PropertyProf Blog

Odinet on Virtual Property and Secured Credit

Chris Odinet (that's me!) (Southern) has posted BitProperty and Commercial Credit (Washington University Law Review) to SSRN. Here's the abstract:

In the past several years the growth of virtual property in today’s economy has been explosive. The everyday use of virtual assets ranging from Twitter and Facebook to YouTube and virtual world accounts is nearly absolute. Indeed, by one account Americans check social media over 17 times per day. Further, a growing number of savvy virtual entrepreneurs are reporting incomes in the six and seven figure range, derived solely from their online businesses. Nevertheless, although the commercial world has come to embrace these newfound markets, commercial law has done a poor job of keeping up. Scholars have argued that laws governing everything from taxation, to bankruptcy, to privacy rights have not kept pace with our ever-changing virtual world. And nowhere is this truer than in the law of secured credit. Doubtlessly virtual property has come to represent significant wealth and importance, yet its value as a source of leveraged capital remains, in large part, untapped. This unrealized potential is not without good reason; the law — specifically Article 9 of the UCC and the law of property more broadly — suffers from a number of deficiencies and anomalies that make the use of virtual property in secured credit transactions not only overly complex and expensive, but almost entirely untenable. This Article shines light on these shortcomings, and, in doing so, advances a number of guiding principles and specific legislative recommendations, all geared toward a reformation of the law of secured credit in virtual property.

#LouisianaFlood: Property Law and Consumer Protection After a Natural Disaster

(Photo Credit: The Millennium Report)

As national news is just getting around to reporting, Baton Rouge and its surrounding areas recently experienced tremendous flooding. Large portions of southeast Louisiana were (and many remain) underwater. Our tax law friends over at the Surly SubGroup, specifically Phil Hackney (LSU), summarize the situation nicely:

The devastation stretches from around the Louisiana-Mississippi border all the way over to Lafayette -maybe 100 miles across. This story does a nice job explaining the weather phenomenon that caused this massive flood event. Neighborhoods that have never flooded before in our recorded history are under 4 -6 ft. of water, and some higher than that. Almost the entirety of certain cities are submerged. The last data I had for my area is that 20,000 were displaced and 10,000 in shelters. I expect that number to go up over the week. Even though it has stopped raining, the flood waters cannot drain because the rivers are too high and cannot take runnoff from tributaries.

For those who may find this helpful, this short post talks a little about the property law (specifically related to home mortgage obligations and homeowners’ insurance) that victims of natural disasters like the Louisiana flooding should keep in mind.

MORTGAGE LOAN OBLIGATIONS

After a disaster like the flooding in Louisiana it is important to get in touch with your bank or mortgage servicer to obtain relief. The reason for this is because even if your property is destroyed and/or you can no longer live in the home, the mortgage debt does not go away. It is still owed even if the improvements on the real estate are not longer habitable. If contacted, however, sometimes the mortgage company will give you more time to pay your monthly note and even dispense with late fees or penalties. Also, if the home has been lost due to substantial or total destruction, you’ll want to talk to your mortgage servicer ASAP to prevent or postpone foreclosure on the property. For private loans (i.e., not government-backed) it will be up to the lender and you to work out those details. Be aware that even if the lender gives you a forbearance for a period of time, you will still have to make up those payments later.

For those loans that are FHA-backed, borrowers are sometimes eligible for resources that allow them to remain in the home. The FHA has a disaster relief policy pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act where, if (1) you or your family live in a federally-declared disaster area; (2) you are a household member of someone who is deceased, missing, or hurt because of the disaster; or (3) your ability to pay your mortgage is significantly impacted by the disaster, then your lender cannot foreclose on its mortgage for a 90-day period. The FHA also strongly advises its participating lenders to work with mortgagees who are affected by natural disasters (for example, by taking a deed in lieu of foreclosure if appropriate or allowing only partial payment for a period of time). This is why it’s so important that homeowners in these flooded areas contact their mortgage servicers and let them know that they qualify for FHA Disaster Relief. For additional help in this process, HUD has a counseling hotline to call at 1-800-569-4287 or you can contact HUD's National Servicing Center.

PROPERTY INSURANCE

With regard to property insurance, dealing with your insurer can be a long and complicated process after a natural disaster. The important part is knowing what your declaration and your policy states, and whether flood insurance is included (i.e., for damage caused from rising waters). A general homeowner’s policy only covers damage caused by wind, rain, hail etc. Flood damage is insured separately. The exclusions portion of the policy will help in making this determination.

When it comes to actually getting money for lost or damaged property, different insurance policies take different approaches. You can either obtain the replacement cost value of the property (which means the insurance company will give you funds necessary to substitute the damaged or lost property with comparable property) or actual cash value (which is where you receive the cash value of the property that was lost or damaged, minus depreciation over time). The insurance policy will reveal to which you are entitled.

In the case of personal property losses specifically, this is generally referred to as the insurance of “contents” of the home. Documenting these losses are particularly important (so don’t start throwing things away too quickly). Keeping receipts are also critical to submitting a successful claim.

