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2012 Property exam feedback memo with sample answersProfessor Rebecca Tushnet

One feature of good answers you will notice: they take a position and explain why it’s the best choice. I may disagree, but a colorable justification gets you a long way. Where there’s more than one “good” answer, this is roughly how I think about the answers, from least satisfactory to most:

(failing range) Doesn’t state operative legal concept/s.States operative legal concept/s but doesn’t apply it/them.(low passing range) Applies operative legal concept/s but merely lists alternative possible results rather than indicating which is best.(average) Indicates which is best, but not why, or uses a rationale that does not square with the option chosen. Takes account of many of the relevant facts.Indicates why the chosen alternative is the best result, in general terms.(strong) Indicates why with specific analysis, giving due attention to relevant policy, theoretical, and/or factual considerations. Explains which facts are or aren’t dispositive given the legal rules (e.g., explains how to deal with evidence of intent in adverse possession cases).

1. Fringeacre

(5 points) Peter Bishop and Olivia Dunham are the record owners of Fringeacre as joint tenants with right of survivorship. Bishop and Dunham grant Bishop’s father, Walter Bishop, an easement to pasture his cows on Fringeacre. Walter does not record the easement. Later, Dunham gives her interest in Fringeacre as a gift to Astrid Farnsworth, who does not know about Walter Bishop’s easement, and who records. When Dunham subsequently dies, Peter Bishop sells Fringeacre to Philip Broyles, who had seen Walter’s cows grazing on the property; when Broyles asked Peter about the cows, Peter said, “Yeah, I let my dad do that.” Broyles records.

The relevant recording statute is: “No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded.”

(4 points) Who owns what, and why?

Some preliminaries: Walter Bishop’s easement is not implied, it is explicit: Peter Bishop and Olivia Dunham granted it to him. In addition, on these facts, it is not implied from prior use, which would require that it had been a use occurring on the land that ultimately became Fringeacre, for the benefit of some other part of the property, at a time when the property was not yet divided. See Restatement 2.12 (easement from prior use can be implied when “prior to a conveyance severing the ownership of land into two or more parts, a use was made of one part for the benefit of another”). The facts do not suggest that Walter’s use preexisted the severance of Fringacre from some larger parcel that benefited from the right to graze cattle on Fringeacre

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and that Walter owned. (Also, a tenancy in common isn’t a severance of ownership of land into two or more parts, in fact it is the opposite: common ownership of a single parcel.) More to the point, we aren’t interested in how the servitude was created: the facts tell you it was an easement (the Statute of Frauds only requires that there be a writing, not that the writing be recorded), and we are interested in whether the operation of the recording act destroyed the easement.

(.5) The conveyance to Farnsworth severs the joint tenancy, (.5) but Farnsworth isn’t a BFP, so her recording doesn’t help her against a prior unrecorded transfer, despite the notice statute. Under the common law, she can only get what Olivia Dunham had to give. She has Dunham’s half interest in Fringeacre, subject to Walter Bishop’s easement. (.5) Her recording, however, does put Broyles on constructive notice, so he can’t be a BFP with respect to her half interest. (.5) Farnsworth and Broyles own Fringeacre as tenants in common, with equal shares.

(2) Is Broyles subject to Walter Bishop’s easement? Depends on whether you think he was on inquiry notice that Walter Bishop’s interest might be an easement rather than a mere license, as the statement “I let my dad do that” might suggest. Credit was available for any credible discussion. One might wonder how only half an undivided interest might be subject to Walter’s easement, but there are a variety of ways we might deal with that, from reallocating percentage ownership between Broyles and Farnsworth to partition; still, it would be reasonable to argue that this wrinkle should tip the balance towards finding that Broyles had inquiry notice, and some people did.

(1 point) How, if at all, would the answer change if the recording statute read, “Every unrecorded conveyance of an interest in land shall be void as against any subsequent purchaser in good faith and for a valuable consideration whose conveyance shall be first duly recorded”?

As shown in, for example, the class slides, this is a race-notice statute, which protects only BFPs who record, unlike a notice statute, which protects BFPs whether or not they record. (Good faith and lack of notice, including actual notice, inquiry notice, and record notice, are the same thing; do you understand why?) A race-notice statute wouldn’t change anything here: the only subsequent BFP here is Broyles, who recorded and is thus equally entitled to protection under either type of statute.

Sample 5-point answer:

The recording statute on the books is a notice statute, which means that prior unrecorded

interests are not protected against subsequent bona fide purchasers for value as long as the

latter do not have notice of the previous purchase.

When Astrid Farnsworth is given part of the interest in the joint tenancy (with rights of

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survivorship) the joint tenancy between Bishop and Dunham is destroyed. In order to have a

joint tenancy you must have four unities (time, instrument, possession, and interest), and

Bishop and Farnsworth lack both unity in time and unity in instrument. Now Farnsworth and

Bishop are in a tenancy in common. When Bishop sells to Broyles, he can only convey his

interest to Broyles, and thus Broyles and Farnsworth are in a tenancy in common now.

Broyles will not be able to say that he should be entitled to the whole thing because of the

fact that Farnsworth received her interest in the land by gift. Indeed, donees are not only

allowed but encouraged to record their interests, they are just not protected against prior

unrecorded interests.

As far as Walter’s easement, Astrid is not protected against the easement because she is

not a subsequent bona fide purchaser for value; she is a donee. With respect to Broyles, it is

a much more difficult question. As a subsequent bona fide purchaser for value he does enjoy

the protections of the recording statute, the question is did he have notice. It is very difficult

to say that Bishop’s offhand remark that he let his dad’s cows graze on the land would be

sufficient to put Broyles on notice that his soon-to-be property was subject to an easement.

Indeed, it was at least from what was said, it probably appeared to Broyles that Bishop had

given his dad a license, permission to come on the property for a specific purpose, which

Broyles could then freely revoke at any time he so desired. Absent any further information, it

cannot be said that Broyles had notice of the easement, thus he should enjoy the protections

of the recording statue. This leads to an interesting situation because now Walter has an

easement that is valid against one tenant in common, but not against the other. If Astrid and

Broyles lived on separate plots, this would perhaps mean that Walter’s cows could graze on

Astrid’s part but not Broyles’.

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Would the situation change if the statute read: “Every unrecorded conveyance of an

interest in land shall be void as against any subsequent purchaser in good faith and for a

valuable consideration whose conveyance shall be first duly recorded”? This is a race-notice

statute, in which a subsequent bona fide purchaser for value, in order to be protected against

prior unrecorded interests, must both not have notice and record first. This would not change

the analysis given the answer offered above. Broyles not only had notice of Walter’s

easement, but he also recorded.

