ACQUISITION OF PROPERTY BY CAPTURE

ACQUISITION BY CAPTURE
1. Pierson v. Post: Notes 3&4, pp14-16
2. Ghen v. Rich: Notes, pp 26-31
3. Keeble v. Hickeringill: Notes & Problems, pp 31-37
BASICS ON PROPERTY LAW: Property Law is State Law
Why do judges provide written decisions? The reasoning in a case helps to provide order in society.
Provides consistency/fairness
Provides predictability
Establishes confidence in legal system
Precedence: The court looks to precedence in making a judgment. Ideally, the court would like to have a case thats
similar in the same jurisdiction & same level of court.
Precedence serves as a persuasive authority b/c helps to give a better sense of what should be followed,
what party to support and rule in favor of.
Lower Cts v. Higher Cts: Lower courts are bound to use the rule of law used by the higher court.
The higher court however does not have to use the same rule of law as the lower court, but can choose to
use it as guidance.
Stari Decisis principle of the court to stand by precedent in general. Only if circumstances have changed
considerably should you also change the rule.
Pierson v. Post p 19 - Possession(Occupancy)
P Post (tried to kill fox but was intercepted)
D Pierson (killed fox)
RULE: Accepts the Rule of Capture
Mere pursuit does not constitute occupancy (occupancy & possession are synonymous).
Must have actual possession
First in time principle is not satisfactory
Dissent: Accepts the first in time principle
Property in wild animals may be acquired without bodily touch, provided the pursuer be within reach, or have a
reasonable prospect of taking, what he has thus discovered an intention of converting to his own use.
POLICY: Livingston wants to promote hunting and the killing of foxes and in essence believes that foxes are better
dead. Therefore he adopted the rule that parallels that idea.

Livingston places emphasis on adhering to the local customs in that area

Rewards those who put time and effort

** Important to realize that the majority and the dissent both provide policy justifications for advancing their
particular rule. Policy justifications are crucial in determining which way to rule a case.
Elements of Occupancy: (p 21) - Pursuit does not constitute occupancy, however the following do:
Depriving the animal of its natural liberty
The purpose of pursuit is to keep the animal for his use
Mortal wounding
Rule of Capture The one who captures it, owns it. The idea is in Pierson v. Post
POLICY: Applies to all industries (hunting, whaling) and encourages industries to invent more efficient
(using better technology and faster vessels) ways to capture. But does the rule of capture adopted by the
majority then lead to over-hunting and over-fishing?
Occupancy Theory & Principle of First in Time (Constructive Possessesion)
The notion that being first somehow justifies ownership rights. Locke says that what makes the first in time
principle work is the law of nature which assumes that when someone owns something, it is theirs, and it cant just
be taken away.

POLICY provides a way for judges to extend the rule

Lockes Labor Theory Believed in First in Time Principle Rules/Policy???
Everyone has property in their own person
Labor creates value; Cultiviation creates value
Ghen v. Rich - p. 26 - Custom
Rule of Law: Actual physical possession is not necessary to vest property rights.
Rationale: Court adheres to custom, and not the finders, keepers rule.
Industry has sustained this rule because it has proven to work. The industry would cease under a rule of
finders, keepers, b/c it prevents the whalers from enjoying the fruits of their labor. The fisherman does all
that he can do in killing the whale to make it his own, therefore it should be sustained as his property.
If the court ruled for Rich, and whalers such as Ghen realized that others could just come in and take away
the whale they worked so hard to kill, it takes away the incentive to go after the whale in the first place, and
this in turn hurts the industry overall.
When should the rule be set according to custom?
The custom affects the entire industry
Provides a sense of predictability/certainty
The rule has been accepted for a long time
If a rule has been in place for a long time, it is because it has proven to work.
It is limited in its application (applies only to the whaling industry)
Should only have a rule that is consistent with the customs, when everyone in that area is familiar with
that particular custom. Cannot apply the rule to just anyone b/c they have not consented.
Can apply a rule for the whaling industry that has been custom for whalers only to whalers.
Reasoning behind the rule: Understanding the reasoning behind a rule, helps to get rid of the ambiguity behind the
rule itself. When determining if something satisfies the element in a test, it helps to look back at the purpose of the
test.
Applying Custom in Ghen v. Rich & not Pierson v. Post:
Applying the custom in Ghen v. Rich is necessary, in order for the whaling industry to flourish. Customs can be
applied to rules, when those custom work in that particular community. But customs may not coincide with the
broader societal system, and In those cases the court should not apply custom.
For instance, the customs of hunters might interfere with others ideas/perspectives. A rule
consistent with hunters customs would not be appropriate, because it does not take into account
the harmful effects of their acts on other people (externalities effects on other people).
Should follow the custom when the social gains of the people is associated with the custom.This is why the court
chose to follow the custom in Ghen v. Rich but not in Pierson v. Post. Following the custom in Ghen v. Rich does
not result in any negative externalities.

Keeble v. Hickeringill - p. 31
(This case differs from the previous cases in that the ducks were frightened off rather than captured by a competitor
of the P)
P Keeble (owned decoy pond to attract other ducks)
D Hickeringill (frightened away ducks by firing gun)
Rule: Interference w/livelihood trade - he that hinders another in his trade or livelihood is liable to an action
for so hindering them
HYPO: Suppose X is an avid hunter who tracks down a deer on open hunting land. The deer is in very close range
and just as X is about to shoot it, another hunter, Y, appears and does so. Who gets the deer?
- Using the rule in Pierson v. Post, Y should prevail b/c Y obtained actual possession by killing and
taking the animal.
- Based on the first in time principle, X should win. X had constructive possession by depriving the
animal of its natural liberty, and was certain to take the animal. It was not actual possession but the
situation allows us to assume he possessed it.
Above HYPO demonstrate Variance in what possession means:
The legal conclusion of possession depends on the courts purpose. In Pierson v. Post, determining who had
possession is essential to the outcome of the case. Whoever has possession prevails, but the question to the court is
whether possession is constituted by actual, physical possession or if constructive possession is enough.
The court in choosing a rule to resolve a dispute considers and focuses on public policy rather than in simply
resolving the dispute at hand.
- Possession is used to encapsulate the rule of law that the court wants to advocate. The court will choose
a rule that advances a certain policy, by what they think it will accomplish in society. For instance,
they can choose a rule that minimizes disputes, increases income equality or one that promotes the killing
of foxes.
** Where precedence is not clear, as in Pierson v. Post, the court has to decide whether that thing (in this
case, possession) occurred by a party based on the public policy that the court might want to enforce.
** So, the analysis here is not whether Post had possession but rather if Post having possession furthers
a certain policy than will a rule that Post had no possession!
Ownership v. Possession:
Difference between ownership & possession: It is hard to establish ownership in a legal argument. Suppose our legal
system was to way we will protect you if you have ownership. The protection would be difficult to get since it is so
hard to prove ownership. Therefore, the legal system makes it easier by protecting for possession, title, etc.
Components of a Rule:
To decide this or any issue, the simplest, most efficient solution is best.
Equitable - Meet expectations, Least risk involved
Deters Conflicts/Misbehavior
Enforceable/Administerability
Conistency/Predictibility
Promotes Public Interest
Limits Externalities Economic efficiency
**Have to apply the rule that has the majority of these components. This is a very typical structure for analysis in
property law.

 CAPTURE & ORIGINS OF PRIVATE PROPERTY: INTRO TO EXTERNALITIES

Notes, Qs & Probs, pp 37-41
Demsetz, Toward a Theory of Property Rights pp 41-48; Yale Law Journal-Property in Land
Note, Extenalities pp48-52
Notes & Problems, pp 53-59
RULE OF CAPTURE & OTHER FUGITIVE SOURCES
Analogies to the capture of wild animals show up when courts have to deal with some fugitive resource that is
being reduced to property for the first time. (e.g) Oil & Gas, Water
OIL & GAS: Assume the Rule of Capture is applied here where the one who gets to the oil & gas first,
possesses it. (first in time principle)
Such a rule can result in competition and essentially lead to an overproduction of oil & an
overinvestment in oil wells because in an effort to get the most oil out of the ground quickest, each
side will build more oil wells.
The issue with OIL & GAS is how far property in land extends beneath the ground. In other words, who owns the oil
underneath your land and if an oil deposit extends beneath the property of several countries, how do you determine
how much of the oil is one sides as opposed to the others and what constitutes trespass on the others property.
Rule of Capture & Fugitive Sources/First in Time principle
First In Time principle leads to overconsumption of the resource. As a result, the govt tries to control
the overconsumption by
- Regulations
- Taxing the Resource, Imposing a Charge
Initially, we try to apply the Rule of Capture to other resources. However, we see that applying such logic is
absurd. It causes Problems..This leads into Demsetz.
PROPERTY RIGHTS

DEMSETZ: THEORY OF PROPERTY RIGHTS Your Actions Impacting Others

Deals with the Functional Aspect of Property: Demsetz discusses what causes a society to reallocate property rights.
Societies adopt new property regimes when some external shock alters the costs/benefits of the existing regime such
that it become less efficient that the one that replaces it. Demsetz says that the allocation of property rights is a
precondition for the efficient functioning of markets. The only criticism of this is that Demsetz does not specify how
this transition is to occur & the existence of such a mechanism is not obvious because the transition is likely to be
costly.
Externality: Cost/benefit of one persons activity on others which that person does not bear.
- Externalities come into play when.X makes a decision about how resources should be allocated
w/o taking into account all of the effects his actions may have. B/c the effect does not affect that
person, they do not take into account.
- Externalities are not always negative- (e.g.)- neighbors nice house drives up your property value
Internalization: Taking the costs/externalities within yourself.
- Private property helps to achieve this because as you are the only owner of a particular property, the
costs of your actions tend to be bear mostly on yourself and as a result you are more careful about
what you do since the effects of what you do impact you directly. In communal property, the effects
of your actions are borne by the others who also own the property.
Communal Property: A right which can be exercised by all member of the community.
- (e.g.) library, park, open grazing land, sidewalk
Private Ownership: Community recognizes the right of the owner to exclude others from using it.
- (e.g.) home, car, body, reputation (not necessarily tangible)
State Ownership: The state may exclude anyone from the use of a right as long as the state follows accepted
procedures as to who cant use property.

