PROPERTY OUTLINE

I. Legal Designation of Propertya. Giving something a legal designation of property means that the law has made a policy-based

determination that the owner of a particular thing is granted a certain bundle of legal rights with regard to the thing owned. Typically, those rights can be can be asserted by the owner against everyone.

i. Bundle of Rights : 1. Right to use your property2. Right to possess (possession) your property [aka right to occupy, or occupancy]3. The right to exclude others from your property4. The right to transfer your property [aka right to alienate/right to alienation]

II. How are Property Rights Created?a. Capture (First Possession): If something is unowned, the first person to capture or take control of it

becomes its owner. b. Creation : Typically, the creation of something new enables the creator to acquire property rights in his

or her creation. (Typically does not apply to land, since virtually all land is owned by someone and new land is not easily created.) However, new products that result from research and development activities and new ideas not previously owned by another can and are created, with the creator becoming the products owner. Property rights related to new ideas and technical know-how, often called “intellectual property,” are an increasingly important type of property in the U.S.

i. Internalization of Externalities : The main allocative function of property rights is the internalization (taking something in and making it an integral part of one’s beliefs) of beneficial and harmful effects (externalities).

1. Thus, property rights emerge because of the emergence of new or different beneficial and harmful effects. They emerge to “internalize externalities” when the gains of internalization become larger than the cost of internalization.

2. The long chain of causation: (1) Changes in technology or the opening of new markets create (2) changes in economic values which increase (3) internalization and (4) lead to property rights.

a. Ex. Indians in Quebec established property rights after the beaver fur trade picked up. Thus, they internalized the externality (over hunting).

c. Discovery : At an earlier time in history when people only inhabited a small portion of the world, the people to find new lands via exploration acquired property rights to the newly discovered land. Its relevance may resurface with further space exploration.

d. Conquest : At an earlier time in history it was common for countries to acquire property via military force. This still occurs today but on a much smaller scale, limited by international agreements and treaties.

III. Utilitarian Theory :a. The dominant legal theory used to determine if something is property. Under this theory, things are

designated as property when doing so promotes the best interests of society.IV. Types of Property :

a. Real Property : (aka Realty) Land, including everything embedded in the land (rocks, minerals, etc.) and everything permanently attached to the land (house, trees, etc.).

b. Personal Property : (aka Personalty) Basically everything other than land. Personal property is further divided into two sub-categories:

i. Tangible : (aka Chattels) Refers generally to moveable property which has a physical existence that you can see, feel or touch.

ii. Intangible : Refers to property which lacks any tangible or physical form such as Intellectual Property (patents, copyrights, trade secrets and trademarks), customer good will or contract rights.

V. Acquisition By Capturea. Actual Possession

i. If something is unowned (wild animals considered as such), the first person to capture or take control of it becomes its owner. (See Pierson v. Post – Post in pursuit of fox but Pierson killed it and possessed it first. Fox became Pierson’s property).

1. Policy Rationale : Such a bright-line rule as ‘first possession’ will reduce disputes. (Dissent in Pierson lobbied for custom (in this case that the person who put in all the work, initiated the pursuit) to play a part in the outcome of the case).

ii. First possession can be made by an act of appropriation, based upon the nature of the case. (See Ghen v. Rich - Ghen killed whale with bomb-lance that contained his identifying mark; three days later another found whale ashore and sold its oil to Rich. Court rule whale was Ghen’s property. Court relied on whaling custom to make their decision.)

1. Policy Rationale : The court based their decision on the sustainability of the whaling industry, which at the time was a big part of the local economy. They thought if the person who did all the work to kill the whale couldn’t profit from the endeavor, less people would go into the industry and the economy would suffer as a result.

iii. First possession rule may be tweaked if it is determined another had a “pre-possessory interest” in the property before first possession occurred. (See Popov v. Hayashi – Barry Bonds HR ball, about to be caught by Popov when mob of people disrupted his ability to catch, was picked up and first possessed by Hayashi. Court ruled for them to split the proceeds.)

1. Policy Implication : The court, equating baseball to a wild animal, tried to employ the Pierson v. Post first possession rule. They stray from this rule when they find that Popov’s efforts to control (pursuit) he ball gave him a ‘pre-possessory interest’ in it. In a possible attempt to reduce disputes, this decision may actually increase them.

b. Constructive Possession i. Every man has the right to use his land for his pleasure and profit. An action lies in all cases

where a defendant commits malicious acts interfering with the profession or livelihood of

another. (See Keeble v. Hickeringill - would shoot his gun, scaring the ducks located in π’s decoy pond on π’s land. π would capture ducks and sell for profit. )

1. Policy Rationale : The court believed it important to protect the rights of the landowner using his land for profit. They didn’t find it necessary to protect the neighbor’s malicious and interfering actions (nuisance). However, if was using his land for a skeet shooting business, no action would lie because he has as much liberty in the use of his land as the π.

a. Nuisance Law : (SEE BELOW FOR MORE IN DEPTH NOTES)i. Public Nuisance Law : Involves action brought by the government

against some activity or use of property by a landowner that causes an injury to the public generally.

ii. Private Nuisance Law : The use of ’s land which results in an intangible invasion of π’s land that substantially and unreasonably interferes with π’s use and enjoyment of her land.

ii. Fugitive Resources : Wild animals, oil, gases, and water are often classified as “fugitive,” meaning that they can easily escape from one location to another. When they are on one person’s land, the owner of that land has constructive possession of them. Once they change location, property rights transfer to the owner of the land they currently reside on, in or under.