Another important aspect of property insurance is the fact that you are not the only person insured. Your mortgage bank is also listed as an insured on your policy, which means that when the insurance company send the check the bank will also be listed as a payee. Usually your residential mortgage contract requires that you send the check to the bank and then, through an escrow and release process, the funds will be distributed to you to pay contractors to repair the home in tranches. This means that you and your mortgage bank will have to work together to get the repairs completed and your contractors paid. Another option can be to actually pay off the mortgage debt altogether (if there’s a sufficient amount), but that is a decision that the mortgage lender gets to make. As a homeowner you should try to find out how the mortgage lender will use the insurance proceeds because if the mortgage debt is paid off that leaves you with no money to make repairs to your home.

The Takings Clause and the Contracts Clause: Friends or Foes?

I’ve been doing a lot of research lately on how property law and the law governing debt recomposition interact—specifically in the context of the Puerto Rican debt crisis. Two major concepts that keep coming up in my research are the Takings Clause and the Contracts Clause.

Property law professors routinely teach eminent domain and Takings Clause concepts in class. In fact, it’s rare to attend a property law conference these days without at least several panels being devoted to such topics. But, I’ve not spent much time thinking about the Contracts Clause—or how it’s different from/similar to the Takings Clause.

Let me make this a little more concrete [BEWARE: this is going to be long-winded] . . . the Supreme Court recently struck down Puerto Rico’s Recovery Act. For those who haven’t been following this as obsessively as I have, Puerto Rico has been going through a bit of a debt spiral of late (to the tune of about $72 billion). Rather than waiting for Congress to do something about it, back in June 2014 Puerto Rican lawmakers decided to take things into their own hands and passed something called the Public Corporation Debt Enforcement and Recovery Act. The new law essentially created a bankruptcy-like process for the island to restructure its debt (I am summarizing, of course. For a more in-depth discussion, the good folks over at CreditSlips have some great descriptions and analysis).

Naturally, the island’s bondholders didn’t greet this new law with open arms. A group of them quickly filed a lawsuit in late summer 2014 arguing that the Recovery Act was unconstitutional. They raised a number of claims, including that the Act was preempted by the U.S. Bankruptcy Code. Now, despite the way oral arguments seemed to go, on June 13, 2016 SCOTUS struck down the Recovery Act in Commonwealth of Puerto Rico v. Franklin California Tax-Free Trust et al., holding that it was preempted by the federal bankruptcy code (specifically, Section 903).

But the part that got me thinking didn’t have anything to do with the Bankruptcy Clause—instead, I got interested in some of the other claims that the bondholders made, but that were not decided by the Court. They asserted in their complaint that “The operation of the Act, as enacted by the Commonwealth and signed into law by the Governor, threatens to improperly impair Plaintiffs' rights . . .  in contravention to . . .  the Takings Clause, and the Contract Clause.” See Amended Complaint, Franklin California Tax-Free Trust et al., 2014 WL 4954576 (D. Puerto Rico) (Trial Pleading). So, basically, modifying the creditor’s debt would violate the Contracts Clause and the Takings Clause—so Puerto Rico can’t do it – because both constitutional rights apply—or something like that—Right?

THE CONTRACTS CLAUSE

The Contract Clause (Article I, Section 10, Clause 1) states that “[n]o state shall . . . pass any . . . law impairing the obligation of contracts . . . .”

By its very terms, it only applies to the states (i.e., feds, this isn’t a problem for you). The Contracts Clause has a storied history—ebbing and flowing from importance to obscurity. In the early days of the republic (often called the Critical Period, being that time during which the Articles of Confederation were in effect) it was precisely due to a fear of state governments interfering with the rights of creditors that the provision was ultimately included in the federal constitution. As background, after the American Revolution many citizens of the new country found themselves horribly in debt. As a result, various state legislatures began passing laws to ease their pain (which creditors didn’t like very much). Drafters of the constitution found these “invasions into the contracts of private parties” harmful to commerce and the general course of business so they decided to put a limitation in place. See Ogden v. Saunders, 25 U.S. 213, 354 (1827) (for some angry commentary by Chief Justice Marshall).  As with so many other provisions in the federal constitution, numerous state constitutions contain parallel contracts clauses as well.

THE TAKINGS CLAUSE

The Takings Clause (in the Fifth Amendment), on the other hand, provides that “private property [shall not] be taken for public use, without just compensation.”

Going back to the early days of the Republic, Thomas Jefferson and his buddies who were opponents of a strong central government advocated for the Bill of Rights (which contained the Fifth Amendment), but they weren’t the first to come up with the idea of protecting private property from the government. The Magna Carta had a similar idea going on, and the concept was already fairly prominent in various state constitutions during the period of the Articles of Confederation. 

Initially, the Takings Clause only applied to the federal government (i.e., states, not your problem). Chief Justice Marshall stated in Barron v. Mayor and City Council of Baltimore, 32 U.S. 243 (1833) that “The provision in the fifth amendment to the constitution of the United States, declaring that private property shall not be taken for public use, without just compensation, is intended solely as a limitation on the exercise of power by the government of the United States; and is not applicable to the legislation of the states.”

But that all changed with the ratification of the Fourteenth Amendment in 1868. In Chicago Burlington and Quincy R.R. v. City of Chicago, 166 U.S. 226 (1897) the Court stated: “‘Whatever may have been the power of the states on this subject prior to the adoption of the fourteenth amendment to the constitution, it seems clear that, since that amendment went into effect, such limitations and restraints have been placed upon their power in dealing with individual rights that the states cannot now lawfully appropriate private property for the public benefit or to public uses without compensation to the owner.”

