion is a presently existing interest in property. If Jeremy has an estate for five years and I have a reversion, and Jeremy lays waste to the land, I can sue him in a cause of action for waste.
•	Contingent future interests: I might transfer my fee simple to my son, but if he dies without descendants, then I might give it to my niece. It is a presently existing future interest that she can use to protect her rights in Blackacre.

Estates and future interests in the transferors
Estate	Future interest	
Fee simple absolute	None	
Fee tail	Reversion	
Fee simple determinable	Possibility of reverter	
Fee simple subject to condition subsequent	Right of entry	
Life estate	Reversion	
Estate for years	Reversion	

Estates and future interests in transferees (third persons)
Estate	Future interest	
Fee simple absolute	None	
Life estate	Remainder	
Fee tail	Remainder (likely to be contingent remainder; also likely to be invalid)	
Fee simple subject to an executory limitation	Executory interest	

3.	History of the “magic words” that create a fee simple absolute. Before the mid-1800s in most states, a conveyance of land that simply said “to A” was thought to create a life estate only – a fee simple absolute would have to say “to A and his heirs.”
a.	Feudal origins. In the feudal period, all estates were held by lords based on their loyalty to a lord higher up in the chain, or to the king. Originally, for a lord to hold an estate he had to be loyal to a person higher up the chain. Lower lords held their property not because of their relationship with the king, but because of their relationship with a higher lord. A lord wouldn’t grant land in perpetuity to the person below him, because that person might have a child who was a weakling and couldn’t provide the necessary military services.
b.	Evolution of the doctrine. In time, there was pressure from all lords to ensure that their land would go to their children. By statute, parliament allowed grants to a person and his heirs. By statute, the legal profession came to see a grant to A and his heirs simply as meaning that the estate was inheritable. The presumption remained that if you granted an estate “to A,” then it was a life estate. The magic words for a fee simple absolute were “to A and his heirs.” This presumption about the magic words remained in place until the mid 19th century.

4.	Fee tail. People are always trying to create fee tails in life estate planning, even though they have been discarded in virtually every jurisdiction. Some attorneys wanted to create an estate that would descend down the family line with life estates in each successive generation. They couldn’t use the phrase “to A and his heirs” so they came up with the phrase “to A and the heirs to his body” or “to A and the heirs of his body lawfully begotten.”

5.	The magic words.
“To A”	Life estate pre-19th century; afterwards, fee simple absolute	
“To A and his heirs”	Fee simple absolute	
“To A and the heirs of his body”	Fee tail	

B.	The Life Estate
1.	White v. Brown (Tennessee 1977).
•	Parties: P is Jessie Lide’s sister in law and the sister in law’s daughter – their names are Evelyn White and Sandra White Perry. The defendants are twelve nieces and nephews.
•	Facts: Jessie Lide died, leaving a holographic will (a will entirely handwritten by the testator, revocable until death). In her will, Jessie said, “I wish Evelyn White to have my home to live in and not to be sold.” The question is whether it’s a fee simple or a life estate. If Jessie gave a fee simple absolute, the nephews and nieces are out of luck. But if she gave a life estate, then they have a reversionary interest.
•	How to get property from a decedent.
a.	Will: Can be a devisee under the will.
b.	Inheritance: Can receive property by inheritance (if a person doesn’t execute a will, or executes a will but doesn’t dispose of all the property). If you don’t devise property, inheritance is basically a state-drafted, default will. Every state follows the same basic scheme:
1)	All property goes to the spouse
2)	If no spouse, then to issue [descendants]
3)	If no issue, then parents of decedent
4)	If parents aren’t alive, then collaterals [parents’ descendants] – all persons related by blood to decedent
5)	If collaterals are dead, then their issue 
6)	If no one else left, then property escheats to state
•	The problem of step-parents. If the surviving parent remarries and predeceased the step-parent, property goes to the surviving step-parent. The children are effectively disinherited by the second marriage. It is thus important to provide a will with a life estate for the surviving spouse. When the surviving spouse dies, there can be a remainder in the children.
•	Reason why the nieces and nephews have reversion and not a remainder. Future interests are classified at the moment they are created. The only future interest that changes its characteristic is a contingent remainder, which can become a vested remainder.
a.	Court’s confusion. There are two possible reasons the court got confused and classified the nieces’ and nephews’ interest as a remainder rather than a reversion:
(1)	Court may have ignored the fact that you classify future interests the moment they are created.
(2)	The court may have relied on the notion that a person cannot die twice, and therefore the future interest must be a remainder. Here Jessie created a life estate and a future interest at the moment that she died. To create a reversion, we’d have to say that she died twice. But American law of property says that a reversion is an interest remaining in the grantor or in the successor in interest of a testator who transfers a vested estate of a lesser quantum than that of the vested estate which she has. When a testator transfers an estate, the heirs have a reversion and not a remainder. A reversion can last forever while a remainder only lasts for a limited amount of time.
•	Parol evidence in wills. Most jurisdictions rigidly exclude extrinsic evidence in will construction cases. Here the court does not consider extrinsic evidence of Jessie’s intent.
•	Formal rules of construction.
a.	Must determine testator’s intention.
b.	Court prefers interpretation in which testator disposes of the whole of the estate.
•	Language that the house is not to be sold. The court views this as a restraint on alienation. Once they find that it is a fee simple absolute, one of the constraints on a fee simple absolute is that restraints on alienation are void. This raises an interesting policy issue: Why can’t I place restraints on alienation of my family property? I can create a charitable trust or a foundation, but I can’t set aside a nature reserve for my children.

2.	Baker v. Weedon (Mississippi 1972).
•	Facts: John Weedon bought the Oakland Farm in 1905 and left it to his wife Anna in his will. The highway department negotiated with John Weedon’s grandchildren, the contingent remaindermen in the will, to purchase a right-of-way through the property. Anna was old and in economic distress, and wanted the whole property sold and put into a trust to provide for her well-being, due to her poor financial condition. The value of the property at the time was $168,500 and the estimated value within four years was $336,000 due to interstate construction. Mr. Baker attempted to sell the land at a reasonable price but was unable due to slow construction of the bypass.
•	Holding: The court says that it can order the sale of property in order to grant economic relief to the life tenant, even if the property isn’t deteriorating. It introduces the doctrine for future cases (akin to saying that economic conditions can give rise to a kind of permissive waste), but in this case says that the best interests of the parties would not be served by a judicial sale, because the remaindermen could be helped by an increase in the value of the property.
•	Nature of interests: Anna was given a life estate, and the grandchildren hold the remainder. There are alternate contingent remainders – Anna for life, to her children if any, and if she dies without issue then to her grandchildren. John Weedon prefers Anna’s unborn children to his grandchildren, but prefers his grandchildren to Anna’s husband if she doesn’t have children. Most likely, Anna is sterile and John knows it.
•	Interesting hypo: The will only says it will go to Anna’s children, not to her issue. What if she dies without children but with issue? Neither condition in the will would be met. And the other provision of the will says if she dies without issue, not dies without children. If that were the case, and neither condition were met, it could revert to John Weedon, and then they would have to find his closest issue – probably the grandchildren. A better interpretation, though, would be to say that the remainder goes to Anna’s children whether they live or die, and if they are dead when Anna dies then it would go to them, and probably pass on her grandchildren.
•	Vesting of future interests in this case. The contingent remainder in John’s grandchildren will become vested when Anna dies without issue – they would be ascertained and there would be no condition precedent. Once Anna dies, she dies either with or without issue. The contingent remainder to the grandchildren both vests and becomes possessory at the same moment.
•	Adopted children. Adopted children are treated exactly like natural children. The medical joke about the “fertile octogenarian” is well taken because she could adopt and then have issue. Stepparents often adopt their stepchildren in order to bring the rules of inheritance back into normal alignment.
a.	Gays and lesbians. Gay and lesbian couples often adopt each other. To prevent your parents from suing your surviving partner, you can adopt your partner – you now have issue.
•	Economic argument made by remaindermen. The commercial value of the land was increasing significantly – they thought they could get more money by hanging onto the land than by investing in stocks. The remaindermen are making a bet that the land will be more valuable several years from now. Their argument is strange – that the market underestimates the value that the land will have several years from now.
a.	The only things that make the land worth less now than it will be in the future are the time factor and the possibility that the development won’t occur.
•	This case shows that it’s a bad idea to create legal life estates. It’s a better idea to put the property in trust so the trustee can maximize the value for the life tenant and the future interests. The trustee could sell the farm, because Anna has a right to enforce an obligation against the trustee with respect to the trust corpus, but the trustee is free to sell the property and buy other property or mutual funds.
•	Potential solutions.
a.	Anna could sell her legal life estate. The problem is that nobody will buy it – they would basically be taking a gamble on how long she would live.
b.	We can also sell the property and put the proceeds in trust. The proceeds would go to the remaindermen, the dividends to Anna. Alternatively, we could put the land itself in trust.
•	Doctrine of waste. A doctrine used to balance interests of present and future possessors. Waste is an abusive or destructive use of property by a person who is in rightful possession. If someone else has a successive interest, that limits your ability to destroy your own land.
a.	Historical doctrine in England. The older version of the doctrine was that the holder of the reversion or remainder was entitled to have possession of the property in the condition it was in when it was divided up into estates. In 18th century England, this created a problem with coal mines found on property.
b.	Historical doctrine in America. In America, where land was plentiful and people had relatively little sentimental attachment to it, the doctrine of waste was good husbandry or reasonable use, which permitted cutting of trees and other somewhat destructive uses.
c.	Permissive waste – failure to fulfill a duty to a future owner (i.e. not fix the roof).
d.	Voluntary waste – the possessor is actively destructive toward the land (i.e. cutting down trees).
e.	Ameliorative waste: Began in the US with the case of Melms v. Pabst Brewing Co. A life tenant can make alterations or even demolish a structure when there is a change in conditions that has deprived the property of its usefulness, provided that the value of the remainder is not diminished by these actions.

C.	The defeasible estate.
1.	Mahrenholz v. County Board of School Trustees (Illinois 1981).
•	Facts: In 1941, W.E. and Jennie Hutton conveyed 1½ of their 40 acres to School District No. 1, provided that “this land to be used for school purpose only; otherwise to revert to Grantors herein.” Later in 1941, the Huttons conveyed to the Jacqmains the remaining 38½ acres, which purported to convey the reversionary interests. The Jacqmains conveyed the 38½ acres to the Mahrenholzes in 1959, also purporting to convey the reversionary interest. School District 20 succeeded grantee of the deed for the 1½ acres and held classes in the building until May 30, 1973 after which the building began to be used for storage purposes. The Huttons died and their heir was Harry Hutton In 1977, Harry Hutton conveyed to the Mahrenholzes all his interest in the school land. Later in 1977, he disclaimed his interest in favor of the school district.
•	The future interests: The transactions in the future interests keep failing because future interests are not alienable. All along the Huttons kept the future interests without realizing it. In 1977, the Mahrenholzes and the school realize that Harry has the future interest. However, in most states, possibility of reverter and right of re-entry are transferable inter vivos.
•	Policy reasons to prevent future interests from being transferred by will or inter vivos conveyance.
a.	Makes it difficult to market and use the land. We may never be able to unite the future interests with the property itself. Courts favor fee simple – if you create these future interests, land becomes difficult to market and difficult to use.
b.	Bilateral monopoly. The holder of a future interest could extort any price.
•	Parties’ arguments. Harry conveys all of his interests by proper conveyance to the Mahrenholzes in May of 1977. In September of 1977 he signs a release to the school. The Mahrenholzes argue that Harry had a possibility of reverter that ripened into a fee simple absolute, so Harry conveyed the property itself to them. The school argues that Harry had a right of re-entry, because Harry cannot convey the right of entry, and the school gets a release of the right of re-entry.
•	Holding: In IL, there is a preference for fee simple subject to condition subsequent. However, the court determines that the original grant was a fee simple determinable followed by a possibility of reverter, by focusing on the language of the original grant. They do not want to interpret the words “otherwise to revert” as not being a possibility of reverter. They remand the case to determine whether the use of the building for storage means that it is no longer being used for a school purpose.

2.	Magic words for defeasible estates
Type of estate	Magic words	
Fee simple determinable	“So long as…, until…” After that it says something like “property will revert to the grantor,” which is a good hint that there’s a reverter.	
Fee simple subject to condition subsequent	It seems to create a fee simple absolute, but the next clause says that they cut short the prior estate.	

3.	Fee simple determinable and non-profit organizations. Fee simple determinables in land seem almost always to be created by individuals trying to benefit non-profit charitable or religious institutions. The grantors have some concern that the institution will reap a windfall by selling the land for commercial development, which is not why they gave the land.
a.	Great length of fee simple determinable. Great length of the condition is a problem. For example, O can grant land to a non-profit organization demanding that they use it for charitable purposes for 100 years. Now the organization has to track down the person who has the future interest in the land. Woburn Baptist Church is such a case.
b.	Fee simple determinable is more problematic for the grantee than fee simple subject to condition subsequent. With fee simple determinable, the grantee no longer owns the land once the use changes. By contrast, a fee simple subject to condition subsequent requires the holder of the future interest to retake the premises. This subjects the organization that violates the fee simple determinable to much greater damages – for example, if they rent out their land, they will have to return all of the money they earn from renting it, while an organization with a fee simple subject to condition subsequent is able to retain those rents.
c.	Adverse possession: With fee simple determinable, if the church stops using it for church purposes and the statute of limitations runs out, the church gets the land by adverse possession because its possession is automatically wrongful. A fee simple subject to condition subsequent does not start the statute of limitations running.
d.	Ability to waive: If the condition is violated, and the holder of the future interest has a right of re-entry, he can waive his rights. But the holder of a possibility of reverter cannot waive his rights because you can’t waive a fee simple – the only thing you can do is transfer by deed or conveyance.

4.	Mountain Brow Lodge No. 82 v. Toscano (California 1968).
•	Facts: Mountain Brow Lodge instituted an action to quiet title to a parcel of real property that it acquired by gift deed from James Toscano and Maria Toscano. The habendum clause in controversy in the deed of conveyance reads: “Said property is restricted for the use and benefit of the second party, only; and in the event the same fails to be used by the second party or in the event of sale or transfer by the second party of all or any part of said lot, the same is to revert to the first parties herein, their successors, heirs or assigns.”
•	Issues: 1) Was the initial grant a restriction on alienation and thus void? 2) Was the “use” condition a hidden restraint on alienation and also void?
•	Parties’ arguments: The Odd Fellows argue that the grant to them is in part void. If the restraint on alienation is void, you cross it out and read the grant as a fee simple absolute.
•	Holding. The court says that the restriction on use, even though it seems to be a restraint on alienation, is actually a typical restriction on charitable organizations and religious organizations when they get a fee simple determinable.

5.	Ink v. City of Canton (Ohio 1965).
•	Facts: Lineal descendents of Harry Ink convey a tract of land to the City of Canton. The granting clause reads “for the use and purpose of a public park, but for no other use or purpose whatsoever.” The habendum clause creates a fee simple determinable with the possibility of reverter. Conveyance was accepted by city and named Ink Park. In 1961, the state instituted proceedings to appropriate perpetual easements for highway. Director of Highways deposited $130,822 to be distributed to those having interests in the property.
•	Eminent domain: The state appropriated the easements under the theory of eminent domain, which is the power to take private property for public use by any level of government. The 1) taking must be for public purposes and 2) the government must pay just compensation.
•	Issue: Who gets the money – the city or Harry Ink’s successors?
•	Old intent-based rule: The eminent domain proceedings caused the condition to be violated, not the action of the person who was granted the fee simple determinable. Thus, the owner of the fee simple determinable should be paid.
a.	Rationale for this rule:
(1)	Owner of the fee simple determinable did nothing wrong – eminent domain beyond his control
(2)	Value of reverter small
b.	Problems with this rule:
(1)	All or nothing rule: The old rule was an all or nothing rule – where property is appropriated by eminent domain, the holder of the fee simple determinable takes the entire price and the holder of the reverter gets nothing. This was a bad rule for fairness reasons.
(2)	Windfall to owner of fee simple determinable: Although the use is restricted, the owner of the fee simple determinable is paid for it as though he had a fee simple absolute. Thus, he receives a windfall.
(3)	It is unfair for the holder of the reverter to get nothing. The reversionary interest has value, but the old rule treats it as though the holder of the reverter loses nothing of value.
•	New rule: Split the eminent domain fee between owner of determinable fee and owner of possibility of reverter.
a.	The problem with this rule is that value of the fee simple determinable and the possibility of reverter do not equal the value of a fee simple absolute.

6.	Money is worth more now than in the future.
•	Interest. This turns on the idea of interest. If the interest rates are 10% and I put $100 in the bank today, then on March 3, 2001 the $100 will become $110. That means that the present value of $110, to be paid out a year from today, is $100.
•	Example. What value will I get if I put $100 in the bank today and it’s paid out on March 3, 2002? I get $10 after one year (10% of $100) and $11 after two years (10% of $110) – for a total of $121. For the promise of $121 two years from now, I would take $100 today – they are equivalent in value.
•	Value of payment in the future. I want to know, if $121 is the number I’m going to get, how do I solve value of payment in the future?
a.	PV = P/(1+r)y
b.	Example: 400/(1+.07)5
c.	It is easy to value the payout if we know exactly when the future interest comes into possession. What is the value to the grantor of getting back his land five years from now? It’s easy – we know exactly how many years, we know what the interest rate is and we know the value of the property.
•	Applied to Baker v. Weedon. The problem in Baker v. Weedon is that there is a life estate followed by a remainder. How do you value the future interest of the children? We don’t know how long it will be until Anna dies. That’s when we use the actuarial tables. You plug in the number of years that Anna has to live. Problems with actuarial tables:
a.	Uncertainty.
b.	Shows that value of fee simple determinable plus value of reverter doesn’t add up to 100%. Let’s say Anna has a fee simple determinable that says she can have possession of the land as long as she can use it for agricultural purposes. She won’t violate the condition because if she does, the estate disappears. If we look at it this way, the value of reverter is zero. However, the value of a fee simple determinable is definitely less than the value of a fee simple absolute. It might be worth 5% of a fee simple absolute. If we look at it that way, the value of the possibility of reverter is 95%.
•	Paradox: You can value the possibility of reverter first and let the lion’s share go to the holder of the fee, or value the fee first and give the lion’s share to the holder of the possibility of reverter.
•	Explanation. The value of those two parts is less than the value of the entire fee simple absolute because we have a restricted possessory estate and a future interest that’s never likely to come into possession – empirical proof that it is a bad thing to carve out legal estates and possessory interests because it causes the overall value to decline.
•	Alternative way of dividing the windfall: If fee simple determinable was purchased, can find the value of a fee simple absolute in the same area and determine what the discount is. For example, fee simple determinable could be worth 60%, and the possibility of reverter worth 40%.
•	Restatement formulation for division under eminent domain proceedings: The Restatement provides for a division of the eminent domain award between the owner of the determinable fee and the owner of the right of reverter where, “viewed from the time of commencement of an eminent domain proceeding, and not taking into account any changes in the use of the land sought to be condemned which may result as a consequence of such proceeding, the event upon which a possessory estate in fee simple determinable is to end is an event the occurrence of which, within a reasonably short period of time, is probable.”
a.	Application. The question is whether a change in use is probable. In Ink, absent the road being built through the park, it was improbable. The park would not give up something (its land) for nothing.