Explanation of Externalities:
People act in ways that make themselves better off. People way the costs and benefits to themselves of
performing a particular function. They take into consideration their own welfare, and not those of others when
considering whether or not they should do something. Ideally, we would want an individual to weigh the cost to
society and the benefit to society (not just themselves) when decididing to do something. The different factors
that you do not consider when evaluating the effects on yourself as opposed the effects on society are the
EXTERNALITIES.
COST TO ME < BENEFIT TO ME (This is what we consider & want when we do something)
COST TO SOCIETY < BENEFIT TO SOCIETY (Ideally, this is what we want people to consider b/c
it creates the best result for society)
So.if we could make people consider along with their own costs, the costs to others, we would essentially be
making them internalize the externalities, which theoretically would lead to a more efficient economy
COST TO ME
+
COST TO OTHERS
(externalities)

<

BENEFIT TO ME
+
BENEFIT TO OTHERS
(externalities)

COST
TO
<
SOCIETY

BENEFIT
TO
SOCIETY

What makes the two equal are the EXTERNALITIES.

Internalizing the Externalities & The Costs Associated With It:
Demsetz theorizes that in order to get people to consider the externalities in their own decision making,
we have to make these costs to others and benefits to others, their own costs/benefits
(internalization). To internalize, you take into consideration the externalities.
Costs of Internalizing: (Costs of creating/exchanging property rights)
- Transaction costs Costs that are incurred in internalizing externalities; Increase as there are more
property owners
- Meeting, Negotiating
- Cost associated with defining property rights
- Cost of making an offer and formalizing an agreement
- Costs associated with monitoring/compliance
- Enforcement costs
- Information costs costs money to research, obtain information
Internalize only when the costs of the externalities outweighs the benefits of internalizing. Example:
Hunting Territory - Everyone hunts on an open piece of land. This was communal property until the
fur trade came along. Why didnt private property evolve earlier? b/c there was no need for it.
- Initially the externalities from hunting were minimal. (Minimal as compared to what it would cost by
internalizing through the creation of private property.) But as the fur trade developed, over hunting was
abundant. The negative effects of one person over hunting to get more and more fur, are borne by everybody
that owns the property. At the point, it became more beneficial to internalize (create private property) even in
light of the transaction costs that were associated with it.
Fundamental Purpose of the Law: To Reduce Transaction Costs
Tort System Forces people to internalize externalities from their activities. They are forced to take
into consideration the effects of their hurting someone, not just to themselves but to others because
they know they will be punished.
Contract Law The law that governs the enforceability of transactions, otherwise known as
transaction costs!
** The fundamental purpose of lawyers then is to help implement the reduction of these transaction costs.
Lawyers are in a sense Transaction Cost Engineers

Private Property:
Private property emerged when the benefits of internalizing began to significantly outweigh the cost incurred by
externalities.
- From the hunting territory example, private property emerged when the externalities as a result of
over hunting became too high. Members of the community found it worthwhile, in spite of high
transaction costs, to create private property from communal property.
How does private property internalize the externalities?
1. Bear the negative effects of your own actions: Private property forces one to consider the costs/benefits of
what you do; in communal property, you dont because you know that others bear the cost of your actions.
2. Reduces the number of people you have to deal with in moderate sized externalities: In a communal property
situation, have to confer with everyone involved and if one disagrees, the entire deal falls apart. By creating
exclusive rights, creates a lower transaction cost (b/c less people are dealt with) thereby making it easier to
internalize externalities.
Demsetz Hypothesis:
Property rights are created/modified as it becomes economical to internalize externalities and private property
rights are a way to do this.
Demsetz says this is also how the law works. When property rights change, the legal rule changes
accordingly. The change happens gradually through common law. Courts automatically start to adopt rules
that internalize externalities become it become the more efficient which is what society values.
Hypo: If an action by A gives A huge benefits but incurs a small negative effect on B, should A still be
allowed to perform the action?
- Society would probably say that A will be allowed to perform the action but only if it compensates B
for the loss it suffers as a result of As action. THIS IS INTERNALIZING THE EXTERNALITY

** By compensating B, internalizes the externality.

This is generally an efficient solution. It only becomes a problem when the people who represent A and B
are always the same people over and over. In such case the A people always advance while the B people
remain stagnant.
YALE LAW JOURNAL: Property in Land
Communal Property failures: Several examples where by transforming communal property situations to
private property living resulted in a productivity increase of nearly 5x & 10x: Jamestown, Plymouth, Salt Lake
City
- The colonists in each situation originally thought that by having communal property, you share the
benefits of your work as well as make yourself more averse to risks by spreading them among
everyone. However, because one persons hard work benefits everyone, people become lazy. They
know they can benefit from someone else working hard without having to do work themselves. In
essence, the communal system internalized the costs, and externalized the benefits. Such a
communal system works only under a powerful leader who is able to effectively monitor and enforce
that work is being performed. But because such monitoring, enforcing are costly, most communal
communities just end up failing; becomes easier with smaller groups.
If we can instill these characteristics of taking others into consideration in our individual decision making
process, we would greatly reduce these enforcement/monitoring/transaction costs. By maintaining a
certain level of social morals in society, the costs of internalization become significantly lower.
- Externalities are internalized by creating rules and enforcing laws. But this comes at a high cost. If we can
get people to do this willingly (increase their sense of morality), the transaction costs are reduced & becomes
easier to internalize the externalities. This allows the economy to function more efficiently.
COASE THEOREM:

The Coase Theorem essentially says that if property rights are well defined and transaction costs are very
low, then it may be possible for the parties involved in an externality situation to reach an efficient
solution by bargaining among themselves.
- Hypo: There is a pond (essentially a swamp) on your neighbors land that drops your property value by
$1000. The swamp also smells and creates lots of mosquitoes in your yard. Should the neighbors be liable for
that money?
-Suppose the neighbors are liable: What costs/benefits do they incur by draining or keeping it.
Keep Swamp
-1000 (pay to me)
TOTAL

---------------- 1000

Drain
-2000 (cost of draining)
+1500 (value of benefits)
--------500

** It is more cost efficient to drain the swamp. Therefore, if you instill a rule that holds the neighbors liable,
you are forcing them to internalize the externality & take into consideration the effects of their creation on
others.
- Suppose the court does not impose liability. The neighbors then wont drain the swamp. But eventually what
happens is because you want the swamp to be drained so much, you enter into a bargain with the neighbor and
offer money to have the swamp drained. Because the cost to you of having the swamp there is $1000, you
would be able to pay anything upto that $1000 to your neighbor to have them drain the swamp. The neighbors
then drain the swamp.
* In both cases, we eventually end up with the same result. The neighbors in one way or another take into
consideration the externalities. But in this case, it is a voluntary action by the neighbors.
Stated alternatively, When property rights are clear and enforceable, when all economic agents have full
information, and when transaction costs are low, there is no need for government intervention to correct
externalities, because the economic agents can bargain to achieve an optimal allocation of resources.
Further, the ability of the economic agents to achieve the optimal allocation does not depend on which
economic agent is given the property rights.
- The law is important only because transaction costs are so high. In the absence of transaction costs, the law
would be irrelevant.
**The Coase Theorem makes us think of how we should design legal rules. The lower the transaction costs,
the easier it is for parties to negotiate.
- Consider the hypo above. Suppose the neighbor doesnt trust the person will pay him to drain the swamp. In
that case, they would have to higher lawyer which in turn incurs transaction costs. This extra cost chnges what
benefit each will ger by draining the swamp b/c they most now include lawyers fees (transaction costs) into
their cost/benefit analysis. The neighbors may no longer have a benefit by draining the swamp and will choose
not to. As a result, the most efficient outcome does not result because of the additional cost of lawyers fees.
- If the transaction cost is too high, the transaction wont result that internalizes the externalities in the most
efficient outcome. It creates a situated where you do not get the most efficient outcome.
PROPERTY RIGHTS & RESOURCE ALLOCATION:
Hypo: What solution is there to the limited parking spots at school.
- A possible solution is creating parking meters so students would only remain in a parking spot for only
the minimum time necessary; or could auction off spaces (students in turn would probably begin to
rent the space out to other students for a fraction of the cost)
- How does Demsetz relate to this situation?
** The above solutions function to make personal cost of the parking spots closer to the social cost. It
forces you the individuals to take into consideration the externalities. (internalizes the externality!)

