III. Immunity from Loss v. Power to Acquire

III. Immunity from Loss v. Power to Acquire

A. TITLE VERSUS POSSESSION

1. 
   Actual possession
   
2. 
   “Open and notorious” (visible)
   
3. 
   Possession has been exclusive
   
4. 
   Continuous possession
   
5. 
   “Adverse and hostile” (without owner’s permission)
   
6. 
   For the statutory period
   

• 
  Facts: Plaintiffs claim adverse possession of two-foot tract of land forming boundary with defendant’s property.
  
• 
  Rule: Burden of proof is on party claiming adverse possession to prove by a clear and convincing standard of evidence all elements essential to title
  
• 
  Holding: Reversed and remanded
  

• 
  Facts: Plaintiff and her deceased husband, son of defendants, purchased land from defendants, entered into possession, built a home on the land, recorded the deed, and lived in the home for 15 years until death of husband, when plaintiff moved to Colorado and remarried.
  
• 
  Rule: Deed is sufficient for purpose of color of title even though deed is void for lack of signature of member of community
  
• 
  Rule: Deed is not void for want of proper description if, with the deed and extrinsic evidence on the ground, a surveyor can ascertain the boundaries
  
• 
  Holding: Affirmed
  

• 
  Facts: Adverse possession claim in rural area suitable for homesites and recreational activities in warmer seasons. Defendants used cornerposts to stake off parcel, built a picnic area, placed a camper trailer, built an outhouse and fish rack, planted trees not indigenous to area, built a reindeer shelter, visited the parcel every other weekend, and walked along various paths on the land.
  
• 
  Rule: Establishment of continuous, notorious, and exclusive elements does not necessarily depend on existence of significant improvements, substantial activity, or absolute exclusivity, only that land be used for statutory period as an average owner of similar property would use it
  
• 
  Rule: Hostility is determined by application of objective test asking whether possessor “acted towards land as he owned it,” without permission of one with legal authority to give possession
  
• 
  Rule: Absent color of title, only property actually possessed may be acquired by adverse possession
  
• 
  Holding: Reversed and remanded
  

• 
  Adverse possessor need not demonstrate that “true owner” actually observed or knew
  

1. 
   Objective test based on possession, meaning the state of mind is irrelevant (majority rule)
   
2. 
   Claim of right: adverse possessor must allege “claim of right” generally requires just treating the land as an average owner would
   
3. 
   Intentional dispossession: adverse possessor must be aware that he is occupying property owned by someone else and must intend to oust or dispossess the true owner. This may be phrased as a “claim of right”
   
4. 
   Good faith: only those who mistakenly occupy property owned by someone else can acquire ownership by adverse possession.
   

1. 
   Knock down fence or offending intrusion (self-help)
   
2. 
   Grant permission/license (preferably in writing)
   
3. 
   Bring lawsuit for trespass seeking injunctive relief
   

1. 
   Providing a degree of certainty of ownership to possessors of land by eliminating the possibility of stale claims to land title
   
2. 
   Encouraging maximum utilization of land
   
3. 
   Protect the expectations of the adverse possessor
   

1. 
   Possessor could be given a prescriptive easement rather than pursue adverse possession
   

A. PRESCRIPTIVE EASEMENTS

• 
  Facts: Dispute over use of shared gravel area between retail store and business. Vehicles entering plaintiff’s loading area would use the gravel area for turning and backing. Defendant purchased land in 1956, but a new survey in 1984 conclusively established bulk of gravel area used by plaintiff’s vehicles actually belonged to defendant. Defendant then erected barrier to prevent use of the area.
  
• 
  Rule: Elements of prescriptive easement: adverse use, which is open, notorious, hostile, and continuous for statutory period, and acquiescence in use or possession by person against whom claim is asserted (same as adverse possession, but involving “use”)
  
• 
  Rule: Extent of use must not be proved with absolute precision, but only as to general outlines consistent with the pattern of use throughout the prescriptive period
  
• 
  Rule: Open and notorious use presumed to be adverse
  
• 
  Holding: Reversed, plaintiff established sufficient evidence of prescriptive easement
  

• 
  Most courts drop the “exclusivity” requirement
  
• 
  Many courts require proof by clear and convincing evidence
  
• 
  Successful claims result in right to continue kind and amount of use that persisted during the statutory period
  

• 
  Generally superfluous with the non-permissive requirement
  
• 
  Some courts interpret to impose requirement regarding adverse user’s state of mind, defeating claim if user did not intend to trespass but believed they had landowner’s permission
  

• 
  Merely means owner did not assert right to exclude by bringing a trespass action (renders the requirement duplicative and unnecessary)
  
• 
  Landowner must have known about the use and passively allowed it to continue without formally granting permission
  
• 
  Landowner would or should have known of use (duplicates “open and notorious” requirement)
  

• 
  Minority of courts presume that use (unlike possession) is presumptively permissive
  
• 
  Some states protect owners from prescriptive easements over large bodies of unenclosed land under a “neighborhood accommodation exception”
  

• 
  Owner claiming prescription must be trespassing or otherwise interfering with true owner’s rights
  
• 
  Lawful use of one’s own property does not place true owner on notice that they must bring a lawsuit to protect themselves against loss of rights
  
• 
  Would interfere too much with free development of land
  

B. OTHER INFORMAL WAYS TO TRANSFER TITLE TO REAL PROPERTY

• 
  Minority of courts hold property owner has absolute right to an injunction ordering removal of encroaching structure, no matter cost involved or relative value of properties or extent of encroachment
  
• 
  Removal of encroaching structure ordinarily ordered if builder knowingly built on neighboring property, without regard to relative hardship
  

• 
  Facts: Plaintiffs thought they were building a coca-cola plant on their own property but built the factory on defendant’s lot, who were unaware of the construction. Defendant’s then claim ownership of building and its fixtures on theory of annexation.
  