IV.	FUTURE INTERESTS

A.	Trusts
1.	Background of trusts.
•	Origins of trusts. Trusts derived from the feudal system of property. To avoid feudal incidents, a landowner would create a trust by conveying title to a group of lawyers as trustees before his death, leaving them with a set of instructions to benefit his son, daughter, etc. It was a sham transaction, and the common law courts wouldn’t complain because the lawyers had full legal title. These trusts were called “uses.” In order to undo the massive tying up of England’s land in uses, Henry VIII passed the Statute of Uses, which was meant to abolish uses but instead created the modern trust.
a.	Enforcement problems. If the trustees decided to keep the land themselves, it wasn’t possible to seek relief in common law courts (the trustees had full legal title). The only alternative was to go to a court of equity, which provided non-legal remedies.
•	Trust as a legal relationship. A trust isn’t a thing, but rather a legal relationship. A family trust gives rise to the right to sue the trustee in equity, but there’s no such thing as the trust itself.
•	Creation of a trust. To create a formal trust, the settler (founder of the trust) delivers property to a trustee with the intention of creating a trust. You can create a trust while you’re alive (inter vivos or living trust) or can create a trust by will that operates when you die (testamentary trust). The person for whom the trustee manages the property is called the beneficiary, and there can be more than one beneficiary. One of the most common mechanisms is the inter vivos revocable trust, which is a way of avoiding probate (proving of a will to the satisfaction of a court).
•	Ways to avoid wills through trust (many wills fail because of formalities required for execution, and some people don’t like will because they don’t like formalities or don’t like to go through probate).
a.	Trust with self as trustee and beneficiary. I can declare myself trustee of all my property, giving myself a life estate with the right to invade the corpus. I would also make this trust revocable. I am the creator, the trustee, and the life beneficiary. Then I create remainders in the people who would otherwise be the legatees or devisees of my will.
(1)	Must have some beneficiary other than the trustee settler. If I am both a trustee and the only beneficiary, the legal and equitable interests merge. If I am both trustee and beneficiary, it is impossible to sue to enforce the trustee’s obligations. The legal and equitable interests merge and the trustee has a fee simple absolute in the property. But as long as there are other beneficiaries, I can create a trust over all of my property, name a substitute trustee, and when I die the substitute trustee owns all of my property and distributes it to the survivors.
b.	Combining inter vivos trust with a will. Can create a trust over some of your property while alive and use your will to pour over whatever passes to this trust. Then you can amend your trust – it is superior to a will because fiddling with your will sometimes invalidates it.
(1)	Reasons for will/trust structure. You may not want or be able to declare yourself trustee over all of your property. Moreover, this pour-over structure is used to consolidate all of your assets in one instrument. For example, you might think that a bank account will pass under the will but it passes through joint tenancy. The will catches whatever didn’t pass and pours it into the trust. Then the trustee can manage all of the property in a way that advantages your beneficiary.

2.	Broadway National Bank v. Adams (Massachusetts 1882).
•	Facts: The bank is Adams’s creditor. The relevant language in the trust fund says: “I give the sum of seventy-five thousand dollars to my said executors and the survivors or survivor of them, in trust to invest the same in such manner as to them may seem prudent … in either case free from the interference or control of his creditors.” Currently the bank can get its money once Adams picks it up. But it doesn’t want to wait for him to pick it up, and wants to reach the trust interest itself.
•	Alienability in the spendthrift trust. One of the ideas that underlies the spendthrift trust is that if you can alienate something, then your creditors can reach it. If you want to make something inaccessible to your creators, it must be inalienable. Every spendthrift trust says here is your equitable interest – it is not alienable and your creditors can’t reach it.
•	Conflicting principles.
a.	The principle that people creating trusts can generally limit them however they want
b.	Property should always be alienable so it remains in the stream of commerce
•	Holding: So long as it does not violate public policy (if it would defraud creditors), then intention of founder to pass restricted estate can be recognized. Thus, spendthrift trusts are allowed in Massachusetts.
a.	Court dismisses the concern that somebody might be able to fool the creditors. The court says that the creditors should know better – they should examine where he gets his wealth to see if he’s a good credit risk.

B.	The Rule Against Perpetuities
1.	Background of the rule against perpetuities.
•	Rule: The rule says no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. It is sometimes amended by saying, “Plus any period of gestation.” The period of gestation is nine or ten months – Jee v. Audley. If a woman is pregnant, we provide also for the period of gestation.
•	Application: The rule against perpetuities applies to all executory interests, but not to vested remainders.
•	Policy: The basic policy behind the rule is to prevent people from tying up property forever through future interests created in unborn people.

2.	Invalid conveyances. A conveyance is invalid if there is any chance that it will not vest within 21 years of the death of the validating life. The rule is one of logical proof. We don’t ask what is likely to happen – if there’s any possibility that it won’t vest, than the interest is invalid.

3.	The “Joseph P. Kennedy” clause. Some corporate trusts say, “No matter what else this instrument says, the trust terminates upon the death of the last surviving descendant of Joseph P. Kennedy (JFK’s father) who was alive as of the making of this instrument.” Thus, the descendants of Joseph Kennedy will affect vesting.
a.	Similar clauses. There is some controversy over similar clauses that provide to the grandchildren alive 21 years after the death of A, B, C, D, E, F and G, the first seven children born in X hospital after the creation of this instrument.

4.	Brown v. Independent Baptist Church of Woburn (Massachusetts 1950).
•	Facts: Sarah Converse left a will devising land to her church “to be holden and enjoyed by them so long as they shall maintain and promulgate their present religious belief and faith.” It’s a fee simple determinable, followed by an executory interest. (There is a single arbitrary rule saying that if you create a fee simple determinable with a future interest in a transferee, that future interest is categorized as an executory interest.)
•	Issue: How long is the church obligated by the fee simple determinable?
•	Holding:
(a)	Executory interest. Since the future interest is an executory interest, it’s subject to the rule against perpetuities. The executory interest won’t necessarily vest or fail within a life plus 21 years. Thus the executory interest is invalid.
(b)	Residuary clause. However, there is a residuary clause in the will that the rest is bequeathed to the legatees. Even though her executory interest was invalid, she created a possibility of reverter for the same legatees. Reversionary interests aren’t subject to the rule against perpetuities, so it’s valid. Sarah’s will does exactly what the rule against perpetuities is designed to prevent it from doing, but they do this by inheriting Sarah’s possibility of reverter.
•	Residuary devise requires Sarah to die twice. The lower court and a lot of commentators apply the rule against perpetuities to the possibility of reverter because the residuary devise requires Sarah to die twice. She had to die for the church to get the land, at which point the interest passed and possibility of reverter was created. You then have to put it back into the will and pass it through the residuary clause.

5.	Exemption to the rule against perpetuities for charitable organizations. If there’s a giftover from one charitable organization to another, it’s valid. Charitable trusts in general aren’t subject to the rule against perpetuities because we want charitable trusts to continue forever.

6.	Jee v. Audley (Court of Chancery 1787).
•	Facts: Edward Audley’s will conveys £1000 to his wife, then to his niece Mary Hall for life, and if she dies without issue to the Jees. The Jees have a shifting executory interest (to become valid it has to divest Mary’s interest). If there’s a default of issue (occurs when her line dies out), it cuts short in fee simple and the remainder goes to the daughters of John and Elizabeth Jee.
•	Issue: Does the conveyance violate the rule against perpetuities?
•	Holding: Conveyance is invalid because daughters must wait until Mary is dead without issue, which could possibly not happen during perpetuities period.
•	Alternative conveyance: The court says that the conveyance would be valid if it said, “To the Jees’ daughters now living” or “To the Jees’ daughters who are living at the time of Edward Audley’s death.”
a.	Court is wrong: Those conveyances would be invalid. If the gift were to Mary with an executory interest to the daughters now living, it would be invalid because the interest wouldn’t be vested until Mary’s blood line ran out (because the daughters’ issue could inherit when Mary’s blood line runs out, and thus there is no validating life). “Daughters who are now living and who are then living” would be a valid conveyance. The daughters themselves would then be the measuring lives.
•	Counterstory (i.e. logically, must the conveyance vest within 21 years of the validating life?). At the time the case came up, John and Elizabeth Jee are dead. It’s impossible for the class to be open. However, we look to whether the interests were valid at the time they were created, not at the time of the litigation.

7.	Validating lives must be human lives – In re Kelly (Ireland 1932). The policy concern is that people will try to create deeds based on the lives of turtles or elephants, or other long-lived animals.

8.	The unborn widow problem. (Shows that perpetuities problems are caused by not naming the validating life.)
•	Problem: O conveys “to A for life, then to A’s widow, if any, for life, then to A’s issue then living.”
•	Estates conveyed: The conveyance to A is a life estate; A’s widow has a contingent remainder in life estate, and A’s issue has a contingent remainder in fee simple absolute.
•	The interest in the issue then living is invalid. It is invalid because the widow isn’t named. It would be valid if it was to A for life, then to A’s wife Iris. But it isn’t to a particular person.
a.	Counterstory: A takes a life estate. His wife dies and so do his children. Now the unborn window is born – Lolita. A waits until she is of age and marries her. Now they have children, A dies. Lolita, an unnamed after-born person, could live more than 21 years. When she dies, her children are expecting to come into possession. However, all the lives have expired and 21 years have passed, so their interests are invalid.
b.	A slight change would make the interest valid: “To son A for life, then to his widow for life, then to A’s children.” The crucial difference is that there’s no requirement of survival. The minute that A dies, A’s children are vested even though they don’t come into possession the minute that A dies.

9.	Rule against perpetuities reform. There are three different kinds of reform to the rule against perpetuities.
•	Wait and see. A lot of jurisdictions have adopted a wait and see approach.
a.	Approach: Rather than trying to figure out whether it’s valid at the time of creation, court waits to see if the rule against perpetuities does get violated, then strikes that portion
b.	Problem: Lack of certainty
•	Wait-and-see for 90 years.
•	The NY approach. When the gift is to a person’s spouse, there’s a presumption is that it’s to a living person. Eliminates the unborn widow problem. This approach is more commensensical.

10.	Hypo. The testator, O, has one son, C. C has two children, D and E. O devises by will to “my son C for life, then to the children of my son for their lives, then to my great-grandchildren.”
•	Type of estate created. C has a life estate, the children of C have a contingent remainder in life estate, and the great grandchildren have a contingent remainder in fee simple.
•	Validity of conveyance. The life estate in C is valid, the contingent remainder in the children of C is valid because it has to vest immediately after C’s life. The contingent remainder in the great grandchildren is invalid.
a.	Counterstory: C’s kids, D and E, die. C has other children, F and G. F and G are not lives in being at the time the interests were created. Then Charles could die. F and G could have children, and F and G could live more than 21 years before dying. Thus it doesn’t vest within 21 years. When F and G finally die, the great grandchildren won’t be able to come into possession within a life in being plus 21 years.
b.	Way to reform conveyance: Can say “to C for life, then to the children of my son, D and E, for their lives, then to my great grandchildren who are the children of D and E in fee simple absolute.”

V.	CO-OWNERSHIP AND MARITAL INTERESTS.

A.	Common Law Concurrent Interests.

1.	Joint tenancy.
•	Right of survivorship.
•	No probate. Because the pre-deceasing joint tenant’s interest disappears, joint tenancy property does not go through probate in order for the surviving spouse to continue living in the home. The two joint tenants own the property while alive and the survivor takes the property without going through probate.
•	Cannot pass joint tenancy through intestacy.
•	Can create a joint tenancy through the use of building blocks of estates and future interests. It is useful to think of it as being to A and B for life in tenancy in common – remainder to the survivor.
•	Four unities of joint tenancy:
(1)	Time. The interests must be acquired and must vest at the same moment.
(2)	Interest. All must have equal undivided shares and identical interests measured by duration.
(3)	Title. Joint tenancy must be acquired by same title or by joint adverse possession.
(4)	Possession. Each joint tenant must have the right to possess the whole.
•	Inter vivos conveyance destroys joint tenancy: Does away with the unity of time and unity of title.
•	Questions about who dies last. These cases were so preposterous that a Uniform Simultaneous Death Act was created. If there’s not enough evidence to show that the joint tenants died a certain amount of time apart (the state fills in the blank – usually 30 to 90 days apart), then the state acts as though they both were the survivors.

2.	Joint tenancy bank accounts.
•	Application: In a joint survivor bank account, either party on the account can withdraw the amount deposited and the survivor takes whatever sum is remaining in the account when the other joint tenant dies.
•	Convenience account. If a depositor, O, is aging or sick and needs another person, A, to pay bills, the depositor may open a joint bank account intending it to be a “convenience account.” If a convenience account is the depositor’s intent, A can lawfully write checks during the depositor’s life to pay bills but A has no rights of survivorship. Because joint bank accounts can be used as a “true” joint and survivor account or as a convenience account, much litigation results as to which time of account was intended by the depositor.
a.	Presumption: The presumption is that by signing a joint tenancy card at the bank, which provides survivorship rights, O, the depositor, intends to open a true joint and survivor account with A, the other party, having full rights of survivorship. In most states, however, this presumption can be overcome by clear and convincing evidence that a convenience account was intended. In a few states, to avoid litigation as to the depositor’s intent, signing a joint and survivor account form is conclusive, and no evidence of a contrary intent is admissible – Wright v. Bloom (Ohio).
•	Will substitute. A joint bank account can also be used purely as a will substitute. In such case, the depositor, O, does not intend A to have any right to withdraw money in the account until O dies. If extrinsic evidence shows this is the depositor’s intent, many courts in the past held the joint bank account invalid because no gift is made during life; the account is a testamentary act not executed with the formalities required for a will.

3.	Tenancy in common.
•	Separate but undivided interests. The thing itself is not separate; rather, the bundle of rights is separate.
•	Tenancy in common passes by intestacy. Each tenant in common can convey his interest by deed or will.
•	Can destroy undivided tenancy in common by partition: Every tenant in common has the right to transform the undivided tenancy in common into a partitioned tenancy in common.

4.	Riddle v. Harmon (California 1980). Sham transaction not necessary to destroy joint tenancy – individual can do away with it by conveying property to him or herself.
•	Facts. Husband and wife purchase property as joint tenants. Several weeks before the wife’s death, she requests that joint tenancy be terminated, granting the interest to herself.
•	Holding: Sham transaction not necessary – individual can do away with joint tenancy by conveying property to himself or herself.
•	Effect of making an inter vivos conveyance to herself. This turns the estate into a tenancy in common because joint tenancy is defined by four unities. A conveyance of the sort would destroy both unity of time and unity of title (didn’t vest at same time and didn’t vest through same conveyance). Alternatively, it can be conceptualized as her unilaterally converting a joint tenancy into a tenancy in common.
•	Sham transactions in place prior to Riddle. To break your joint tenancy, you can convey to somebody else. Since you want to keep your interest, lawyers came up with a scheme where you transfer to someone else, and they transfer back to you.
a.	What happens if the strawman doesn’t convey back? Reiss v. Reiss: Mother conveys land to her son in trust, with the trust instrument requiring that he convey it back upon demand. Court upheld the arrangement.
•	Opportunity for fraud. California’s ruling presents a major opportunity for fraud.
a.	Example. Frances may not be dying, but may not want her husband to take in joint tenancy if she pre-deceases him. She could have written out this deed to herself breaking the joint tenancy, then locked it away in her drawer. She could leave instructions to her daughter stating the following: “If I die first, show the world that I transferred the property. If I die second, tear up the deed (because I’ll take the entire property through joint tenancy).”
b.	There may be strong public policy considerations for not letting people turn joint tenancies into tenancy in common in the seclusion of their own homes.
•	Can create indestructible joint tenancy: It would be a life estate with the remainder to the survivor. We have to understand the power to destroy joint tenancy as inhering in it.

5.	Loss of poor black workers’ farmland in the South.
•	Background: The people who own farmland in the Southeast are the descendants of African-American and poor white farmers. All companies have to do to force a partition is find someone who has a 1/817 interest in Baltimore or DC, buy it from them, then go down to the proper county and petition for a partition. The court sells the land to the highest bidder, which is almost invariably the company with its 1/817 interest.
•	Person with the smaller share has more interest in preventing partition. If A and B are tenants in common, A with 1/12 interest and B with 11/12 interest, they both have a right to possess the whole. Obviously, A gets the most bang for their buck.

6.	Delfino v. Vealencis (Connecticut 1980).
•	Facts: Plaintiffs are the Delfinos and the D is Vealencis. The Delfinos own 99/144 of the property. Vealencis uses part of the property for her rubbish and garbage removal business. The plaintiffs want to develop the land, so they ask for partition by sale. Vealencis opposes it. The Delfinos’ bid, on the other hand, is based on the highest and best use (suburban development), without a third of it being used as a garbage dump.
•	Holding: Partition in kind is appropriate here; Vealencis wins.
•	Rule: Sale is only awarded when the physical attributes of the land are such that 1) physical partition is impracticable or inequitable, OR 2) if the interests of the parties are better met by sale.
•	Presumption. The court states that, when someone asks for a partition, it favors a partition in kind. Nevertheless, the overwhelming majority of partitions occur by partitioned sale. One reason is apathy –people often don’t oppose the petition for partitioned sale.
•	What happens with partition in kind: The bargaining hasn’t stopped. They can continue to bargain with her and buy her out.
•	Competing policy concerns:
a.	Vealencis’s business imposes costs on other owners: The garbage hauling business reduces the value of the subdevelopment that they want to build. Do we really need to honor her wish to stay in the garbage business when the court below said the interests of all owners (including Vealencis’s) would be better advanced by a partition by sale?
b.	Benefit of the bargain: The competing concern is that Vealencis is entitled to the benefit of the bargain – probably the more persuasive rationale. That is ultimately what the court decides.

7.	Johnson v. Hendrickson (South Dakota 1946).
•	Facts: Katie is estranged from her children from the first marriage. She devises the entire 160 acre farm to her second husband and children. The second family has made a lot of improvements on the farm. Karl (second husband) and his sons own adjoining land. Bauman children bring an action for a partition sale and Karl wants a partition in kind.
•	Rule: Sale is OK if value of partitioning the land is much less than the value of the land sold as a whole. Here, a subdivision into four tracts would materially decrease the value of the land. A farm of less than 160 acres won’t be very valuable for agricultural purposes.
•	Bidding at a partition sale when you’re a major ownerIf you are a tenant in common and successfully bid at the sale you get part of the money – i.e. if you are a 2/3 owner, you get 2/3 of the price.