To the point about the recomposition of debt, SCOTUS later developed the regulatory takings doctrine in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), which provides that the government need not physically dispossess a person from his property in order for a takings claim to be raised. Rather, the government could restrict or regulate the use of property to such a degree that the state action was tantamount to a physical taking.

THE CLAUSES WORKING TOGETHER (OR NOT)

So now, when a state government takes an action that causes an impairment or modification of a contract, an aggrieved party can asset claims under both the Takings Clause and the Contracts Clause. That got me wondering—are they really, practically different? Do they produce different outcomes? Are those outcomes consistent? Do courts do a good job (or even try) when it comes to differentiating between the two?

I’m still working on the answers to those questions, but what does seem clear to me is that there doesn’t appear to be very clean lines here. The law is a bit…well…cloudy.

Take the Contracts Clause, for instance. Contemporary cases have held that just because a law impairs a contact doesn’t necessarily mean that it’s prohibited. Cases like U.S. Trust v. New Jersey, 431 U.S. 1 (1977) and Allied Structural Steel Co. v. Spannaus, 438 U.S. 234 (1978) hold that this clause still has to be squared with “the inherent police power of the State to safeguard the vital interests of its people.” See Energy Reserves Group, Inc. v. Kan. Power & Light Co., 459 U.S. 400, 410 (1983). The Supreme Court noted in U.S. Trust that “an impairment may be constitutional if it is reasonable and necessary to serve an important public purpose.” So the prohibition isn’t all that prohibitive after all.

In the context of the Takings Clause, courts have held that various government actions, despite limiting or restricting the use of property, nevertheless do not raise a takings claim. Regulations related to providing for the general welfare, for instance, are perfectly permissible. The court in Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 105 (1978) stated that where the government “reasonably conclude[s] that ‘the health, safety, morals, or general welfare’ would be promoted by prohibiting particular contemplated uses of land,” there is no requirement to compensate the owner. Joe Singer points out in Justifying Regulatory Takings, 41 Ohio N.U. L. Rev. 601 (2015) that:

Key examples of laws that promote the public welfare are zoning and environmental laws and consumer protection laws such as building codes. The Supreme Court has upheld against takings challenges laws that impose height limits and setback requirements, as well as zoning laws that segregate residential, commercial, farming, institutional, and industrial uses. The Court has upheld public accommodation laws and implicitly approved fair housing and employment discrimination laws. It has allowed minimum wage and maximum hours laws and workplace safety laws to operate without challenge.

Both clauses are, in a sense, concerned with protecting the sanctity of property rights (be they tangible—like land or personalty—or intangible—like those arising from a contract creating debt). One obvious difference is that with the Takings Clause it’s still possible for state governments to “take” property as long as they do so for a public purpose and just compensation is paid. Under the Contracts Clause, however, states are flat out prohibited from impairing a contract right. But, as indicated above, both of these commands can ring a bit hollow. States can pass laws that break contracts when it's “necessary and reasonable” and states can regulate property without causing a taking when its “justified.” And if a state is prohibited from impairing a contract, then can they just turn around and claim they're doing it under the Takings Clause? Can a public purpose be "necessary and reasonable" for Contracts Clause purposes and yet not "justified" for Takings Clause purposes? What about the other way around? Are these standards different or are they the same thing?

So what does all this mean for the distinction between the two? Can they always be raised together in the face of state action? What are the defining features/lines that make them wholly separate concepts—or is it better to think of them as being interlocking (like how Justice Kennedy describes the Equal Protection and Due Process Clauses in Obergefell v. Hodges)? I hope to formulate some answers to these questions (or at least sound a bit more like I know what I’m talking about) in the months ahead. Your thoughts are welcome and appreciated in the comments below.

The Property of Debt

I’ve been thinking a lot lately about the property law aspects of debt (don’t let your head hit the keyboard as you fall into a deep slumber from reading that, now!). Most of my interest in this topic comes from my obsession with the Puerto Rican debt crisis. Unless you’ve shut yourself off from social media (or any media, for that matter) you likely at least know that the island, a U.S. territory serving as home to 3.5 million American citizens, is flat broke. They’ve defaulted on multiple interest payments to their bondholders, tried to enact their own bankruptcy-like law (overview by Stephen Lubben at Senton Hall here)--currently pending a decision from SCOTUS, and right now Congress is trying to pass a super special insolvency procedure to help out the island (for a little Citizens United flavor, take a look at this dark money ad urging the defeat of the bill). I’ll have a post on this topic, and the takings claims posed by the bondholders, next week.

But back to debt as property . . . The Supreme Court has long held that rights in debt (contract rights) constitute property. See Omnia Commercial Co. v. U.S., 261 U.S. 502 (1923); see also Lynch v. United States, 292 U.S. 571, 579 (1934) (“Valid contracts are property.”). And we freely buy, sell, and trade such rights all the time. Indeed, that’s what the secondary mortgage market and the private label mortgage market are all about! Buying and selling mortgage debt at discounted rates, typically (in the Fannie/Freddie context) to provide more liquidity to the residential housing market and thereby increasing the availability of credit.