Footnote 31, p 55 is relevant: discusses how sometimes the govt, regulations, in an attempt to correct
resource misallocation, can themselves fail. This can happen when the govt regulations impose a cost
on too small a group of people, however the benefits of those regulations extend to the entire public.
How do special interest groups & transaction costs relate? The footnote points to the example of how
the US Forest Service has regulated too little, by favoring special interest groups that represent
agriculture and the timber/cattle industries.

PERCEPTION OF PROPERTY RIGHTS: SCHOOLS OF THOUGHT

1) Natural Rights Approach - It is the natural law that gives you a right to property by expending energy into it.
One who puts the labor into it owns it.
Today, society does not follow natural rights as much. Rather, property rights are created & enforced by the
state. W/o government, there would be no property rights. Generally, the only modern day reference to
Natural Rights is when you hear individuals arguing against government intervention in land.
Constitution - Govt can take your property but must provide reasonable compensation. There are cases
where the govt doesnt take the individuals property, however, it deprives the owner of basically any use of
property. In such a case, the govt has essentially taken the property.
This has evolved into people arguing for compensation if the government imposes any type of
restriction on private property. The govt in turn acted by putting zoning laws in place.
Zoning laws and other such restrictions, in a sense, evolved from Natural Rights Arguments.
2) Utlilitarian Arguments The idea that the way you achieve value maximization is by internalizing the
externalities.
1) Efficiency Arguments All rules relate to economic efficiency as their goal.
(e.g) - Livingstons Rule in Pierson v. Post promotes the killing of foxes which he believes is
ultimately best for society.
2) Private property is important in securing liberty from govt action. The idea that you cant argue against
govt and have enough of a stand unless you have some security in property. This is what entices the
government to listen to you.
3) Property leads people to have more of an interest in whats best for society because they have an actual
stake in it.
3) Identity/Personality Theory of Property people invest themselves emotionally in property. They create and
protect a sense of self identity in their property (have an individual value for it)
(e.g.) - The government may compensate you for taking your property however that may not
suffice b/c sometimes property has a unique value other than money.
4) NORMATIVE ECONOMICS v. POSITIVE ECONOMICS
(what should be)
(what the reality is)
** Economics as a positive tool is very different from economics as a normative tool. Demsetz serves as the
core to thinking about Economic Issues/Property Law
Normative Economics Takes the facts and decides, therefore this is what the outcome should be.
- An important social goal behind normative economic theory is value maximization and wealth
maximization
(e.g.) The individual will select a rule that maximizes efficiency/wealth. Wealth maximization
and value maximization become important decision-making criteria.
Positive Economics Analytical tool that describes the situation in a way that gives insight into it. It
expands the understanding of the likely effects of the rule and helps in constructing arguments.
- The individual does not necessarily care how efficient a solution might be overall. Rather, they
would argue that because a certain decision may have bad effects on one group of people, it should
not be adopted. Uneven allocation
(e.g.) Even though the rule maybe efficient, it should not be adopted b/c it hurts some people.
Hypo: Parking Situation - Referring back to the hypo on the shortage of parking spots.
- Positive Economics Charging hourly will lead to people driving less
- Normative Economics Charging hourly will lead to people driving lesstherefore it is a bad rule
because the effect on poor students will be worse.

 ACQUISITION BY CREATION
Smith v. Chanel
INS v. Associated Press
Cheney Bros v. Doris Silk
Right to Include/Right to Exclude, pp 99-105
Property rights as they apply to ideas & information is an issue for the legislature to consider
- Absence of property rights lowers production
- Recognition of prop rights creates monopoly power
Trademarks words/symbols indicating source of product or service; serves the consumers by letting
them know who the suppliers are of their goods
Patents meant for novel, useful, nonobvious processes/products
- In getting a patent, there is a tradeoff that is made. The creator of the good has to make it public but
in return gets protection from government. But by the good becoming public, others can try to
improve it and sell it in their own market.
Copyrights protect expression of ideas (not the ideas themselves)
-For instance, in the 1920s the court did not allow copyrights of fabric designs b/c it believed that
cloth designs only had a functional purpose. Today, anything expressive can be copyrighted.
DEMSETZ:
**Copyrights & Patents internalize the externalities allow a person who put work into a product to also get the
benefits; otherwise he would bear all the cost, and everyone else would get the benefits. Provides an incentive for
companies to create products/better products
**On the other hand, w/o patent protection, companies would internalize all the cost and externalize the benefits,
thus taking away the inventive to make inventions.
** Parties only engage in an activity if they can internalize the externality copyrights/patents accomplish this.
Smith v. Chanel

Concept: Trademark, Unfair Competition

P Chanel, Inc
D Smith (imitated fragrance)
Issue: Whether the D could imitate & reference the Ps product in advertising his own similar product.
Rule: A large expenditure of money does not in itself create legally protectable rights. Appelles are not
entitled to monopolize the publics desire for the unpatented product, even though they themselves created
that desire at great effort & expense.
POLICY: The Ds advertising could not be condemned b/c the common law of unfair competition because
It did not contain misrepresentations or create a reasonable likelihood that purchasers would be confused as to
the source, identity, or sponsorship of appellants' product.
Also, the owners' reputation was not directly at stake because the advertisement made it clear that the product
the seller offered was his own, and if it proved to be inferior, the seller and not the owners would bear the
burden of consumer disapproval.
Imitation is the lifeblood of competition

International News Service v. Associated Press p 60 - Acquisition by Creation/Prop Rights of News

P Associated Press
D International News Service (copied APs news)
Rule: News that has been acquired as a result of organization and the expenditure of labor, skill and money
cannot be taken by a competitor, passed off as ones own and used for commercial use.
The defendant is a competitor of the plaintiffs and it is using the plaintiffs news stories for its own profit. Plaintiff
put in a lot of labor to produce these news stories and the defendant is trying to reap what it has not sown. The key
is that the parties are competitors
POLICY: (p63 half way down)
Granting individuals exclusive rights to the information they gather conflicts with other rights in a way that
granting exclusive rights to property does not.
Competition depends on Imitation: this is how we have advancement in technology. Competition fuels the
invention of better, more technologically advanced devices. However, this case is different.
The public is better off as long as the freedom to imitate does not destroy the incentive for people to come
up with new devices. APs copying of news, does this.
Fruits of Labor & Interference w/Trade:
D is not burdened with the xpense of getting the info on their own; doesnt do any of the work, just
interferes precisely at the time where profit is to be reaped.

Cheney Brothers v. Doris Silk Corp. p 64 - Ct chooses not to protect P

P - Doris Silk Corp (makes fabric w/designs)
D- Cheney Brothers (copied Ps design)
Doris Silk is asking injunctive relief for protection of their designs being copied during the season.
RULE: Preventing others from imitating goods sets up a monopoly and gives one person more power over his
colleagues in the field.
DEMSETZ: P bears all the cost, while the benefits are externalized to everyone else
POLICY:
P idea of coming up with the good is what is protected, not the good itself Fruits of your labor are
protected
If the court decided to protect fabric for one season during which it is popular, puts the court in a position
where in future cases it would have to grant protection to other manufacturers for as long as needed
creates monopolies.
Imitation helps create competition which is good for the economy - creates market efficiency, makes
people make better goods Promotes innovation
Although the ruling may seem unfair to the individual companies, on a broader scale, it is better for the industry as a
whole because it promotes market efficiency through competition.
The P is asking for a radical change; If the court offers protection to the P here, it would have to provide
similar protection to everyone else in the industry.
Even though the P had S. Ct precedence, the Court still rules against the P. Although the INS case and Doris
Silk are nearly indistinguishable, the court doesnt apply the rule in INS here because it feels that the S. Ct in INS
did not mean for such a broad interpretation of the rule.

10

This is a question for the legislature to address; not a judicial question.