8.	Swartzbaugh v. Sampson (California 1936).
•	Facts: Husband and wife were joint tenants of 60 acres of land on which they had a walnut orchard. Husband agreed to let defendant Swartzbaugh open up a boxing arena on a parcel of the land, and leased it to him while the wife was ill. After she recovered, she sued to cancel the lease.
•	Holding:
(1)	Lease is valid despite P’s lack of agreement, because husband’s consent is enough for Swartzbaugh to build the boxing arena. When cotenant A leases to a third party, he relinquishes his rights and the lessee has cotenancy rights with B for that area.
(2)	Cotenant A cannot carve out a piece of the property and convey it exclusively to C. If he conveys it exclusively, he is conveying something he doesn’t have.
(3)	P has no rights against lessee absent an ouster.
•	Accounting [dividing the profits from an enterprise]. Cotenant A has a right to an accounting when cotenant B leases to a third party. However, he has no right to an accounting when cotenant B engages in a business of his own (because there are other issues involved there, like labor and payment of taxes).
•	Ouster. Changes the relationship of the parties.
a.	Nature of the parties’ relationship under joint tenancy. If A wants to come into possession, B cannot say no. Under Hofeld’s analysis, the relationship consists of privilege and no right. A can use the land just as B would, and vice versa. They have no exclusory rights vis-à-vis each other.
b.	Ouster. What happens if A is in possession and B comes onto the land saying he wants to farm also? When A says no, he has committed an ouster.
c.	It may be in Mrs. Swartsbaugh’s interests to get ousted. How to get ousted:
(1)	Bringing local temperance league to boxing match. If she wants to sit in front with the local temperance league, she can sit in the front seat. If Sampson gets fed up, he has excluded Mrs. S and there is an ouster. Now Mrs. S can demand rent from Sampson – a reasonable market value rent.
(2)	Conflict of interest in the cotenancy relationship. Mr. Sampson demands the right to build a boxing pavillion or else there’s an ouster. Mrs. S demands the right to pick walnuts every day or else there’s an ouster. But the walnut trees must be cut down in order to erect the pavilion.
•	Why not have a set of detailed rules – that the tenant in common must remit half of his profits to his co-tenants?
a.	Too many contingencies. There might be too many contingencies that would carve out exceptions to the rule – i.e. somebody might pay taxes while the other person doesn’t.
b.	Tragedy of the anti-commons. It might create a “tragedy of the anti-commons” – incentive to do nothing with the land.

B.	MARITAL INTERESTS
1.	The divorce revolution in the United States.
•	Pre 1970 requirement of allegation of fault. Before 1970, almost every state had a system of divorce that required an allegation of fault. In order to get a divorce, you had to allege that your spouse engaged in some form of fault – cruelty, abandonment, adultery. If you alleged and proved fault, then you could get a divorce.
(1)	System of separate property. Husband and wife had their own property, so a husband’s earnings were his, a wife’s earnings were hers. At divorce, the husband’s property (acquired by him) was taken by him and the wife’s property was taken by her. Most women didn’t work, so the vast bulk of property went to the husband at divorce.
(2)	Alimony. Alimony reflected the lifelong obligation of a husband to provide support for his wife. It also was a kind of implicit punishment for the wrongdoing of the spouse at fault. Alimony was overwhelmingly paid by husbands to wives. Only debt or remarriage stopped the obligation of alimony. But if the wife was at fault, she got nothing.
(3)	Problems with fault rule:
i.	Spouse not at fault must sue. If you committed a fault and the other person didn’t want the divorce, you couldn’t get it unless the other person sued.
ii.	Perjury. Divorce lawyers in the past used to have to commit perjury in order to get the divorce to go through. They would take pictures of the husband in a hotel room with the legal secretary, for example, and use those as evidence of adultery.
•	No-fault divorce. In 1970, CA adopted no-fault divorce and other states soon followed. No-fault divorce is characterized by three contrasting notions:
(1)	There’s no fault. Either party can say that the relationship has irreparably broken down and seek a divorce.
(2)	Little or no alimony. Both parties have equal earning power. There is limited alimony, though – one party pays alimony until the other spouse can retool him or herself and get out on the job market.
(3)	Equitable distribution of property. We divide property in a way similar to community property.
•	Difference between system of fault and no-fault divorce. In the 1950s and 1960s, women didn’t want a divorce because of the loss of status, wealth and security that divorce would entail. In the new system, enacted when feminist jurisprudence influenced the legislature, either party could walk away from the marriage. Equitable distribution in the no-fault system removes the incentive of the wealthier spouse to walk away from the marriage, and reduces the incentive for the poorer spouse to stay in the marriage.
•	Unintended consequences of divorce revolution. Lenore Weitzman writes about the unintended consequences of the divorce revolution, which mainly fell on men and women whose expectations were shaped by the previous regime – i.e. 1950s housewife who thought that she would be cared for by her husband throughout her life.
•	Return to the alimony regime in cases of dividing value of a degree: We find it hard to divide a degree that constitutes the majority of most families’ property. We basically give an amortization of this asset and we’re back in alimony – only now the alimony is measured by the career of the richer spouse, not by the life of the poorer spouse.
a.	Habendum clause in marriage vows. The K is not just that you’re getting property rights in your spouse’s career – you’re getting property rights in your spouse. If so, there shouldn’t be any problem dividing the career. You own that person.

2.	Equitable distribution of marital property vs. alimony.
•	Alimony. Alimony is something that the richer spouse must pay to the poorer spouse. The husband had a lifelong obligation to support his wife, and only death or remarriage ended that obligation, not divorce. If the wife engaged in fault, she wouldn’t get alimony.
•	Ideas of alimony in the new system:
a.	Custodial support for the children (distinct from child support)
b.	Rehabilitative alimony. Payment from the higher earning spouse to the lower earning spouse to let the lower earning spouse adjust from marriage and become self-supporting. Alimony was designed to support the non-working spouse until she could get on her feet and support herself.
c.	Impaired-earning alimony. Alimony was seen as compensation for the impaired earning abilities of one spouse that resulted from marriage. The question raised is how long alimony should be paid. Do you give a housewife enough support to earn a law degree? Do you give her enough support to get herself together and flip burgers at McDonald’s? It was typically closer to the latter.
d.	Reimbursement alimony. Because of decisions like In re Marriage of Graham, they developed reimbursement alimony. The spouse who sacrifices his or her career to help the other spouse should be reimbursed for those sacrifices.
•	Equitable distribution. The division of property comes from a completely different rationale than alimony, that marriage is like a family business. Everything the couple accumulates after marriages is divided in half. Reasons courts don’t do an accounting of the marriage, instead dividing it in half:
a.	Judicial economy. The court doesn’t want to hear days of testimony on who did what.
b.	Fairness. This rule overwhelmingly benefits people who decide to stay at home, much more than a rule that tries to value what they did.
•	Problem with equitable distribution when separate property and marital property merge. The real difficulty comes with property that is separate property but that gives rise economically to property that looks like marital property. If husband brings into the marriage a rental property owned before the marriage and uses it to purchase mutual funds, is that separate or marital property? Is it a conversion of separate property into marital property?
a.	Jurisdictions are split over this. Some say that if you can trace property acquired after marriage into separate property, then it is separate property.
•	Incentives for women to work. One of the legislature’s goals was to change the rules to incentivize women to look out for themselves.
a.	Rule formation: If we really don’t want to patronize poorer spouses, what rules will cause both spouses to look out for their own interests?
•	Alternative: If you have a rule that says title governs (i.e. no marital property), then for important assets husbands and wives would both insist on taking title as joint tenants or tenants in common.
a.	If you want the old style property regime you can have it. But we shouldn’t have a default rule that a lot of people will object to, and which doesn’t encourage women to look after their interests.
b.	Do away with the myth that marriages last forever. We have a set of rules that assumes marriage lasts forever. But the reality is that 50 percent of marriages will fail. Maybe instead of basing our rules on a mythology we should have rules that incentivize people to go in with their eyes open, knowing that it’s more likely than not that the marriage will fail.
•	System of marital property is probably a good thing, but it is not without its problems. The problem is that the rules are becoming more paternalistic toward women – it may be reinforcing the thing we are trying to avoid.
•	Community property. In a community property state, property acquired by one of the partners prior to marriage is defined as part of the marital property.

3.	In re Marriage of Graham (Colorado 1978).
•	Facts: Husband worked part-time most of the marriage and went to school full-time, earning his MBA. His wife worked full time to support him. They divorced just after he finished his MBA, and had no marital assets.
•	Issue: Was the MBA part of their marital property?
•	Holding: Degree not marital property. Refutation of the reasons they provide:
a.	No exchange value or transferable value on an open market. Contingent remainder also can’t be transferred, and yet if it were a contingent remainder in a trust we might subject it to distribution on the open market.
b.	It is personal to the holder. Poor reason.
c.	It terminates on the death of a holder and is not inheritable. The same is true of a life estate.
d.	It cannot be assigned, sold, transferred or pledged. The same is true of a life estate and joint tenancy.
e.	It is the product of many years of previous education, combined with diligence and hard work. The same is true of a restaurant.
•	O’Brien court’s view. O’Brien (NY), on the other hand, says that marital property is a fiction – it’s a method of getting an equitable distribution of property, but it isn’t property. It’s a heuristic device that we use on divorce.
•	Real reason court is reluctant to grant equitable distribution of an MBA: They’re worried about involuntary servitude to your ex-spouse.
a.	Gastineau v. Gastineau. Mark Gastineau had a K in 1988 for $47,000 a game, and after six games broke his K to be with his girlfriend, ending his professional career. The court held that he still owed his ex-wife half of his career value, including the portion of the K that he didn’t play out. The wife was given the home, and the husband was given the broken and worthless contract.
•	How do we value the degree?
a.	We can come up with a number that tells us exactly how much the degree is worth depending on where spouse will work – Cravath, Legal Aid, etc.
b.	Locking richer spouse into a career: The problem with estimation based on career path is that it locks a richer spouse into a career. One solution is giving the poorer spouse a continuing claim to a percentage of the richer spouse’s income.
•	Stock market hypo. H and W invest $2500 in dot.coms, and the stock value grows to $2 million. Under equitable distribution, each gets $1 million worth of stock.
a.	Reimbursement alimony. Instead of being stock, it’s a career at a great law firm. The husband’s career is worth $2 million. The investment in the degree is $50,000. Now, instead of them each getting $1 million, the poorer spouse will get $25,000. But if it were a stock, W would get the benefit of her luck or skill in getting that stock.
•	Todd v. Todd. The court says the spouse leaving the marriage is the equivalent of a silent officer withdrawing from a business. There are detailed, complicated accounting methods already in existence for partnership accounting that we can bring to bear on marriage. We can solve accounting objections through a detailed body of accounting rules – GAAP (Generally Agreed-upon Accounting Principles).
•	How cases like this would turn out if the couple had other assets. The court would value the degree as though it were tangible property.
a.	If the husband’s assets are $100,000 (the law license/degree) and the wife’s assets are $10,000, then on equitable distribution W can walk away with $10,000 but she can’t reach the value of the degree.
b.	On the other hand, if H has a degree worth $100,000, W has $10,000 in the bank, and H has $90,000 worth of mutual funds, the courts have no problem saying that the total assets are $200,000 – W gets the $90,000 in mutual funds and the $10,000 in the bank. Thus it is split in half – all of the non-degree assets go to the wife.
c.	Discrimination within the distribution system: It discriminates against a class of people who have degrees and no other property, but most courts have no trouble splitting it up when they do have “tangible” assets. When they have other assets, all the courts will treat it as an asset. What’s interesting is that even if a jurisdiction won’t distribute the degree as marital property, they will distribute other property in lieu of the degree. They accept the idea that implicitly the degree is marital property.

4.	Uniform Probate Code.
•	Background: The Uniform Probate Code is basically like the Uniform Commercial Code – it’s an attempt by the legal profession to create a formal statute that governs wills, intestacies, trusts, etc.
•	UPC approach: The surviving spouse can upset the will to the extent necessary to get the spouse’s elective share, based on the length of the marriage. Now, instead of just saying ½, 1/3 or whatever, there is a long and complicated schedule based on length of marriage, up to 15 years of marriage.
a.	Problems: There may be a couple that has been married for 15 years but has no marital property outside of the law practice/law degree, while another couple may be married for a short time and have more property.

5.	Good will as marital property.
•	Background on good will. Good will is an intangible value of a business, which is its relationship with its customers and suppliers, and reputation in the community.
•	Calculating good will: Good will is easily calculable through accounting. Once you add up the market capitalization of a corporation or business and then subtract the net asset value, the rest is good will. In other words, take total value of the assets and subtract all the liabilities. One company may use the net assets to generate more profits than another.
•	Todd v. Todd (California): The husband had a law practice, the wife had supported him, and she sued to get a portion of the law practice as marital property. The court said that good will was properly included in the valuation of the practice. As a CA case, they were trying to determine whether the good will was community property.
•	A court can’t divide a professional practice. This is because a professional practice is a partnership, and every member has to be a licensed professional. Another kind of discrimination is that the divorce structure favors professionals – you cannot divide a professional practice and give half to the unlicensed spouse.
a.	Potential solution: put the partnership interests in a constructive trust for the poorer spouse.

6.	O’Brien v. O’Brien (NY). Can measure licensed career as marital property.
•	Facts: The wife had sacrificed her career to put her husband through medical school. Their only asset was the husband’s newly acquired license to practice medicine.
•	Holding: The court decided that that was marital property, subject to equitable distribution.
•	Myer’s concurring opinion. Raises the issue that Dr. O’Brien served his wife with divorce papers two weeks after he got his medical license (equitable issue).
•	Dissent. Valuing O’Brien’s career locks him into a specific career path – i.e. not public interest medicine. The dissent says that the court should revise the distributive award to conform to the fact.

7.	Elkus v. Elkus (NY 1991). Can measure non-licensed career/celebrity status as marital property.
•	Facts: Wife was a famous opera singer whose career took off during the marriage. Her husband critiqued her performances, served as her voice coach, sacrificed his own career to devote himself to wife’s career. Husband contends that he is entitled to equitable distribution of her celebrity status as marital property.
•	Issue: Whether celebrity status is marital property.
•	Holding: Celebrity status and other non-licensed careers can be treated as marital property

8.	Marvin v. Marvin (California 1976). Non-marital contract should be valid unless it is for meretricious sexual services. Also, in non-marital relationships, implied K claims may be valid.
•	Facts: Lee Marvin moved in with his girlfriend Michelle and they were never married. Michelle brought an action asking for division of property. All of the property that Lee earned had been taken in his name. Michelle brings a claim that they had an express K that they would hold themselves out as husband and wife. The question is whether Lee Marvin should win on the pleadings.
•	Rules:
(1)	Courts should enforce non-marital contracts between partners to the extent that the contracts are not based on meretricious sexual services. For example, the partners can create a cohesive economic unit. The fact that they are cohabiting doesn’t disable them from entering into a K to share their property and wages.
(2)	Courts can find implied contracts in these situations, including quantum meruit and other remedies. The court should inquire into the conduct of the parties to see whether it creates an implied K.
a.	Policy issues. If a coupled wanted to live together and had no intention of sharing property, they would need an express K not to behave like husband and wife and not to share property. The question is what the default K should be.

VI.	TRADITION, TENSION AND CHANGE IN LANDLORD-TENANT LAW

A.	The Leasehold Estate

1.	Economic difference between buying and renting a house.
•	Apparent difference: Seemingly, when you buy a house your net worth increases, and when you rent a house, it decreases.
•	Long term leases can also increase renter’s net worth. For example, you enter into a long term lease for $150 a month, and the value increases to $1500 or $2000 a month, your wealth has also increased even though your lease will expire at some point.
•	Money that goes into buying a house can be invested. Does real estate value grow faster than a mutual fund? Maybe you’re better off negotiating for a 20 or 30 year lease and putting your money into the stock market.

2.	Different kinds of leasehold estates:
(1)	Tenancy for years. It doesn’t have to be for a year – a tenancy for six months is a tenancy for years. All it means is that it’s a tenancy that can be fixed by calendar dates.
(2)	Periodic tenancy. Most common kind of residential tenancy. It’s a lease for some period of fixed duration that continues for succeeding periods until either the landlord or tenant gives notice of termination.
a.	Periodic tenancy gives landlord a certain amount of security. Tenant can’t move out in the middle of the year. Also, there is a certain kind of rhythm to the real estate market (i.e. seasonal housing in college towns). One of the purposes of a periodic tenancy is to make sure that the tenants move out according to the rhythm of the real estate market.
(3)	Tenancy at will. No fixed period; endures for as long as tenant and landlord so desire. Either party can terminate it at will. More of a metaphysical possibility than a practical reality.
(4)	Tenancy at sufferance. Arises when a tenant holds over. A holdover tenant becomes a tenant at sufferance after termination of the tenancy. The landlord can consent to the holdover, or the landlord can treat the tenant as a trespasser and eject him from the premises.
a.	Common law limit to the rule: If the initial term was for a year or more, the new periodic tenancy will not be for more than a year.

3.	Rent as covering a full term. Your rent is not $1,000 a month, but rather $12,000 a year payable in monthly installments. You receive a conveyance of a leasehold estate that lasts for a year. The $1,000 a month is simply an installment K.

4.	Deeds and Mortgages vs. Leases.
Deed and mortgage (from bank)	Lease	
Borrower gets possession	Lessee gets possession	
Lender has title	Landlord has title	
Installment payments to bank	Installments to landlord	

5.	Crechale & Polles v. Smith (Mississippi 1974). Holdover tenants.
•	Facts: There was a commercial lease for five years from 1964 to 1969. It was about to expire. In 1969 the tenant wanted to move to new premises, but the premises weren’t ready yet.
•	Issue: What happens if T stays beyond termination of tenancy?
•	Holding:
(1)	Landlord faced with holdover tenant can choose to 1) treat him as a trespasser and evict him, or 2) treat him as a tenant and extend the lease.
(2)	In most jurisdictions, lease renewal will create a new term for the length of the prior term – i.e. if you had a six-month term, it creates a new six-month term. However, in all jurisdictions lease renewal cannot be for more than a one-year term.
(3)	The choice is binding; court takes money as choice to treat him as tenant and extend lease
(4)	It is presumed that you accept the terms that the other party offers. That is why Crecheale refuses a check that says “Final payment.”
•	Reasons L might prefer vacant building to tenant holding over on month to month basis:
(1)	Rising rents. Rents may have gone up; the landlord may want to charge a higher rent.
(2)	Security and continuity. He’s trying to lock in a steady stream of income, rather than the insecurity of a month to month lease.
(3)	Security and continuity example. Landlord gets $7,000 a year from an apartment in his building. If the prevailing interest rate for commercial loans is 7%, we can ask what would be the principal amount of a bond that pays 7% a year. I am indifferent between owning a $100,000 bond that pays 7 percent a year, and these premises that pay $7,000 per year. If the landlord misses just one month rent, he will get $6,417 profit instead of $7,000 profit. The bond you would have to get to be equivalent of $6,417 is $91,667. Thus, the value to the landlord has decreased by $8,333. Therefore, landlords are completely obsessed with the certainty of the stream of income.
•	Double rent. Applied in some jurisdictions.
a.	Provides incentive to get the T out. The holdover of a month to month lease always gets exactly what he wants. That suggests we need an incentive to get the tenant out. Is double rent the best way?
b.	Problem with double rent. It looks like an unfair penalty. Many people can’t afford to pay it, especially in a jurisdiction like NY.
c.	Alternative: Treating it as a new term for a year disincentivizes the T from holding over because T will take on a serious financial obligation.
(1)	Solves problems of double rent. L gets the money, and T can sublease if he really doesn’t want to live there for the entire year.
(2)	Reasonable rent. In some jurisdictions, the landlord can charge a reasonable rent (i.e. if the current rent is now below market value, they can make the holdover tenant lease for a year at the market value).
(3)	Reasons T might not hold over if he has option of subleasing:
i.	Depreciation of value in property. In a college town, a tenant may be willing to pay more for a lease that begins at the beginning of the school year and runs until the end of the school year than one that begins in October.
ii.	Tenant is guarantor for the subtenant: He is liable for subtenant’s nonpayment.
(a)	May not find someone who wants to sublease for whole year.
(b)	He is on the hook for the whole year the subtenant is there.