1. Common Law Water Rights (Underground Water, aka Groundwater/Percolating Water)a. Absolute Ownership Rule (aka English Rule): Landowner owns water under her

land and can do whatever she wants to do with it. Any damage that results to neighboring land (ex. Causing neighboring land to sink from pumping out groundwater) is not actionable.

b. Reasonable Use Rule (aka American Rule): Landowner free to use water under her land in any reasonable manner in connection with any reasonable use of her land. If such use results in injury to adjacent land, no liability arises against landowner.

2. Common Law Riparian Rights (Rights as to Streams)a. Natural Flow Rule : Each riparian owner has the right to have the flow of water

across or adjacent to her mainland in its natural state without it being diminished in quality or quantity. Each riparian owner has the right to use the water for natural purposes as well as extraordinary purposes, as long as such use does not materially affect the water.

b. Reasonable Use Rule : Each riparian owner has full use of the water for any beneficial use provided only that it does not unreasonably interfere with the beneficial uses of other riparian owners. Under this rule, the court balances the uses of the water by the different riparian owners. The majority of states follow this rule.

3. Common Law Rights as to Diffuse Surface Water (Typically rainwater or melting snow)a. Natural Flow Rule (aka Civil Law Rule): Each landowner can only discharge

surface water from her land via natural drainage paths.b. Common Enemy Rule : Each landowner has the right to expel unwanted diffuse

surface water from her land without regard to its effect on neighboring land.c. Reasonable Use Rule : Each landowner has the right to discharge diffuse surface

water from her land in a reasonable manner. The majority of states follow this rule.

4. Oil/Gas Rights a. Common Law : You were able to extract/pump out as much as you want.b. Modern Day : Reasonable Use Rule.

i. In parts of the country where this is more of an issue, an actual regulatory scheme is in place.

VI. Acquisition By Creation a. Protection of Intangible Property

i. U.S. Constitution states: “The Congress shall have power to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;…And…To make all laws which shall be necessary and proper for carrying into execution the foregoing powers.”

1. Granting property rights to creations targeted to the good of society, gives the necessary incentive for inventors living in a capitalist society. The purpose of giving property rights is rewarding the inventor for the benefit made to society.

ii. Patent Law : Provides property rights for 20 years for functional inventions (Exclusively Federal Law)

iii. Copyright Law : Provides property protection for non-functional original works such as music, books, photos, etc. (Predominantly Federal Law)

1. A copyright lasts for the author’s life, plus 70 years. It does not protect information or facts, just how you express them.

iv. Trade Secrets Law : Provides property rights in commercially valuable information in secret. (Predominantly State Law)

1. If you develop something and keep it a secret, that’s your property. (Like Pierson v. Post, trade secrets use “possession/control” as the medium of gaining property rights.

v. Trademark Law : Provides property rights (i.e. Coke, McDonalds, Disney) for as long as the trademarks are recognizable. (State and Federal Protection)

vi. Property in One’s Person : A celebrity’s “right of publicity” is widely recognized as a kind of property interest.

1. The right of publicity seems to be rooted in the right of privacy. Still, an ongoing concern with IP rights of publicity – is that there is a danger of going too far, protecting too much, at unnecessary cost to the public.

b. Property in One’s Ideas and Expressions i. Misappropriation (free-riding) of another’s quasi-property (material which generates a profit)

which is gained through the use of one’s “skill, labor, and money” (pursuit) is an actionable offense. (See INS v AP – INS was taking news facts gathered by INS, re-writing them and printing them in their newspaper.)

1. Policy Implication : Court strikes balance between promoting competition and preventing unfair competition with the potential to destroy the news business and industry.

a. On account of the economic value of the news, a company can have a limited proprietary interest in it against a competitor (but not the public) who would attempt to take advantage of the information. The decision may increase disputes as no bright-line rule was given as to whether news was property. Giving news a ‘quasi-property’ label shows the acknowledgment of the fact that, like a wild animal, when it is first captured, it belongs to the captor, but when it is put into the public domain (news), the captor loses control over it.

2. If the information was copied verbatim, it would have been a violation of copyright law. ii. A man’s property is limited to the chattels which embody his invention. Others may imitate

these at their pleasure. (See Cheney Brothers v. Doris Silk Co. – Cheney sought to enjoin Doris Silk from copying its dress designs during the season. Court ruled in favor of Doris.)

1. Policy Rationale : This court felt that to rule for Cheney would in effect begin to set up a monopoly structure and that such a decision should be made by Congress, not the courts. This decision flies in the face of the INS court. Cheney court works to avoid monopolies and encourage competition through imitation while INS works to eliminate misappropriation and free-riding that can result from imitation. The Cheney court feels that following the rationale set in INS would damage the fashion design market and that

consumers must have a choice among designs and prices which are determined by the market.

c. Property in One’s Person i. Rule for Conversion : To establish conversion, plaintiff must establish an actual inference with

his ownership or right of possession. Where plaintiff neither has title to the property alleged to have been converted, not possession thereof, he cannot maintain an action for conversion. (See Moore v. Regents of UCLA – Moore treated for Leukemia, convinced to have spleen removed and cells were then used by doctors to patent a cell line, in hopes of making a profit. Court ruled that once spleen was out of Moore’s body, it was no longer his property. They reasoned that Moore did not expect to retain possession of his cells. Moore won on his breach of fiduciary duty claim.)