But people buy debt for other reasons as well—to make money! There was a great (and, per usual, hilarious) discussion on John Oliver’s HBO show, Last Week Tonight, this past Sunday on the topic of “Debt Buyers.” Here’s the video:

 

In the show he points out a bunch of things about the debt buying industry—prominently discussing the shady practices of some of the industry’s less than wholesome characters. In fact, he sends a team with a hidden camera to the industry’s trade conference in Las Vegas. One of the panel presenters at the conference notes cavalierly that, despite state law requirements that debt buyers disclose to consumers that their obligation to pay the debt may be extinguished by the statute of limitations: “Who’s going to read and understand the words on this letter? The unsophisticated consumer? . . . I depose these plaintiffs in these lawsuits and they don’t even read the letter.” What a jerk! I bet he wasn’t too happy to see his remarks go viral.

But back to the point . . . the general idea of the show was to basically talk about how bad the debt buying business can be: how bad guys go after poor, unsuspecting consumer debtors and ruin their lives. But it strikes me that the issue of how one gets into debt and the ability of someone other than the original creditor to enforce the credit right are entirely different. Putting aside the former, is there anything wrong with selling debt like we sell tangible personal and real property? From a debtor’s perspective, does it really matter whether the original counterparty to the contract is the party now trying to enforce it? We could assume that there might be something particular about that specific obligee that makes contracting with him, from the obligor's perspective, special. In those cases we have doctrines of assignability. But, in the context of pure debt (the right to collect on an amount owed) in an arms-length transaction, it does not seem much different than a market for anything else.

But are there policy reasons why we should prohibit (or at least discourage) this type of market from becoming more robust (if it isn’t already – spoiler: it is already)? Chain of title problems certainly loom large in these transactions. As the segment above indicates, often all that is exchanged between the debt seller and debt buyer is the purchase price and an Excel spreadsheet with minimal information about the obligations owed. There’s also little due diligence done on the buyer’s end – such as ascertaining whether the debt is even still collectable. Perhaps one could argue that the nature of this particular type of “property” (specifically how it can impact vulnerable consumer debtors when owned by unscrupulous collectors) merits thinking differently about whether the debt buying business is just another property market. Maybe there are just too many bad guys or, if there aren't that many, the damage that the few cause is just too great.

My home state of Louisiana has a really interesting way of dealing with debt sales once litigation on the debt has commenced. We call it the “right of litigious redemption.” It basically works like this: Original Creditor commences a lawsuit against Debtor. As the litigation proceeds, Original Creditor realizes that he cannot (or does not want to) carry the lawsuit through to the end because it is too time consuming or is eating up too many resources (or for whatever reason). Instead, Original Creditor “sells” the lawsuit to Buying Creditor for a discounted purchase price. Now, Buying Creditor is the plaintiff against Debtor in the litigation. Under Louisiana law, Debtor can now pay to Buying Creditor an amount equal to the discounted purchase price he paid Original Creditor, and in doing so completely extinguish the lawsuit! Voila! Just like that. You can see how this is a great deal for Debtor. If the debt he owes to Original Creditor is $20,000, but Buying Creditor only paid Original Creditor $7,000 for it, then Debtor is essentially relieved of paying $13,000 worth of debt! The supposed policy reason for doing this has to do with wanting to discourage a robust market for the buying and selling of lawsuits from developing. To my knowledge, no other state in the U.S. has such a law (please correct me if I’m wrong in the comments below).

So what about property markets in debt? Good? Bad? Or . . . like most things, a little bit of both?

Kids Learn the Darndest Things About Property Law

I am in recovery.

Recovery from spending two back-to-back weekends chaperoning eight-year-old girl sleepovers.

During the last weekend of April, I took my daughter and her Brownie Troop camping. Sure, thirteen little ones look cute standing on the dock making funny faces after fishing, but at 3pm when the heavens open and you are standing amid a rain storm with a group of screaming second graders, they are not quite as adorable. Or when 2am rolls around and the girls are like whac-a-moles—you get one in the tent in her sleeping bag and another one pops up. Again, not the precious angels shown here.

The next weekend (aka three days ago), my daughter had a sleep over to celebrate her eighth birthday. There were games, there were ice cream sundaes, there were high-pitched squeals. There was staying up until the wee hours of the morning to make sure the girls stayed down all night, and there was waking up before sunrise because, well, the girls were up and I like the downstairs of my house too much to let them have unsupervised control over it for any lengthy period of time.

While chaperoning these weekends of elementary school bliss, I realized that I could teach the better part of my 1L property class to the girls using the experiences they were having. It was a real life, in the moment type of class a la Jerry’s field class at the University of Idaho. It was, in the words of Tony the Tiger, grrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrreat.

I started at the very beginning, asking “what is property?” The girls looked at me like I was crazy, but then, so do my 1Ls when I ask the same question. Are your thoughts property? Is your persona property? Is your body property? All of these questions were dealt with during my chaperoning weekends.

8-year-old #1: (high-pitched yelp) She’s touching me! She’s touching me!
8-year-old #2: (higher-pitched yelp) She started it! She touched me first!
Me: (after drinking a sip of beer) Everyone keep your hands to yourself. Your body is yours, though we don’t want to call your body your “property” as that has negative connotations. But you have full rights to exclude everyone else from your body, unless parts of your body or organs have been removed, in which case you have no rights to them. See Moore.
8-year-olds #1 and #2: (looking at me like I have two heads) Huh?
Me: Well, you see there was a guy in California . . . . (8-year-olds run off, having forgotten what they were fighting about and now sharing the common thought that I’m nuts, not unlike my 1L property students)

Next, I taught about the Tragedy of the Commons.