6.	Hannan v. Dusch (Virginia 1930). Delivery of possession.
•	Facts: Hannan is P and Dusch is D. P showed up on Jan 1 to take possession of land that D had leased to him, but another tenant was holding over.
•	Issue: Whether a landlord, who without any express covenant to deliver the possession, is required under the law to oust trespassers and wrongdoers so as to have it open for entry by the tenant at the beginning of the term.
•	Holding: Court adopts American rule. There is no implied covenant for actual possession, because “the law helps those who help themselves.”
•	Court says this case is not about ensuring the tenant the legal right of possession. The difference is that, under legal possession, the tenant can sue for ejectment and exercise all the rights that the landlord could exercise, while actual possession is being able to live there. If the case had been about the legal right of possession, it would have turned out the other way.
•	If trespasser disturbs T after T takes possession: If a trespasser disturbs T after he takes possession, he has to deal with that himself. You hold the possessory estate and the conveyance, so the landlord has nothing to do with it.
•	Rationale for L having implied covenant to put T in possession, as per the English rule:
(1)	T wouldn’t want to contract into a lawsuit to prevent the holdover.
(2)	More within landlord’s knowledge and ability to evict the holdover. L is in a better position to monitor what the previous tenant does.

7.	Ernst v. Conditt (Tennessee 1964). Subleases vs. assignments.
•	Facts: Ernst leased to Rogers, R leased to Conditt. Unclear if it is a sublease or assignment; makes a difference in terms of who is responsible for non-payment.
•	Issue: Is the conveyance a sublease or an assignment? Doctrinally, if it’s a sublease, the sublessor is responsible for the rent. If it’s an assignment, the sublessee is responsible directly to the head lessor.
•	Holding: Despite the language that indicates “sublease”, court finds an 	assignment because of the intention of the parties. Court adopts the modern rule by examining intention. Old rule is more formalistic.
a.	Alternative way to decide the case. The judge could say that all he cared about is whether Conditt paid Rogers. If Conditt paid Rogers, he would not be liable. If he didn’t pay Rogers, he would be liable. Conditt shouldn’t have to pay double rent as a matter of equity.
•	Difference between sublease and assignment. Since assignment is for the remainder of the term of the lease, assignee essentially replaces first lessee, and directly pays L. Someone else is being substituted to perform all the duties of tenants. Thus, T cannot assign without permission of L. In subleases, for the other hand, there is no privity of contract between L and sublessee – sublessee pays directly to sublessor and has no contact with head lessor. However, at equity many jurisdictions say that even though the sublessee is not in privity of K with the head tenant, the sublessee is in privity of estate with the landlord and therefore is required to perform covenants that touch and concern the land. That means the landlord can’t go after the sublessee for rent, but can go after the sublessee for destroying the premises.
a.	In most jurisdictions, if lessee 1 assigns a lease, lessee 1 remains liable for all conditions of the original lease unless the landlord releases him. If lessee 1 remains obligated, why don’t we allow assignment without the permission of the landlord?
b.	Separating lease interest two parts. Lease can be separated into two parts:
(1)	Assignment of rights
(2)	Delegation of duties.
(3)	Example of landlord assigning a right. L has a debt to the bank and wants T to send a check to the bank. L has assigned the right to the income to the bank.
•	Hypo: What if it said in the lease that the withholding of sublease could be reasonable or unreasonable? NY real property law says that tenants have the right to sublease, and approval by the landlord cannot be unreasonably withheld. We make public policy decisions all the time that override private transactions.
•	Common law rule of sublease vs. assignment: Common law distinction is that an assignment purports to transfer the lessee’s estate for the entire remainder of his term, but if it is even one day less it is a sublease – Jaber v. Miller. Many jurisdictions use the common law formalistic approach.
•	Modern rule of sublease vs. assignment: Modern rule is supposed to ascertain the intentions of the party. But if you use that rule, it seems to be a sublease that says that Rogers is liable. Court gets around this because course of performance/parol evidence is also important: How long did Conditt pay? Who did he pay?

8.	Conceptualizing assignments.
•	Under original K, promisor or obligor carries out a promise on behalf of the promisee or obligee. If we separate assignment from obligation, it’s easy to understand assignment.
•	Example: Jeremy may be obligated to pay Venable money, and Venable may say, “Pay Jocelyn instead.” Assignments of rights are simpler than delegations of duties. Jeremy has promised payment of money or delivery of goods, which Venable assigns to Jocelyn. Jocelyn thus becomes the assignee of the promise. Now the promisor performs the duty for the assignee as opposed to the promisee.
•	Circumstances where we would want the promisor’s permission to delegate duty: It may be medical insurance. Venable may be a healthy, young person. Without insurer’s permission, he couldn’t assign the medical obligation to a 90 year old diabetic with a health problem.
a.	We also have an original obligor or promisor who fulfills a duty to a promisee or an obligee. The promisor now wants to delegate the duty to a delegate. We want the promisee to be able to consent or not consent to the delegation of the duty, depending upon the ability of the delegate to fulfill the duty.
•	As long as the promisor will pay the rent, why should the landlord care about who has the right of possession?
a.	Other covenants exist other than covenant to pay rent. The tenant also has a covenant not to destroy the apartment. But if the original lessee can obligate himself to pay rent on the part of the assignee, he can obligate himself not to allow the subtenants to wreck the apartment.
b.	Commercial reasons to turn down assignee. In the commercial context, for example, there may be a particular set of businesses landlord wants to promote.

9.	Insurance. Presumably, landlords build into their rental prices all the costs, including cost of tenants not complying. The bad part is that whether these insurance costs are placed on landlords or tenants, they tend to raise the cost of renting.

10.	Kendall v. Ernest Pestana (California 1985).
•	Facts: Kendall is sublessee of lease for which P holds reversionary interest. Lease says “no assignment without prior consent of sublessor.” P unreasonably refuses to consent to assignment
•	Holding: Court adopts Restatement position, that refusal of assignment must be a commercially reasonable objection.
(1)	This is the minority rule, still gaining ground.
•	Old rule: Where a lease contained an approval clause, the lessor could arbitrarily refuse an assignment or a sublease.
•	Attempting to use the approval clause to get the benefit from the increase in value of the premises is not a commercially reasonable objection.
a.	Can’t bargain out of the rule: Under the new rule, even if the clause says that L has a right to consent, the law overrides the provision if the landlord intends the provision to say that the landlord has the right to withhold consent unreasonably.
b.	Rationales:
(1)	Original lessee remaining liable protects lessor’s interests: The Restatement and minority jurisdictions say that the lessor’s interests are protected by the fact that the original lessee remains liable to the lessor as a surety even if the lessor consents to the assignment.
(2)	Modern K principles: The adoption of modern contract principles justify the new rule – a discretionary clause must be exercised in good faith and in accordance with fair dealing.
•	Commercially reasonable reasons that residential L would object to a T. The main commercially reasonable reason is inability to pay rent, or probable failure to pay rent.
a.	Discrimination. For public policy reasons, there are certain bases that a landlord cannot use to reject a tenant – ethnicity, gender, etc. Many states say that you cannot reject a tenant because he or she has children. It is basically a subsidy for families – if children put more wear and tear on the house, then single people are paying more money.

11.	Berg v. Wiley (Minnesota 1978). Self-help for landlords.
•	Facts: L objected to T’s continued remodeling, operating restaurant in a state of disrepair, and alleged health code violations. L entered premises in T’s absence and changed locks.
•	Holding: Court adopts modern rule which says that any lock-out is wrongful as a matter of law
•	Old rule. In the late 19th and early 20th century, L would simply put T out on the street for non-payment of rent. In fact, the common law endorsed that. The requirements were that 1) the self-help had to be peaceable and 2) L was legally entitled to possession.
•	Policy reasons for new rule:
(1)	Violence concerns inhere in any self-help situation (there is no such thing as a “peaceful” entry, considering that housing is a basic necessity for every T).
(2)	Summary proceedings are an effective alternative. They are fast enough that L won’t be unduly inconvenienced by the lack of self-help. A recent empirical study says that the average length of time between a landlord bringing an action in summary procedure and the eviction of a tenant is 116 days.
(3)	Deprives tenants of due process of law. Nobody should be the judge in their own case, which is what lock-out does. Although, tenants get to do the same thing by refusing to pay rent, it is more serious when a L is the judge in his own case because if a T is locked out of his apartment, he loses a basic necessity and becomes homeless.
•	T’s remedy if wrongfully put out under old rule: T evicted wrongfully could sue under wrongful eviction. Practically speaking, tenants didn’t have the money and typically housing lawyers didn’t represent tenants at the time.
•	Reasons to return to old rule.
(1)	Summary proceedings do not work.
(2)	Must allow landlords to bring pressure to bear on T: Self-help accomplishes that, often resulting not in a T being evicted but in T paying rent.
(3)	Hurts small landlords. If small scale landlords miss rent, they won’t be able to pay their mortgages. They will go into default, leaving tenants with a building with no services.
(4)	Cost-spreading. If the landlords don’t default, they will charge other tenants – thus making responsible tenants subsidize irresponsible tenants (usually poor tenants subsidizing other small tenants).
(5)	Tenants are more sophisticated now: The vast majority of people are tenants in NY, even upper middle-class people.
(6)	Explosion of legal services for tenants: Not difficult to get landlord/tenant lawyer if you’re a tenant.
•	Depositing rent with court. Many jurisdictions adopted a counter-reform saying that if you’re going to withhold rent, you now have to deposit it with the court and the court will decide. It was a way of countering what was an excessively pro-tenant approach.
•	Economies of scale. Larger landlords can pay a hefty retainer to a landlord/tenant firm to constantly be on call. Smaller landlords cannot afford it, so they are in greater danger of non-payment of rent. Do we need different rules for different landlords or different kinds of tenants? Perhaps we need to be aware that we’re making rules that apply to different segments of landlords and tenants.
a.	Differing sets of rules. Rental properties with four units or less have a different set of rules.

12.	Sommer v. Kridel (NJ 1977). Landlord’s duty to mitigate.
•	Facts. Two cases with similar issues are being adjudicated together:
a.	Sommer. T changes plans and doesn’t move into apartment which he had a two-year lease on. Third party tried to rent the apartment and landlord did not let him. Landlord did not show the apartment to anybody until August 1973, and rented it out beginning September 1, 1973.
b.	Perosio. Similar facts. Two year term running until January 31, 1975. D took possession and occupied apartment until February 1974. The trial court ruled for the landlord.
•	Old common law rule. It would be anomalous for the L to concern himself with T’s property, so L had no duty to mitigate. Court separated conveyances from covenants. For example, when landlords breached covenants (i.e. covenant to keep the apartment in good repair), courts typically said that this didn’t allow T to abandon possession, because T had received a conveyance.
a.	Example: You moved into an apartment for a two-year leasehold. The L kept the apartment in a horrific state of disrepair. The older courts would say that the L was liable for damages, but you could not leave the apartment or refuse to pay rent.
b.	Reasons for common law rule:
(1)	Legal formalism.
(a)	Extreme example of legal formalism: Basing landlord/tenant law on rural agricultural leases. When NYC began to build multi-tenant buildings, there were occasionally fires. If the building burned down, T was still obligated to pay rent in a building that didn’t exist because the leasehold conveyed land. That was the legal formalistic explanation.
(2)	Class legislation. The legislatures and courts favored landlords.
c.	Cannot reconcile old common law rule with the idea that L has to mitigate damages.
•	New rule: L has a duty to mitigate damages by trying to relet the premises. The landlord has the burden of proving that he used reasonable diligence in trying to relet.
a.	Policy reasons for new rule:
(1)	Limit damages – the policy behind this is economic efficiency. There is no point in having the tenant’s money go to waste, when the apartment could be put to a more productive use by renting out to somebody else.
(2)	Recognize that leases are contractual relationships. This is in line with the move to recognize that leases convey a bundle of goods and services.
•	Lost volume problem. At any given time, a percentage of apartments are vacant. In a tight market, the vacancy rate can be 5%. If a landlord has 5 vacant apartments, as he finds new tenants, others will move out. If a T leaves before lease expires and we put on L the obligation to treat this newly vacant apartment as his vacant stock, we’ve increased the number of vacant apartments to six.
a.	Where does newly vacated apartment go in the queue? If landlord has a duty to mitigate damages, aren’t we pushing in a new vacant apartment at the head of the queue? Or should we say that the T who abandons creates a new vacant apartment at the back of the queue?
•	Relationship between L’s duty to mitigate and T’s right to assignment. What is the relationship between duty to mitigate and right to refuse unreasonably?
a.	Example: T has to break the lease, and asks if he can have an assignee. L says he has the right to withhold consent unreasonably, so withholds consent to a sublease or assignment. The duty to mitigate damages strengthens T’s right to sublease, weakening L’s ability to unreasonably refuse subleases or assignments.
•	The L has three choices when T offers to terminate the lease:
(1)	Accept termination and retake the premises. Cordial L/T relation.
(2)	Can do nothing, and hold T to T’s duty to pay rent – treat the one year lease as conveyance of a leasehold estate for one year. This has been modified by L’s duty to mitigate.
(3)	Can reenter and relet the premises for T’s account – charge T for the difference between T’s rent and rent received from the replacement T.
a.	Example. L decides to hold T to the lease but mitigate by leasing to a new T. The original T’s rent is $500 per month. In the rent to get a new T, he leases the premises for $400 per month. Assuming he uses his best powers, T is liable for damages. On the other hand, if the $400 per month is a silly rental (L didn’t try very hard, just grabbed the first person and didn’t negotiate), then the L didn’t really mitigate because he has to try to get the best deal. If L gets $600 a month, he gets no damages.
b.	Courts don’t second-guess the deals that parties enter into. If L charges T $700 a month, which is a good deal for L (it’s really worth $500), court still awards L the difference between $700 and the new rental price.
•	Timing question. L’s calculate damages over the whole time period of the new leasehold, not at the moment he brings in the new T. If L gets a better deal that makes up for the one month vacancy, T doesn’t owe him for the one month vacancy. If there’s a one month vacancy and the new T pays the same as old T thereafter, old T will owe him damages.
•	L may have to pay T. If L gets a particularly good deal from new T, most commentators suggest L should send a check to the new T. Thus, L has to be careful with the remedy that he chooses.
•	Anticipatory damages. L can ask for anticipatory damages in court rather than wait until the lease term ends to go into court.

13.	Law of supply and demand. Economists use two axes – one for quantity and one for price.

            P	|
	|
	|
	|
	|___________________________
					Q
•	Explanation of the curves.
a.	Demand decreases as price increases. In any market, there is a downward sloping demand curve. The lower the price of the good, the more of the good that is demanded.
b.	Supply increases as price increases. If the price of an apartment goes up from $500 to $600, the number of units supplied will rise. If the price is low, the number of units supplied will decrease.
c.	Intersection key. In most markets, the intersection of supply and demand tells us what the price will be.
•	Effect of improvements. Adding pipes was an expense, making apartments a little more expensive. But if the apartments are made a little more expensive, it shifts the supply curve to the left. Thus, the result of improving the quality of housing by statute is to raise the price and reduce the quantity available on the market.
•	Issue: Are regulations actually good for low income tenants?
a.	Economist’s view. Economists say that L is going to pass on the cost of improvements to the tenants. The tenants will pay more per month and fewer tenants can afford apartments. This implied warranty of habitability helps upper middle class tenants because poorer tenants can’t afford the housing mandated by the housing code. Poor people could be priced out of the market and become homeless.
b.	Caused crisis in South Bronx. Landlords abandoned their buildings. If the landlord is amoral, he torches the building and collects insurance. Prices were out of whack in the South Bronx, and thousands of units burned down every year due to arson.

14.	Revolution in landlord/tenant law.
•	Historical situation. Historically, the background rule for leasing property was caveat emptor. If the T wanted any warranty, he would have to obtain an express covenant. However, there were some problems with express covenants:
(1)	Express covenants of repair, suitability or habitability were considered independent of the covenant to pay rent. Even if L didn’t keep the place in good repair, tenant still had to pay rent. The tenant could pay to make the repairs and then sue the landlord for reimbursement. Many of the tenants of the late 19th/early 20th century, however, didn’t have the resources to sue.
(2)	Landlords had more bargaining power than tenants. Thus, they never put express covenants in their leases.
(3)	Urbanization made these rules seem obsolete. Rules that might work in an agricultural setting did not apply to the new urbanization. Some of the first changes in landlord/tenant law came in furnished apartments (seen as a package of goods and services) and soon spread throughout leasehold estates.
•	Upgrading in tenement conditions. The first big change in landlord/tenant law, upgrading of terrible tenement conditions, began around the turn of the century. This was largely through state regulation of tenements.
•	Tenant movements. The changes in the 1960s and 1970s have more to do with changing the relationship between landlord and tenant rather than imposing regulations on landlords. There was a movement to use the law to increase the quality of housing throughout the rental market.
•	Judicial attempts to increase quality of housing. Courts tried to address this problem in several different ways before they addressed the implied warranty of habitability.
(1)	Breach of covenant of quiet enjoyment/constructive eviction. Originally this was a covenant about the legal status of the premises, not its physical status, but courts began to expand the doctrine and hold that T could be excused from paying rent and was justified in vacating the premises if L committed certain acts that rendered the premises uninhabitable.
a.	Example. For example, if the L broke out the windows of the premises in the dead of winter, his affirmative acts constituted constructive eviction relieving T of the obligation to pay rent and allowing him to vacate the premises.
b.	Omissions. Omissions also came to be seen as constructive eviction – for example, allowing rodent infestation.
c.	Requirements. These acts had to be continuous, and T had to leave within a reasonable period.
d.	Limitations on constructive eviction.
i.	Didn’t address larger problems. It didn’t address the larger problem of improving quality and reducing cost of housing.
ii.	Express covenants limited application. Constructive eviction was based on express covenants, and there was uncertainty whether T could raise the defense of constructive eviction in a jurisdiction that had implied covenants of quiet enjoyment. In many jurisdictions, T had to have express covenant of quiet enjoyment.
iii.	High risk to T. T who asserted constructive eviction would have to find a new place, which wasn’t necessarily possible.
(2)	Illegal lease. Various formulations existed for declaring a lease illegal if it was for a substandard apartment or premises. It simply excuses tenants from paying rent.
(3)	Implied warranty of habitability.
a.	Only works as policy tool by stripping summary proceedings of their summary nature. It was impossible in some jurisdictions to raise the defense of constructive eviction in a summary proceeding. The whole point of summary proceedings is that they’re summary. If the implied warranty of habitability will work better than constructive eviction, we have to let T raise as a defense the breach of implied warranty of habitability. Implied warranty of habitability won’t work as a policy tool unless it can be raised in summary proceedings, which means they’re no longer summary.
(4)	Turning leases into long term leases. If we want any of these remedies to work, we have to say the L can’t evict, not even a month to month T – otherwise, if a month to month T tries to enforce his rights, L can say the T is disruptive and deny his lease the next month. If we say L can’t evict, it turns all the leases into long term leases.

15.	Reste Realty Corp. v. Cooper (NJ 1969). Constructive eviction.
•	Facts: Premises used for personnel training and meetings; drainage problem causes water leaks in basement. L ignored complaints; P gave notice, and receivedno response, so moved out
•	Rule: Any act or omission of the landlord or of anyone who acts under authority or legal right from the landlord, or of someone having superior title to that of the L, which 1) renders the premises substantially unsuitable for the purpose for which they are leased, or 2) which seriously interferes with the beneficial enjoyment of the premises, is a breach of the covenant of quiet enjoyment and constitutes a constructive eviction of the T.
•	Old common law rule: Even if L had a covenant to repair, tenants were not excused from paying rent no matter how bad the apartment became. If L breached the covenant to repair, that simply gave T a claim for damages. He couldn’t leave the premises.
•	Policy questions: Should poor people be allowed to rent substandard apartments? Should you be able to begin renting a substandard apartment for a very cheap amount, then take L into court and under the implied warranty of habitability demand that he bring the housing up to code?
•	What qualifies as constructive eviction? The interference has to be so severe that it actually conflicts with the purpose for which the apartment was rented. Being in a crime-ridden neighborhood would not rise to the level of constructive eviction. The prostitution cases deal with L allowing prostitution in the premises, not simply the existence of prostitution in the neighborhood.
•	Fraud/misrepresentation elements. L argued that T had entered into a second lease knowing that there was flood damage. T knew that there was flooding, but the court says that there were representations by the agents of L that repairs would be made.