1. Public Policy Rationale : The court stated it must balance the competing interests in determining whether conversion liability should be extended. Extension of conversion liability would produce great harm to future medical research. The court held that it was better left to the legislative branch. The court was wary of providing extracted cells with the ‘bundle of rights’ that come with a property distinction.

ii. Next of kin have property rights in a deceased relative’s body. (See Whaley v. County of Tuscola – Per agreement, Central Eye Bank would pay counties expenses if county removed eyes and corneas for use of Central Eye Bank.)

1. Policy Rationale : There is an expectation to get our loved ones back whole after an autopsy (unlike the fact in Moore that no expectation to get diseased body parts back). Next of kin has a right to give deceased family member’s organs as gifts, triggering rights that closely associate with property’s ‘bundle of rights.”

iii. Moore v. Whaley 1. The Moore court found that when a public benefit may exist (future medical research)

no property rights should be granted. In Whaley, the court said property rights (to deceased relative’s body) outweighed a possible public benefit (cost of autopsies paid for).

2. Why is the Moore rationale more convincing?a. Typically in the U.S., we rely on a utilitarian theory of property (rather than a

labor or natural rights theory). Under the utilitarian theory, property exists to maximize the overall happiness or “utility” of all citizens. Accordingly, property rights are allocated and defined in the manner that best promotes the general welfare of society.

d. Property in One’s Own Real Landi. A court of equity has the transcendent power to invade the property of a private citizen; There

is no such thing as an “absolute property right.” (See Edwards v. Sims – Court upheld a judge ordered survey of π’s property to determine whether rights to an underground cave shifted to a neighboring property as well.)

1. Policy Rationale : The court reasoned that the right to enjoyment and possession of property is limited in so far as the state has a right to infringe upon those rights when it believes that those rights are being used to the detriment of other private citizens.

2. Fifth Amendment grants the right of the government to take a private citizens property BUT such a seizure must come with “just compensation.” (Eminent Domain)

a. Need to ask the question, ‘when is something a regulation and when is something a taking?’

ii. Title above the surface of the ground is now limited to the extent to which the owner of the soil may reasonable make use thereof and title of an owner of the soil will not be extended to a depth below ground beyond which the owner may not reasonably make use of. (See Boehringer v. Montalto – Defendant defaulted on mortgage payments and claimed he agreed to make those payments on the fact that the land came with no encumbrances [any claim or lien on parcel of real property], however, a sewer line 150 down was an encumbrance.)

1. Policy Rationale : Reasonable use theory. If Montalto is deemed ‘inconvenienced’ by the sewer line and is allowed to get out of paying his mortgage thereupon, it will open up a Pandora’s Box of being able to get out of payments when any small imperfection is deemed an encumbrance on a property owner.

a. Externalities : Cannot allow use of land to the center of the earth as the externalities (negative outcomes) will affect society as a whole. What if we allowed Montalto to break through the sewer pipe to get to the land below it?

iii. Air and Underground Rights 1. At common law, a property owner owned to the heavens and to the center of the earth.

After Montalto, the owner owned what they may make reasonable use of.a. Specifically with air rights, modern day limit is 500ft.

e. Property by Find i. Under common law, there are four categories of found property

1. Abandoned Property : Property is abandoned when the owner no longer wants to possess it. Abandonment is shown by proof that the owner intends to abandon the property and has voluntarily relinquished all rights, title and interest to property. Abandoned property belongs to the finder of the property against all owners, including the former owner.

2. Lost Property : Property is lost when the owner unintentionally and involuntarily parts with its possession and does not know where it is. Stolen property found by someone who did not participate in the theft is lost property. The right of possession of lost property belongs to the finder, as against all other persons than the true owner. (True owner First Finder Subsequent Finders)

3. Mislaid Property : Property voluntarily put in a certain place by the owner who then overlooks or forgets where the property is. The finder of mislaid property acquires NO rights to the property. The right of possession of mislaid property belongs to the owner of the premises upon which the property is found, as against all other persons other than the true owner.

a. It differs from lost property in that the owner intentionally and voluntarily places mislaid property in the location where it is eventually found by another. In contrast, property is not considered lost unless the owner parts with it involuntarily.

4. Treasure Trove : Treasure Trove consists of coins or currency concealed by the owner. It includes an element of antiquity. To be classified as treasure trove, the property must have been hidden or concealed for such a length of time that the owner is probably dead or undiscoverable. Treasure Trove belongs to the finder as against all but the true owner.

ii. Lost Property: 1. A finder of a chattel does not acquire an absolute property right, however he does have

title superior to everyone except to prior possessors and the rightful owner. (See

Armory v. Delamirie – Chimney sweeper finds ring, brings it to goldsmith for appraisal, goldsmith keeps stones, court rules stones are chimney sweeper’s property.)

a. Policy Rationale : This case deals with relative property rights and its outcome creates a hierarchy of property rights, with the true owner at the top.