THE RIGHT TO INCLUDE/EXCLUDE

(These cases dont necessarily belong in this unit but are here for their prinicipal ideas)
Jacque v. Steenberg Homes, Inc p 100
P Jacque (owns land)
D Steenberg Homes Inc (trespasses across Ps land)
Policy: Although there was no damage as a result of the trespass, the court feels it must still award punitive damages
as a matter of principal. Awarding nominal damages (in name only) does nothing to prevent trespassers and
protect landowners right to include/exclude others from their property.
**When landowners are confident that their rights will be protected, less likely to take matters into their
own hands you dont want people to think that the govt cant help them
Rule: Right to Include/Exclude has no practical meaning unless that right is protected by the state.
State v. Shack p101 - Property righst are not exclusive!! Limitation on Property Rights
P State
D Shack
Rule: Property rights are not absolute. One should not use his property so as to injure others.
Title to real property cannot include dominion over the destiny of persons the owner permits to come upon
the premises.
POLICY:
Property rights are not absolute cannot be used to injure others
When landowners are confident that their rights will be protected, they are less likely to take matters into
their own hands we dont want people to think that the govt cant help them
Property Rights in Bodies: (p 95-98)

State v. Shack & Freedom of Contract:

What if the farmer in State v. Shack paid the migrant workers if they agreed not to have visitors?
Should the agreement be enforceable? Should the migrant workers be allowed to contract away their rights?
Foundation for Contract Law: Voluntary transactions are allowed, based on the idea that people are the best judges
of their own welfare.
But when we suspect the ability of the people to make the decision to judge the value of the rights they are
trading away we cannot enforce the contracts they make. Rather, the law makes the decision for that
person under the belief that the govt is a better judge of the persons welfare over that person himself.
(e.g) this is why young children cannot enter into contracts.
In this case, the migrant workers are not socially educated & are illiterate.

11

Limitations on Freedom of Contract Contracts are not enforceable when there is an unequal bargaining power
Here, it is not a difference of wealth, but a difference of knowledge & the ability to interpret information.
Premise Behind Freedom of Contract:
1) Person enters into contract when they feel they will be better off
2) Capable of Judgment of their own welfare

Parentalism: The govt limits the freedom of power/contract when it feels the person cant make judgment of
welfare for themselves. Govt in a sense, serves as the parent.
Self-Parentalism: Voluntarily choose to have the government restrict us from what we may choose.

*** OVERVIEW ***

Property concerns relationships among people with respect to things. It is not a relationship between a person
and an object!
The subject matter of the case from here on relates to:
WHAT ARE THE LIMITATIONS INHERENT IN VARIOUS PROPERTY RIGHTS??
Covered so far
How Ownership arises in property that has previously been owned.
Natural Rights Theory
Lockes Labor Theory
Determination of First Ownership
Explored Fundamental Questions of the Function of Property Rights

Property encourages Efficiency

Private Property Advantages to Trade

Property Conservation for Future Use

Peace & Order

Externalities

As a Social Institution helps to efficiently protect individual

rights

Resolves Individual Disputes

Political Purpose
_____________________________________________________________________________________________

ACQUISITION BY FIND
Subsequent Possession: Disputes in Property over things previously owned

Trover monetary value of the possession taken

Replevin Return of the actual good taken

Armory v. Delamirie

Concept: BFP

Rule: The title of the finder is good as against the whole world but the true owner.
First in Time, Ownership is relative:
-The law does not protect the idea of ownership b/c proof of ownership is difficult to prove. Therefore, the court
only requires proof of prior possession.

12

-Finder prevails against all claims of ownership, except against the true owner or any previous possessors.
With this rule in mind consider
1. In a suit b/w the sweep and the true owner, the owner wins.
2. In a suit b/w the owner and Delamirie, Delamirie wins.
- b/c Delamirie cannot be punished for the same crime twice. He has already been punished and paid trover to
the sweep
Wrongdoer, having once paid full damages to bailee, has answer to any action by the bailor
APPORTIONING THE LOSS BETWEEN TWO INNOCENT PEOPLE:
A steals a good and sells it to B. True owner tries to claim good as it was originally his. Who should get it?
The court faces a challenge where they dont want to protect the thief but at the same time they dont want an
innocent person to lose.

ACQUISITION BY PURCHASE: Bona Fide Purchaser Handout

INCLUDE BASIC NOTES/SUMMARY ON BFP & HANDOUT

Bailments:
Rights against 3rd parties: A bailee is entitled to full damages resulting from wrongdoing aof a 3rd party
Liable to the bailor: If the bailee recovers, they are liable to the bailor
Bailor cant recover from the 3rd party, rather they are bound by the acts of the agent
Involuntary Bailments: recovery by bailor from the 3rd party may be allowed to prevent injustice
-BFP
-Voidable title
-Entrusting
Miller v. Race
P Miller (received bank note that was stolen from mail)
D Race (Bank Clerk)
Rule: When both parties are innocent, assign the loss to the least-cost avoider.
Policy: It is easier to put the risk on the true owner rather than socially impact trade. Therefore the BFP benefits,
while the true owner bears the loss in a situation where two innocent parties are involved.
HYPO:
Using the rule from Miller v. Race that the loss should be apportioned to the one who could have avoided the
problem at the least costconsider the following Hypothetical with various scenarios.
Buyer sees painting in an art gallery. He buys the painting but the art gallery sold it without actually owning it. Who
should bear the loss?
The buyer doesnt have as easy an opportunity to verify ownership as the art gallery would, therefore the
gallery should bear the loss and the buyer should be allowed to keep the painting.
** If the buyer knows the item is stolen, he is no longer a BFP and therefore his right to ownership is not protected
Painting was stolen and the thief sells it someone who sells it to someone who sells it to an art gallery. The art
gallery in turn sells it to another buyer. In a dispute between the true owner & the buyer, who gets the painting?

13

Suppose we place the burden on the buyer. If that was the case, every buyer, before he purchased a good
would have to verify that the good was not stolen. Such an obligation would put a hamper on the art market
by increasing transaction costs.

An owner of a painting lends it to the art gallery to clean it and refurbish it. The gallery instead takes it and sells it.
Who has the right to the paining the buyer or the true owner?
Buyer, he is the BFP (Bona Fide Purchaser)

Least-Cost Avoider Principle:

The principle states that the burden of the loss should be placed on the person who could have avoided the loss at the
least cost.
But is the goal of policy to avoid loss at the lowest cost? Does such an idea seem practical?
HYPO: We impose a law where the speed limit is set at 15 mph, to avoid accidents. Is this a good rule?
No, because the costs/inconveniences created by the rule, outweigh the benefits. People would rather bear
an increased risk of death spread out among the population in exchange for convenience for the majority.
Cost-Benefit Analysis: The cost of eliminating the harm does not offset that the benefits that come from
eliminating it.
** Individuals perform cost-benefit analysis in their own decision making; the legislature does the same.
HYPO: HARM = $1000
Cost to each of avoiding the harm:
A = $1500
B = $2000
** In this case, it doesnt make sense to take the precaution and avoid the harm. Neither party will do it as the cost
of preventing the harm exceeds the cost of the harm itself.
What if:
A = $500
B = $2000
** Whether any precaution is taken voluntarily, depends on who will be affected by the harm. But if the burden is
placed on the party that has to spend the least amount, that party will then choose to take the precaution, thereby
creating the most efficient outcome.
**This demonstrates the reasoning behind the principle of putting the loss on the least cost avoider.
Courts & The Least-Cost Avoider Principle:
How does the court determine which party can avoid the harm at the lowest cost? This is a difficult question for the
court to determine, and in the end, the process of trying to answer the question only results in high litigation/judicial
costs.
Therefore, legislation/court in an effort to find a more practical way to apply this principle, creates a set of
sub-rules under this general rule/principle.
The result is that the rule generally creates the correct result. The tradeoff is that although the result may
occasionally not be correct, the court achieves resolving the disputes at lower litigation costs.
U.C.C. 2-403: (p 167)
1) 2-403 is an expression of the general principle of the least cost avoiderbut it applies to a certain set of facts.
The BFP has title over essentially everyone else.
2) 2-403 helps to establish Certainty/Security of Title: There is a need for the BFP to have assurance of what they
are buying; Otherwise it imposes a high transaction cost on buyers, and people would not be comfortable to
purchase goods.

14

Security of title is an essential element of life. It makes life easier, more organized. The greater the
uncertainty to title, harder to organize your life.

15

 ADVERSE POSSESSION
A person who is in possession of property can have possession against everyone except for those who may have a
better claim/title to the land (generally the true owner).
The owner however is subject to an SOL (10 yrs) in which he may claim his property from the AP.
Once the SOL has run, the owner, although he may have title, no longer has possession of the land.
Rather, the law affirmatively vests title (creates a new title) for the AP. The law relates the title back to when the
AP first possessed the property.
POLICY: Rationale behind the idea of AP: Earning & Sleeping Theory
1. Earning Theory A person owns the property by making significant productive use of the property.
Rewards those who have put work into a piece of land by giving them possession of it.
2. Sleeping Theory Idea of penalizing an owner who sleeps on his rights; fails to enforce his right to
property, maintaining it and preventing other from using it; the idea behind this is that if an individual does
not protect their own rights, the govt wont help protect those rights either.
3. Security of Title AP provides a certainty to title. It provides a clear cut idea of ownership of a peace of
property. This is discussed by Oliver Wendell Holmes.
Societal Interest/Policy of AP:
The Statute of Limitations for AP serves to provide society/individuals
1. Security gives people a sense of security after a period of time that they will not be litigated for adversely
possessing a piece of land.
2. Justice By waiting too long to litigate, justice may not even be served. As time goes on, evidence
becomes stale and memories fade. The idea of letting bygones be bygones
3. Certainty in Title This goes with the idea of security. Want people to have security with a feeling of
certainty in title.
Without certainty, people wont be able to plan, invest and order their affairs. If there is
uncertainty in title, people will be reluctant to purchase plots of land and develop it, and
subsequently the resources to waste.
** Certainty of Title is the primary goal of Adverse Possession

Laches Serves as an equitable defense to replevin. Unconstitutional delay in bringing a lawsuit; the delay
prejudices someone. As a result, the court does not allow the lawsuit to be brought.
(e.g.) you see a person building a house on a portion of your property. But you dont do
anything, rather you wait until the individual is finished building the house and then bring an
action against them for AP. Even if the SOL has not run, the ct may dismiss the COA under
Laches.