16.	Housing codes.
•	History. First housing code adopted by a legislature was in NY. It imposed obligations on L to keep premises to a certain standard – watertight roofs, adequate chimneys. In the late 1800s, states and municipalities passed model housing codes covering four areas:
(1)	Structures. Integrity of roofs, floor, walls, etc.
(2)	Facilities. Sinks, stoves, fixtures.
(3)	Services. Heat, hot and cold water, sewage, refuse removal, a certain amount of repairs.
(4)	Occupancy standards. Limit the number of people per room or dwelling that L can rent to.
a.	Is it fair to big families to say that you need a certain number of rooms per family members? For many working families, two or three kids in a room is not unusual.
•	Federal government requiring housing codes. By 1954, only 54 housing codes existed across the country. When the federal government starting making aid available, they conditioned it upon adoption of housing codes. The problem was that the codes were adopted but not enforced.
•	System of “private attorneys general.” Courts and legislatures wanted to create a system of private attorneys general – tenants enforcing the housing code. NY let tenants withhold rent if L had serious housing code violations.

17.	Javins v. First National Realty Corp. (D.C. Cir. 1970). Implied warranty of habitability – housing code is a starting point, but not determinative.
•	Facts: Tenants admitted they had not paid rent for April, alleging numerous violations of housing regulations. Implied warranty of habitability in this jurisdiction is measured by the housing code.
•	Issue: Whether housing code violations that occurred after tenants moved in justify T withholding rent.
•	Rule: Court adopts implied warranty of habitability; on remand finder of fact must establish that the violations existed during the period for which rent was withheld, and what portion of the rent should be withheld
•	Policy reasons for new rule.
(1)	Old rule no longer justified by its own assumptions. Old rule was based on tenant as farmer jack of all trades. Tenants are no longer jacks-of-all-trades. Also, people are no longer interested in leasing a farm (the land) – they want a place to stay. Also, in a rural lease the lessee had access to all of the structure that needed repair, while in the modern context the T cannot carry out repairs on plumbing or electricity.
(2)	Product liability rules dictate old rule should be discarded.
(3)	Modern housing markets can’t justify the rules. There is inequality in bargaining power. Little tenant leverage – discrimination, standardized form leases, L’s place tenants in take-it-or-leave-it situations. Shortage of adequate housing.
(4)	Externalities argument: Poor housing detrimental to the whole of society. Makes disease more likely to spread and other deleterious effects.

18.	Hilder v. St Peter (Vermont 1984). Implied warranty of habitability – housing code is determinative.
•	Facts: Tenant sues for reimbursement for rent paid on premises with tons of defects which landlord promised to fix and never did, so tenant ended up paying for repairs herself
•	Holding: Landlord breached warranty of habitability; court adopts the implied warranty of habitability and reverses doctrine of caveat lessee
•	Difference between Javins and Hilder. In Hilder, implied warranty of habitability is not measured by the housing code – the courts can look to the housing code, but it is only a starting point. In Hilder, the housing code is determinative.
•	T cannot waive implied warranty of habitability: Otherwise landlords will eventually contract out of the warranty of habitability for every T.
a.	It may not be the case that pre-printed leases mean L has more bargaining power. L and T may actually bargain over the price. The reason lease covenants are the same is because the market has created a standard package. Maybe all the standardization is channeled into the covenants, and the variability into price.
•	Remedies available to T for breach of implied warranty of habitability:
(1)	Can stop paying rent. Withholding rent may make tenants the judge in their own cases.
(2)	Can just move out: Use breach of implied warranty as a defense to L’s claim for rent.
(3)	Do the repairs yourself and bill the L.
(4)	T can bring a suit for damages. The measure of damages is the rent as reserved under the lease minus the fair market value.
a.	Something is going wrong in the market so that these substandard apartments are overpriced. People don’t have a choice and are moving into bad apartments.
b.	Measure of damages is based on the notion that what L is charging is what’s warranted, but the property is worth less than that. For example, if I’m paying $700 a month, that is the value of apartment as warranted. I am overpaying, though, which entitles me to damages. If the fair market value is $500 a month, the damages are $200 a month.
•	Explanation of apartments being overpriced.
(1)	Supply curve may be vertical in places like Manhattan – no matter how much we offer landlords, there won’t be any new entry into the market. Because housing is limited by the amount of land, landlords make super profits. In the 1960s and 1970s, that fact may have been in the minds of most judges. Hard to create new housing but easy to destroy old housing – see Jill Jones.
(2)	Landlords communicate with each other to make sure their rents don’t go too low, and the industry recommends prices that they should charge
(3)	Landlords utilize managing companies that sent higher rents than apartments without managing companies
(4)	Tenants need housing. It’s a necessity, which means that tenants’ movements are likely to have less bargaining power than landlords.
(5)	Tenants aren’t able to communicate to the same degree as landlords
•	Ways the quality of housing will be improved:
(1)	Private attorney general theory. Tenants would force the value up because L will either be incentivized to fix up the apartment or live with the reduction in rent.
(2)	Punitive damages. They are rarely given. There is a willful and wanton standard for providing them.
(3)	T can fix the apartment on his own.
(4)	These remedies let whoever can make the repairs more cheaply do it. The large-scale L has his handyman on staff and extra fixtures on the premises. But if the L is a little old lady in central Brooklyn who would have to hire a plumber, then the T can do it.

19.	Putnam v. Stout (NY 1976). Tort damages against L when T or T’s guests are injured.
•	Facts: P’s shoe got caught in a hole and she fell on the premises of Grand Union (tenant). Landlord was Steigler, who died, and is represented by his executors. Jury found for P, splitting damages between Grand Union and Steigler.
•	Issue: Whether L is liable to Mrs. Putnam in tort damages.
•	Traditional rule. In an ordinary case, if L breaches covenant to repair the damages are decline in the value of the leasehold.
•	New rule:
(1)	Liable to 1) Lessee, OR 2) People there with consent of lessee or sublessee, if
(a)	the lessor, as such, has contracted by a covenant to keep the land in repair, and
(b)	the disrepair creates an unreasonable risk to persons upon the land which the performance of the lessor’s agreement would have prevented, and
(c)	the lessor fails to exercise reasonable care to perform his contract – breach must be negligent.
•	Policy reasons behind new rule:
(1)	Make L take into account true risk – take appropriate level of care to avoid injury
(2)	Fully compensate T
(3)	L is better risk-bearer. He is better situated to make repairs and obtain insurance.
•	Background rules. Prosser says the lessor becomes for the time being the owner and occupier, subject to all the liabilities of one in possession. In the absence of agreement to the contrary, the lessor surrenders possession and control and has no right to enter without agreement of the lessee. It is the general rule that the lessor is under no obligation to anybody to keep the premises in repair, because they don’t have control.
a.	Exceptions being carved out. The common law had begun to carve out exceptions until the 1960s and 1970s, when the basic regime was overturned.
b.	Some exceptions.
(1)	L could be liable for accidents caused by defects in the common areas (not really an exception because the common areas aren’t part of the leasehold).
(2)	L isn’t liable for latent defects in the premises, but a lessor, just like a seller of land, is always obligated to disclose to the lessee concealed dangerous conditions. Concealing dangerous conditions is like fraud.
(3)	Defects in land leased for admission to the public – i.e. if he leased a baseball stadium or amusement park, L could be liable.
(4)	L made repairs but did so negligently. If L attempted to make repairs and someone was injured, the injured person could maintain a cause of action. One example is L making repairs but not finishing them. Another example is L putting cardboard over a hole in the floor.
(5)	Most important exception is if lessor agreed to covenant to repair in the lease, in some jurisdictions landlords could be held liable for injuries arising from the breach. But there were two problems.
(a)	L was only liable for contract damages. If P falls through the hole and suffers $1 million in injury, L is only liable for the cost of a floorboard.
(b)	Privity of K problem.
•	If L is liable for breach of express covenant, how about breach of implied covenant? Courts have taken three positions:
(1)	Some courts hold that implied warranty of habitability is not designed to impose tort liability on landlords. This is the best rule:
a.	Applying tort liability to an implied warranty is anathema to the leasehold estate. In the system of leaseholds, the tenant has a present interest in the estate, and the L has a reversionary interest. If the L is constantly entering to examine the premises and make repairs, it upsets this arrangement and potentially intrudes upon the T’s privacy.
b.	Increase costs due to amount of repairs.
c.	Decrease availability of rental units. The increased expenses could drive rental units off the market at the margins.
(2)	Other courts take the approach in Putnam. Landlord’s breach of implied warranty of habitability gives rise to L liability if L failed to make repairs negligently, had notice of the defect and an opportunity to repair and failed to do so. Landlords are strictly liable for injuries caused by defects they failed to correct in violation of implied warranty of habitability or express covenant – like negligence per se.
a.	NH has taken the lead in this in Sargent v. Ross – they found that L was liable to T or others for injuries on or about the premises if L failed to exercise reasonable care. This is slowly gaining ground but isn’t catching on like wildfire.
(3)	CA has taken another new approach not adopted anywhere but CA – L of residential premises is strictly liable for all T injuries caused by defects (Becker). They make the policy argument that this is risk shifting – the L is in a better position to buy insurance. Arguments against strict liability:
a.	Applying tort liability to an implied warranty is anathema to the leasehold estate. In the system of leaseholds, the tenant has a present interest in the estate, and the L has a reversionary interest. If the L is constantly entering to examine the premises and make repairs, it upsets this arrangement and potentially intrudes upon the T’s privacy.
b.	Increase costs due to amount of repairs.
c.	Decrease availability of rental units. The increased expenses could drive rental units off the market at the margins.
d.	Two possible negative behavioral results: Either a) L will not be vigilant at all because there is no level of care that he can meet, or else b) L will be hypervigilant, increasing costs and potentially invading T’s autonomy.

B.	Anti-discrimination law

1.	Kramarsky v. Stahl Management (NY 1977).
•	Facts: P brought an action under NY’s anti-discrimination statute saying she had been discriminated against on the basis of race and gender. She is a divorced black woman and state statute forbade discrimination on the basis of race, sex or marital status. She says the company discriminated against her on those bases. L says it’s not because she’s black, a woman or divorced – it’s because she’s a lawyer.
•	Rule: Absent anti-discrimination law, L is free to rent to whomever he wants at his whim. The only limitations are that he can’t use race, sex, national origin, etc. but can refuse to rent to anybody else as he chooses. Other than that, the baseline rule is that a L can discriminate based on whatever belief, no matter how unreasonable.

2.	Federal Fair Housing Act, 42 USC §§3601-3619, 3631 (1994)
•	Discrimination code doesn’t apply to single family homeowner, but it does apply after 1969 if he uses real estate broker or advertises. Once in commercial stream, can’t discriminate.
•	3604(c) forbids advertising real estate in a discriminatory manner. L can’t put an add in the paper for three bedroom apartment for white family, or no Jews allowed.
•	3604(e): “For profit, to induce or attempt to induce any person to sell or rent any dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, sex, handicap, familial status, or national origin.”
a.	This is the anti-blockbusting provision. Most cities were rigidly segregated by race when this went into effect. Real estate agents made a killing turning over whole neighborhoods. A realtor would buy a home in a neighborhood, sell it at a low price to a black family, then go around saying “They’re coming!” He could buy homes in the neighborhood cheaply, then sell at market prices to incoming families. Neighborhoods would change from all white to all black in the space of a year.

3.	Marable v. H. Walker & Associates (5th Cir. 1981)
•	Facts: Marable is P, bringing discrimination lawsuit. Defendants own apartment complex. P applied for apartment. Credit rating said he was OK. D’s didn’t rent to him, giving all sorts of reasons: 1. They only rent to married couples, not single males. 2. He was harassing them with his phone calls. 3. His credit rating was poor. The trial court accepted D’s arguments even though none of them were credible.
•	Court of Appeals overturns trial court’s factual conclusions. It’s interesting that the Court of Appeals is overturning factual conclusions because the factual conclusions seem so counter to the evidence. The court had to overturn the findings of fact on the basis of a clearly erroneous standard.

4.	US v. Starrett City (Second Circuit 1988).
•	Facts: Starrett City was allocating apartments on the basis of race, claiming that they wanted to prevent “racial tipping” – i.e. white flight. Gilderbloom says that one of the most important criteria for white residents is the extent to which the neighborhood doesn’t have minorities in it. This racial discrimination in the name of integration placed a burden on minorities, who the Fair Housing Act was designed to protect.
•	Issue: Can Starrett City discriminate on the basis of race in order to maintain an integrating housing development?
•	Holdings:
(1)	Quota system is a violation of Fair Housing Act
(2)	Apply the Title VII criteria to determine whether Starrett City’s policy is acceptable.
(3)	Good intentions are irrelevant
(4)	Builders are not state actors – not immune to FHA, just because state approved of their plan
•	Conflict between policies: Conflict here is between policy of non-discrimination and that of integration.
•	Otero. Case in New York City where the NY City Public Housing Authority argued that we can’t let all the new minorities come in to new apartments or the apartments would become a pocket ghetto. The Otero court found that it was legitimate to rent out apartments to non-former site occupants, primarily to whites. However, this was a one-time solution for the purpose of integration.
•	Segregation increases rents.
a.	Empirical data. One of the odd empirical bits of data that strongly support the idea is that housing in Harlem before desegregation was more expensive than housing on the Lower East Side. If that’s the only place they can purchase, rents tend to be very high.
b.	Rents decrease for minorities who can move to integrated neighborhoods. Before the Fair Housing Act, population of Harlem was about 500,000. During the 1960s and 1970s it dropped to about 250,000 because black people could finally get out. Presumably, rents fell.
c.	Value of minority neighborhoods falls with desegregation. With desegregation, if there is a strong preference among the majority not to live in minority neighborhoods, the value of minority neighborhoods falls. This occurs even in black and Hispanic middle class neighborhoods since there’s no demand outside of the racial or ethnic group.
•	Types of multifamily housing. There are three kinds of multifamily housing: rental housing, condominiums and co-ops (where you purchase shares in the corporation that owns the building). If it’s a co-op you basically become a homeowner.
a.	Starrett City changed from co-op to rental housing, causing the surrounding community to oppose the development. As a condition to approving the project, the board pressured Starrett City to maintain racial integration.
•	Starrett City as a “good guy” for old civil rights activists. Morris Abram is counsel for Starrett City, and Kenneth Clark files an affidavit for Starrett City. So Starrett City was actually the good guy to a lot of the old civil rights activists, probably because this case came up in the context of Reagan’s opposition to quotas.
•	Court looks to Title VII’s criteria for affirmative action to be permissible:
(1)	Can’t be timeless – must have a defined goal as its termination point.
(2)	There had to be a history of discrimination – societal discrimination alone could not suffice
(3)	Burden shouldn’t be on the people that the race conscious remedy is supposed to help.
(4)	Should examine the criteria as an equity concern. In this case, the court weighed the advantages of integration against the harms of discrimination, and found that discrimination was a greater concern than integration.
•	White flight. As Gilberbloom and Appelbaum suggest, there is a very strong preference among white Americans not to live among minorities.
a.	Jill Jones article. If Jones is correct, a neighborhood becoming all minority can be catastrophic.
b.	Moral hazard. There was moral hazard in the South Bronx, encouraging people to do bad things. If you post a sign to a desparate person saying that the only way to get priority housing is if your apartment burns down, the ludicrous rule creates an incentive for the apartment to burn down.
c.	Jill Jones story may be an economic story. All the people who originally lived in the neighborhood were working. The new people who moved in were on welfare. She probably sees a mix of ethnic and socioeconomic factors.