Here’s a good discussion of Walter v. Broyles going the other way:

Walter’s easement is good against Broyles because had constructive notice of the

easement. He noticed the cows and was worried enough to ask Bishop Jr. The response might

seem at first glimpse to indicate no easement existed, but “I let my dad do that” leaves a lot

of room for ambiguity. It could be referring to a written easement, or a license, or even an

easement created by prescriptive use (Restatement § 2.16). It was enough to put Broyles on

inquiry notice to determine what rights Walter had (like Sanborn v. McClean). So, Walter

has an easement to pasture his cows on Fringeacre, protected by the notice statute.

2. Beaches

(8 points) Under Disturbia state constitutional law, people have a right to access the beach; the courts have stated that this right covers at least recreation, hiking, picnicking, fishing, swimming, surfing, diving, viewing and nature study. Over the past year, Atomic Beach residents began to complain of the influx of large numbers of homeless youths. Residents complained that they openly used and dealt drugs on the beach, got into fights, smashed bottles, spat on passers-by and panhandled aggressively. The problem spread to boardwalk vendors. With too many sellers vying for 205 slots along the west side of the boardwalk, police said, some began hiring the young transients to protect their selling spaces. Some of those vendor vigilantes used force, intimidating artists and musicians who stopped showing up. The young "travelers" also used their proceeds to buy medical marijuana from boardwalk clinics and then resell it, according to the commander of the beach police division.

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To deal with the problem, Atomic Beach imposed a curfew barring sleeping on the beach at night (midnight-5 am). In order to deter violations of the curfew, the police also confiscated and destroyed tents, blankets, cellphones, computers and other personal items that had been left in an encampment under a pier. A group representing the homeless sues to enjoin the curfew as a violation of open access rights and for compensation for the destroyed property as a taking. Evaluate these arguments (and only these) and indicate who should win.

(4 points) Sleeping isn’t explicitly in the list of things that people have the right to do on the beach, but is it the kind of thing that either falls naturally within that list or that should be? Although the most likely answer is that it isn’t—sleeping is too different and too much like living on the beach, which interferes with others’ rights to access the beach—one could argue it either way. But since sleeping itself isn’t causing the problem, it was important to address sleeping v. doing all the other bad things. Also it was important to recognize that the state’s powers here aren’t limited to suppressing nuisances. Managing public trust property can aim for the good, not just suppress the worst.

Sample answer:

The group representing the homeless youth first contends that the curfew barring sleeping on the

beach violates the youth’s open access rights. This argument should be evaluated under the

public trust doctrine, outlined in Sax’s article, which suggests that the government, as a trustee of

the public beach, 1) must hold the property as available for use by the general public, 2) must not

sell the property, and 3) must maintain the property for particular types of use. The public has the

right to use the beach for recreation, hiking, picnicking, fishing, swimming, etc. While this list is

not exhaustive, the public does not have an inherent right to sleep on the beach. Therefore, the

curfew is not making the beach unavailable for use by the general public by prohibiting

something that is not a general use. Furthermore, the third requirement—maintenance of the

property for particular uses—makes reasonable the curfew. In order for the beach to be

maintained for particular types of uses, the government needs to institute the curfew. The

homeless youth have been wreaking havoc on the beach and in order to maintain the property for

the public’s use, the curfew is important.

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(4 points) This is a question of whether the confiscation and destruction is the kind of government action that counts as a taking at all, notwithstanding that it is in fact a physical appropriation of private property. (Thus Kelo was largely unhelpful/irrelevant to the argument. Lucas is also not much help because Scalia explicitly limits the total wipeout rule to real property land.) Lee Anne Fennell’s categories might suggest this is a confiscatory non-taking: We know that seizing property as evidence of a crime is not a taking. Is this a similar non-taking situation, as Jed Rubenfeld’s analysis suggests (the government interest is served just as well by destruction as by taking the property for itself), or is the government trying to achieve a legitimate regulatory objective (keeping access to the beaches open to all) for which it ought to pay? The property itself--cellphones, computers, etc. – wasn’t the problem (this property was not itself a nuisance), deterrence was. Perhaps the confiscation might serve appropriate law enforcement objectives, though destruction might constitute a different kind of government action.

Sample answer (please note that I don’t think this discussion of Michelman adds anything to this answer, because the answer doesn’t take a position on how Michelman’s theory would resolve the question, if that can even be done):

The group’s main argument that the police action constituted a taking is based on the

holding of Loretto. In that case, the government was found to have conducted a taking when it

physically took possession of plaintiff’s property, making him entitled to a nominal

compensation of $1. In the current case, police not only took physical possession of the

property, but also destroyed it. This, the group will allege, is a regulatory taking which should

be compensable or an outright exercise of eminent domain. The group may cite the Michelman

theory of takings, which finds that if the demoralization costs of the group and their sympathizers

are greater than the settlement costs, then the government should pay. It is unascertainable

whether a large enough number of people sympathize with the homeless youths to create such

high demoralization costs. The settlement costs are relatively low – the group is ascertainable

and their property was not extremely valuable. The demoralization costs may be even less,

however, and as long as they remain less than the settlement costs and the efficiency gains

remain positive, then the state is not required to pay just compensation.

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The state’s counter-argument will be that the act was an ordinary exercise of the police

power (in order to prevent harm) or a confiscatory nontaking, such as when personal property is

taken as evidence of a crime. When police take personal property in the course of investigation

or crime prevention, this is normally considered to not be compensable because it is state action

to prevent public harm (confiscate a vehicle to catch a criminal, seize items as evidence of

crime). This is best illustrated by Rubenfeld’s theory of taking. If the government could take

property and destroy it (as it did here) rather than restrict the owner’s usage, then the action is

not a taking. Rubenfeld’s theory suggests that if the government was exercising its police power

to prevent harm, a non-compensable action, then it is the same to it if it takes or destroys the

property. In this case, the taking or the destruction achieve the same result, they help enforce the

curfew by preventing the homeless youths from having a place to return to under the pier. As a

result of the foregoing discussion, the police should win and the actions be ruled as not takings

deserving compensation.

Less likely outcome (seizure and appropriation of cars and other property related to crime occurs all the time, and challenges routinely fail), but good try--maybe one of you will establish this as the right rule someday:

Although we have mostly studied Takings as applied to real property, the 5th Amendment

says “private property,” not just real property, so there is no reason to think that the takings

analysis should be different (but see Scalia’s differentiation of “wipeout” for personal vs. real

property in Lucas). Because personal property can be “taken,” a takings analysis must be

conducted.