Me: (putting out four large, family-sized bags of potato chips that were sufficient to feed an army) Snack time!
All 8-year-olds: (gulping down chips like they have not been fed for days) Gimme! She got more chips than I did! (munch, munch, munch) I want more! (smack, smack, smack)
Me: Sigh. (drinks longer sip of beer) I will divide the chips into even amounts for you, otherwise you will overconsume the chips out of fear that someone else will get your chips, thereby depleting all of our chips, and leaving us with no more snack time resources. This is a good time for me to tell you a story. Gather ‘round everyone for a cattle-grazing tale by a man named Garrett Hardin . . .
My 8-year-old: (whispering) Mom, please don’t embarrass me.
Me: Siiiiiigh. (opens another beer)

Then we moved into what makes up the proverbial bundle of sticks of property rights by first looking at the right to exclude.

8-year-old #1: (in a whining voice because she has a belly ache caused by overconsuming chips) She’s laying on my sleeping bag and pillow!
8-year-old #2: (in an equally whiny voice) I like yours more than mine. Let’s trade.
8-year-old #1: I want mine! Make her give me mine!
Me: Everyone has to use their own sleeping bag. No one touch other people’s stuff. Your sleeping bag is your own personal, private property so you have the ability to exclude everyone else from your sleeping bag.
8-year-old #1: (whispering in my 8-year-old’s ear) What is your mom talking about?
My 8-year-old: (opens her eyes wide, glaring at me with that “please be quiet” look) Mooooooom!

Having multiple kids sleeping in the same tent naturally leads to a discussion about the right to include.

8-year-old #1: (tears streaming down her face) They won’t (sob) let me (sob) in the tent!
Me: Everyone in the tent come out.
Three girls come out, looking sheepishly.
Me: You can’t exclude anyone from the tent. Everyone gets the right to use the tent. The tent is like a public thing or a quasi-public thing. Everyone has a right to . . .
8-year-old #1: (no longer crying) Do y’all want to go fishing?
All 8-year-olds: YAY! (they run off)
Me: Sigh. (shotgun second beer)

Fishing brings us to a lesson in the rule of capture.

8-year-old #1: I caught a fish! I caught a fish! I caught a fish! (waiving around a fishing rod with a small bass hanging on the end, still stuck on the hook)
Me: Hold still and let me take the fish off the hook. (insert mild expletives under my breath as I get stuck by the hook while removing the fish) There! (throw the fish into the bucket that is holding all of the fish)
8-year-old #2: Ooooh! I want your fish! (sticks hands in the bucket)
8-year-old #1: She’s touching my fish!
Me: Don’t bother the fish. That’s her fish because she caught it. When you capture something that is a res nullius, like a wild bass, it becomes yours under the rule of capture. The rule of capture is really fascinating because . . .
8-year-old #3: We’re catching tadpoles over here!
8-year-old #1 and 2: FUN! (recently caught fish is dropped on the ground and jumps around, finding its way back into the lake before I can grab it)

Catching tadpoles with nets allowed for a lesson in future interests and, shocking as it may be, the RAP (or at least the fundamental ideas behind the RAP).

8-year-old #1: (to 8-year-olds #2 and 3) You can use the net now, but after y’all use it, you have to give it back to me.
8-year-old #4: I want a turn!
8-year-old-#1: I gave the net to 8-year-olds #2 and 3 and then I get the net back.
8-year-old #4: (looking at me) She won’t let me have a turn!
Me: (looking at 8-year-old #1) You can’t control who uses the net that long after it’s been in your possession. You can only control the use of the net for 21 minutes after your possession of it because otherwise you would be exercising too much long-term control over the net and for the good of all of us on this camping trip, we want the net to be more transferable and usable by lots of different people so . . .
8-year-old #2: People are going hiking! Let’s go! (drops net into the lake such that I have to wade in to grab it)

Eventually, the fishing, tadpole-hunting, and hiking came to an end and we commenced roasting weenies and s’mores. I brought with us some long roasting sticks and put them out for the girls to use, which prompted a good discussion on adverse possession.

8-year-old #1: (tugging on my shirt while pointing at essentially all of the other 8-year-olds) She took my roasting stick!
Me: (thinking “why did I agree to be the Brownie Troop leader?”) Are you sure it was yours?
8-year-old #1: (confidently) Yes! (pointing aimlessly at the table behind her) I put my stick on this corner of the table three hours ago and told everyone not to touch it, but she (again, pointing at the collective group) picked it up and has been using it to roast two hot dogs and four marshmallows.
Me: (taking a deep breath) She’s been possessing the stick for a pretty long time. I think the stick is now hers. After you adversely, physically, openly possess property for a long enough period of time, that property becomes yours.
8-year-old #1: That’s not fair.
Me: I know it seems unfair, but there are a lot of reasons we say the adverse possessor gets the property. It requires you, the true owner, to pay attention to your marshmallow roasting stick instead of just leaving it, unattended on the table. It creates stability in title so 8-year-old #2 eventually can be confident the roasting stick she’s using is hers and won’t be taken away. It encourages her to use the roasting stick and develop it, shape it, bend it, into the best roasting stick she can make . . .
8-year-old #1: Chocolate!!!! (runs off when a new box of Hershey chocolate bars is opened)
Me: Sigh. (realizes beer is not strong enough so opens up flask of bourbon)

Finally, we all learned about the virtues of easements.