Elements/Requirements of AP:
1. Actual & Exclusive Not being shared with the owner or general public/ON THE LAND
2. Open & Notorious APs acts have to be ones that would reasonably notify (put on notice) an attentive
landowner that the AP is using the land.
- The use of the land cannot be secretive; must be visible to public - a very small encroachment
may not be good enough b/c it is unnoticeable to owner (Mannillo v. Gorski)
3. Adverse & Hostile AP must use the land as if he were the owner. If use of the land by the AP is
permissive by the true owner than it is not adverse possession.(Mannillo v. Gorski)
- Mistaken claim of title meets the hostile qualification
4. Continuous AP must use the land continuously through the statutory period. Requires a degree of
occupancy that the average owner would make of the particular type of property.
- Being at a summer home for month a year is continuous as long as AP exercises dominion of
control (Howard v. Kuntos)
- Tacking: Some courts allow an AP to tack the time she is in possession onto that of her
predecessor in interests period of AP as long as there is privity (voluntary transfer of possession
either by deed or just by intention of passing rights) between two APs.
And sometimes
5. Claim of Right Mental state
6. Color of Title AP is on land with a written document that purportedly gives the AP title. Some states
require color of title for AP of land; with color of title there is hostile possession

16

** Under the idea of Adverse Possession, the AP gets the land once the SOL has run; if the true owner
brings suit before SOL has run, then owner is entitled to retain title/possession of the land.
Manillo v. Gorski p147 - Adverse Possession
P Mannillo (owned plot of land next to D)
D Gorski (owner of piece of land)
Rule:
1) Any entry and possession for the required time which is
1. exclusive
2. continuous
3. uninterrupted
4. open and notorious
even though under mistaken claim of title/ is sufficient to support a claim of title by adverse possession
b/c meets the Hostile Requirement
2) Only where the true owner has actual knowledge thereof may it be said that the possession is open and
notorious. No presumption of knowledge arises from a minor encroachment along a common boundary.
Rationale:
Mental state of mind is not an issue in determining adverse possession as either way, the end result is the
same. Ds still lose b/c their possession was not open & notorious. Because the encroachment was so
small, only 15, Ps were not sufficiently put on notice by Ds, the AP, as is required by the rule.
Early common law rule was that: Anything built on the wrong land, whether in good faith or not became
propert of the landowner.
POLICY: Modern day rule as shown in MANILLO, helps the innocent improvers landowner can buy the
improvement; forcing a sale of the land from landowner to the improver

Mental State of Mind as a requirement for Adverse Possession:

The court in Mannillo v. Gorski evaluates 3 standards of Mental State for qualifying as an Adverse Possessor.
- Mental State of mind is a separate element of adverse possession that only some states require.
1.

Aggressive Trespasser/Maine Doctrine - Intended to claim land they didnt own; I knew I didnt own it
but I intended to make it mine.
2. Objective Standard/France Doctrine - State of mind is irrelevant; Once there is an entry of the land, the
owner has a COA
3. Good Faith Standard/Claim of Right Can acquire title as AP only if you claim in good faith that the land
is yours.
** It is important to clarify that the adverse/hostile requirement of AP is not related to a mental state of mind.
Rather, it is used to determine whether use of the land is permissive
Should Mental State of Mind Matter in Determining AP?
Depending on the goal/policy being furthered by Adverse Possession, we can determine if state of mind should play
any role in determining AP.
1. Goal is to protect those who are using the land productively (Earning Theory) state of mind is irrelevant
2. Goal is to reward people for moral behavior state of mind can become relevant.
3. Goal is to punish those who dont protect their rights (Sleeping Theory) state of mind is irrelevant.
4. Goal is to provide some sort of certainty of ownership (Quiet Title) state of mind irrelevant
** The court in Mannillo, as have many other states, rejects the Maine doctrine.
State of mind is very hard to determine making litigation costs even higher when that is a requirement.
Intent: Why does it matter whether the encroachment onto anothers land is intentional or not?
To answer this, we look to the economic implications
-Bilateral Monopolies

17

Mistaken Boundaries:
HYPO: A & B own adjacent lots. A erects a fence on what she mistakenly believes is the boundary of the land.
Rather, she has erected the fence 3 feet into Bs land. A acts as owner of the land for the entire statutory period and
as a result has acquired the land by adverse possession. B later finds out about the mistake and tells A. In order to
avoid a hassle, A tears down the fence and builds a new one on the correct boundary. 3 yrs. Later, A realizes she had
acquired the 3 feet of land that the fence overlapped, acquiring it by adverse possession and now sues B for the 3 ft
of land.What result?
- B wins. By A leaving the land and giving it back to B, A relinquished her right of adverse possession.
Boundary disputes can be solved under 3 Doctrines:
1) Doctrine of Agreed Boundaries Oral agreement to settle a dispute over boundaries is enforceable if the
parties have accepted the boundary line for a long period of time.
Statute of Frauds - In order to convey an interest in land, must be written, not oral
2) Doctrine of Acquiescence Long acquiescence (a shorter period than the SOL) is evidence of an
agreement b/w the parties fixing the boundary line.
3) Doctrine of Estoppel Comes into play when one neighbor makes representations about (or engages in
conduct that tends to indicate) the location of a common boundary, and the other neighbor changes her
position in reliance on the representation/conduct. The first neighbor is estopped to deny the validity of his
statements or acts.
(e.g) A developer promises the townspeople to plant 150 feet of trees as a boundary to a new
development if the residents agree not to attend a town meeting and reject the zoning. Residents
agree, however developer goes back on his promise.
- here, it prevents the landowner form building
Estoppel has also been applied to situations where one neighbor remains silent in the face of
expenditures by another that suggest the latters notion of the boundarys location.
Laches an unreasonable delay causing prejudice to the other side.
Color of Title:
If AP enters WITH color of title he can get constructive possession if
(1) Single parcel or tract of land
(2) Tract must be under single ownership
(3) No actual possession by another
Constructive Adverse Possession: (Extends the idea of possession)
Actual possession of a part of the land under color of title allows the adverse possessor to claim AP of the entire title
of land.
Underlying Assumptions:
1. The same owner must have title to the parcel of land referred to under constructive AP and AP
2. Property that you have actual possession of & have color of title over must be contiguous.
HYPO:
O owns the entire piece of land and has a house on a part of land. A acquires small box of
land by AP. Can A claim the entire plot of land under constructive AP?
No, b/c the elements of AP are not satisfied as to the entire parcel of land. As possession
is not exclusive. A only keeps the small portion of land it has acquired through adverse
possession but not the other portion b/c O is using that land.
Tacking & Privity:
Howard v. Kuntos (DRAW DIAGRAMS!!)

RT=Kuntos

P = Kuntos

P = Moyers

RT = Moyers

RT = Howard

P = Howard

18

RT = Howard
RT = Record Title
1932: McCalls

19xx: Millers

1959: Kuntos

RT = Moyers

P = Possession

** Kuntos - can tack on possession of predecessors

RULE: In Howard v. Kuntos, the court says tacking of AP is permitted if the successive occupants are in
privity (summer occupancy does not destroy the continuity)

Tacking - Adding on the years of possession of priors possessors to your own possession of the property to
satisfy the SOL required to gain AP
Buyer has the same rights as the previous owner
Privity Refers to a continuity in possession
there has to be a reasonable connection between successive occupants
voluntary transfer of property through possession/title
Trespassers DONT qualify for satisfying privity
POLICY: bars old claims; promotes consistency of results promotes alienability of land

ANALYSIS: A deed normally establishes privity, however the problem in Howard v. Kuntos is that the deed held
by the Kuntos is invalid.
BUT, the Kuntos dont need tacking to prevail in the case b/c they prior possessors of the property, the Millers
owned the property for more than 10 yrs - thereby acquiring the property by AP. The property became theirs to sell.
Limitations on Adverse Possession:
AP doesnt run against all parties or interests.
1. Parties (e.g) Government:
- The govt owns too much land. It is too much of a burden to place on the govt to require them to
monitor all of their land against trespassers.
- Land is owned for public interest

This is similar to the idea of sovereign immunity where people cannot sue the govt unless
there is a specific statute allowing it.
** From the idea that AP does not apply to the govt, it is important to realize that a public policy reason behing AP
may not be about the useful use of land. It is just about continuous use.
2.

3.

Interests (e.g) - Easement:

AP does not overcome someone who does not have a possessory interest in land. For example if
an individual has an easement (right to use the property for a specific period of time such as
driving across the property), the AP cant get the interest of the person who holds the easement.

Future Interest Descendants (children) of the AP dont have a possessory right to the land.