Second, there seems to be a physical taking under Loretto. Under Lucas, there is an

exception to the per se taking of a regulatory “wipeout” for common-law nuisance abatement,

but we have read no case implementing the Lucas/nuisance exception to physical takings. If

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there was such a case, it could be argued that the youths’ disturbing the public’s use and

enjoyment of the beach is a nuisance and that the physical taking is excepted. However, because

I think that no such rule exists, I would argue that there was a permanent physical taking

(especially if the police destroyed the confiscated items) and that the State must compensate the

owners for their losses. However, one would argue that there was no taking because of the nature

of the government action. In class we discussed that the government can take your property

without compensation if the character of the government action is crime prevention: for example,

the police can commandeer a car to chase a criminal and need not compensate if it is destroyed.

Similarly, the character of the government action, it could be argued, is crime prevention,

because the homeless youths have been seen breaking the law (engaging in acts of violence,

assault, drug use, etc.). As such, the government could argue that it need not compensate the

youths for the destruction of their property because (1) they were in violation of the law and (2)

the property destroyed was directly related to the law violated.

However, I would disagree and argue that a per se permanent physical taking occurred and that

the government must compensate the youths. Not only was the taking clearly physical, but the

government’s argument for “government action” seems faulty. If you are pulled over by a police

officer for talking on the phone while driving – which is clearly hazardous to other drivers – the

police officer can cite you and fine you for violating the law, but he may not destroy your phone

without just compensation, even though the destruction of the phone was in furtherance of the

law prohibiting phone calls while driving. Of course, the police may destroy personal property if

the property itself is illegal (for example, it may destroy your cocaine if they find it on you

during an arrest), but the facts indicate that the police destroyed perfectly legal property; as such,

a physical taking occurred and the police must compensate the youths for it.

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3. Revenge

A. (3 points) Victoria Grayson signs an agreement with Amanda Clarke stating that Amanda can live in the guest house on the Grayson property as long as Victoria Grayson is satisfied with her performance as nanny to the kids, Charlotte and Daniel Grayson. Identify the best legal label for Clarke’s situation with respect to the guest house and explain why it is the best.

This looks like a tenancy at will, except that it appears to be terminable only by Grayson, while tenancies at will by definition are terminable by both parties. The closest other alternatives—a fee simple or life estate determinable for Clarke, with the determining event being Grayson’s dissatisfaction—seem far less likely given the employment relationship between the parties, though they do allow Grayson the unilateral power to terminate. Especially given that FSD/LED would have potential tax consequences (owners pay taxes) and would also free Grayson from a landlord’s duties, including the implied warranty of habitability, which we probably want Grayson to have, it seems best to say that Clarke has a tenancy at will (meaning that she too can terminate, despite the explicit terms). Another option, a license, is also probably inferior, again because of the landlord’s duties, though an argument could be made for it.

Sample answer:

While the agreement is not specifically clear as to whether Grayson conveyed a freehold estate

or leasehold to Clarke, a leasehold proves most applicable to the situation. The phrasing that

Clarke “can live” in the guesthouse does not suggest that she has a freehold estate interest in the

property. Instead, it suggests a landlord-tenant relation. Grayson still owns the property and

Clarke is simply leasing the guesthouse.

The agreement does not contain any fixed period or time. Therefore, this is not a term of

years or periodic tenancy. However, the tenancy at will does not normally allow unilateral

termination of tenancy. This agreement explicitly states that Grayson has the power to terminate

the leasehold if she is not satisfied with Clarke’s performance as a nanny, but does not reference

the same power for Clarke. A similar issue arose in Garner v. Gerrish. In that case, the lease

granted the tenant a similar conveyance, which the court found to be a life tenancy terminable at

the will of the tenant. This case proves similar, but grants the unilateral power to terminate to the

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landlord instead of the tenant. However, Garner basically created a new kind of property

relationship that common law had not previously recognized. Pursuant to the idea of numerus

clausus, property law should avoid creating new types of property relationships. There should

only be so many types of estates. Therefore, the Disturbia court should not adopt the Garner

approach. Instead, the court should find a tenancy at will. Although few set out to create

tenancies at will, courts may find these leaseholds to get out of problems. In this case, that

finding may even further the interest of the parties. The agreement was that Clarke “can live in

the guest house on the Grayson property as long as Grayson is satisfied.” The phrase “can”

provides room for interpretation of intent. She does not need to live in the guesthouse. Therefore,

it seems that Clarke does possess the right to terminate the leasehold.

In summary, this lease possesses no fixed period or end date and can be terminated

bilaterally. Therefore, there is a tenancy at will.

License argument:

The best legal label is that Grayson has granted Clarke a license to live in the guest house. In

discounting other possibilities, we first discard any freehold label because Grayson is not giving

any ownership rights. Turning to leaseholds, none of the possible estates fit this situation. Term

of years and periodic leases both require some term and none is here given. Tenancy at will is a

possibility (with nannying being the “rent paid”), but Grayson would need to provide adequate

notice before the termination of the leasehold, and that may not be practical if she wants to fire

the nanny and bring in a new one to the guest house within a short time. We are left with our

other options: licenses and servitudes. This case directly follows a license as it is revocable at

will.

Whether or not Clarke has the right to exclude others from the guest house may enter the

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consideration as well (it may shift it toward a tenancy at will for example), but without more

information a determination cannot be made on that account.

Finally, though tenancy at will may be the best option for Clarke (giving her the most

rights), a license gives Grayson the most rights, and we are not in a position to balance those

rights without further information such as other terms of the employment or Clarke’s personal or

financial situation.

B. (3 points) One day, Clarke praises one of Victoria Grayson’s diamond necklaces. Grayson says, “You can have it if Charlotte and Daniel are accepted into Evernight Academy. In the meantime, you can wear it.” Clarke thanks Grayson and wears the necklace thereafter. Right before the Evernight entrance results are released, Grayson fires Clarke, telling her, “Your lies have failed! I despise you and I will never lift a finger to help you again!” Clarke leaves, taking the necklace with the rest of her things. A day later, Charlotte and Daniel are accepted into Evernight. A day after that, Victoria Grayson sends a letter to Clarke demanding the return of the necklace. Who owns the necklace and why?

This is a question about whether the elements of a (conditional) gift were satisfied all at the same time. At the beginning, there was no gift, only an intention to make a future gift, which does not have any legal effect. This is the difference between “I now give you a remainder in X” and “I promise to give you X in the future (usually but not necessarily ‘when I’m dead’).” The former is valid; the latter is not effective. Clarke has possession, not a future interest. Consider what should have happened if Grayson had decided she’d made a mistake 5 minutes after her statement: in the case of a valid transfer of a future interest, the transfer would already be complete and her attempted revocation would be too late! Because it’s not really plausible that she intended a present transfer of a future interest, we do care about whether she in fact changed her donative intent in time. (Once the gift is complete, she can’t unilaterally revoke: consider our discussion of Christmas presents.)

The condition here was the admission to Evernight, as the condition for an engagement ring is marriage.