5.	History of the Fifth and Fourteenth Amendments.
•	Fifth Amendment. Says that a citizen shall not “be deprived of life, liberty or property without due process of law, nor shall private property be taken for public use without just compensation.” First clause is the due process clause, and the second is the takings clause.
a.	Takings clause doesn’t stop government from taking your property. Government can always take your property – that’s part of being a sovereign.
b.	However, if they do take your property:
(1)	it must be for a public purpose
(2)	they must provide just compensation
c.	Tool for big developers. NYT wants to get property across the street from the Port Authority station. Big developers typically ask the city or state to condemn that property, and then sell it to the developer. This was legally controversial – the question is whether this was for a public purpose. The city must allege that there is a broader public purpose – i.e. the redevelopment of Times Square. It gives rise to abuses where powerful developers want to develop property and don’t have the power of condemnation.
•	Fourteenth Amendment.
a.	Baron (1833): Chief Justice Marshall concluded that Fifth Amendment was intended solely as a limit on exercise of power by the US and is not applicable to legislation of the states.
b.	Post Civil War amendments. Post-civil war amendments radically changed development of constitutional law – 13th, 14th, and 15th amendments (15th amendment being the voting rights amendment).
c.	Section 1 of the 14th amendment. Granted US citizenship and citizenship of the states where they had been enslaved to the freedmen. “Nor shall any state deny any person life, liberty or property without due process of law, nor deny to any person the protection of the laws.” In later Supreme Court cases, the Supreme Court decided that the 14th amendment’s guarantee of due process of law incorporated the first ten amendments into the 14th amendment as a guarantee against the states.
•	Supreme Court’s conservatism. The post-civil war amendments obviously were designed to protect the freedmen after the Civil War. But by the late 19th century, after Reconstruction and the great compromise, the Supreme Court became increasingly conservative and refused to apply those amendments to the southern states.
a.	Plessy. In Plessy, the Supreme Court decided “separate but equal,” which governed race relations until the late 1940s and early 1950s.
b.	14th Amendment used to help corporations. In the 19th century, the era of the robber barons and a conservative Supreme Court, the Supreme Court decided that a corporation is a person for the purposes of the 14th amendment, and applied it vigorously for the purposes of enforcing business property interests. The 14th Amendment was dead letters as far as protection of the freedmen, but became very important for purposes of enforcing business interests.
•	State legislatures as vehicles to regulate businesses. It was easier for a progressive movement to capture a state legislature, so the state legislatures began passing legislation to improve the conditions mostly of workers and unionizers. They also tried to improve the quality of business products – in particular people were horrified when The Jungle came out, and they found out how absolutely filthy the conditions in the meat packing industry were.
a.	13th, 14th and 15th Amendments counteracted progressive state legislation. The courts were extremely conservative and used these amendments to protect business interests, saying that state regulation was unconstitutional, and struck down legislation designed to protect workers and quality of products. Here’s how:
(1)	Substantive due process. An amorphous idea that some statutes are so unreasonable as to deny a person the due process of law. If a legislature said that a particular industry had to limit the hours of workers to 8 hours, then the state had interfered with the liberty of the worker and the employer – thus any attempt to regulate the hours of workers was a violation of due process of law.
(2)	Takings clause. If you run a tenement and have an income of 10%, if the tenants are too poor for you to pass on costs, then the L’s profit will go down. Landlords say this is a taking – either pay me or legislation must be struck down.
(3)	Equal protection. At the time the Supreme Court refused to enforce rights of African Americans, if a state legislature said bakers had to limit the hours in K with workers but didn’t say butchers had to do the same thing, the court would say that they discriminated against bakers with regard to butchers.
b.	Lockner v. New York. Supreme Court struck down legislation in Lockner v. NY. It’s famous because the majority opinion is so old-fashioned and dissents were brilliant. Supreme Court said that a statute that said bakers could not have 10 hour a day contracts was unconstitutional.
(1)	Rationale. Reasoning in Lockner is still used. The majority said that the statute interfered with the right of K between employer and employee with regard to how long the latter could labor. Individual can make the K, protected by 14th amendment – no state can deprive any person of life, liberty or property without due process of law. The right to purchase or sell labor is part of the liberty protected by the amendment. Rhetorically it argues that this is about the right of bakery workers to work 10 hours.
(a)	Balance of constitutional rights with police power of state. The Court says that we have to balance the constitutional rights of people against the police powers of the state. The question is whether this is a fair, reasonable and appropriate exercise of police power.
(b)	Factual observations. The Court goes on to make some factual observations. “There can be no doubt that the trade of a baker is not an unhealthy one to the degree that allows the government to interfere with labor.” It has never been regarded as an unhealthy one. Are we all at the mercy of legislative majorities (the employees who outnumber the employers)? They are afraid that bankers, etc. can be regulated as well.
(2)	Dissent. Dissent says that the labor of the bakers is among the hardest imaginable. They vividly portray the problems that bakers face as opposed to other professions. The legislature’s factual conclusions are overturned by the Supreme Court’s blithe comments that being a baker isn’t that bad.
(3)	Holmes dissent. Holmes gave a much more pithy dissent. It’s about the role of the judiciary. “I do not conceive that to be my duty, because I strongly believe that my agreement or disagreement has nothing to do with the right of a majority to embody their opinions in law. State constitutions and state laws may regulate life in many ways that we may see as injudicious. A constitution is not to embody a single theory, whether of paternalism or laissez faire. Every opinion tends to become a law, and I think the word liberty in the 14th amendment is perverted when it is held to prevent the outcome of a dominant opinion.” He says he has no right to inquire into whether baker’s laws are good or not.
•	Constitutional crisis. Conservatives on Supreme Court held sway until the 1930s and created one of the biggest constitutional crises in US history. Stock market crashed in 1929 and country plunged into Great Depression. It lasted until WWII. In 1932, FDR was elected.
a.	The New Deal. He had been governor of NY, which had experimented with all sorts of legislation. He brought this to DC and called it the New Deal. The idea was that the government would intervene in the economy in new ways.
b.	Conflict between FDR and Supreme Court. FDR brought these ideas to DC and the Supreme Court struck down all of the New Deal legislation. Roosevelt became so frustrated with the Supreme Court that he proposed to congress that the size of the Supreme Court be increased. The Supreme Court got the idea and began sustaining New Deal legislation. Shortly thereafter the more conservative members of the Court retired, and it stopped striking down legislation that regulated the economy. All we do is determine whether the law is constitutional. We won’t impose an economic policy on the legislature.
c.	Demise of substantive due process and equal protection claims. In 1938 the New Deal court said they wouldn’t listen to substantive due process or equal protection claims. In the most famous footnote in Supreme Court jurisprudence, they said, “There may be a narrower scope for presumption of constitutionality when legislation appears to be in a specific prohibition of the constitution, such as those of the first ten amendments. It’s unnecessary to consider whether legislation which restricts those processes is subject to more exacting scrutiny than other types of legislation.” They say they won’t use the 5th or 14th amendment to protect business, but they may use it in the voting rights cases, and to protect discrete and insular minorities. A footnote in 1938 anticipated the 1950s and 1960s jurisprudence.
d.	Carolene Products. Carolene Products was in the process of selling adulterated milks. They would skim off the cream and sell cream, then put stuff in the milk. Congress determined that adulterated milk was unhealthy and passed a law prohibiting it. Congress put in the statute the reason it was passing it (i.e. a “whereas” clause). The company, which was prevented from selling adulterated milk, brought substantive due process claims – consumers have the right to buy adulterated milk and we have the right to sell it.
(1)	Rational relationship test. Since courts were getting out of the business of second guessing the legislatures, they articulated an early version of the standard that has ever since been used in commercial challenges – the rational relationship test. If an owner of a business brings a challenge under substantive due process and says that the statute is unreasonable because it interferes with liberty of K, the court will apply the test that says if the statute and mechanism behind the statute has any rational relationship, the statute will be upheld.

C.	Rent Control

1.	Constitutional challenge (takings) flow chart.
a.	What is the nature of the constitutional challenge?
•	Facial unconstitutionality - could never be constitutional
•	Applied unconstitutionality - unconstitutional as applied to a particular person or persons, requires people actually harmed by the statute to bring the claim
b.	Constitutional requirement - Does not deny a fair rate of return on the investment
c.	Statutes usually define fair rate of return (approximately 11.5 %)
d.	If a landlord can show that the statute deprives her of fair rate, then it is a taking and unconstitutional as applied.
e.	Do landlords get compensation when a rent control statute deprives them of fair return? Should they get compensation?

2.	Cromwell Associates v. May and Council of Newark (NJ 1985).
•	Facts: NJ had a rent control formula that allowed a 6% annual increase, with a hardship exception. It guaranteed landlords an 11.5% return. A couple of years later, Newark put a 25% total cap on all increases. L petitioned for a hardship increase and was given a 33% increase before the 25% cap was in place. For the subsequent year, he was denied his 6% annual cost of living increase because it would have brought his total increases to 39%. He says that his property had been taken without due process of law.
•	Issue: The 25% overall limit on rent increases means that there might be some group of landlords who need more than a 25% increase to ensure that they have an 11.5% return. Bearing that in mind, is this statute constitutional?
•	Holding: NJ says it’s unconstitutional on face, because some landlords might not be able to get an increase that allows an 11.5% rate of return. It’s not clear, though, that any L doesn’t get 11.5% because he’s limited to the 25% increase. They find it facially unconstitutional, but the argument seems to in actuality be that it’s unconstitutional as applied
•	Standard used in Cromwell: “It is the obligation of the court to uphold the validity of the ordinance when there exists any reasonable interpretation which effectuates the legislative intent without violating the constitution. Any reasonable interpretation which achieves this goal would be more desirable than a finding of unconstitutionality … Municipal ordinances are presumed to be valid, and this presumption can only be overcome with clear and convincing evidence that the ordinance has a confiscatory effect on landlords.”
a.	Business or property owner can succeed if a statute is so arbitrary and capricious (i.e. not reasonable or rational) that it’s unconstitutional. “It does require that the regulation serve a public purpose without arbitrariness and discrimination.”
•	Example of unconstitutional on face vs. unconstitutional as applied. Two statutes in first amendment context that show unconstitutional on face vs. unconstitutional as applied.
a.	Unconstitutional on face. If mayor passed a law saying that no group in City Hall Park may criticize the mayor or police, that’s unconstitutional on face.
b.	Unconstitutional as applied. If he passes an ordinance saying that in order to protest in City Hall Park you need a license from police, that’s not unconstitutional on face. If he never gives permits to groups criticizing the mayor or police, it is unconstitutional as applied.
•	Test for unconstitutional on face. Test that federal court uses to determine whether something is unconstitutional on face. “The federal courts have stated that a facial challenge must demonstrate that no set of circumstances exists under which the challenged act would be valid.”
a.	There are circumstances under which a L could reach 11.5% in NJ. Calling it unconstitutional on face is a stretch.

3.	Details of current NY rent stabilization system.
•	L and T bargain freely for the market rent initially. However, once you enter into the lease the L can only raise the rent at the 7.5% annual increase that’s provided. As long as you have moderate rent control, a wise L can price the premises when the T moves in to take account of how long he thinks T is going to be there. A wise L under rent stabilization shouldn’t end up with an apartment that doesn’t cover his costs unless there is something unexpected – that’s why there’s hardship increases.
•	Highlights rent control as a middle class subsidy. One argument against rent control is that it serves as a subsidy to middle class T’s who want to live there for a long time. The price of vacant apartments is skewed upward because L is trying to insure against the possibility that T will be there for a very long time. The short-term T has to pay a price that reflects a long-term lease when all he wants is a short-terms lease. Harms poorer tenants in the outer boroughs.
•	Vacancy decontrol. Generally if a T moves out the market will set the price. It is interesting how T’s organizations argue that not only should rent be stabilized but that landlords shouldn’t have the right to raise the rent on a vacant apartment.
(1)	Vacancy decontrol tends to lock you into your apartment the longer you stay.
(2)	Doesn’t necessarily make L’s select richer white tenants instead of poor minority tenants. If landlords want to get their Puerto Rican and Polish residents out, they don’t have the legal right to get them out in order to let trendy new tenants move in. They are either violating the rent stabilization code or else using extra-legal methods. Enforcement is a significant problem. However, the solution is not to get rid of vacancy decontrol, but rather to step up enforcement.
•	Luxury decontrol. If an apartment costs more than $2,000 a month, it is removed from rent stabilization.
•	Arguments against rent stabilization and in favor of more restrictive control (neither of them very persuasive):
(1)	Economic diversity
(2)	Leverage argument
•	Two available hardship exceptions.
a.	Comparative hardship. Available to L if his net income is less than the average net income for the period 1968-1970 (for L’s who purchase past 1968, it’s if the income is less than the average net income for the first three years of ownership). Your expectations when you purchase the property are protected. It’s up to a 6% increase in rent up to an 8.5% return on equity.
b.	Alternative hardship: L can get increases if operating expenses exceed 95% of gross revenues. RSA makes a big point that apartments held by co-ops & condos aren’t covered by alternative hardship.

4.	Rent Stabilization Association v. Dinkins (Second Circuit 1993).
•	Facts: RSA v. Dinkins is about the NY rent stabilization system which is very complicated (rent stabilization replaced the old bad rent control scheme that Jill Jones wrote about). The city allows the L to raise the rent 7.5% annually to keep up with operating costs.
•	Issue: Whether statute was unconstitutional on its face or if the court needed a L before them who said it was unconstitutional as applied to him.
•	Holding: This is an as applied claim, and thus requires the participation of individual plaintiffs.
•	RSA’s arguments. They make two constitutional claims:
(1)	the hardships and procedures by which they’re implemented violate the takings clause of the Fifth Amendment
(2)	the internal policies and guidelines are arbitrary and irrational so as to deprive RSA members of substantive due process
•	Test: The basic test for economic legislation being constitutional is that it must pass the rational relationship test. The question is whether there is a rational relationship between the statute and the legitimate public purpose that it is meant to serve. To say that it doesn’t pass rational relationship test, you must say that it’s so arbitrary and irrational that you can raise a claim for violation of due process.
•	Takings claim. Some L’s are not entitled to the alternative hardship increase. The court says you have two hardship provisions – it doesn’t matter that some L’s don’t get alternative hardship because they still have comparative hardship. There’s no constitutional right to both hardships – if one is available, no constitutional hardship on its face.
•	Facial unconstitutionality. For L to show facial challenge, they must show that no set of circumstances exists under which challenged act would be valid. However, as long as they could get the increase, they have to bring the “as applied” claim and not an “on its face” claim.
•	The as-applied claim. RSA provides evidence of the cost and difficulty of getting an increase through the board. They say that typically you’d have to pay $6,000 in accounting fees and 350 hours of professional time to get a hardship increase through the board. The requirements for RSA to bring an as applied claim are:
(1)	members have standing
(2)	interests germane to organization’s purpose
(3)	neither claim asserted nor relief requested requires individual P’s in the law suit
•	Disparate impacts on small and large L’s. Rent stabilization tends to place more difficulty on small L’s than big L’s Small L’s have to hire an accountant and a lawyer to get their claims through, while a big L already has an accountant and just has to print out the right spreadsheet. Distributive consequences of rent stabilization and rent control.

5.	Rent control and the market.
•	Assumptions of efficiently operating market. Gilderbloom and Appelbaum set out the assumptions that must exist for an efficiently operating market. All locations must be essentially equal, there are no barriers to entry into the market, there is no racial discrimination in the market, T’s and L’s have complete information, buyers and sellers are numerous, there is no collusion, individual sales are small in relation to the aggregate market.
•	Assuming there is an efficient market, here is how rent control affects it.
a.	Typical supply and demand curve. In our typical supply and demand curve, we assume that as price increases more and more apartments will be constructed. The supply curve slopes upward. As price of rental units declines, people who were doubling up will move out and get their own apartments, so the demand curve tends to be downward sloping. Where supply and demand curve meet, we have equilibrium quantity and price.
b.	Government setting price below equilibrium. If the government sets a price below the equilibrium, the amount supplied goes down and the amount demanded goes up. Fixing the rent downward by fiat instantly creates the perception of a shortage.
c.	Difference between market with elastic supply and inelastic supply. If you regulate the price downward in an inelastic market, there’s an instant shortage. With inelastic supply, you can regulate the market price down without decreasing the quantity supplied. If we regulate the price downward, the quantity supplied doesn’t change.
(1)	Assumption that supply would not decline was wrong. It was believed that you could regulate the price down in an inelastic market without supply being withdrawn. But as the price went down, the apartments burned. L’s can take their apartments off the market. Jill Jones explained exactly what happened.
d.	Subsidy to middle class tenants. If our goal is to help poor tenants, why do we provide this subsidy to middle-class tenants?

D.	Redlining

1.	Redlining problem.
•	Impact of redlining. It compounds the problem of restrictive rent control, leaving landlords with only the option of burning their buildings to collect insurance. The restrictive rent control regime insures that L’s will make a loss on their buildings, and redlining means that they won’t be able to sell the buildings even if they’re able to find a willing buyer, because that buyer won’t be able to find a loan to finance the purchase.
•	L as a lender. Should look at a lease as a conveyance of leasehold estate, K for services and a financing. The price for a $1,000 a month is really $12,000 for the year. The L has leant you the rest. The L is also a financial intermediary – he is like the banker to the poor. If there were no L’s and T’s, the poor could only purchase houses, which they can’t do. L’s themselves have very strong incentives to borrow money. That makes the L a financial intermediary.
•	Leveraging. Demonstrates L’s incentive to borrow.
a.	Leveraging hypo. At the end of the year, L’s profit is $15,000. If the building cost is $100,000, L’s rate of return is 15%.

Revenue	Interest	Net	Return	
$15,000	0	$15,000	15%	

What would happen if L borrows? Assume a 10% interest rate.

Borrow	Revenue	Interest	Net	Return	
$50,000	$15,000	$5,000	$10,000	20%	
$80,000	$15,000	$8,000	$7,000	35%	
$90,000	$15,000	$9,000	$6,000	60%	

b.	Boost rate of return by borrowing. If rate of return on the enterprise is higher than the cost of funds borrowed, you can boost the rate of return by borrowing.
(1)	Risks. The problem is that the more you leverage, the higher your risk. With no money borrowed, L has to make $15,000 less to suffer a loss. With 50% borrowing, a $10,000 decline in revenue causes a loss. With 90% borrowing, if his revenue declines $6,000 then he loses out.

2.	NY PIRG report.
•	Findings. It demonstrates that thrift institutions throughout NY withdrew credit from Brooklyn. When the savings banks withdraw credit from vast parts of the outer boroughs, they are forcing the rate of return down to L’s in those neighborhood.
•	Thrift institutions as localized. At the time of the NY PIRG report, thrift institutions were very localized. They were obligated by law to make loans in the same neighborhoods from which you took deposits (i.e. a 50 mile radius). These limits began to be expanded so banks could take deposits in one place and invest in another.
•	Discrimination. NY PIRG report showed how discriminatory the banks were. For example, for the Greater New York Savings Bank, 7% of Brooklyn deposits were invested in Brooklyn loans. 306% of Nassau-Suffolk deposits were invested in Nassau-Suffolk loans. Brooklyn loans were financing the development of wealthy Nassau and Suffolk counties.
•	Impact of redlining discrimination. We know that L’s are likely to borrow to keep up rate of return. But we normally think of them borrowing money when they need to sell. In a typical real estate transaction, buyer pays up front by getting a loan from the bank and entering into a long term note to pay bank over 20-25 years. What happens in a market where they can’t get their money because they can’t get a loan? Redlining may have contributed as much to destruction of S. Bronx as rent control.
a.	Problem with long-term notes. The only alternative is for the seller to take an installment note and receive the installments over 20-25 years. The person selling the house essentially becomes the banker, giving out a note and taking installments over the next 20-25 years. There would be a real incentive for the owner to torch the building.
•	Government bonds and housing. The government kept interest rates down so housing could be purchased. But once interest rates began to rise, the best interest rates were on treasury bills. The problem was that most small investors couldn’t get together enough money to buy treasury bills (the smallest denomination they could buy was $1000, and most investors didn’t have $1000). As more savers had $1000 in the bank and thought about buying treasury bills, the government raised the minimum to $10,000.
•	Securitization of the mortgage industry. This had benefits and detriments to poor people and minorities. If an individual had $1 million and each house was $50,000, he could only finance 20 mortgages without securitization.
a.	Effect of securitization. Individual financer would take his 20 loans, send them into the government – you’d have a package of 1 million loans (or however many) with government guarantees. You would buy a government security – with the proceeds of the sale you’d have $1 million and sell the loans to other people, then get another $1 million. Savings & loans with other resources became generators of loans and not investors in loans. This was so successful that it expanded very rapidly.
b.	Selling shares to the public. The next innovation was that Wall Street investment banks came up with the idea that you could put the $1 million in a trust or corporation and sell shares to the public. If we put the $1 million in a trust ($1 million in loans) and sold certificates, each would only be $1,000. The average person, just as they could afford a money market fund, could now afford a mortgage-backed security. This created on a national scale the mortgage market, which had previously been local. This gives Wall Street the ability to package certain kinds of loans – from commercial sector, from people with good credit ratings, even from people who’ve had credit problems (finance loans for people with bad credit ratings, but charge them a higher interest rate).
c.	Individualizes discrimination. This also means that discrimination in the credit market has become more individualized. Banks can now discriminate on the basis of individual characteristics. According to FDIC, there are very disturbing trends. In one study, the national banking regulators looked at the origins of mortgages, and found that minorities are rejected for loans at a higher rate than whites. The previous assumption had been that it’s because minorities were poorer. But they found very odd results – when you categorize people by all the things that banks look at, class them by credit risk and income, the wealthiest category of African-Americans were rejected from loans at a rate higher than the poorest group of whites was rejected.
d.	People less likely to be rejected outright. As this process continues, people are less likely to be rejected outright for credit. However, they are more likely to have to pay higher interest rates for their credit.
e.	Speeds gentrification. This also speeds the process of gentrification.
f.	Originators of mortgages. In the old days, you had to go to the bank to get a mortgage. Now there are all these little companies that originate mortgages. The fact that banks are losing their monopoly on lending and originating loans may counteract discrimination.

VII.	THE LAW OF NUISANCE

1.	General nuisance issues.
(1)	What should be the threshold in determining whether an action for nuisance lies or an injunction should be issued to the P?
(2)	Behavioral effect: Does it really matter whether D has the right to continue his or her activities when there’s a conflict in uses between P and D?
(3)	Environmental law: Why has nuisance law been supplanted by environmental law and zoning? Why did it fail to do what people wanted it to do such that legislatures adopted zoning and environmental law?