HYPO: Problem 1, pg. 160

1991 - A enters adversely upon Blackacre owned by O.
1998 B tells A to leave, and feeling threatened, A leaves
2001 Who owns Blackacre?
O owns the land, b/c there is no privity and A had relinquished its right to AP.
- B cannot tack on As years of possession b/c it forced A off the land (violates criteria for privity)
- If the dispute was b/w A & B, A can recover possession against B b/c he has a better right to property
- In 2008, the SOL will run and B can gain AP; A loses its right to a remedy against B

19

American Rule vs. English Rule:

American Rule requires privity - therefore, in 2001, O owns the property
English Rule doesnt require privity - B owns the property
Public Policy: Why allow Privity/Tacking??
Furthers certainty in title bars old claims
Promotes transferability/alienability of property property can be bought/sold
Consistency of results want purchasers to be able to get the same rights to property that predecessor
had
DOES IT MAKE SENSE TO REQUIRE PRIVITY? There is no right answer.Depends on the policy justifications
of AP
HYPO: Problem 2, pg 160:
1985
A enters adversely on Blackacre, owned by O
1986
O dies; leaves will devising Blackacre to B for life, remainder to C
2001
B dies w/o having ever entered Blackacre
Who Owns Blackacre in 2001?
Interests Created: B Life estate; C Remainder
B & C inherit the interests/obligations of prior owner; Successors take the same rights predecessors had
1995 A adversely possesses Blackacre
HYPO: Problem 3, pg 160
1986
O, owner of Blackacre dies leaving a will; Blackacre to B for life, remainder to C
1987
A adversely enters
2001
B dies
Who Owns Blackacre in 2001?
C owns Blackacre
The SOL is running against C as far as As adverse possession is concerned b/c successors get rights of
predecessors.
Distinguish between problems 2&3:
A entering adversely before vs. after O dies
OKeefe v. Snyder
OKeefe v. Snyder
S. Ct. of NJ, 1980
416 A.2d 862
p 163

Concept: Adverse Possession

P OKeefe (painter of paintings in dispute)

D - Snyder (current possessor of paintings, bought paintings from Frank)
Facts:
P sought to recover three paintings from D's gallery that she painted but were stolen from another gallery.
D is the BFP, had taken title of the paintings by AP, and that taction for replevin was barred by SOL
Question of when - SOL begins to run once all of the elements of AP are satisfied - here Snyders possession was
not open & notorious b/c the painting was hanging in his house
Rule: The court held that the discovery rule applied in determining when the statute of limitations began to run in
the action for replevin.
Discovery Rule: A COA will not accrue until the injured party discovers, or by exercise of reasonable
diligence and intelligence should have discovered, facts, which form the basis for a COA.
SOL does not begin to run until the true owner knows or should know the identity of the
possessor.

20

POLICY: The purpose of AP is to create certainty in title.

Under the Discovery Rule, the possessor does not have certainty in title; For instance even if he had the item
for 40 yrs, original owner can have it back b/c did not know that AP had it
The idea is that it is not fair to say that the SOL is running against you when you dont even know who you
have COA against discovery rule puts the onus on the true owner
GUGGENHEIM RULE: (Alt. to Discovery rule) Statute does not run until the true owner demands return of the
item and refuses
ACQUISITION BY GIFT
Text and Problems, pp 178 180
Newman v. Bost, pp 180 -186; Notes & Problems, pp 186 187
Gruen v. Gruen ; Notes & Questions, pp 187 -194
Acquisition by gift requires Intention, Delivery & Acceptance
Importance in delivery requirement
Handing over the object makes it vivid/concrete to the donor that the item was actually given to him.
Act serves as evidence of a gift allows for witnesses of the txn
Gives the donee, prima facie evidence
If manual delivery not possible b/c of size, weight or inaccessibility of good, constructive or symbolic delivery is
allowed
Constructive Delivery handing something that grants access to the gift; (e.g) - key
Symbolic Delivery handing over something symbolic of the property given
(e.g) written note declaring the giving of the gift
** However, if an object can be handed over, it MUST be
PROBLEMS: P 179
Q1: O owns a pearl ring. O visits her daughter, A and leaves ring on sink. A calls to tell O she forgot ring, but O tells
her to keep the ring as a gift. Has O made a gift to A? If so, can O change her mind the next day and ask A to return
the ring?
A: Once a gift is given, it is irrevocable.
Intention is satisfied states to A to keep ring
Delivery is satisfied p 187 (If the donee is already in possession of the property, there must be
a redelivery to effect valid gift causa mortis but not if the gift is inter vivos)
Q: O says at dinner I promise to leave you this ring when I die
A: No delivery, not a gift
Q2: O writes check to B; O dies before B cashes check.
A: Intention is satisfied; Constructive/Symbolic delivery
Ct holds: No gift until check is paid; Donor still retains control of funds b/c could have placed stop
payment on check
Q3: O while wearing a watch writes a note to A saying I give you the watch I am wearing.
Restatements says this is a valid gift note sufficient even if he could just as easily have given it to him.
Howeverif the note said I will give you my watch, it is considered an unenforceable gratuitous promise.
A: Dont agree w/Restatement leads to inconsistency; confusion
If you can physically hand over the object, you should be required to do so
Not a gift Symbolic delivery is not adequate when manual delivery is possible
Gifts Causa Mortis:
A gift made in contemplation of death or expectation of immediate approaching death (causa mortis) substitutes a
will. If person lives, the gift is revoked.
A gift causa mortis doesnt require the formality of a will will requires disinterested witnesses and a document

21

 Gift causa mortis vs. inter vivos: stricter requirements on causa mortis
The stricter requirement is there b/c it is easy for fraud with causa mortis
If there is a question over whether something was given as a gift or not, can always question the
person who gave it, but when the gift is given causa mortis, cant question the person b/c he is dead.
If donee is already in possession of property, there must be a redelivery of the gift causa mortis, but not
inter vivos
(e.g) - Say that you will give gift to A when you die; when you are actually close to death, have to deliver the
gift to A again
Newman v. Bost
Dispute b/w housekeeper & estate
Important to realize here that the courts motivation behind the decision is different than the reasoning.
- Ct. applies such a strict doctrine b/c they dont trust her - moral issue; idea of her being the housekeeper
mistress to a rich man.
- Or the idea that a man on his death bead is not in his right mind to demonstrate manifest intent.
ISSUE: Whether the items were conveyed as a gift causa mortis (a gift made in contemplation of death)

Gruen v. Gruen

Facts: Painting was purchased by Victor Gruen (father of P and husband of D)

Issue: Whether a valid inter vivos gift of a chattel may be made where the donor has reserved a life estate in the
chattel and the donee never had phyiscal possession of it before the donor's death.
P (son of Victor Gruen) - argues symbolic delivery through gift letters
D (wife of Victor Gruen) painting is considered chattel; physical delivery should be required b/c it is possible
Analysis:
>
LE

Remainder

Father gave painting as a gift, but retained a life estate and gave son remainder interest after his death.
(Present vs. Future Interest)
o A future interest exists today (it is a present interest) but does not become possessory. It is a
present right to make future use
Manual delivery being required here (Ds arg) does not make sense b/c the gift is of a future interest.
At the time the gift was made, the son was only getting a remainder interest in the painting

Holding: P wins. Appellate Ct upholds the Decision.

RULE: For an inter vivos gift to be valid
(1) Donor must show INTENT to make a present transfer
(2) DELIVERY of the gift (actual or constructive)
(3) ACCEPTANCE by the donee
** P has b/p of each element
Rationale:
(1) Donor must show INTENT to make a present transfer
P received title (right of ownership) immediately upon making of the gift, but possession was postponed for the
future.
Once the gift is made it is irrevocable and Victor's right in the painting is limited - he only has the rights as a life
tenant and not an owner.
(2) DELIVERY of the gift (actual or constructive)
The requirements of physical delivery as opposed to constructive/symbolic delivery are not meant to be
rigid....vary according to the circumstances of the specific case
Ct says physical delivery not required; does not apply b/c Victor did not give P all rights to the painting - only title
to it, no right of possesion until Victor's death

22

 Physical delivery would be illogical b/c that is exactly what Victor wished to retain
(3) ACCEPTANCE by the donee
If gift is of value to donee, law automatically presumes that donee has accepted the gift.
Letters serve as evidence; told others of the gift he received
Sharing Ownership in Property:
1. Concurrent property 2 or more people have the same interest in the property today.
2. Easement you own the property but someone else has easement to use your property
(e.g.) run pipes on land; cross over your land