Grayson delivered the necklace, but arguably lost the intention to make the gift before the triggering event occurred, and it might be pointlessly legalistic to say that she had to say so explicitly given the other things she said, which should have made clear that her intention had changed. We don’t want people to be unable to change their minds about promised gifts; aside from the consequences to friendly, casual promises, think of the risks of fraud when the alleged giver is dead. Still, it might be legitimate to allow each element of the gift to persist unless explicitly revoked, since there’s no reason to think Clarke failed to satisfy her side of the

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condition and since Clarke’s possession made Grayson feel the “sting of loss.” A good answer could go either way as long as it recognized the issues.

Sample answer:

Amanda owns the necklace. The acceptance by Daniel and Charlotte are conditions precedent to

Clarke owning the necklace. Victoria is distinguishing between “having” the necklace, and

“wearing” it, thus when Clarke originally starts wearing the necklace, a court would likely not

find that Victoria has gifted it to her because there was no intent for Amanda to keep it unless the

children got into the Academy. [RT’s note: this next sentence is unhelpful, since Clarke is in

possession and we aren’t talking about a gift of a remainder.] This may be an inter vivos gift, in

that Clarke did not have to maintain possession of the gift in order for her to receive a remainder

interest. (Gruen v. Gruen, holding that there has to be donative intent to make an irrevocable

present transfer of ownership in the interest. The court presumed acceptance where the gift is of

value to the donee). Clearly Amanda held value in the necklace as she had praised it. Victoria did

indeed deliver the necklace manually when she told Amanda that she could wear it in the

meantime, and Gruen held that one does not have to “redeliver” once the requirements are met.

Amanda also clearly accepted the gift. The main question is whether there was an irrevocable

present transfer in the interest of the necklace. Once Victoria stated that Amanda could have it if

the kids got into the academy, she was stating a future gift, which is revocable unless the gift has

been given and accepted. Victoria did not say she revoked her agreement to give Amanda the

necklace, and stating that you hate someone and that you will not lift a finger to help them may

be different from sticking to past agreements. While a court may hold that the bad blood between

Amanda and Victoria, and Victoria’s biting words were enough to revoke the offer, it is more

likely that the court will find that the intent to give remained because Victoria did not have to lift

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even a finger to give Amanda the necklace—her children merely had to get into the academy.

Amanda accepted the gift by maintaining possession once the children got into the academy;

Victoria would have had to take the necklace back before the children got in or revoke the

agreement. The letter is too late, and Amanda owns the necklace.

An alternative answer:

Grayson owns the necklace. Once a gift is made, the transfer is irrevocable, and Grayson cannot

demand the necklace back. The issue then is whether the gift was completed and valid. Here, the

elements of the gift are satisfied. (a) Delivery. Grayson physically handed the necklace to Clarke

easily satisfying the laws preference for manually delivery (Bost). (b) Acceptance. There is no

argument that Clarke accepted the gift. She received after remarking on its beauty, thanked

Grayson in recognition of a gift being given, and wore it immediately. (c) The only real issue is

whether Clarke manifested an intention to transfer ownership presently. She did not. An inter

vivos gift is not valid if the donor manifests intention to transfer ownership in the future (Gruen).

Of course, a donor may transfer ownership presently, while maintaining possession (as in

Gruen), but that is not the case here. Grayson’s intent was to transfer ownership if and when her

children were accepted, not before. She said “you can have it if..,” but may wear it “in the mean

time.” This indicates only intent for Grayson to maintain ownership while Clarke maintains

possession, in complete contradistinction to Gruen. This issue is dispositive. The condition

attached to the gift plays no role in determining the gift’s validity. The only issue that matters is

that Grayson did not intend to make a present transfer, but a future one, which invalidates the gift

entirely. Grayson still owns it because she never transferred ownership.

4. Ghostfacers

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John Winchester left a rental property in his will “to my sons Sam and Dean as tenants in common.” While Dean was off on a cross-country trip, Sam rented the property to Emma Swan and Mary Margaret Blanchard for a year beginning Jan. 1, 2012 with rent payable at $2000/month, which was the then-prevailing market rate for the area. In early January 2012, after paying the first month, Swan and Blanchard moved out and refused to pay further, claiming that the property was haunted. They contended that paranormal activity — including eerie whispering sounds, flickering lights and slamming doors — forced them to flee the property just a week after moving in. They even brought in ghost hunters from the reality show Ghostfacers to verify their claims. The Ghostfacers crew managed to film some nighttime footage of a bowling pin falling over on the floor of the home apparently on its own.

Sam insisted that the fallen pin was the result of creaky floors. Several previous tenants had also broken their leases and complained of feeling “watched” or that the house was “creepy,” but when Sam looked around before renting to Swan and Blanchard, he concluded that he felt nervous just because he was in an old, empty house. Anything he might have thought he saw or heard, he insisted, was just his mind playing tricks on him. Sam told Swan and Blanchard that they were still responsible for the rent.

After $100 spent on advertising (a reasonable amount for a property of this type), Sam relet the house starting in April 2012 for $1900/month. Though the then-market rate was $2100 for theoretically comparable rentals, he knocked $200 off the rent because the place was beginning to get a reputation in the neighborhood for being haunted, which he believed accounted for the delay in reletting.

A. (4 points) Sam sues Swan and Blanchard for ten months of unpaid rent (counting the forfeited security deposit and the month’s paid rent as the other two months). Is he entitled to any award, and why?

Were Swan and Blanchard constructively evicted or was the implied warranty of habitability violated? The obvious comparator is Stambovsky, though the situation is different—a rental rather than a purchase agreement. The issues raised by Stambovsky should thus be translated into the rental context, where the ongoing landlord/ tenant relationship and the balance of power between the parties make the Stambovsky considerations addressable though the lenses of the implied warranty of habitability and constructive eviction. Perhaps most significantly, it doesn’t seem like Sam did anything to create or conceal the allegedly haunted condition; yes, he’d had complaints before, but nothing on the order of “haunted.” They also didn’t give him time to fix the problem, though it’s not clear what he could have done.

Sample answer:

Sam is entitled to an award because he did not violate any of his duties as a landlord.

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Were Swan and Blanchard constructively evicted from the property because it was

haunted? The implied covenant of quiet enjoyment allows tenants to lawfully vacate the property

after giving the landlord notice of the disturbance and a reasonable opportunity to cure if (1)

landlord breached a duty owed to the tenant, (2) that caused a substantial interference with the

tenants enjoyment of the property or rendered it unfit for the purpose for which it was leased and

(3) tenant vacates within reasonable period of time after the landlord fails to ameliorate the

problem.

Here, Swan and Blanchard did vacate within a reasonable period of time. That is likely

the only element that was satisfied.