2.	Morgan v. High Penn Oil (NC 1953).
•	Facts: P owned a restaurant. High Penn Oil Company arrived after the plaintiffs. The refinery emitted nauseating gases and odors in great quantities, causing people to feel sick. High Penn failed to remedy this air pollution. The trial court found the damages to be a nuisance and enjoined the D from continuing the nuisance.
•	D’s argument: Defendants contend that evidence wasn’t sufficient. Second, they contend that it must be a nuisance per se or nuisance in fact. Third, they say that this must be a nuisance in fact because this is a lawful use of the land. Fourth, a business can only be a nuisance in fact if and only if it is constructed or operated in a negligent manner. Fifth, P’s fail to establish negligence.
•	Holding:
(1)	There was evidence of negligence.
(2)	Only an unintentional nuisance needs to be negligent. For an intentional nuisance, D is liable if conduct is unreasonable under the circumstances.
(3)	D’s conduct is intentional and unreasonable, and thus relief is warranted.
•	Court’s nuisance distinctions.
a.	Per se vs. per accidens. A nuisance per se is a nuisance at all times regardless of the location or circumstances. It isn’t clear what some jurisdictions mean when they say nuisance per se. A nuisance in fact is a lawful use that causes damage to the use or enjoyment of land of another person. The important point here is that cases dealing with nuisance in fact don’t seem to require negligence.
b.	Public nuisance vs. private nuisance. Public nuisance interferes with general community’s interest, while a private nuisance is an unreasonable interference with use or enjoyment of land of one or more private landowners. They try to narrow their focus or discussion to private nuisances in fact.
c.	Intentional nuisance vs. unintentional nuisance. For D to be liable for an intentional nuisance, D’s conduct must be unreasonable under the circumstances. For an unintentional nuisance, D is liable if conduct is negligent, reckless or ultrahazardous. Court is trying to say that this is an intentional nuisance, so conduct only needs to be unreasonable under the circumstances – not negligent.
(1)	Confusion over meaning of unreasonable: Jurisdictions do not agree what it means for a use to be unreasonable. Some jurisdictions have held that unreasonable means negligent, others hold that it means substantial, and others hold that it means that the costs outweigh the benefit to society of the D’s actions.
(2)	Confusion over meaning of intentional: Definition of intentional is also confusing. Here the court held that High Penn’s conduct was intentional and unreasonable. As a result, several remedies are available. P can receive damages, or if D continues his use the P can get an injunction.
•	Basic definition of nuisance: D makes an unwarranted use of property that interferes with use and enjoyment of P’s land. Sometimes courts will say that it has to be a substantial, non-trespassory invasion of the use of P’s land.
•	Balancing. The old rule is that you’d balance damage to P against usefulness of D’s activities.
a.	Boomer. In Boomer, for example, the court was clearly troubled by the fact that the damage to each P was small, but the defendant’s cement factory constituted an investment of $45 million and employed 300 people in the usually depressed upstate NY/Hudson River Valley area. If you balance the damage to the P against the benefit of D’s actions to society, the old rule will deny relief in almost every case.
b.	Hypo. A has a pig sty and sludge is running onto B’s farm. The damages are comparable. Maybe the court will give B damages or an injunction. The benefit to A of discharging pollution may be $100 – detriment to B is $100, and when we balance them we say that the damages to B are substantial so we give damages or an injunction.
c.	Modern context. A factory is emitting smoke – instead of another farm you have an entire city. I complain that Con Edison is emitting smoke. How much better off am I if Con Ed shuts down or cleans up its smokestack? Each owner has relatively small damages ($10), while Con Ed has a $45 million plant. With the old rule, when a D is discharging air or water pollution, when you balance the individual P vs. the individual D, you always say that value of D’s actions outweigh P’s damages or inconvenience – no action lies. Thus, companies are able to basically appropriate your air or water because the damage to you was so small, opposed to damages to them.

3.	Boomer v. Atlantic Cement (NY 1970).
•	Facts: Cement plant emits smoke and vibration. It is a $45 million plant in a depressed upstate community, and P’s individual costs are relatively minor. Lower court decided there was a nuisance, issued damages and declined to issue an injunction.
•	Can’t use litigation to solve air pollution. Court says we can’t use individual litigation to reduce this complex problem of air pollution, so we limit ourselves to this one problem.
•	Old rule: In a previous NY case (Whalen), the court ruled that the balancing to injuries cannot be justified. Although P’s damages may be slight compared to damages to D, that isn’t a reason to avoid an injunction.
•	New rule: Weigh the benefits of injunction against the benefits of the industry in question to determine whether to provide an injunction.
•	Court said there were three remedies:
(1)	Injunction – Atlantic Cement shuts down
(2)	Temporary damages – damages for each injury up to the filing of the lawsuit
(3)	Permanent damages – something like an easement. They say that Atlantic Cement has to buy an easement to pollute Boomer’s land forever. The value of permanent damages will be equal to the discounted present value of a future stream of temporary damages.
(4)	Two different ways to be compensated:
a.	Give the money plus CPI, or
b.	Give the money plus interest
c.	Cannot do both of them – can either do inflation or interest. If you get the money now, you want that value plus CPI. If you’re getting it in the future, you want that value plus interest.
•	Temporary damages vs. permanent damages. Temporary damages will better incentivize the industry to reduce pollution. On the other hand, permanent damages provide the business with certainty and predictability.
•	Tradable emissions permits. Atlantic Cement was forced to purchase an easement. Now it owns the right to pollute. It can sell it to a dirty industry – they are called tradable emissions permits.
a.	Water pollution controls. The EPA has to go around and find every water source that’s polluted and find how much the water source can bear. After that, they divide up the total amount of pollutants. Water pollution controls make it easier to privately enforce environmental control laws, as opposed to suing in nuisance. Public interest law firms tend to enforce these claims. Litigation tends to be channeled into the environmental rather than nuisance laws.
b.	Trading. If I’m a particularly good citizen or have a particularly good technology, should I be able to sell to a dirty industry?
c.	Internalizing externalities. If we can figure out the cost of discharging pollutants into the river, the amount of cement and the price will reflect the total cost. If the cost goes up, the supply curve shifts. The end users now pay for the true cost of cement.
d.	Tradable permits let industries trade the costs. If we tell the cement supplier that he can’t produce any waste, the cost might skyrocket and then we’d produce less cement at a higher price and lower quantity than justified.
•	Whether injunction is given doesn’t affect parties’ behavior.
a.	There will be post-judgment negotiations. There may be bilateral monopoly problems, but assuming that the court supervises the bargaining for the damages (so P doesn’t charge an excess price), Con Ed will be able to buy it.
b.	Coase theorem (Coase, The Problem of Social Cost). Initial legal rule doesn’t matter as long as the parties can bargain to reach most efficient outcome. Any precaution costing more than the amount it saves is not cost justified.
(1)	Assumption: This is a frictionless bargaining, and bargaining will not raise transaction costs, so overall result is efficient.
(2)	Problem with his argument: In reality, impediments to bargaining may be so great that Coase’s idea is impractical.
(3)	Transaction costs can be lowered by forming a firm employing both parties, so that efficient results can be mandated without negotiation. Federal statutes often put government in role of super firm.
(4)	Factory and fishery example #1: If factory has right to property with an inefficient result (pollution costs to fishery of 6 and control costs of 4), then fishery can pay factory to install controls at cost of 5 and they both profit.
(5)	Factory and fishery example #2: If fishery has right to property with inefficient result (stops factory that would make profit of 6 when pollution cost is only 2), then factory can pay fishery to waive normal legal rights to halt pollution.
(6)	Property hypo. If A has the right to pollute, B can offer to purchase from A the right to be free from pollution. But the only value to B of being free from pollution is $50,000. If they are free to bargain, A will continue to pollute.
(a)	Alternative rules. If those rules are changed, and B has the right to be free from pollution, A has to think that it will cost him $1 million to clean up the pollution. Will negotiate.
(7)	Property hypo #2. A benefits $50,000 from pollution and it costs B $1 million. If we start out by saying that A has the right to pollute, B can’t go to court to stop him. But since the costs to B outweighs A’s benefit, B will pay A to stop polluting. If B has the right to be free from pollution, A will clean up the pollution rather than buy out B’s right to be free from pollution.

4.	Spur Industries v. Del Webb (Arizona 1972).
•	Facts: P is a developer and D has a cattle operation. The cattle operation began first, and the residential development began later. As the residential development began to expand toward the cattle feed lots, people would not buy these residences. In addition, some residents who had already bought their homes couldn’t enjoy them because of the pollution and flies.
•	Holding:
(1)	Del Webb, the developer, moved to the nuisance. In such an instance, relief should be denied.
(2)	However, this is a public nuisance, because Spur posed a health hazard to people in the southern part of Sun City.
(3)	Compromise solution is to enjoin Spur from continuing operations, but make Del Webb pay their costs of relocation.
•	Spur is also appropriating something from Del Webb. Regardless of Spur’s precaution, they were appropriating something from their neighbors even though their neighbors didn’t care. Can’t Del Webb say that they have the right to be free of pollution since they have a fee simple absolute regardless of where they go – moving to an industrial area or wherever? The reason the land next to Spur is cheap is because they had appropriated a right to pollute. But they haven’t paid anybody for the right to pollute.
a.	Buffer area. Perhaps Spur should have bought a buffer area around them. Regardless of where they go, they are appropriating the right to pollute from their neighbors.
•	Del Webb misrepresented the value of its lots to the ultimate purchasers. The lots were only worth $10,000 because they were close to the cattle feedlots, and they sold the lots for $25,000 to residents. If so, Del Webb would pay the cost of their bad behavior to the ultimate purchasers.
•	Efficiency: The bottom line is what is the better use of the land? Is the better use a feedlot or opening it up to more residential development?
a.	Doesn’t make a difference where Spur is. Nobody knew this land had any value. When you begin to develop land, the valuable thing you purchase is the water rights. Now that there’s water in Sun City, why do you want a cattle feedlot as long as Spur Industries is compensated for moving?
(1)	One danger is marginalization of agriculture – pushing it to areas where it is more difficult to raise cattle. However, the agriculture would be just as valuable 20 miles from town as it would be next to the town itself. Also, if the market is overallocated to urban development over farmland, the price of agricultural goods will rise and farmers will make more money, then can bid more people out of their land to produce more agriculture.
•	Grouping uses. When you group uses that are the same, they don’t seem to produce externalities – i.e. two noisy factories next to each other don’t impose externalities because it’s already noisy. It may make sense to say that the feedlots are next to each other here, homes can be here, retail can be here. If they’re all alike, they don’t impose costs on each other. This is zoning.

VIII.	EASEMENTS

1.	Easements.
•	Definition: A use right over someone else’s property. What’s peculiar is that they benefit adjoining land no matter who the owner is. If there’s a house on Whiteacre with a road and easement over Blackacre, the right to use the road over Blackacre goes with Whiteacre. The parcel of land benefited is called the dominant tenement, and the parcel of land utilized is called the servient easement.

2.	Holbrook v. Taylor (Kentucky 1976).
•	Facts: Taylor relied on right to use right of way over Holbrook’s land.
•	Four ways to get easements:
(1)	express grant
(2)	easement by implication. Can be implied from prior use or from necessity.
(3)	easement by prescription
(4)	easement by estoppel (this is Holbrook)
•	License: License is mere right of entry. If you grant a license and someone relies on it, it can become an easement by estoppel.
•	Easement by reservation. Someone owns both Blackacre and Whiteacre, then grants Blackacre to someone else but wants to maintain a right of way. He says that he grants and conveys all right, title and interest in BA to the grantee but holds back an easement over Blackacre – almost always to get to a public road.

3.	Van Sandt v. Royster (Kansas 1938).
•	Holding:
(1)	Underground uses are apparent if the person holding the servient tenement could have with reasonable inspection found the use giving rise to the easement.
(2)	Easement for an underground lateral sewer drain was implied by prior use.
•	Elements of easement implied by prior use:
(1)	grant conveyance
(2)	physical part only of land
(3)	before grant, grantor used one part of land for benefit of other (i.e. roadway)
(4)	usage must be more or less necessary (distinguish from easement by strict necessity)
(5)	easement must be apparent
•	If these conditions are met, then even if the deed says nothing, we will imply in law by prior use that owner of Whiteacre has easement to go over Blackacre.
a.	Minority jurisdictions: In some jurisdictions this would not be true. If the owner conveyed Blackacre, some jurisdictions say that you must state the easement expressly. Can’t make a grant that burdens granted property without explicitly reserving it for yourself.
•	Intentions of parties. One theory is that the easement for prior use is based on intentions of the parties. If the buyer inspects Whiteacre and sees that the grantor is using its right of way, we assume it’s his intention to reserve the right of way.
•	Move away from legal formalism: Holding in Van Sandt was moving away from formalisms concerning whether you sold the dominant or servient tenement. Following Restatement, it looks to the full variety of facts and circumstances.
•	Elements of easement implied by necessity:
(1)	grantor makes a conveyance
(2)	of physical part only of the land
(3)	after conveyance it is strictly necessary for enjoyment of one part that the other part be burdened.
•	Easement by necessity example. Original owner owns Whiteacre and Blackacre as a single parcel, and he conveys Blackacre to someone else. The only road for miles is the road that abuts Blackacre. Regardless of whether there was a prior use, regardless of whether grantor or grantee, everyone should have access to road. No matter what the circumstances except for freak circumstances (Othen), an easement can arise by necessity much more easily. The crucial thing is that this must be the only way for to get to the public road.

4.	Othen v. Rosier (Texas 1950).
•	The confusing thing about Othen is that the court was looking at two ways of creating an easement – by necessity and by prescription. Unless there’s evidence that the only way to the public road is over Rosier’s land, Othen hasn’t shown strict necessity at the time of the severance.
•	Easement by prescription. Very similar to adverse possession. To prove that you have an easement by prescription, use must be:
(1)	Actual
(2)	open and notorious
(3)	continuous. Continuity that is normal for easements.
(4)	hostile and exclusive
a.	Exclusive is the most difficult requirement. Most people think that exclusive simply means that it isn’t open to the public in general – the holder of a servient tenement is entitled to use an easement. Easement by prescription may arise.

IX.	THE LAW OF ZONING

1.	Village of Euclid v. Ambler Realty (Supreme Court 1926).
•	Importance of the case: This case established the constitutionality of zoning.
•	Facts: Village of Euclid consisted of farmland, and was in danger of urban expansion from Cleveland. The city council passed a zoning statute creating 6 use classes, height classes and area district classes. It tries to keep similar uses together and different uses apart.
•	P’s argument: The zoning is unconstitutional because it limits P to the highest zone, where the only thing that can be constructed is single family homes. For lower uses, it has a market value of about $10,000 for acre – but if the use is limited to residential single-family homes, the value is about $2500 per acre.
•	Holding: The court applies a rational relationship test and simply says that it cannot be said that the ordinance passes the bounds of reason and assumes the character of an arbitrary fiat. They also say that we must give deference to the legislature.

2.	PA Northwestern Distributors v. Zoning Hearing Board (Pennsylvania 1991).
•	Facts: P owned adult bookstore. D enacted a zoning statute that restricted P’s business to certain kinds of locations where he wasn’t. P could not conform to the zoning restrictions, so his was a non-conforming use. The zoning statute provided that a non-conforming use had 90 days to either come into compliance, or it would be a period of amortization for those pre-existing businesses.
•	Holding: This statute was unconstitutional on its face because the amortization period was only 90 days – preposterous on its face.
•	Amortization: It means that a business leaves slowly – you spread the value of an asset over time.
a.	Example. My non-conforming use represents an investment of $100,000. My net income per year is $10,000. If the company is told to amortize and leave, it will stay for 10 years. In 10 years it will have its $100,000 and nothing will be taken from the company.
b.	Majority jurisdictions: Most jurisdictions find that amortization is a valid way of avoiding the takings claim. The problem is that the amortization must be for a reasonable amount of time. The municipality knows that in some jurisdictions you can avoid a takings claim by calling the period of time between the zoning statute and the end of the non-conforming use amortization – but labeling it is not the reality. The majority rule is that municipalities cannot compel a change in the nature of an existing lawful use, unless they give you time to amortize.
•	Existing lawful uses. A municipality can zone vacant land. However, the court says, “It has long been the law of this commonwealth that municipalities lack the power to change an existing lawful use of property. In addition, they cannot prevent the owner of lawful property from making additions, so long as such additions would not be detrimental to the public welfare, safety or health.”
b.	Example. We can tell you if you have farmland that you cannot develop it, but once you’ve developed it we can’t tell you that you must end an existing use. They cannot compel a change in the nature of an existing lawful use, unless the use is something like a nuisance.
c.	Hypo demonstrating problem with “existing use” exceptions. There are two people who each own plots of land. A owns vacant land worth $10,00 and plans to build a convenience store, with which land would be worth $25,000. If before he builds the store the municipality says that they’re zoning the land, his loss is $15,000. Euclid tells us there’s no taking if the zoning occurs before the development. If B owns a convenience store worth $25,000 and it’s zoned for vacant land so that it’s only worth $10,000 aren’t they in exactly the same position? Why is that not a taking?
(1)	It’s an arbitrary line but we protect tangible things. Most societies are skeptical of speculation and speculative, intangible values are not protected.
(2)	The Supreme Court is taking a harder look at the type of taking where they prevent the convenience store from being built. If Euclid came before Justice Scalia, the outcome would have been completely different, because Scalia tends to look at property as a disaggregated group of estates, and if the government regulates any estate, then there has been a taking.
•	Courts’ justification for zoning regulations. The courts generally fall back on the argument that we haven’t taken your air space because what was taken would have been a nuisance to others. If you’re the owner next to the building that would be very high, then they would have taken your right to light. The courts see it not as taking owner 1’s air, but preserving owner 2’s light. We don’t own property all the way down to the center of the earth and up to the heavens. Rather, property is part of an ecosystem. We aren’t taking the right to spray insecticides, etc. Rather, the spraying of insecticides is a nuisance and we’re protecting the rights of all of us to a diverse ecosystem.
•	P’s claim: There was a takings claim, as are most non-conforming use claims. If a person has a right to their non-conforming use as a property interest, then the government shutting it down is a taking.
•	Court’s reasoning.
(1)	All property is held in subordination to its right of reasonable regulation by the government necessary to preserve health, safety and general morals of people. The government has power to regulate to promote these values.
(2)	This being a post-New Deal decision, the state courts also largely followed suit. There is a presumption of validity that attaches to any zoning ordinance.
(3)	The government’s police power is subject to a citizen’s ability to use property unfettered by such provisions except where the use violates a law, covenant, etc. If a zoning ordinance defines as non-conforming use a use that is nuisance-like, the government will have more power to regulate it out of existence than if it is not a nuisance.
(4)	We know when a taking occurs. For example, if the government takes title to your property it is a taking or if it builds a road through your land. “Although it may be difficult to discern if zoning regulation is a taking, taking is not limited to physical taking of property. If it deprives an owner of the lawful use of his property, it is a taking which must be justly compensated.”

3.	Other kinds of zoning regulations. One of the purposes of zoning is to create livable cities and towns. One problem with NY was buildings right next to each other with no air, no light, and buildings coming right up to the sidewalk or the street. One purpose of zoning was to prevent the concrete canyons with no light and no air on the public streets.
a.	Light angle. Think of an imaginary line going up from the middle of the street to the buildings on either side. A certain amount of light has to be able to penetrate to street and sidewalk level. If you want to build a four story building, you have to set it back even further. Taller buildings are set back more, and you’re more likely to see the skyscraper in the park structure – set back and surrounded by empty areas so they don’t block out light.
b.	Floor-area ratio. The floor-area ratio is set by ordinance between the area of a lot and the floor space permissible in a building. If you have a floor-area ratio of 1, that means you can build a one-story building that completely covers the lot. This gives you flexibility – you could also build a two-story building that covers half of the lot, or 1/3 for a three story building, etc.