Me: Okay girls, everyone get in their sleeping bags and close their eyes. It’s time to go to sleep.
8-year-old #1 moves her sleeping bag to be right in the pathway I’ve created for the girls to exit the tent
Me: Put your sleeping bag back where you had it. We need to leave a pathway for folks to get out of the tent.
All 8-year-olds in unison: (in a voice that says “I’ll do anything to stay awake a little longer, even listen to your crazy lectures”) Why?
Me: Well, someone may need to potty in the middle of the night, so we need to have an easement so y’all can exit the tent. When you have an easement, you cannot block the use of that easement because . . .
All 8-year-olds: Zzzzzzzzzzzzzz.

There you have it. Property 101 through the eyes of an 8-year-old. We didn’t quite cover everything—I haven’t yet figured out how to work mortgages into the conversation—but we covered a lot. The conversations didn’t go exactly as I’ve described above. The girls were not nearly this whiney, in fact they were all actually pretty good, and while I'm not a particularly cool mom, I am a cool enough mom to not mention Garrett Hardin to my daughter’s friends. But all of the general activities described above did occur and the girls had a great time, which may be more than I can say for all of my 1Ls. Who knows, maybe they even took away a few lessons in property law.

The Steve Jobs Action Figure and White v. Samsung

 

 

We discussed the common law right of publicity today in class, particularly the 1993 9th Circuit Vanna White v. Samsung Electronics case.  If you aren't familiar with the case, Samsung had a national ad campaign which featured an image of a robot wearing a blonde wig, turning letters on a Wheel of Fortune-type board.  The campaign did not name White or Wheel of Fortune, but in the context, it is pretty clear that they meant to invoke White.  They even referred to the ad internally as the "Vanna White ad."  Underneath the image, the text read: "Longest running game show, 2012 A.D."  The class thought that bit was fairly funny.

We also discussed a ripped-from-the-headlines example of the Steve Jobs action figure.  The company "in icons" had proposed to sell the 1-foot, increadibly realistic action figure, beginning in February.  It received a cease and desist letter from Apple, threatening legal action.  After initially refusing to budge, in icons caved yesterday, announcing that out of respect for the Jobs family, it would not produce the figure.

Discussing the Jobs action figure after reading the White case was very effective, allowing us to debate drawing distinctions between property rules protecting the images of entertainment celebrities (like White) and public figures (like Jobs), the living and the dead, those who made money by selling their image, versus those who did not.  The same issues can be raised by discussing White v. Samsung and the Martin Luther King Jr. Center for Social Change case.

Tanya Marsh

Waldeck on the Inheritance of Heirlooms

Sarah Waldeck (Seton Hall) has posted Rethinking the Intersection of Inheritance and the Law of Tenancy in Common (Notre Dame Law Review) on SSRN.  Here's the abstract:

The Article is about "identity property," which it defines as property that is strongly linked to one’s sense of self and family and is valued by its holder primarily for what it represents. Identity property is often jointly inherited by siblings or other relatives, who take as tenants in common. Standard doctrine relies on familial bonds and the unilateral right of partition to mitigate the problem of bilateral monopoly and to foster cooperation in the management of the tenants’ common resource. The Article argues that, in the context of identity property, this standard account is wrong. Rather, because the law favors partition by sale, the exit of one tenant often means that the remaining co-tenants will be forced to sell the identity property. Because the remaining tenants perceive the property as non-fungible, the threat of exit is powerful enough to exacerbate the bilateral monopoly and decrease the likelihood of cooperation. The Article relies on the example of the family cottage to elucidate the meaning of "identity property" and examines the formal agreements that relatives who jointly own cottages make when they decide to opt out of the tenancy in common default rules. These formal agreements reveal a willingness to sacrifice the right of exit in order to increase the odds that co-tenants will continue to own the identity property. The Article argues that the law should heed the message of these formal agreements and adopt a more flexible approach to the inheritance of identity property, including the possibilities of temporal partition and facilitated agreement.

Steve Clowney

Property Worth Saving, ctd

Last August, Tanya wrote a great post that asked,"What would you save if your house were on fire?"  For many families in Japan it appears that the question has become all too real.  The LA Times ran a heartbreaking story today about people who are making mad dashes into the radiation hot zone around the Fukushima Daiichi nuclear plant in order to save a few family treasures.  The paper reports:

On the drive to town, swaddled in clothing to protect them from nuclear fallout, [the Nikaidos] entertained a difficult question: How do you reduce a lifetime of memories and possessions into one mad-dash snatch and scramble?  "I'm going to get some dishes, clothes and my computer: everyday things I can use to start a new life," said Seiko, who along with her mother has relocated to just outside Tokyo. "We can come back to collect the rest, the memories; that is, if they ever let us return here again."

Steve Clowney

Famous Objects From Classic Movies

Ji Lee's addictive game, Famous Objects from Classic Movies, is one part hangman, one part movie trivia, and one part commentary on how property gives meaning to our experiences.

The game is simple.  It displays a silhouetted image of an object and asks the player to determine what movie it comes from. Three wrong answers and you fail (and there are currently over 60 movies in the game's catalogue). 