• 
  Rule: An improver of land owned by another who through a reasonable mistake of fact and in good faith erects a building entirely upon the land of the owner, with reasonable belief that such land was owned by the improver, is entitled to recover the value of the improvements from the landowner and to a lien upon such a property which may be sold to enforce the payment of such lien
  
• 
  Rule: Alternatively, improver entitled to purchase land improved for value of the land less the improvements; if landowner refuses, must either pay improve the amount by which the value of his land has been improved or convey the land to the improver for the value of the land without improvements
  
• 
  Holding: Defendants stand to be unduly and unjustly enriched at expense of plaintiffs
  
• 
  Dissent: Nothing less than condemnation of private property for private use; he who made mistake must suffer hardship rather than he who was without fault; defendant should have option of purchasing building, selling property, or requiring plaintiff to remove the building from defendant’s property
  

• 
  Some courts take the position in Somerville and say a good faith mistake entitles builder to compensation, other courts say that trespassers cannot have the advantage of any benefits they have made to the property
  

• 
  Longstanding recognition of a boundary can be enforced even without oral agreement
  
• 
  Can also be established by estoppel is one owner erroneously represents to another owner the boundary line and the second builds improvements in reliance that encroach on the true boundary; some states may even find estoppels in owner’s silence in face of knowledge neighbor is building encroaching structure
  

• 
  Erosion of land shrinks owners rights
  
• 
  Avulsion of land (sudden changes caused by earthquakes, floods, and other natural events) do not change property borders
  

1. 
   Conversion rule: starts running of the statute of limitations when the property is wrongfully taken
   
2. 
   Discovery rule: statute of limitations would start to run only when the true owner discovered or reasonably should have discovered where the stolen property is located (O’Keeffe)
   
3. 
   Demand rule: until the demand is made and refused, possession of the stolen property by the good faith purchaser for value is not considered wrongful (Lubell); much more protective of the interests of the true owner)
   

• 
  Market value determined by how much individuals are willing and able to pay for entitlements
  
• 
  Transactions include three elements: (1) initial distribution of property rights, (2) offer price by a non-owner, and (3) an asking price by an owner
  

• 
  Pareto Superiority: if someone gains by the change and no one is injured or made worse off by it (voluntary exchanges)
  
• 
  Pareto Optimality: no further exchanges can be made that are Pareto superior, meaning no changes can be made without harming others or making them worse off
  
• 
  Wealth maximization (Kaldor-Hicks criterion): the benefits of the change outweigh the costs, meaning the winners from the change could fully compensate the losers and still be better off. (“potential Pareto superiority”) This one is the criterion most often used in the economic analysis.
  

• 
  Justice Brennan in Armstrong: those who profit from an activity should bear its costs – encompasses both a rights argument and a social utility argument
  

• 
  Rights argument: those who benefit from an activity should not impose costs on others
  
• 
  Social utility argument: economic actors should internalize their external costs to promote efficiency
  

1. 
   If there are no transaction costs, it does not matter which legal rule is chosen because any legal rule will produce an efficient result
   
2. 
   In the presence of transaction costs, the choice of entitlements by the courts may have an effect on efficiency. The courts may increase efficiency by assigning entitlements to the parties who would purchase them in the absence of transaction costs.
   

• 
  Efficiency is a function of the initial distribution of wealth
  
• 
  Offer/asking problem: result of transaction cost analysis dependent on which party is given entitlement initially and assumption that offer and asking prices are unlikely to differ much is arguably unwarranted
  
• 
  Different ways of measuring efficiency
  

• 
  Fair market value
  
• 
  Auction (looks at the willingness and ability to pay of the parties and focuses on the amount they would OFFER to get the entitlement)
  
• 
  Status quo (assign entitlement to the current owner and ask whether non-owners are willing and able to offer enough to get the owner to sell)
  
• 
  Redistribution (conclude that existing allocations of entitlement are unfair or presumptively inefficient and alter them)
  
• 
  Reverse auction (which party would ask the most to give up the entitlement; what is the asking price?)
  
• 
  Social welfare (decouple efficiency analysis from reliance on market measures (focus more on a combination of dollar amounts and subjective consideration of the magnitude, character, and distribution of benefits and burdens)
  

• 
  Difficulty of defining “voluntary exchange”: voluntary exchanges increase social wealth by making both parties better off in their own terms, while involuntary or coerced exchanges do not make both parties better off
  
• 
  Difficulty of identifying transaction costs: deciding what is and is not a transaction cost is not always obvious
  
• 
  Efficiency has a conservative bias because it gives greater weight to the interests of the wealthy and the large corporations that currently wield substantial economic power and also tends to privilege interests of property owners over those of non-owners
  
• 
  Commodification: certain kinds of valued resources should not be traded in the market or otherwise treated as if they were commodities for sale (e.g. workplace safety conditions and slavery)