Sam had no notice and no reasonable opportunity to cure the problem. Swan and

Blanchard moved out only a week after moving in. They did not notify Sam of the alleged

poltergeist but instead expected him to telepathically discover that they were having issues in the

home and gave him no opportunity to hire an exorcist or similar ghost-busting professional to

ameliorate the problem. Although Swan and Blanchard believed the flickering lights, whispering

sounds and slamming doors were spooky, they likely did not constitute a substantial interference

with their enjoyment of the property or render it unfit for habitation. Previous cases have found

that a landlord’s refusal after numerous pleas from the tenant to fix a driveway that causes

repeated floods, (Reste Realty), a landlord’s refusal to supply heat on cold days (Higgins v.

Whiting), a landlord’s refusal to repair the main waste pipe of a building that was clogged for a

significant period of time causing a horrible odor and health problems (Anderson v. Walker), all

constituted substantial interferences. The only independent verification of Swan and Blanchard’s

claims was the Ghostfacers crew’s filming of a bowling pin falling over. That is not a substantial

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enough interference to cause constructive eviction. Additionally, courts may be disinclined to

consider preventing and abating hauntings to be a duty of a landlord.

Did the spiritual occupation of the house violate the implied warranty of habitability? In

Hilder v. St. Peter, the court established that rent premises be offered and maintained in a safe,

decent and habitable condition (usually governed by building and housing codes). In Hilder, the

tenant’s apartment had sewage leaks, a clogged toilet, her lock was broken, the bathroom light

didn’t work, and there was a broken window. The presence of ghosts in the house is not nearly as

bad as the conditions of the apartment in Hilder and there is no housing code indicating that

ghosts should be considered in evaluating habitability, therefore the warranty of habitability was

not violated here.

Another question to consider is if Sam has a duty to disclose that the house was haunted.

Stambovsky v. Ackley establishes that a seller must reveal a defect to the buyer if (1) he created

the defect; (2) they materially impair the value of the property, and (3) they are not likely to be

discovered by a prudent buyer using due care. It’s important to note that Stambovsky concerned

the purchase of a property and not a lease, but the duty to disclose may also apply here. The

court in Stambovsky found it significant that the sellers “created” the poltergeist defect (in

essence by profiting from it and advertising it) – and they therefore had a duty to disclose.

Because Sam and Dean did not create the defect here and Sam himself was not sure the house

was haunted, Stambovksy does not apply. Johnson v. Davis held that a seller must reveal defects

that (1) materially affect the value of the house; (2) are known/accessible to the seller; and (3)

are neither known nor readily observable to the buyer. With the disclaimer that Johnson likely

does not apply to landlord/tenant issues: the haunting was neither known nor readily observable

to Swan and Blanchard. Arguably Sam knew about the haunting, but refused to believe it – thus

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satisfying the second element. Finally, does the haunting materially affect the value of the house?

Doubtful. Because the materially-affected standard is fairly high (for Johnson it required an

awful roof) if Swan and Blanchard are only dealing with pins falling over, a court will be

unlikely to find the value was materially affected.

I think this next answer represents the less likely outcome but consider it a good try, though it makes a factual mistake (it didn’t take a year to re-let) and would be better emphasizing Sam’s need to drop the price in an apparently hot market:

Traditionally and in common law, the rule of caveat lesse of buyer or renter beware provided that

the seller did not have a duty to disclose defects and that the duty was on the tenant to figure out

what they were getting into to. Caveat Lesse was subject to the covenant of quiet enjoyment and

constructive eviction. The Covenant of Quiet Enjoyment is not implicated in this case because

Sam did not interfere with Emma Swan and Margaret Blanchard’s enjoyment of the premise,

rather ghosts did. The would also under common law not be afforded the right of constructive

eviction because Emma and Margaret failed to notify Sam as their landlord that ghosts were

interfering with their intended use and enjoyment of the premise. The constructive eviction

defense is used when the landlord fails to interfere with a problem that is affecting the tenants

enjoyment, but Sam can claim that he did not know about this interference and was not given the

opportunity to remedy the defect. Thus, Emma and Swan would still have to pay the unpaid rent.

However, the modern rule allows contract principles to govern leases. The landlord has

an implied warranty of habitability and the tenants obligation to pay rent is dependent on the

landlord ability to provide and maintain habitable premises. This requirement is both a warranty

and covenant, ensuring that the premises are fit for habitation at the execution of the lease and

that the Landlord will maintain the premises so that the remain in the same condition throughout

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the lease. Emma and Margaret have a tenable claim that Sam breached this warranty by renting a

house that he know was haunted. They can also claim that he breached is duty of disclosure for a

latent defect and as such their contractual lease should be rescinded.

Under the modern rule, the landlord has duty to disclose latent defects. Latent defects are

defects that (1) the seller is aware or ought to be aware of, (2) the purchaser is not likely to

discover through reasonable inspection and (3) that materially alters the value. An undisclosed

condition that impairs the value of the property is a basis for the rescission of the contract

(Stambovsky)

(1) Sam ought to have been aware of the defect regarding paranormal activity. Regardless

of his belief that his nervous feeling was a result of him being in an old and empty house, he was

on constructive notice that the house was “haunted” given that several previous tenants had also

broken their leases because they thought they were being watched and that the house was creepy.

(2) Regardless of where Swan and Blanchard relocated from, it is implausible to belief that they

would have discovered through reasonable inspection that the house felt haunted. One would

have to spend s night in the house or contact previous owners to ascertain such knowledge that

was peculiarly known to Sam and previous tenants. (3) While Sam may try to claim that the

presence of ghosts would not result in a material alteration of value, because some people may

pay more to live amongst ghosts, objectively speaking a reasonable person would attach

significant importance to living in a haunted house. The fact that several tenants had broken their

lease and that it took Sam a year to relet the house at a reduced price also supports the contention

that the presence of ghosts is a facto that materially affects the value of property. Because Sam

failed to disclose this defect when renting the house to Blanchard and Emma he breached his

duty of disclosure and the contract should be rescinded. Because the contract should be rescinded

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and the time of his breach, Blanchard and Emma are not responsible for the ten months of unpaid

rent. He also breached his warranty of habitability by not disclosing this fact and thus Blanchard

and Emma are not responsible for the ten months of unpaid rent. (Hilder v. St. Peter)

B. (3 points) Notwithstanding your answer to the previous question, assume the court rules in Sam’s favor. How much money should he be awarded, and why?