23

POSSESSORY ESTATES

FEUDAL HISTORY

PP 295-209
Note: Seisin, pp 238-9
William the Conqueror takes land and transfers rights to the land to his supporters in exchange for their loyalty and
services. The landlords were able to keep the land for so long as they remained loyal and provided services. King
had the ultimate ownership.
KING
TENANTS IN CHIEF (from tenure to hold/have; hold the land of their lord)
Landlord
MESNE
TENANT IN DEMESNE (has the possessory right to the land)
ARISTOCRACY made up this structure; below the aristocracy are those who worked the land
This served as the Economic, Political, Social & Land Structure
Three Basic Tenures:
1. Socage Personal services & money rent to the lord
2. Frankalmoign Religious services to the lord
3. Military Knight services to the lord; most imp b/c it was critical for the King to maintain authority
Military Tenure: 3 Critical Aspects
1. Personal Relationship of Loyalty the relationship very personal b/c about loyalty, service and protection;
the tenure offers loyalty and receives protection in turn
Seisin present possessory right (transferred through a ceremony of livery of seisin)
The person with seisin is required to perform the services otherwise must forfeit the land.
- Seisin is important b/c of the services associated with it. Seisins relevance in the law
today is future interest
2. Knight Service Important for the kings remaining in control.
However, as the structue of the economy changed and the military changed, knight service
evolved into only payment of money rent (socage). It was more efficient to have an army instead
of knight service.
3. Incidents Other duties aside from services
1) Relief If tenant died and son succeeded to land, had to pay relief to get the land
This was eventually devalued through inflation
2) Aids Sums that had to be paid for specified purposes dowry, knighting, etc
Eventually devalued thru inflation
3) Fines Payments made to lord if transferred interest in land to another (like a sales tax).
Eventually eliminated through statute
4) Escheat If tenant failed to perform duties, died w/o heirs, convicted a felony, tenants land would
escheat to the lord; For treason, land escheated to the king
5) **Wardship If tenant dies and the inheritor is a minor (therefore incapable of services and
managing the land), lord became the guarding. The lord could do with the land as he
felt w/o any responsibility to the heir
6) **Marriage Lord can arrange marriage for the minor heir in wardship
Wardship & Marriage were very valuable rights to the lord
Transition in Feudal History to Current:
Life Estate Fee Simple Absolute
Tenants want ability/right to pass their land on to their heirs.

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 Originally tenant holds the land for life (life estate) and at his death, the land reverts back to the landlord
(reversion)
The grant was only from the landlord to the tenantbut turned into a grant to tenant and heirs
Tenant no longer had just a life estate in the land; their interest could last forever (fee simple absolute)
Sub-Infeudation: (Modern day subleasing)
Tenants want to sell Land (substitute someone in the feudal hierarchy but cant do so w/o consent of lord)
Subinfeudation evolved b/c allowed you to just create another level in the hierarchy w/o interfering with your
relationship with the lord.- paid rent to the tenant while the tenant still provided the services to the lord
PROBLEM: Subinfeudation made wardship & marriage worthless - problem b/c wardship and marriage were
large sources of income to the lord.
** Created a conflict of interest b/w the Tenant and Lord for Subinfeudation
Statute of Quia Emptores: Solved the problem Subinfeudation created
Tenant not allowed to subinfeudate but allowed them to have inter vivos sales (sell by substitution)
When the tenant died, land is escheated to the lord/king
**Eventually, the levels in the hierarchy died out and the old land structure was eliminated
Rule of Primogeniture;
The original rule of primogeniture says that the eldest son inherits everything
Policy: Maintains power of family over the generations by not fragmenting land into smaller and smaller
portions among the sons
The Statute of Quia Emptores interpreted the grant of land to tenant and his heirs differently heirs only meant
perpetual interest not a life estate heirs in fee simple
Statute of Tenures (1660); Money Rent
Converted all tenures in land to socage tenures (got rid of military tenures) only $, not services
Evolved to look very similar to the system of ownership we have today alloidal ownership owning land
without lord or services provided
Couldnt devise property until the Statute of Wills in 1540
ESTATES IN LAND FREEHOLD ESTATES
Freehold estates - Give possession under some legal title or right to hold (e.g. fees, life estates)
Non-Freehold Give mere possession (e.g. leases)
Holographic Will handwritten will
Heirs those who inherit the real property if a person dies without a will
in these grants, heirs is a word of limitation it says what estate is created and not in WHOM
Inheritance
- Will - controls disposition of property at persons death
- Devisee gets real property (did not inherit)
- Legatee
FEE SIMPLE ABSOLUTE: usually expressed with language to A and his heirs largest estate, everything is
devised from this estate.
Problems p 214: Inheritance of Fee Simple
2. O has 2 children, A (daughter) and B (son). B dies testate, devising all his property to W, his wife. B is
surivived by 3 children, B1(daughter), B2(son), and B3 (daughter). A1 (son) is born to A. Then O dies
intestate. Who owns Blakckacre in 1800? Today?
TODAY:
O
1/2 A (d)

A1(s)

B (s)

B1(d) B2(s) B3(d)

1/6

1/6

1/6

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1800: B2 - Rule of Primogeniture descends down the tree through the eldest sons

FEE TAIL: Grant is expressed as to A and heirs of his body.

Only linear descendants of the person can get the land. Can place limitations in the fee tail (male/female
daughter/son)
Disadvantages: Fee Tail eventually died out and evolved to the Fee Simple Absolute
1. Could only sell life estate b/c at death reverts back to heirs. This is not very efficient and caused
tension.
2. Couldnt disinherit your heirs
3. Clouded land titles (e.g) person dies with only daughters but the grant had said to A and male
heirs of his body
4. Limited the economic use of property
5. King was unhappy with the idea of Fee Tail
-Normally when A has committed treason, property escheats to the king. But with a fee tail, when
A dies, property goes back to As heirs.
LIFE ESTATE:
Judicial recognition of LE had two important consequences.
(1) Grantor of LE could control who takes control of property at Life tenants death
(2) With the rise of the view of property becoming income-producing capital, trust management for life
tenant developed. Under modern trust management one person manages property for benefit of life tenant,
paying the life tenant income from the trust. Today most LE created in trust.
o to A for life gives A LE that lasts for the duration of As life.
o A can transfer his LE to B, in which case A has created LE pur autre vie. This means that an life
estate is measured by As lifetime not, Bs.
o If B dies during As lifetime, the LE passes to Bs heir/devisees until A dies
o Every LE is followed by a future interest
o Reversion: in the transferor
o Remainder: in transferee.
White V. Brown P 221
- White: Sister-in-law of deceased
- 12 nieces and nephews of Perry
Although courts want to stick to language of a will it is difficult to determine intent of decedent by their word
choice.
RULE: If the words of the will are unclear as to establish a LE, then doubt will be resolved in favor of the FEE
simple.
Interpretation of a Will:
1. Start by looking at precise operative language. The precise language pertaining to nature itself.You then
shift from operative phrase Not to be sold (twice)
2. You look to all four corners of the document. I wish to leave personal property Because she knew
how to create unencumbered language she knew she was creating LE to Whiteif an only if the language
is ambiguous then you will move to.
3. Then shift to surrounding circumstances: The fact that she lived with Ms White might intend that she
wanted her sister-in-law and niece.
4. Presumptions: Thik about what most people mean in that circumstance: We dont know what X meant but
lets presume X meant what most people meant.

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POLICY: Strong presumption will reduce litigations costs. By having strong presumptions maybe we can reduce
litigations costs. Although, the presumption may be wrong, for the most part it is right and we lean toward it for
policy reasons.
o Presumption are sometimes wrongSometime Presumptions designed to accomplish other things:

Can interpret the language according to the outcome that is benefical to society

Courts not precise as to if they are interpreting or constructing

Interpretation vs. Construction:
Interpretation: Firguring out what person meant. What did they mean?
Construction: no that we know what they meant, what legal effect does it have. Is court willing to give
legal effect to that intent? Often legal effect will create what testator wanted.not always
Ex. Leave property to X so long as she kills her mother. Are we going to give
effect to that? No. As matter of construction we will not give effect to that intent.
Ex. Even if she intended to give a FS without alienation we are constructing it to
say that is not will happen (because it is in contention with intent of FS) White v.
Brown
Odds are, L never may have had intent on issue of FS v LE. This a common problem with homemade will. Person
doesnt understand/think through legal framework. Trying to interpret document on matters person didnt consider.
This is a case where we can see what she wanted, but on some level trying to discern her intent is almost a fictitious
exercise. You are searching for something that never existed.
o Court looks to presumption that prevents partial intestacy. We try and read will in manner that
disposes of all of her property.
STUDY QUESTIONS:

Holographic will - Hand written

Controlling test in construing a will or grant - Intent of testator through language of the will

If a will is unclear, court clarify the testator's intent by making presumptions

What does it mean to say that there is a "statutory presumption against partial intestacy"? There is a statute
which states that unless clear intention states that estate is to be discharged of partially, it will be presumed
that testator intended to transfer entire estate.