2. The finder of lost property has superior title against the owner of the land on which it was found. (See Hannah v. Peel - Solider staying in rented home finds a brooch in the house. Landowner, who was not true owner of brooch, claims ownership based upon his status to land, court ruled that it belonged to soldier who found it.)

a. Policy Rationale : The landowner had no knowledge of the brooch prior to its discovery and the brooch was not a fixture.

i. The Law of Fixtures : Things permanently attached to real estate or things which can’t be severed from the real estate without substantial efforts are fixtures. Fixtures are legally treated as part of the real estate they are attached to.

f. Property by Adverse Possession i. Establishing Adverse Possession : The doctrine of adverse possession is a combination of

common law and statutory law in most jurisdictions1. Statutory law provides the time period during which property must be possessed before

adverse possession transfers ownership of that property.2. Common law , in most states, generally requires that the property at issue must be the

subject of possession that is: a. Actual Possessionb. Open and Notorious (typically possession that discloses to the world that the

adverse possessor is in possession)c. Hostile d. Exclusivee. Continuous

ii. Open and Notorious : The claimant’s activities must provide some form of visible evidence that the property is being adversely used. If they provide visible evidence of adverse use, then they are said to be “open and notorious” acts of possession. This enables a true owner, who acts diligently, to discover the trespass before the statute of limitations expires and take appropriate action.

iii. Hostile and Adverse Possession : At a minimum, this requirement means that the person was in wrongful possession, not rightful possession, of the land. If the possession was wrongful, then by definition the true owner had a cause of action for trespass. Possession is adverse only if it is without the authority or permission of the true owner of the land.

1. Intent : Many cases interpret “hostile possession” occurs only if the possessor has a certain state of mind. The basic issue is whether the adverse possessor’s subjective intent may serve to cause the possession to be deemed nonhostile and, thus, insufficient.

a. The Connecticut rule, presently followed in the large majority of states, adopts an objective view of hostility. The possessor’s subjective intent while trespassing is not relevant. Only actions are evaluated.

iv. Exclusive Possession : The claimant must have exclusive possession of the land. This requirement is not taken literally. First, a group of persons, such as a married couple, may qualify as joint adverse possessors of land. Second, the claimant’s possession may be shared with third parties, provided that the nature of that sharing is consistent with how an owner of land generally behaves.

1. When applying the exclusive possession test, care must be taken to concentrate only on the tract of land claimed by the adverse possessor. Exclusivity of possession is not destroyed where the adverse claimant possesses part of a tract of land, asserting title thereto, and the true owner has possession of the remainder of the tract, to which the

claimant is not asserting title. The true owner’s possession of contiguous land (sharing a common border) is irrelevant. This rule is essential for the principle of adverse possession to function properly in mistaken boundary cases.

v. Continuous Possession and Tacking: The concept of tacking modifies the requirement of continuous possession. Under American law, successive adverse possessors are allowed to “tack” (add together) their periods of adverse possession, even though there is no single adverse possessor who maintained possession for a time as long as the relevant statute of limitations when “privity” exists between them.

1. Privity exists if there is a sufficient nexus or connection between the consecutive possessors. Usually privity rests upon a conveyance, with the former possessor delivering a deed or a similar instrument that purports to convey title to the land. Such writing is called “color of title.” It does not matter whether the conveyance stems from a sale of the land or a gift. Succession at death, whether by inheritance or a devise in a will, also supplies privity.

2. Inverse Tacking : The statutory time period for an adverse possessor does not end and restart each time the property owner sells or transfers ownership of the property to a new party.

vi. The title obtained by the act of adverse possession is typically referred to as an original title – adverse possession says you own the property.

1. To clarify, an adverse possessor can typically only obtain the property interest of a party who had the right to possess the property at issue at the time the adverse possession began. Consequently, the adverse possessor’s title is a new one but its scope is defined by the title of the party with the legal right to possession of the property at issue at the time adverse possession started.

2. If a property owner divides up her property after an adverse possessor begins the adverse possession period, adverse possession applies to the property interest that the property owner possessed at the time the adverse possession commenced.

vii. Case Examples 1. It is sufficient to obtain land through adverse possession if the acts of ownership are of

such a character as to openly and publicly indicate an assumed control or use such as is consistent with the character of the premises in question. (Monroe v. Rawlings - s acquired title by AP for over 15 years consisting of such open and public use, acts of ownership and assumption of control, including construction of a cabin, were consistent with the character of the premises and to which alone the land was adapted.)

a. Ratio nale : Hostility requirement is that claimant act as if he owned the land (paid taxes); Open and Notorious requirement is to put true owner on notice. (Construction of cabin)

2. From the standpoint of the true owner, the purpose of the various requirements of adverse possession - that the nonpermissive use be actual, open, notorious, continuous, exclusive and hostile - is to put him on notice of the hostile nature of the possession so that he, the owner, may take steps to vindicate his rights by legal action. (Peters v. Juneau-Douglas Girl Scouts – Family interest in land for many years, lived there seasonally for 40 years, girl scouts had true title, Peters AP’d the land.)

a. Rationale : Exclusivity requirement can be met if you have as much exclusivity as the true owner would have. As long as you’re not sharing possession. (Didn’t kick out clamdiggers b/c he was a nice guy, doesn’t affect ‘exclusivity.’) Hostility requirement is that claimant act as if he owned the land. (Lived there seasonally, used boats in the area for sealing, built a bench for skinning seals, and his relatives built cabins in the area.) The goal of exclusivity and hostility requirements is to put the record owner on notice of adverse possession.

viii. Color of Title and Constructive Adverse Possession : Color of title consists of a deed or other instrument that purports to transfer title to the adverse possessor. The deed or instrument constituting color of title is invalid or defective for some reason, and this induces the grantee to rely upon adverse possession in order to overcome the defect.