Preliminarily: the tenants had a term of years, here one year. They can’t get out of it before the year is up by giving notice, as in a periodic tenancy.(1) The rule: Sam is entitled to the benefit of his bargain. Since he’s kept the security deposit, he’s been paid for 2 months. He is owed: $2000/month for ten months, plus what he spent to relet, minus what he should have gotten in mitigation (or from letting the apartment on the tenants’ account). (Even if he had no duty to mitigate, having done so he had to be reasonable.)(2) Well, what should he have gotten in mitigation? Assume the new lease started April 1, 2012 and went for at least nine months (if not, we have to adjust our calculations accordingly). Sam seems to have made reasonable efforts to relet (though if he didn’t start advertising within a reasonable period we’d count that against him), so he’s entitled to $2000 for the month of March. The question is whether renting at what appears to be a below-market rate is a failure of his duty of mitigation, in which case he wouldn’t be entitled to an award of the $100 difference in rent he gets from the new tenants. Given the growing paranormal reputation of the property (to which the defaulting tenants contributed!), however, and the difficult choices a landlord must face, it would be reasonable to say that the current market rate for this property is $1900/month. So then he’d be entitled to $900 (9 months of $100 lost) + $100 (advertising) + $2000 = $3000.If you instead argued that Sam should have held out for $2100, or at least for $2000, then he failed in his duty of mitigation and is only entitled to $2100.

C. (1 point) Upon his return from his rambling, Dean asks Sam for his share of the rent. To what does the law entitle him?

Co-ownership means co-ownership of the whole, which means that Dean owns half even though he doesn’t do anything to make the property valuable; he gets his share of the value anyway. That’s why in Delfino v. Vealencis, the parties were supposed to get shares that reflected their fractional ownership, even though Vealencis was the only one who’d invested in developing the property thus far. In a physical partition, Vealencis should have received land worth 5/16 of the total value of the entire parcel, since that was the fractional share she’d inherited. Dean is entitled to half of the proceeds, less half of the costs Sam incurred. Sam isn’t required to bear those costs all by himself, but he also doesn’t get anything extra for his effort.

If you thought that Spiller v. Mackereth controlled and left Dean owed nothing because he hadn’t been ousted, that’s wrong—that’s a special rule for the co-owner who’s occupying the land

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herself, since although she’s deriving economic value from occupation it seems unfair to make her cough up a money payment to a co-owner who doesn’t want to use the property himself. For one thing, she might not have the available cash to pay him his share of market rent (if market rent is even the right measure). When she’s collecting rent from a third party, by contrast, there is no problem with making her transfer some of that cash to her co-owner. Still, I accepted that reasoning since I didn’t think I was clear enough on the distinction in class.

Some people also used Spiller to get to the correct result, calling the rental a constructive ouster of Dean given that he couldn’t occupy the premises with renters already in place. This requires us to assume that Dean is bound by Sam’s rental (otherwise he could move in with the renters or rent to other people himself) but in all likelihood Dean would in fact be deemed to have acquiesced to Sam’s renters’ exclusive occupancy, if only to reach the result that he’s entitled to half the proceeds. It is true that in theory Sam needs Dean’s consent to rent to tenants exclusively, but under ordinary circumstances, for reasons that are easy to imagine, a court is going to be eager to find that consent, especially if Sam held himself out as having the ability to rent the property all by himself.

5. The Middleman

(3 points) Manservant Neville grants property “to Wendy Watson for life, then to Wendy Watson’s oldest living child at her death for life, then to Lacey Thornfield’s children who attain 22.” At the time of the conveyance, Wendy Watson has no children and Lacey Thornfield is dead, leaving her infant son, Clarence.

Identify all the interests the grant attempts to create, identify which are subject to the RAP, explain whether they violate it, strike any that do, and identify the resulting interests.

WW = life estate(.5) WW’s oldest living child at WW’s death has a contingent remainder in life estate.(.5) This passes the Rule. WW is a life in being. Assume WW has a child, young Tyler. Then every life in being, including WW, dies. Tyler’s life interest vests, well within the perpetuities period. If, on the other hand, Tyler died before WW, his interest would immediately fail. The same is true if WW has a bunch of kids: at her death, we know who her oldest living child is.(.5) Clarence has a contingent remainder in fee simple (also an EI, but it’s enough to identify the contingent remainder). It waits patiently for the end of the life estate of WW’s oldest living child at her death (or if there is none, the end of WW’s life estate); it would never step in to cut off either of those even if Clarence attained 22 before then (as alternate language such as “but when LT’s children attain 22, then to those children” would).(.5) Since LT is dead at the time of the conveyance, she can have no more children. Clarence, a life in being, is his own validating life. If he doesn’t reach 22, his interest will be destroyed. If he reaches 22, he’ll either have a vested remainder in fee simple (if WW or her oldest child alive at her death are still alive), or a fee simple absolute (if they’re dead). Thus, Clarence’s interest will either vest or fail within his own lifetime, although it may well not become possessory for long after that; it’s possible that he’ll attain 22, then die before WW’s oldest living child at her death dies, but that’s ok because his then-vested interest will pass to his heirs.

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(.5) MN has a reversion …(.5) subject to an executory limitation if his reversion were to become possessory (WW and her oldest living child at her death were to die) before Clarence turned 22 but while Clarence was still alive. The paired EI is in Clarence.

6. Barksdale v. Bell

(5 points) Disturbia requires developments of more than 10 housing units to include an affordable housing component. Developer Avon Barksdale therefore records affordability covenants for 10% of the housing units he constructs. The covenants provide for perpetual affordability restrictions on the affordable units: Affordable units must be sold—and resold, when resale occurs—to qualified buyers. Qualified buyers must earn between 80-110% of median yearly income for the area. Buyers can only sell after living in the property for five years. The allowable resale price is restricted according to a formula based on the purchase price, median local appreciation, and sales costs. The value of improvements, as opposed to repairs, cannot be taken into account in setting the sale price.

Buyer Stringer Bell purchases a covered unit at the affordable price, then after two years seeks to sell it free of the affordability covenant. What is his best argument, and should he prevail?

Bell’s best argument is that the covenant unreasonably restricts alienability. Restrictions on to whom the property may be sold (people making a certain income) and when are direct – they prevent willing buyer and sellers from transfers they’d otherwise make -- and must be reasonable. See Restatement § 3.4, Direct Restraints on Alienation. Likewise, the price restrictions and ban on taking improvements into account indirectly restrain alienability – they make the property less desirable to groups of people with certain preferences -- and must be rational. Id. § 3.5. Though affordability covenants are generally acceptable, this one is so stringent that it might be unreasonable. The most troubling parts are the 5-year residency restriction—there are some good reasons people might want or need to sell before that—and, somewhat less so, the absolute ban on taking the value of any improvements into account. One possibility would be to reform the covenant or strike only the provisions that go too far, leaving some affordability constraints in place. Of course, it was possible to defend even the time and improvement restrictions, despite their likely effect of making the property harder to sell and disincentivizing the owner to improve the property (something we might not want if the intent is to keep some housing stock at the entry level); a good discussion could go either way.