I find it wonderfully surprising how the dark silhouette of a piece of property can serve as a shortcut for a whole range of sensory experiences and memories.  Strangely, I even managed deciphered a bunch of answers to movies that I've never seen.  We do see the world through property-shaped lenses.  

Steve Clowney 

 

 

Pierson v. Post Overturned!

Hot off the press from LawForAttorneys.Com: 

In what can be billed as one of the most surprising decisions handed down in recent memory, the ruling in Pierson v. Post, one of the nation’s oldest property-law cases, was reversed this week by the Supreme Court of New York. The court’s reconsideration of the ruling was prompted by new evidence arising from an in-depth autopsy analysis that was performed last month on the remains of the fox at the heart of the famed case. . . .

[E]arlier this summer at the request of Broderick Post, great-great-great-grandson of Lodowick Post, the remains of the fox were exhumed and analyzed, at a personal cost of about $1 million. The long-overdue autopsy found conclusive evidence that, by the time Pierson had discovered the fox, it had already died of exhaustion from Post’s pursuit. Post then petitioned the court to have the case reopened.

Read the whole thing for more on this shocking development in property law!

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

What would you save if your house were on fire?

I am at the tail-end of packing up our house to move to Winston-Salem.  The truck comes on Tuesday!  For days, I have been categorizing my personal property into: (i) stuff we're taking; (ii) stuff that we don't need or want but someone might, i.e. Goodwill; and (iii) stuff we don't need or want and nobody else needs or wants.

I am struck and frankly embarrassed by the sheer amount of stuff that we have accumulated.  But this isn't a diatribe on the rampant consumerism of which I am equally guilty.  No, this task is super-boring, so I began trying to figure out a fourth category -- what would I save if the house were on fire?

Dispense with the easy stuff -- spouse, kids, pets.  Let's just focus on personal property.

The vast majority of stuff that I have is replaceable, given sufficient insurance proceeds.  I'm left with three categories of irreplaceable (or replaceable only at a time and expense that won't be adequately compensated by insurance): family heirlooms, art, and information (most of which is digitized).  I am struck by the contrast between the categories. 

I am the family historian, so I have LOTS of family heirlooms (just ask my husband).  Civil War discharge papers, family Bibles from the mid-1800s, a receipt for a land purchase in 1830, family photos from the turn of the last century, handwritten marriage certificates, deeds, wills, military papers.  My maternal grandmother's set of kitchen crockery and my paternal grandmother's wedding ring.  A cherry china cabinet made by my great-great grandfather in the late 1800s.  The desk from my grandfather's general store.  A lot of stuff.  So you can see that choosing five items from that assortment would be heartbreaking.  The china cabinet would have to burn.  Its just too darn heavy.

But the family heirloom category is other people's stuff that defines their lives.  What personal property defines mine?  Besides my wedding ring and the art that I've acquired or made, it would seriously have to be my iPhone.  Because the personal property that is most important to me is information -- pdfs, mp3s, jpgs.  My important personal property has been digitized and saved on a passport hard drive smaller than an index card.  As long as I grabbed that and my iPhone, and as many family heirlooms as we could carry (most of which are scanned in on that hard drive, btw) we'd be okay.

What five items would you save if your house were on fire? 

Tanya Marsh

[Comments are subject to review and may be delayed]

More on the Meteorite

Andrea Boyack (Catholic) has an interesting essay in the National Law Journal on ownership of the Lorton, VA, meteorite.  Check it out!

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

Who Owns Meteorite, the Landlord or the Tenant?

A meteorite crashes through the roof of a commercial office building.  Who owns it, the landlord or the tenant?  According to this story, it may be that the landlord has a better claim.  However it turns out, it sure is an interesting fact pattern.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

MacLeod on Suicide and Gifts Causa Mortis

Adam MacLeod (Faulkner) has posted A Gift Worth Dying For?: Debating the Volitional Nature of Suicide in the Law of Personal Property on SSRN.  Here's the abstract:

This article examines the debate in personal property law over the question whether suicide is ever a volitional act and the attendant issue whether a gift causa mortis ought to be enforced when made conditional upon an act of suicide. Scholars have missed substantial doctrinal changes in the law of gifts causa mortis during the last thirty-three years. These changes bear upon other contested, legal issues, such as the wisdom of legalizing assisted suicide.

The article tests the modern rule that all gifts made in contemplation of suicide are enforceable and the assumption on which this rule is predicated, namely that all suicides are wholly non-volitional acts, products of mental or emotional infirmities. It tests the assumption against human experience, other bodies of law, and the best contemporary learning of psychology and sociology.

The article also offers a new understanding of the traditional rule (voiding gifts conditioned upon suicide), answers a strong doctrinal criticism, and attempts to fashion a more advanced version of the traditional rule, which avoids the shortcomings of both the traditional rule and the modern rule. It posits a stronger doctrinal basis for the traditional rule: strict adherence to the Statute of Wills, to which gifts causa mortis constitutes exceptions, best protects the donor’s intentions.