1. Color of Title serves two (2) roles: (1) In many states, a statute expressly requires color of title for certain adverse possession claims. Some states, for example, allow a shorter period of limitation for a claimant with color of title. (2) Color of title allows the adverse possessor to use the doctrine of constructive adverse possession. Constructive adverse possession is an exception to the requirement that the claimant must be in actual possession of part of the land described in the color of the title, the claimant also gains title to the unoccupied part. The adverse possessor is said to be in “constructive possession” of the entire parcel.

a. To use this doctrine, the possessor must have had a good faith belief in the validity of the color of title (the deed purporting to convey title).

ix. Boundary Disputes 1. Any entry and possession for the required time which is exclusive, continuous,

uninterrupted, visible, and notorious, even though under mistaken claim of title is sufficient to support a claim of title by adverse possession. (Manillo v. Gorski – 15 ft encroachment on neighbor’s land. Believed they owned the land when the built steps but did not. )

2. Possession is open and notorious only when the true owner has actual knowledge. When the possession of land is clear and large enough to be immediately visible, there is a presumption that the true owner has actual knowledge of the adverse occupancy; however, there is no presumption of actual knowledge by the true owner when the encroachment is of a small area along a common boundary and is not clearly and self-evidently apparent to the naked eye. This rule may impose undue hardship upon an adverse possessor. Equity may therefore require that the true owner convey the disputed land to the adverse possessor upon payment of its fair value. (Manillo v. Gorski – Court, for first time, focused on plaintiff’s knowledge of their land boundary. In interest of equity, court gave land to for fair market value.)

3. Boundary disputes may also be resolved by the doctrines of agreed boundaries, acquiescence, and estoppel.

a. Agreed Boundaries : Provides that if there is uncertainty between neighbors as to the true boundary line, an oral agreement to settle the matter is enforceable if the neighbors subsequently accept the line for a long period of time.

b. Acquiescence : Provides that long acquiescence – though perhaps for a period of time shorter than the statute of limitations – is evidence of an agreement between the parties fixing the boundary line.

c. Estoppel : Comes into play when one neighbor makes a representation about (or engages in conduct that tends to indicate) the location of a common boundary and the other neighbor then changes her position in reliance on the representations or conduct. The first neighbor is then estopped to deny the validity of his statements or acts. Estoppel has also been applied when one neighbor remains silent in the face of expenditures by another that suggest the latter’s notion of the boundary’s location.

x. Adverse Possession of Chattels : Statutes of limitations for the recovery of personal property are usually much shorter than for land. For the conversion of goods, typical periods are three to six years, which apply whether the true owner seeks replevin (return of the item) or trover (damages).

1. Common Law Approach : Apply the rule developed for AP of land. Possession must meet all requirements (hostile, open and notorious, exclusive, and continuous) for the requisite statutory period.

a. Just as for land cases, tacking by successive adverse possessors is allowed, and expiration of the statute extinguishes the original owner’s title and vests the possessor with a new title.

2. Discovery Rule : The cause of action accrues when the owner knows of the location of the chattel or the identity of its possessor, or when the owner should have known of the location or identity through the exercise of due diligence. (O’Keefe v. Snyder – Claim for paintings.) The statute of limitations only begins to run against the true owner if the true owner fails to utilize appropriate due diligence to pursue her stolen property.

a. The owner has the burden of proving that she has exercised due diligence in seeking to recover the property. What constitutes due diligence depends upon the facts, including the nature of the property and its value.

i. Ex. For a stolen chattel filing a police report may be sufficient, but if the chattel has high value and there are additional steps that a prudent owner would take, then more is necessary to toll the running of the statute of limitations.

3. Demand/Refusal Approach : The statute of limitations begins to run after the true owner demands return of the personal property from the possessor and the possessor refuses to return the property in response to the demand.

4. Under the doctrine of adverse possession, the burden is on the possessor to prove the elements of adverse possession. Under the discovery rule, the burden is on the owner as the one seeking the benefit of the rule to establish facts that would justify deferring the beginning of the period for limitations.

g. § 2-403. Power to Transfer; Good Faith Purchase of Goods; “Entrusting.”

i. This code § involves allocating property rights among multiple innocent parties (typically original owner and good faith purchaser). The true owner is usually left with the burden in order to limit transaction costs etc.

(1) A purchaser of goods acquires all title which his transferor had or had power to transfer - Exception: Purchaser of a limited interest acquires rights only to the extent of the interest purchased.

- This is the general common law rule you cannot transfer more than you have.-If you have possessory rights, for example through a bailment, you can only transfer those possessory rights and no more.

A person with voidable title has power to transfer a good title to a good faith purchaser for value.

- This is an exception to the common law rule. A person with voidable title can transfer a good title to a property to a third-party if the third-party is a good faith purchaser.

- Note: Person with voidable title (title that will expire, or is subject to some condition) does not get property at issue. (Transfer must occur before the title is voided).