Sample answer:

In the case of Barksdale v. Bell, Bell’s best argument is that the covenants represent a

direct restraint on alienation under Restatement §3.4. Under Restatement §3.4, direct

restraints on alienation are valid unless they are unreasonable. There are two direct restraints

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on alienation in the grant: the prohibition on selling the property sooner than five years after

purchase and the prohibition on selling the property to unqualified buyers. Bell’s best

argument will be that one of these two direct restraints on alienation in the grant violates this

test. Under Restatement §3.4, cmt. c., reasonableness is determined by balancing the utility

of the purpose served by the servitude against the harm that is likely to flow from its

enforcement. Because the prohibition on selling the property sooner than five years after

purchase is the least reasonable, Bell’s best argument is that it violates Restatement §3.4.

Under the balancing test of Restatement §3.4, the prohibition on selling the property

sooner than five years will most likely be found to be unreasonable. The utility that this

servitude will provide is mainly its ability to incentivize property owners to keep their

affordable housing in good condition. The harm that it stands to inflict will outweigh this

utility. This servitude could force property owners to stay in affordable housing after they

have been able to obtain higher wages and could afford other properties, taking up space in

the affordable housing development that could be put to better use through occupation by

those who continue to need it. Furthermore, it could also force property owners who can no

longer afford mortgages on their properties to remain in them instead of attempting to sell

their interest. As such, this direct restraint on alienation frustrates the purpose of affordable

housing and will most likely be found to be unreasonable. Bell’s best argument is to

challenge it as a violation of Restatement §3.4

Alternatively, the prohibition on unqualified buyers will likely be deemed reasonable, so

his best argument will not be based on this prohibition. Providing affordable housing

represents a great utility to society, if not a necessary one, and limiting that housing to

qualified buyers represents a minimal harm so long as affordable housing is necessary and

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buyers will be influenced to purchase that housing. While limiting alienation to qualified

buyers does reduce the number of buyers who are eligible to purchase a given property,

because, by virtue of those qualifications, those buyers are the most likely to purchase the

affordable housing, it does not seem to harm the property owner that significantly.

It is also worth noting that Bell should not pursue an argument based on Restatement

§3.5’s prohibition on indirect restraints on alienation. Such an argument, claiming that the

restrictions on the calculations of the resale price or on the inclusion of the cost of

improvements has a significantly lower chance of success, because such restraints are subject

to a standard of rationality, not reasonableness. Because providing affordable housing is

certainly a rational goal, and these covenants are rationally related to the furtherance of that

goal, a court will most likely be unwilling to invalidate them under Restatement §3.5.

7. Weyland-Yutani v. Blue Sun

(5 points) Weyland-Yutani Corp. is a small but growing company. It recently signed new contracts requiring it to expand production, so it bought a building from Skynet on a lot that had room to build an addition. Skynet’s business had been occasionally noisy, so Skynet had allowed shrubs to grow up on most of the lot, providing a sound barrier but also obscuring the view. As the contractor, Montgomery Scott, was inspecting the property, he noticed that the heating, ventilation and air conditioning (HVAC) system for a building on an adjacent lot was on the Weyland-Yutani lot. Scott explained to Weyland-Yutani manager Ellen Ripley that the HVAC system, which sat on a 100-foot-square of concrete surrounded by shrubs, would have to be relocated in order to construct the addition.

Ripley contacted River Tam, who manages the adjacent building on behalf of its owner, the Blue Sun Group. Tam said, “This is the first I’ve heard about that. The contractor who installed the HVAC must have misplaced it. It’s been there for ten years and Skynet never complained.”

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Disturbia’s statutory period for adverse possession is seven years. By some bizarre happenstance, Disturbia has absolutely no case law interpreting the requirements for adverse possession. Who owns the land on which the HVAC sits, and why?

Start with the basic requirements of adverse possession: hostile to the actual owner, actual possession, open and notorious, exclusive, and continuous for the statutorily mandated period of time.

Putting a big piece of equipment on land is pretty good evidence that Blue Sun was acting like the owner of that land (actual possession, exclusive). Given the installation, the occupation was also continuous. And just because it was behind bushes doesn’t make it not open and notorious, especially when the bushes were Skynet’s own doing, though that’s certainly an available argument for Weyland-Yutani. A key question is what standard for intent Disturbia should impose: good faith, bad faith, or an objective test? If bad faith is required, Blue Sun probably loses; it appears to have been negligent at most, rather than aware of what had happened. If good faith is required, one could go either way: Blue Sun may well have been negligent, and especially if there was a distinct visual boundary between the properties because of Skynet’s bushes, it should arguably have been clear to Blue Sun that the HVAC was not on its land, preventing it from acting in good faith. On the other hand, if it’s really the contractor’s fault, Blue Sun could have relied on the contractor in good faith and simply not checked, though that’s a bit of a stretch. If the test is objective, then acting like an owner is probably enough, and Blue Sun has a strong case. A good answer could advocate for any of these rules.

Sample answer:

Blue sun owns the property the HVAC sits on. To win an adverse possession claim four

elements must be fulfilled. First, there must be actual entry giving exclusive possession. Blue

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Sun entered the piece of land to build the HVAC and exclusively possessed it without a

challenge from anybody else and not sharing with the public generally for 10 years. Second,

there must be open and notorious possession. The HVAC was built in a place with an obstructed

view. However, an obstructed view does not make the HVAC invisible. It was still a 100-foot-

square of concrete on Weyland- Yutani’s property that was easily discovered when a contractor

was conducting as visual inspection of the property. Third, the adverse possessor must claim the

property adversely and under claim of right. Blue Sun was presumably using the land by

mistake as evidenced by River Tam’s statement that the HVAC must be there by mistake and

that it must be misplaced. However, this mistake does not have to be determinative of this third

prong. If the Maine Doctrine is applied mistake is determinative because if Blue Sun was

occupying by mistake and would not have done so otherwise adversity is missing. However, the

better standard is the majority standard applied by the New Jersey court in Mannillo v. Gorski.

This is the better standard because it puts the burden on the owner to know what land is theirs

and take steps to remove trespassers. This is the better standard to apply because it reflects the

policy objectives of adverse possession that owners are responsible for ensuring that their land is

free of intruders. Intruders may begin to have expectations that the land is there’s after time has

passed and memories fade. Thus, if owners are incentivized to be on the alert for intruders to

their land these issues can be dealt with before expectations arise and while memories are fresh.

Thus, the objective standard should be applied to determine claim of right and Blue Sun’s

mistaken use of the land is not determinative. The burden was on Weyland- Yutani to ensure no

one else was using their land. Lastly, the use must be continuous. Blue Sun had the HVAC

continually on this land for 10 years. This fulfills the statute of limitations period of seven year.

Because the statute of limitations time period has been fulfilled and all the elements of adverse

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possession are met Blue Sun is the owner of the property where the HVAC sits.