4.	Southern Burlington County NAACP v. Township of Mount Laurel (NJ 1975).
•	Facts: Southern Burlington County NAACP represents the plaintiffs. They were low or moderate income people who feel they’ve been denied the ability to have housing in Mt. Laurel. They are residents of township in dilapidated or substandard housing, former residents forced to move, nonresidents in central city substandard housing, and the organizations who are representing them.
•	Mt. Laurel’s zoning techniques. The residential zones provided only for single family housing and there was a minimal lot size requirement. There were minimum width requirements and minimum dwelling floor requirements. It creates as a matter of zoning a rather large suburban house. It means that a developer cannot buy a 1 acre lot and carve it into NYC-sized lots to build affordable housing.
a.	Policy against children. The township required that developers provide that no school age children occupy any 1-bedroom apartment, and no more than 2 in a 2-bedroom apartment. They don’t want families of modest income who put two children in one bedroom. The developer was required to record a covenant providing that if more than .3 children attend the township school system, the developer has to pay the child’s tuition. This incentivizes the developer to discriminate, which is unconstitutional in most jurisdictions.
•	P’s claim: It’s both a substantive due process and equal protection claim.
a.	Substantive due process claim: Who the “general welfare” applies to has to be thought of regionally, not just locally. Police power is based on the state, not just the municipality. Zoning regulations of the municipality must be looked at from the context of the state police power, which looks at the benefit of the people in all the state. Mt. Laurel can’t regulate only in the interest of the people of Mt. Laurel. The state government created the municipality. It is the people of the state of NJ, not just the Mt Laurel township, whose general welfare must be protected.
b.	Substantive due process requirement: The regulation must contain a rational relationship to the interest in order to pass constitutional muster (i.e. rationally related to promoting health, safety and morals or the general welfare.
c.	Application. The statute is unconstitutional because its purpose is maintaining safe, aesthetic housing. This is not related to promoting housing for the people of NJ, so it’s an unconstitutional statute. If you’re going to promote housing, library, schools or education, you need to take into account all the people of NJ. The grant of police power is for the whole state, and helping the citizens of Mount Laurel is not related to the policy of providing safe, affordable housing for the state as a whole.
•	Court’s remedy. As a developing municipality, Mt. Laurel must make available an appropriate variety and choice of housing for all varieties of people who choose to live there. They assume that when we get rid of the restrictions, garden apartments will be built because of market demands.
•	Subsequent litigation. In subsequent litigation, there were more stringent requirements. Eventually they passed a statewide housing organization that looks at each community to see if they’re bearing their fair share of affordable housing.
•	PUDs (planned urban developments). The power of easements and developments is that you can tell each home purchaser that by accepting the deed they’re accepting a covenant. The covenants can have all of the restrictions struck down by the court. In fact, covenants are often far more restrictive than zoning. Should private developers and resident’s organizations be able to do what communities can’t do in Mt Laurel?
•	Decision is under the NJ constitution. They are doing this because they believe that the Supreme Court would uphold the right of the municipality. If this were decided under federal constitutional law, it could be appealed from the NJ Supreme Court to the Supreme Court. Thus, the NJ Supreme Court is foreclosing an appeal to the US Supreme Court by deciding it under state law. (It can’t be appealed, because the state is providing more protection to the individual from taking – states can provide more protection than constitutionally required, they just can’t provide less.)
•	Equalizes burdens on all the municipalities: In state litigation, pressure to raise state income taxes is equal protection claims over state education. How can a state government provide a superb education in a rich community and a shoddy education in a poor community? Given that the communities are racially and ethnically segregated, you have a strong prima facie case.
a.	Police power limited by substantive due process and equal protection. Substantive due process is looking at the goals of government and whether the regulation carries out those goals. To meet the substantive due process test, the statute must have a legitimate due process goal – meeting health, safety or the general welfare.
b.	Where, as here, it’s shown that the municipality through its regulations has not made available a variety and choice of housing, a facial showing of violation of substantive due process has been made out.

X.	REGULATORY TAKINGS

1.	Takings flowchart.
a.	Was there a taking? (physical takings are always a taking – Loretto v. Teleprompter.)
b.	Was it for a public purpose? (Rational relationship test – if not for a public purpose, it’s unconstitutional.)
c.	Was it regulated a noxious or nuisance-like use? (If yes, no compensation required. If no, must compensate to be constitutional.)

2.	Hawaii v. Midkiff (Supreme Court 1984). Actual taking.
•	Facts: Oligopolistic housing market concentrates most land in HI in the hands of a few landowners who won’t sell it because it would cost them too much in taxes. Legislature passes Land Reform Act which involves the government condemning the property and arranging its sale to others, while avoiding the tax problems
•	Issue: Is this a taking of land by government for a public purpose?
•	Holding: Statute constitutional; public purpose was to create a competitive housing market where there has been a market failure
•	Test for taking. Court says, “Whether in fact the provision will accomplish its objectives is not the question. The constitutional requirement is satisfied if the state legislature rationally could have believed that the act would promote the objective.”
a.	Relationship to legislation’s enabling clause. Legislature puts any purpose in the “whereas” clauses of the legislation. The court says “When the legislature has spoken, the public interest has been declared in terms well nigh conclusive.”
b.	Will generally find legislation constitutional. According to Midkiff, it will be found constitutional as long as it’s not an insane idea. If it’s not insane, the court will defer to the legislature.
•	Takings clause. The relevant part of the 5th Amendment says that the government can take property and pay for it, but only if the purpose is public. If the purpose isn’t public, they could presumably enter into private transactions just like anyone else.
•	Condemnation is the process by which the power of eminent domain is carried out. Midkiff is unusual. Most condemnations involve the government taking property – i.e. building roads through farmland. If the government needs a parcel to build an office building, there’s no reason for eminent domain. They act like an ordinary purchaser. However, bilateral monopoly may allow one person to block a series of parcels. The government will use eminent domain to buy a series of parcels and makes sure that there are no holdout problems.
a.	Private developers. Private developers may ask whether they can use the government power of eminent domain to acquire the land.
•	Berman v. Parker: The lead case was Berman v. Parker, in which the District of Columbia condemned privately owned slum areas to transfer them to private owners. However, government in our society doesn’t do a whole lot of public development. The question was whether that was a taking from A to give to B for a non-public purpose. The precedent suggests that it’s a public purpose, improving the health and safety of the public.
•	Court on public use requirement. They said, “The public use requirement is coterminous with the scope of a sovereign’s power.” You might have a test for compensated takings that is easier or harder than police power.
a.	Narrower test. A narrower test would be that it’s only satisfied if the government enters into possession. For example, government could only exercise eminent domain if it’s going to build a structure that is used by the government itself.
•	Hypo. If you passed legislation the purpose of which was to eliminate art, it would arguably fail substantive due process because it’s an unreasonable statute. However, the statute might say: “whereas the legislation wants to improve health and safety by eliminating art…”
(1)	Can closing art galleries improve health and safety? You could actually ask if they’re related, or do what the court does and ask if they could reasonably believe that closing art galleries would improve health and safety.
•	State’s exercise of eminent domain subjected to same test as federal government’s. The Supreme Court says the fact that a state legislature made the determination doesn’t mean that it’s less appropriate.
•	Discrimination. When state or federal government discriminates on the basis of race, religion etc. or burdens fundamental liberties the courts don’t apply a rational relationship test. They apply a more difficult test, the strict scrutiny test. If the state passes a law saying that African Americans and Jews must get a blood test before getting married (African Americans could have sickle cell anemia and Jews could have Tay-Sachs disease), the test you apply is whether it is a compelling government interest, and the statute has to be narrowly tailored to carry out that compelling interest.
a.	In some circumstances, the ability of state governments to discriminate on the basis of race is more constrained than the federal government. In minority set-asides, the federal government’s ability to set aside FCC licenses has been upheld by the court at the same time that the City of Richmond’s attempt to redress past discrimination by setting aside minority businesses was struck down.

3.	Pennsylvania Coal Co. v. Mahon (Supreme Court 1922). Regulatory taking.
•	Facts: PA statute prevents coal mining which causes subsidence.
•	Holding:
(1)	A regulation will be considered a compensable taking if it goes “too far”
(2)	This is not a bright line test, but 100% is too far (100% of a distinct, severed portion of the estate, not the entire estate)
•	Holmes (majority) defines this is a private nuisance. “This is the case of a single private house. No doubt, there is a public interest in this, as in every purchase and sale. But ordinarily in private affairs it doesn’t warrant such a nuisance.”
•	Private nuisance. There is never a taking when the government regulates away a nuisance. If government said you don’t have the right to take away support from your neighbor, it’s not a taking because you don’t have the right to take away the support in the first place. However, Holmes doesn’t say that this is like a nuisance because the parties specifically bargained for the right of a subsurface user for subsurface subsidence.
•	Division of use estates. Holmes says there are three use estates – surface, coal and support. Penn Coal owns the right to the coal and the right to support, and the city owns the surface.
a.	Once you divide the fee simple into these distinct things, the statute is taking the right to eliminate support, which is what the coal company had reserved. Very little of Penn Coal’s subsurface rights were being taken – just because you can’t cause subsidence doesn’t mean you can’t mine. It is possible to take coal and not cause subsidence. Brandeis is saying that they’ve taken very little of the value of what PA Coal has, so they haven’t gone too far. Holmes says, however, that once you break it up to different interests, the statute takes 100% of the right of support. This method of analysis is actually popular currently in the Supreme Court, sometimes referred to as severance.
b.	Severance hypo. What is the right to develop in the Adirondacks? Property is worth $50,000, right to develop maybe worth $500 – that’s only a 1% taking. If you do what Holmes did in this case though, or what Scalia does, then you’ve taken 100% of the right of development (500 out of 500).
•	Brandeis dissent: Just because individual homeowners sold the right to support, that doesn’t mean that they can’t regulate the entire town. It is inherent in the municipality’s fee simple that they have a right to support, and anything the coal company does to disrupt that right is tantamount to a nuisance.

4.	Penn Central v. City of NY (Supreme Court 1978).
•	Facts. NY passed a landmark preservation law and named Grand Central a landmark. The reason it was passed was because the same railroad company had torn down Penn Station, one of the architectural treasures of NY. Penn Central wanted to tear down the stations and build modern office buildings. Since the city law prevented them, they came up with an architectural plan to just put office buildings on top of Grand Central.
•	Issue. Is this kind of regulation (taking Penn Central’s air rights) a taking?
•	Holding: In a way this case doesn’t answer that question because in the landmark preservation law they came up with a creative idea – take those air rights and consider them to be transferable development rights that Penn Central could sell to other buildings.
•	The Court summarizes all of this mess of standards that had been set:
(1)	If there’s a physical invasion, there’s a taking.
a.	Loretto v. Teleprompter: Infinitesimal physical encroachment on the building was a regulatory taking. Rule: Where there is a physical invasion, the court will find a taking that requires compensation.
(2)	Economic impact.
a.	Holmes’s standard in Pennsylvania Coal Co. – a regulation that goes too far is a taking.
(3)	Regulation by prohibiting a noxious/nuisance-like use is not a taking.
a.	Scalia confirms this rule in Lucas. However, he also limits the meaning of noxious, nuisance-like use.
(4)	Zoning laws that don’t effect existing uses aren’t a taking.
(5)	A statute that so interferes with existing investment backed expectations may be a taking.
•	When regulation takes all of the economic value of a parcel of land, a taking will be found.
a.	Clearly another fairly easy to apply rule is that where the regulation takes all of the economic value of a parcel of land, a taking will be found. The question is what “all of the value” entails. If value declines by 90% is there a taking? If it declines by 50% is there a taking?
b.	Regulation that eliminates a noxious/nuisance-like use and also results in a reduction of value by 100%: Scalia confirms that this would not be a taking.
c.	The rule that eliminating noxious or nuisance-like uses is not a taking is sometimes worded affirmatively – that regulations that promote health, safety or morals are not a taking. It should actually say that regulations that promote health, safety or morals by eliminating noxious or nuisance like uses are not takings.
•	Investment-backed expectation.
a.	The court uses a lot of imprecise and often not helpful phraseology. One phrase that comes up over and over is “does the statute so intefere with investment backed expectations to constitute a taking?”
b.	Possible meanings of investment-backed expectation: This may mean the circumstances under which the parcel is acquired.
(1)	Farmer hypo. If a farmer purchases farmland and uses the farmland for farming purposes, and in order to preserve open space the municipality passes a statute saying that this land can’t be developed, we ask what the farmer’s expectations were. The expectations were to farm. His greed-based expectations (wish fulfillment) might be frustrated, but his investment-backed expectations may not.
(2)	Developer hypo. On the other hand, if he sells the farmland to a developer and the municipality passes a statute zoning the land for agricultural uses only, this developer’s expectations are not lottery expectations but rather they are investment backed.
(3)	We might look at the claims of the farmer who purchased the land at agricultural prices and the developer who purchased it at development prices differently.
c.	Reciprocity of advantages. The courts ask if this is a statute that adjusts the benefits and burdens of economic life, or does it place all the benefits or burdens on one person? Even people who are burdened by zoning may benefit from zoning. We’d say reciprocal advantages and disadvantages are placed on everyone.
(1)	By contrast, historical preservation laws may place all the burden on one or two parcels – i.e. in Penn Central, all of the burden was placed on the owners of Grand Central Station, while all the people around Grand Central benefit. If it hadn’t been for the creation of air rights, there wouldn’t have been a reciprocity of advantage there.

5.	Lucas v. Sout Carolina Coastal Council (Supreme Court 1992).
•	Facts: In 1977, SC passed a coastal management act to preserve its beaches and coastline. In 1986, Lucas bought some residential lots to build on them, and the existing statutes at the time of purchase permitted him to build. New legislation was passed in 1988 preventing him from building, and thus decreasing the value of the property that he purchased. Lucas believed that there was a taking.
•	Holding: There was a taking. Too difficult to define nuisance so as to distinguish between harm prevention and benefit conferral. Thus, definition of nuisance must be limited to what it was at common law because people have relied on those rules, and otherwise, legislature would have incentive to call everything a nuisance in order to avoid having to compensate; beach erosion was not a nuisance under those rules so is not now.  Wants nuisance escape hatch to be narrow.  Took 100% economic value of land even though could be considered nuisance prevention
•	Scalia argues that it isn’t easy to determine whether a regulation of a use is to prevent a noxious use or to provide benefits. SC and many statutes are saying that if you fill in or drain your swamp, there are going to be environmental consequences for someone else.
(1)	West Way example. In the 1960s and 1970s, when NY was going through its fiscal crisis, the roads were in dire repair. The worst was the West Side Highway. It became so decrepit that a car fell through it. They planned for a new elevated highway called West Way. However, we don’t have West Way today because it was found out that the west side of Manhattan was an important breeding ground for the striped bass. If West Way had been built and we tore down the piers, we would have driven the striped bass into extinction.
(2)	Hudson River example. The Hudson River is incredibly important ecologically. You own riverfront property along the Hudson River. If you construct your home or your dock along the Hudson River, you prevent a certain number of fish species from breeding. Some fisherman will have less fish to catch.
(3)	Wetlands example. Say you have a wetland in NJ. People for many years would drain, fill it in, construct shopping malls and suburbs. Now we know that if a certain amount of wetlands are converted, a certain number of homes will be subject to flooding.
(4)	These examples overstate the scientific certainty. You can’t definitely show particular fishermen who will lose fish. However, we can say that if 50 miles of the Hudson are developed, there will be no fish. It can’t be shown in nuisance terms, but can be shown in probabilistic terms.
(5)	The issue. The question is whether a regulation that prevents a filling-in of a wetland a regulation of a noxious use, or is it simply trying to appropriate value from someone and give it to another person.
(6)	Scalia’s view. Scalia discounts the noxious use exception. He says that the distinction between harm-preventing and benefit-conferring regulation is in the eye of the beholder. There is no such thing as harm-preventing or benefit-conferring regulation – you’re always taking from A and giving to B.
•	Hypo. A is at a pond first, and A uses the pond to discharge noxious wastes. Along comes B, who purchases his home on the opposite end of the pond for a fishing retreat. He needs pristine waters. If these two owners are there at the same time, you’d think that A was imposing a cost on B. But if we reverse the roles, and give to B the right to shut down A’s use, then B is imposing a cost on A. The need for pristine waters imposes a cost on anyone who needs to use water as a discharge receptacle. They are simply conflicting uses – B imposes as much of a cost on A as A imposes on B.
•	Scalia says this doesn’t regulate a noxious or nuisance-like use. Scalia says that you could say that this regulation is designed to prevent harm to the barrier islands. But he says that you could also see it as achieving the benefit of an ecological preserve. If they’re not preventing harm, they’re trying to incur a benefit on somebody else – thus it doesn’t fall into the noxious use exception.
•	Investment-backed expectations argument. The problem with the argument is that investment-backed expectations have nothing to do with whether the use is a nuisance. If you buy a pond with the expectation that you’ll discharge sludge into it, you still cannot discharge sludge onto your neighbor’s land. It’s a nuisance regardless of whether you buy your pond with the expectation to discharge the sludge.
•	Scalia’s science argument. Scalia’s argument is that when I dump sludge into a pond and it runs onto my neighbor’s land, it’s obvious. We don’t need a lot of science to know that a cost has been imposed on a neighbor. When a cost is imposed on a fisherman, there is a required direct cause and effect link.
a.	Criticism. Scalia’s opinion has a flat-earther quality to it. He says if I don’t think that construction on barrier islands puts costs on people, then it’s not a nuisance. Why should you build a house on barrier islands that can shift the sands and discharge erosion on someone else’s property? Why is that right within my fee simple absolute? It’s like he’s saying that he simply doesn’t want to believe cause and effect when it comes to environmental law.
•	Alternative approach. Say that Lucas bought the plot for $900,000, but developing it will impose $1 million in costs on someone else. So you can develop but have to pay $1 million for a permit that will compensate someone else for the damage you do to them.
a.	Water pollution control approach. This is what water pollution control does. It says you have to buy a permit. It will tell you how much you can pollute and you have to pay for it.
•	Scalia’s definition of nuisance. Scalia says it’s not what the legislature says it is. He says rather that the “logically antecedent inquiry into the owner’s estate” shows that it wasn’t part of his expectation.
a.	The only time the state can prevent a use without compensating is when it’s like common law nuisance.
b.	Does this mean the common law courts of each state are not free to change the law of nuisance? It changes the background principles at the time that you purchased.
c.	Why does Scalia thinks the courts should be allowed to create new nuisance law but the legislature itself can’t create new nuisance-like regulations? The idea is that legislatures, being majoritarian, will seek out people to impose costs on and the courts won’t.
•	Suggestion about only applying prospectively. But what about a hog farm raiser who developed one of these processing plants, then started to create a nuisance?
•	Legislation as protecting builders from themselves. The statute was designed to protect the owners of beachfront property themselves. It isn’t necessarily saying that Lucas is imposing costs on other people. It’s really saying that Lucas and his successors in title are short-sighted. Barrier islands erode and you’re setting yourself up for a catastrophe. If we tell you that you can’t build, you lose some money. But if you build there, you will lose even more money – the legislature is protecting the builder from himself.
a.	Is it legitimate for the legislature to say that it’s such a stupid investment that you can’t make it?