For Example: X purchases car from Y for $10k with a bad check he knows will bounce. After driving car off the lot, X has a voidable title. He then sells the car to Z for 12k.

Z would own the car over Y because X had voidable title, and the sale was made to a good faith purchaser. However, Y could sue X for damages.

When goods have been delivered under a transaction for purchase the purchaser has such power even though:

a. the transferor was deceived as to the identity of the purchaser, orb. the delivery was in exchange for a check which is later dishonored, or c. it was agreed that the transaction was to be a “cash sale”, ord. the delivery was procured through fraud punishable as larcenous under the criminal law.

- List of specific examples of situations where the person who acquired the voidable title can transfer a good title to a third-party who is a good faith purchaser.

-- Good Faith : Honesty in fact in the conduct or transaction concerned.

o “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

- Buyer : Person who buys or contracts to buy goods.

(2) Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.

- “Buyer in the ordinary course of business”: a person who in good faith and without knowledge that the sale to him is in violation of the ownership rights or security interest of a third party in the goods, buys in ordinary course from a person in the business of selling goods of that kind but does not include a pawnbroker.

o All persons who sell minerals or the like (including oil and gas) at wellhead or mine head shall be deemed to be persons in the business of selling goods of that kind.

o “Buying” may be for cash or by exchange of other property or on secured or unsecured credit and includes receiving goods or documents of title under a pre-existing contract for sale but does not include a transfer in bulk or as a security for or in total or partial satisfaction of a money debt.

- “Merchant”” a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

(3) “Entrusting” includes: any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting OR the possessor’s disposition of the goods have been such as to be larcenous under the criminal law.

- Acquiescence: "permission" given by silence or passiveness. Acceptance or agreement by keeping quiet or by not making objections

(4) The rights of other purchasers of goods and of lien creditors are governed by the Articles on Secured Transactions (Article 9) and Documents of Title (Article 7).

- Note : 2-403(2) is limited to situations involving merchants who normally deals in type of goods involved. (e.g. not fish store that sells TVs…sketchy); 2-403(1) does not limit itself to merchants BUT must be a good-faith purchaser.

- Policy Rationale of 2-403 : Policy is implemented to protect the innocent buyer. Otherwise, we would be requiring a reasonable buyer to inquire into past title of all things. It’s very difficult to know who owned the goods prior to the seller.

o If the rules didn’t exist…an innocent buyer would have to constantly check into the title of goods…policy protects society so that people can freely buy/sell goods.

Examples

Example 1: A entrusts a ring to B, a jeweler, to be cleaned. B needs $ so sells ring in good faith to C.

Result: C keeps ring. A must sue B for damages etc.

Example 2: A steals C’s ring, but then entrusts it to jeweler B to be cleaned. B sells ring to D.

If A sues D for ring, D will prevail since B was able to transfer all rights of entruster (A) to D.

If C sues D for ring, C WILL PREVAIL…because D only had rights of entruster (common law: rights relative to TRUE OWNER, C).

h. Bailments: A bailment is a legal relationship between a person and personal property. It is rightful possession of personal property by one who is not the true owner.

i. The “bailor” is the true owner of the personal property who gives possession of the personal property (bailed property) to someone (“bailee”) for some purpose, but with the understanding that the bailee shall return the property to the bailor.

1. The bailor never gives up ownership of the property to the bailee; the bailor only gives up possession of the property to the bailee. (Possession requires the bailee to have both physical or actual control of the property plus the intention to exert that control.)

ii. Analyzing a Bailment Transaction 1. Does a bailment exist?2. If yes, what is the property that is the subject of the bailment (or, what is the bailed

property?)3. If a bailment exists, what standard of liability should be imposed on the on the bailee?4. Who has the burden of proof, and how can the burden be satisfied?

iii. Bailments: Standards of Liability : 1. Traditionally, courts categorized bailments into three distinct categories: gratuitous

bailments, bailment for the benefit of the bailee, and “bailments for hire.” A different standard of care was applied to each category.

a. Gratuitous Bailments: Exists when the bailment is solely for the benefit of the bailor. In such a situation, the bailee is only liable if her conduct amounts to gross negligence.

i. Ex. You keep your friend’s boat in your garage for the winter as a favor.b. For Benefit of the Bailee : Bailee is subject to the very low standard of slight

negligence.

i. Ex. Your friend loans you her lawnmower as a favor to you. If you damage the lawnmower due only to your slight negligence you are liable to your friend.

c. “Bailments for Hire” : aka bailments for mutual benefits. Such a bailment exists when a bailment is created for the benefit of both the bailor and the bailee. Typically, most commercial bailments are bailments for hire. In this situation, the bailee is only liable if her actions amount to ordinary negligence.

i. Ex. You leave your clothes at the dry cleaners to be cleaned. d. Many courts today have eliminated the above distinctions between different

types of bailments. In lieu of those distinctions, an ordinary negligence standard is applied to all bailments. Not all jurisdictions have taken this approach, it represents the modern judicial trend.

e. The delivery and acceptance of a chattel constitutes the receiver a bailee although he may not have appreciated or been aware of the chattel's true value. Hence, should the bailee lose the chattel, he is liable for its true value. (Peet v. Roth Hotel Company – Hotel had accepted the ring in the ordinary course of its business and so, because of mutual benefit, its liability is formed following an ordinary standard of negligence.

f. No bailment will exist where the goods are concealed from the alleged bailee. (Peet v. Roth)

g. Enclosed, attended commercial parking garages create bailments for hire and a presumption of negligence if a car is stolen. (Allen v. Hyatt Regency-Nashville Hotel - Generally, vehicles driven unattended and open lots will not be considered bailments for hire. However, in the present case the Hyatt Regency garage was enclosed and attended, showing sufficient control and custody. Therefore, a bailment for hire was created when Allen left his car there. )

i. Gifts of Personal Property : i. The three requirements for a valid gift are (1) donative intent, (2) delivery, and (3) acceptance.