The article examines a stronger policy basis for the traditional rule, namely that the traditional rule, like parallel doctrines in tort law, criminal law, and insurance law, affirms the intrinsic value of each human person. This teaching helps promote a cultural commitment to the dignity of all human persons and informs contemporary debates on more complex problems, such as the question whether our nation recognizes a fundamental right to assisted suicide. This article concludes with a proposed revision of the traditional rule that is intended to reflect and advance contemporary learning about suicide.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

The History of Pierson v. Post

Daniel R. Ernst (Georgetown) has a fantastic summary of the recent scholarship on the history of Pierson v. Post in the Green Bag.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

Nelson on Virtual Property and the Rule of Capture

John William Nelson (Samford/East Anglia) has posted Fiber Optic Foxes: Virtual Objects and Virtual Worlds Through the Lens of Pierson V. Post and the Law of Capture on SSRN.  Here's the abstract:

Virtual worlds are more successfully blurring the lines between real and virtual. This tempts many to try and equate virtual property with tangible property. Such an equation creates problems when the common law of property is applied to virtual objects over which users can not possess complete dominion and control. The result is a conversion of the tangible resources that support virtual worlds into a virtual commons. Accordingly, the common law of contracts, rather than that of property, should be used to govern transactions between a user and owner of a virtual world.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

Merrill on Accession and Original Ownership

Thomas W. Merrill (Yale) has posted Accession and Original Ownership on SSRN.  Here's the abstract:

Although first possession is generally assumed to be the dominant means of establishing original ownership of property, there is a second but less studied principle for initiating ownership, called accession, which awards new resources to the owner of existing property most prominently connected to the new resource. Accession applies across a wide variety of areas, from determining rights to baby animals and growing crops to determining ownership of derivative rights under intellectual property laws. Accession shares common features with first possession, in that both principles assign ownership uniquely in a way that imposes minimal information cost burdens on society. But accession differs from first possession in that it does not presuppose that rights are established in an open access commons and does not require the performance of an act to establish ownership. These features of accession make it, as a rule, more efficient than first possession, at least where property rights are thick and securely enforced. More broadly, accession can be seen as the critical legal principle that generates the internalization function of property, insofar as gains and losses attributable to the management of resources are automatically assigned to the most prominently connected property by accession. Although the story of accession is generally a positive one from an efficiency perspective, it may be more problematic from several normative perspectives, which are briefly considered.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

Strahilevitz on The Right to Abandon

Lior Strahilevitz (Chicago) has posted The Right to Abandon on SSRN.  Here's the abstract:

The common law prohibits the abandonment of real property. Perhaps it is surprising, therefore, that the following are true: (1) The common law generally permits the abandonment of chattel property; (2) The common law promotes the transfer of real property via adverse possession; and (3) the civil law permits the abandonment of real property. Because the literature on abandonment is disappointingly sparse, these three contrasts have escaped sustained scholarly analysis and criticism. This paper aims to provide a comprehensive analysis of the law of abandonment. After engaging in such an analysis, the paper finds that the common law's flat prohibition on the abandonment of corporeal interests in real property is misguided. Legal rules prohibiting abandonment ought to be replaced with more a more permissive regime where what matters is the value of the underlying resource and the steps that the abandoning owner takes to ensure that would-be claimants are alerted to the resource's availability. Furthermore, the law of abandonment ought to be harmonized for real property and chattels. Finally, the paper criticizes the law's preference for adverse possession over abandonment as a means of transferring title in cases where the mechanisms might function as substitutes.

In the course of analyzing the law of abandonment and offering a qualified defense of the practice, the paper provides the first workable definition of resource abandonment, develops a taxonomy of existing regimes, suggests that the abandonment of positive-value real and intellectual property is surprisingly widespread, and analyzes the costs and benefits associated with abandonment. The paper explores at some length the factors that will determine whether an owner opts for abandonment or other means for extinguishing his rights to a resource, as well as the considerations that should drive the law's receptivity to these efforts. The latter include the decision costs, transaction costs, decay costs, confusion costs, lawless race costs, and sustainability issues associated with abandonment. In addition, readers who make it through the paper will be exposed to pertinent tidbits concerning the social norms of geocaching, the anthropology of "making it rain," the unfortunate decline of municipal bulky trash pickup, Mississippi's misguided livestock laws, and the dubious parenting choices of Jean-Jacques Rousseau.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]

First Circuit's Decision in Vineberg v. Bissonnette

How did I miss this?  Last month Judge Selya wrote an opinion affirming a summary judgement award of a painting that Max Stern, an art dealer, was forced by the Nazis to sell at below fair market value in 1937.  The opinion is here.  (Thanks to a link from the Illicit Cultural Property blog.)  There's a lot of stuff in there, though the opinion focuses on a laches argument that the possessor of the property made against the Stern estate's replevin claim.  (I know, I know--laches is an equitable defense and replivin is a legal action.  I had the same reaction.  But the district court allowed the argument and so did the first circuit.)

The possessor of painting ("Girl from the Sabine Mountains") is German baroness Maria-Luise Bissonnette.  She inherited it from her mother in 1991.  Bissonnette's step-father purchased the painting in 1937.

Alfred Brophy

Never Forget The True Owner In Finding Cases

A while ago, we noted a dispute between a contractor and a homeowner about a bunch of 1920s currency found in a wall.  Classic finder v. owner of the locus dispute, right?  Well, the publicity generated by the dispute brought the true owner's descendents out of the woodwork, and they'll get a share.  Of course, the lawyers will probably get the biggest share.

Ben Barros

[Comments are held for approval, so there will be some delay in posting]