6. More specifically, what is the role of presumptions in interpreting ambiguous language? What presumptions
should be used? Why use presumptions at all? Keeps transaction costs down.
7. Is it fair to say that the majority has disregarded Mrs. Lide's explicit command that the house not be sold? If so,
then do you agree that the majority has misconstrued Mrs. Lide's devise? Yes, considering it was explicit in will. Yes
it made statements void.
8. Why are restraints on alienation disfavored by the courts? (SEE BELOW A.) And why is the law more tolerant of
restraints on the alienation of a life estate than of restraints on the alienation of a fee simple absolute?
POLICY: Objection to Restraints on Alienability
Courts leery on restraining alienation.
1. Restraints make property unmarketable (property not put to best use)
2. Restraint tends to perpetuation concentration of wealth by making it impossible for owner to sell
property and consume proceeds of sale. America founded on distaste for aristocracy, so cant allow that
3. Restraints discourage improvement- Improve to sell profit...if you cant see it, there goes that. (cant
develop land without mortgage)
4. Protection of creditors. People may extend credit based on appearance of wealth, but find out cant
foreclose cuz not alienableEven though land owner hasnt paid bill, he still gets to keep property
5. Inheritance problem created

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Suppose you have property. It may never be sold. You have 4 children. Property split amongst
them. They each have 4. Children. Now property owned by 16 people. They each have 4
childrennow have 64 owners. Generation after generation land will be owned in such small
piece that you cannot make use of the property

Disabling restraint

Withholds from grantee the power of transferring his interest

Ex. O Black To A and his heirs but any transfer hereafter in any manner of an interest in
Black shall be null and void. White v. Brown

CLASS: Removes power form owner to transfer property. If you write deed to transfer
then that deed is void.
o Forfeiture restraint (may sometimes be upheld)

If grantee attempts to transfer interest, it is forfeited to another person.

Ex. O Black To A and his heirs, but if A attempts to transfer property by any means
whatsoever, then to B and her heirs.

CN: If you transfer interest, then your interest terminates and shall revert to O or other .
o Promissory Restraint (may sometimes be upheld)

Grantee promises not to transfer the interest. Promise by grantee and grantees heirs and
this promise is a condition . Enforceable through damages for breach of covenant. You
can transfer property, but you may be liable in damages to person to who promise was
made.

Ex. O Black To A and his heirs, and A promises for himself, his heirs and successors in
interest to Black will not be transferred by any means.

Rare, but usually are enforceable under contract remedies

1. PRESENT VALUE (PV)

Need to know life expectancy and the interest rate.

R= annual interest rate

N= amount of years until death of person holding LE

FVn= Future value n years from now

PV = FVn / (1+ r)n

o Ex. Property worth $10,000. Assume interest rate =6%, Mrs. White has life expectancy of 15
years. Remainder is right to receive property in 15 years. What is PV of right to receive $10,000 in
15 years? (FV=$10,000/n=15/r= 6%)

PV= $10,000 / (1 + 6%) 15

PV= $10,000 / (1.06) 15

PV= $10,000 / (2.4)

PV= $4,173

Total between value of remainder today + value of Ms. Whites LE today must = total present value of
total property

LE= $10,000 - $4,173 R= $5,827

R=
+ $4,173

Total Property Value

$10,000
Baker V. Weedon SC MS- 230
- Grandchildren of Weedon - 3rd Wife of Weedon
Legal Issue: When is it appropriate to sell land which is subject to future interest?
HELD: Equity does not warrant the remedy of sale of all of property since this would unjustly impinge upon vested
rights of the remainderman.;Judicial sale of property is proper when the sale is necessary for the best interest of
all parties.
POLICY:

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There must be necessity before court can order a judicial salethe power should be used with caution
and only when the need is evident.however also need consider question of whether a sale is necessary
for the best interest of all parties, that is life tenant and the contingent remainderman.
Best interest of all parties would not be served by a judicial sale of the entirety of property at this time.
Although such a sale would provide immediate relief for D it would cause a great loss to the P
(remainderman).
Remanded to other court to decide if Ds motion to sell a portion of property would be in best interest of all
parties. Parties could come to some form of settlement in lower court found it to be reasonable.

CLASS NOTES:
o
Anna: A has LE for the life of Anna
o
Contingent remainder in fee simple absolute in her children.
o
If she has child it is a vested remainder in fee simple absolute subject to divestment :
o
Difference: If Anna dies and child is alive we know who gets it and there are not conditions to satisfy.
Something could happen which could deprive child of the right to take.
o
Alternative contingent remainders (Annas children/Johns grandchild)
o
Anan wants to sell land because she needs the money. She has asset with $160K which is giving her
$1300 in returned (approx 1%). What if she invested this money? Bonds: 8-10% So we have ea situation
where she owns land that generates little income but is expected to appreciate rapidlygood for
remainder not for the life tenant. Interest of LT and R are at odds. split of present and future interests
Coase: Transaction costs are low, initial entitlements are irrelevant. Because parties can negotiate to efficient
outcome. In negotiations they are trying to split growth in the pie. Why not force parties to negotiate solution?
Bilateral Monopoly
U want to buy car. You r willing to spend up to $25,000. Looking at new car. Sells for
$14-$15K.Dealer says I l let you have it for $22K. Not going ot spend that extra
money cuz you can take business somewhere else. Dealer knows this and so that there is
a functioning market serves as a restraint on the parties. Dealer knows he has to be
somewhat reasonable, because they know you have alternatives.
Market competition prevents parties for putting unfair terms on other party. If one side is
unfair, party can go do business with someone else.
Anna: Lets sell property, Ill get proceeds. Grandchildren: no lets keep the property, value
is going up. Anna: Im going to sell without your consent. Grand: You can only sell LE.
Anna: Ok I will sell wood flooring, rip out mineral, rent out property for rock concert, I
hear town is looking for a new land fill site.
Parties forced to deal with each other. If one party is unreasonable, the other party is
stuck. Normally market competition prevents this behavior. BM locked into negotiation
and cannot go anywhere else.
What is role of law: Law says, if you refuse to be reasonable, then we will impose
reasonable resolution. Court: We will provide alternative that the market normally
provides. If grandchildren unreasonable she doe shave alternativeshe can go to court
If party knows the law forces them to take reasonable position, then hopefully that
lubricates toward efficient negotiations. Situation, absent legal remedy, the transaction
costs were high. BM has high TC cost, because neither has leverage to walk away, leads
party to be opportunistic. Structure of law reduces the TC to allow the parties to resolve
the dispute in an efficient manner.
Wisdom of creating life estate: Is it wise to create a LE? Some potential problems that can result are from:

(a)

Sale: LT cannot sell a FS unless all other persons having an interest in property
consent to, unless a court of equity orders sale and reinvestment of the proceeds

(b)

Lease: May be advantageous for the LT to lease property for a period extending
beyond LTs death

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(c)

Mortgage: If LT has not capital, she may be unable to improve without mortgaging
property to bank. Banks typically do not loan money if security is a LE rather than
FS.

(d)

Waste: LT may want to do things to the land which according to waste may entitle R
to injunction/damages.

(e)

Insurance: Although LT is not required to insure land/buildings, but if they do and

event destroys property, LT is entitle to everything while R is entitled to nothing.
A LE can be coupled with any number of powers to do specific acts not otherwise permitted to LT.
Protecting Life Tenant by Creating a Trust
o Trust should be considered if client wants to create LE.
o Trustee holds legal FS and as manager of property may pay all income to LT or allow Lt to being
possession. Trustee has power to administer trust for benefit of LT and R. If property sold,
proceeds would then be paid as income to LT.
o LE should almost always be avoided. LE was created when in England land was symbol of wealth
that was rarely transferred and the value of land was stable. LE is unfit to conform to market
economy which sees land as form of income producing wealth, which can appreciate quickly and
must be managed efficiently
According to the "Coase theorem" (review note on Externalities, pp. 48-52 and footnote 28, page 52), when
transaction costs are low, we should expect parties to negotiate to an efficient resolution regardless of their initial
legal rights. Why do you think Anna and the grandchildren cannot negotiate a resolution to their dispute? In this
regard, can you
(a) explain the bilateral monopoly problem created by future interests (see footnote 16 on p. 141 and note
1 on pp. 234-35); and .
Because the two parties are locked into negotiation through the relationship that was created by Mr. Woodens will,
they are forced to bargaining with one another. Neither has ability to walk away. As a result each party is more
likely to consider strategy because it is now a bi-lateral dealing and each party is only forced to consider what either
side needs. Anna is going to want to sell as much as the land as possible so she can so she is not force to be in the
financial hardship that she was previous. The grandchildren are in a sense playing with the houses money. They
werent even aware of the contingent remainder interest in the land. They are going to try to try to hold out and
make sure not that much land is sold now because all land sold now will go into the trust for now. Assuming they are
in economic hardship themselves, they will be able to sit back and refuse to come to terms until as little land is sold
as possible so there future interest will be more profitable. As a result, if the court was not involved the land would
just deteriorate and rot. Grandchildren wouldnt wind but Anan would because she would be broke and she may be
forced into making a deal that may not be equitable. The court plays an important role in deciding in equity how
both parties interests are met. The court acts as the 3rd party which exerts outside pressure for each party to act
fairly and not only consider getting the largest piece of the pie possible.
(b) explain how the law of waste tries to solve this problem?
4. When may the court order a judicial sale of land subject to a future interest? Are you confident you
understand the rule? Can you explain the purposes served by this rule? Would you modify it in any way?
A: When it is in the best interest of all parties involved. The rule serves as a limitation on the equity courts. It forces
the court to not only look at the necessity of the LT, but also the loss of the remainderthat way court will try to
balance all interests so everyone is happy.

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