1. Donative Intent : The donor must intend to give the property to the donee. There must be intent to give a present gift (an intent to make a future gift is not valid). Donative intent is usually established through the donor’s written or spoken words. Often the words alone are not conclusive as to what the alleged donor really intended to accomplish. They may be ambiguous or incomplete, and this is one reason why the law requires delivery in addition to manifested intent.

2. Delivery : The gift to the donee by a transfer of possession and dominion over the gift property. Delivery may be physical, constructive, or symbolic.

a. Physical Delivery : Actual physical transfer of possession of the chattel to the donee. This is sometimes called manual transfer of the chattel. This transfer of possession is seen as strong evidence that the donor intended to make an irrevocable gift.

b. Constructive and Symbolic Deliveries : A donor may deliver to the donee a writing or another object that represents or refers to the chattel. Delivery of that thing may suffice to validate the gift if the court recognizes a constructive or symbolic delivery.

i. This type of delivery is not always allowed. Courts often say that the donor must make the “best delivery possible” under the circumstances. A constructive or symbolic delivery is allowed as a substitute only if there is some reason why it was not practical for the donor to make a physical delivery of the chattel.

c. Some courts use the terms constructive delivery and symbolic delivery interchangeably, but there is a recognized distinction between the two terms.

i. Constructive Delivery : Delivery of the means of obtaining possession or control of the gift property (i.e. keys to a car).

ii. Symbolic Delivery : Delivery of something in lieu of the gift property which represents the gift property. Symbolic delivery is generally accomplished by the donor delivering some type of writing to the donee.

1. Some courts are more willing to allow a constructive delivery, compared to a symbolic one, because with a constructive delivery, the donee is able to obtain dominion and control over the chattel without doing anything further.

3. Acceptance : The donee must accept the gift. a. Acceptance by the donee is required but this requirement seldom poses a

problem. Courts have often said that acceptance is presumed or implied if the gift has value. In the absence of affirmative evidence that the donee rejected the gift, an attempted gift is not likely to fail for lack of acceptance.

4. When an alleged gift is disputed, the donee has the burden of proof for all three elements.

ii. Inter Vivos Gift : A gift of personal property made by the donor to the donee during the donor’s lifetime. To be valid, an inter vivos gift must satisfy the above three requirements.

1. A party who makes an inter vivos gift is called a donor. The donee is the party receiving the gift.

iii. Wills : A donor can agree in advance to transfer her property at death via the creation of a document called a will.

1. To be valid, a will must comply with numerous formalities (i.e. must be in writing & signed by the donor in the presence of at least two witnesses who must also sign the will in the presence of each other and the donor) which are prescribed by statute and designed to insure the validity of the will.

a. A major distinction between an inter vivos gift and a will is that an inter vivos gift is irrevocable; in contrast, a will can be revoked by the donor at any time prior to the donor’s death.

2. A party who makes a gift via a will is called a testator. A party who receives property via a will is called a beneficiary. A transfer via a will is called a testamentary transfer.

iv. Causa Mortis Gift : A gift made by the a donor who is in apprehension of imminent death from an existing sickness or peril. “Deathbed gifts.”

1. Like inter vivos gifts, causa mortis gifts must satisfy the same intent and delivery requirements.

2. A causa mortis gift is revocable (unlike inter vivos). If the donor of a causa mortis gift doesn’t die from the cause of death she is in apprehension of dying from at the time the

gift is made, the gift is automatically revoked. Additionally, prior to the death of the donor the gift can be revoked by the donor (just like with re: to a gift given in a will.)

a. Difference between causa mortis gift and will: A will is an “ambulatory document” which does not pass any interest in property prior to death of the testator. In contrast, a causa mortis gift effects transfer of property immediately at the time of the gift with the gift being subject to revocation prior to the death of the donor. In practical terms, a causa mortis gift typically accomplishes the same thing as a will, and it is sometimes viewed as a will substitute.

3. A causa mortis gift becomes an absolute or irrevocable gift to the donee if the donee survives the donor’s death and the donor has not revoked the gift prior to the donor’s death.

v. Gifts of Future Interest : Although a promise to make a future gift is unenforceable, a gift of a future interest in property is valid. A promise to make a gift in the future does not transfer any property right to the promisee at the time the promise is made. In contrast, a gift of future interest vests the donee with title to the future interest at the moment the gift is made.

1. Like other inter vivos gifts, a gift of future interest is irrevocable when made. The donee’s right to possession is deferred until the point in time when the present estate expires. By definition, every future interest represents deferred enjoyment of property.

vi. Case Examples 1. Where intent to give gift of bonds proves to be testamentary and there is insufficient

delivery of the bonds (#5 on), there is no valid gift. (Hocks v. Jeremiah - court holds that the first set of four bearer bonds that were personally delivered to were a gift. Hocks hand delivered those. However, the property in the safe deposit box does not meet the requirements for intention and delivery.)

2. Courts often say that the donor must make the “best delivery possible” under the circumstances. A constructive or symbolic delivery is allowed as a substitute only if there is some reason why it was not practical for the donor to make a physical delivery of the chattel. (In re Cohn – Husband’s note to Wife on her b-day and 6 days prior to his death giving her stock in company = sufficient intent for inter vivos gift [no imminent threat of death and letter said “this day”] and sufficient symbolic delivery and a valid gift.)

3. Where one's actions indicate an irrevocable and immediate transfer of title to another, while the donor reserves possession until death, the donor's rights are thereafter limited to possession, but not ownership. (Gruen v. Gruen - Plaintiff claims that his father gave him a painting for the plaintiff's 21st birthday. Plaintiff never received the painting because the father stated in a letter that he wished to retain a life estate in the painting. Upon the father's death the plaintiff sought possession of the painting from his step-mother. The step-mother refused and the plaintiff brought suit. Son got painting.)

4. A party can make an inter vivos gift by giving part of the interest away. (Gruen – The Dad intended to give some present interest in the gift to the son prior to his death and delivery was symbolic through the letters.)

vii. Correlation between Delivery and Intent: a. The stronger the intent, the less likely the court is to require strong evidence of

delivery (symbolic or constructive delivery OK).b. The weaker the intent, the more likely the court is to require actual, physical

delivery.

i. Cohn - Strong intent, no actual delivery required.ii. Hocks – Weak intent (inter vivos? Testamentary?) and more focus put

on delivery.j. Nuisance : Two Types of nuisance actions exist – public and private.

i. Public Nuisance actions typically involve an action brought by the government against some activity or use of property by a landowner () that causes an injury to the public generally.

1. Public nuisance actions have historically been criminal actions; however, today they are often civil actions. Generally, a private party can’t bring a private nuisance action.

ii. Private Nuisance actions allow an individual¿) to bring an action against another landowner () when the engages in conduct that interferes with π’s use and enjoyment of her land. The interference must be both substantial and unreasonable. The interfering activity can be either a legal or illegal activity.

1. An intangible invasion of property would include things such as sound, smell, dust, vibrations, pollution or light.

2. The “substantial interference” requirement serves to separate normal everyday noise, smells, etc. from noise, smells, etc. which a reasonable person of ordinary sensibilities would find acceptable from those which a reasonable person would find a substantial interference with their right to use and enjoy their property.

a. This requirement recognizes that in day-to-day society we all must accept a certain amount of noise and other intangible interferences and it acts as a filter to block typical intangible interferences which a reasonable person would find acceptable.

3. The “unreasonable interference” requirement is used by the court to engage in a balancing between the competing land uses of π and , and the societal effects of allowing or disallowing the conduct at issue. This means that a substantial interference with the use and enjoyment of your property may or may not be a nuisance.

4. An injury must be shown for a private nuisance action to prevail.5. Ordinary Person Standard – the interference with the use and enjoyment of the land

must be sufficient to offend the average normal person with ordinary sensibilities.6. Fact Dependent Analysis – the determination of the existence of a nuisance cannot be

determined in a vacuum – the surrounding facts and circumstances are always relevant. 7. Balance of Competing Land Uses – The determination of whether some land use is a

nuisance typically involves balancing the competing uses of the π and . a. Courts often follow Restatement (Second) of Torts Requires the court to

balance the utility of ’s land use against its effect on the π. The existence of the following factors often support finding a nuisance:

i. The alleged nuisance is an activity that is not customary for or suited to area.

ii. The activity causes observable effects that most of us would find disagreeable, without regard to whether an activity actually harms the π.

iii. The activity is carried on via methods that produce more disturbance than other available methods.

iv. The activity is of little value to the .v. The activity is unimportant to society.

vi. The ’s activity was begun after π’s began her present use of the land.

8. Remedy : Traditionally, once a continuing nuisance is found, it will be enjoined by the court. Damages may also be available for past injury and the injunction will prevent future injury.

a. A modern trend is to refrain from automatically issuing an injunction for a continuing nuisance. Pursuant to this trend, some courts have awarded money damages to compensate for the ongoing nuisance in lieu of an injunction.

9. Trespass v. Nuisance : a. Trespass involves a physical invasion of your land by a person or a tangible

physical object. No injury or damage is required to establish a trespass. The mere invasion of your property interferes with your right to exclusive possession and use of your land and therefore such interference alone is actionable. Another way to look at it is to say the injury is the interference with the landowner’s exclusive right to exclude others from her land.

b. Private Nuisance involves an invasion of your land by intangibles (i.e. noise, smell) which substantially interfere with your ability to use and enjoy your land. Unlike trespass, not all actions that interfere with your use and enjoyment of your land are actionable as a nuisance. The determination of a nuisance involves a balancing of competing land uses.

i. In a sense, nuisance law is an attempt by courts to find a way to accommodate competing land uses in an ever-changing society. Therefore, some interference with the use and enjoyment of your land may be legally permissible. This can be considered the cost of living in society with neighbors.