This answer seems less likely to me but makes a good case:

Weyland-Yutani Corp. owns the land on which the HVAC sits. The element of open and

notorious possession was not met.

There are four requirements for adverse possession: (1) entry, (2) open and notorious

possession, (3) adverse and under claim of right, and (4) continuous for the statutory period.

Entry. There must have been an entry that would create a cause of action under which

Weyland-Yulani (W-Y) could have sued Blue Sun (BS). The building of the HVAC on W-Y

property was such an entry; W-Y could have sued BS for trespass.

Open and notorious possession. The adverse possessor must give the owner notice of the

incursion so that the owner has the opportunity to rectify the situation – adverse possession

creates new title in the industrious at the expense of those who sleep on their rights, but it should

not be a tool to aid surreptitious theft. The possessor must use the land in a manner that would

give the owner notice of his possession.

The HVAC was built on a parcel of land covered in shrubbery; it was not openly visible

to the naked eye even though it was right there on the property for ten years. This case is similar

to Mannillo v. Gorski, in which the Gorski’s renovations to their home included the accidental

encroachment of a stairstep on to 15 inches of their neighbor’s land. Although the 15-inch

encroachment had been right there, in plain sight for over 20 years, the court found that it was so

minor an encroachment that it could not be seen as an encroachment with the naked eye, and that

actual notice, not constructive notice, must be demonstrated in order to prevail under the open

and notorious element. To hold otherwise would have amounted to requiring a survey of your

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property every time your neighbor undertook a home improvement project.

The HVAC was similarly invisible to the naked eye. Though larger than a 15-inch

encroachment, the dense nature of the flora on the lot obscured it from view. To hold that

constructive notice exists for such a hidden object would be to encourage the construction of

hidden encroachments on neighboring lots. Actual notice must be required in this case, as it was

in Mannillo.

Adverse and under claim of right. There are conflicting interpretations of this element.

The “Maine doctrine” holds that there must be intention to claim land not the possessor’s own, a

doctrine that penalizes good-faith mistakes and rewards sharp dealing. The good-faith rule,

adopted in New York and Colorado, holds that only those who mistakenly believed the land was

theirs may claim adverse possession. This rule is under-inclusive, as it seems inconsistent to treat

two otherwise like parties differently based only upon the fact that one didn’t know the land

wasn’t theirs and the other did, and it may invite perjury or otherwise demand difficult state-of-

mind inquiries. The middle-ground rule is the objective rule or Connecticut doctrine, which

holds that state of mind is irrelevant, and the act itself is the hostility. This rule provides

consistent results and is easy to administer. Under the Connecticut doctrine, this element is met.

The good-faith rule and Maine doctrine tests require an inquiry into the state of mind of the BS

contractors, builders, and management.

Continuous for the statutory period. Disturbia’s statute of limitations is seven years.

The HVAC has sat on W-Y property continuously for ten years. This element is met.

Because BS cannot demonstrate open and notorious possession, their claim for adverse

possession fails. W-Y owns the property on which the HVAC sits.

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8. Bennet v. Salvatore

(10 points) Bonnie Bennet owns a 1500-acre organic farm surrounded by conventional farms owned by Damon Salvatore. Bennet and Salvatore bought their land and began operations on the same day. Before then, the land was zoned for industrial use, and was rezoned for agricultural use when the anticipated need for industrial uses in Disturbia didn’t materialize. Federal farm policy encourages both organic and conventional farming; currently, organic farms represent less than 10% of total farm acreage in the US and in Disturbia.

Organic farming is governed by stringent FDA regulations prohibiting the use of pesticides. If applied on windy days, however, pesticides can easily drift across the borders of neighboring conventional farms, which extensively use pesticides. Once pesticide drift (also known as overspray) has occurred, a crop can no longer be sold on the organic market and loses a substantial amount of value, since organic crops sell for two to three times the price of conventional crops. Because organic production is more expensive than conventional production, selling formerly organic crops on the conventional market results in even larger losses than reflected in the lower sale price. In addition, fields that have suffered overspray must be kept fallow for three years before they can again be used for organic production. As a result, Bennet will not be financially able to farm organically if drift occurs more than one day a year.

The only feasible method of avoiding overspray is to avoid spraying on windy days. There are so many windy days in Disturbia that, were Salvatore to avoid spraying on such days, it’s more likely than not that he wouldn’t be able to apply enough pesticide to keep his crops from being infested by various pests, which would decrease their value by between a third and a half. Conventional farming is a low-margin business, and Salvatore would be financially unable to farm if he suffered four years of consecutive losses.

Bennet could convert to conventional farming, which would cause her to lose her investment of over $3 million in organic certification but would likely allow her to cover her costs going forward. Salvatore could convert to organic farming, but if the organic market is not strong in four years (when his lands would be usable for organic farming after the required fallow period), he would be wiped out.

After suffering her fourth contaminated field, Bennet complains to the Disturbia Department of Agriculture, which fines Salvatore $10,000 for applying pesticides to Bennet’s agricultural property without her permission. Bennet also sues Salvatore for operating a nuisance, and Salvatore counterclaims, contending that Bennet’s farm is a nuisance. How should the court rule, and why?

Okay, this one was hard! It was designed to offer a situation in which each use interferes with the other, and there was no question of “coming to the nuisance” because both uses were of equal vintage. The conduct of both Bennet and Salvatore is intentional here, as they intend to farm

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(and in Salvatore’s case spray) resulting in interference with the other’s land (Salvatore’s spraying interferes with Bennet’s farm / Bennet’s continued operation interfering with Salvatore’s ability to spray his crops). You need some principle to pick between them—if the answer is “the court should do nothing,” you’re allowing Salvatore to put Bennet out of business, and while that might be the right result you need some explanation for why. If the answer is “Bennet should win because Salvatore did something physical to Bennet’s land, and Bennet did nothing physical to Salvatore’s land,” that’s also possible—it has the benefit of the intuition that in any interaction there is someone who does something and someone who is acted upon:

The court should side with Bennet and issue an injunction against Salvatore, in the nature

of Atlantic Cement, and High Penn Oil. In both of these cases, the party bringing the suit

can be seen as a nuisance to the other party. After all, one parties full enjoyment of their

land will often lead to a hindrance on the other person’s land. However, in Atlantic

Cement and High Penn Oil, the court has deemed a preference to side for the side that is

not taking affirmative action to inconvenience the other party. In High Penn Oil, the

refinery was the party blowing fumes into the restaurant, even though it was a moderately

industrial area and the restaurant could have been seen as stopping High Penn Oil from

the full enjoyment of their property. Similarly, Atlantic Cement was held to be a

nuisance because of the dust and noise and tremors, when Boomer was effectively

hindering their ability to use their land. In this instance here, it is Salvatore’s pesticides

that are causing the problem, not any affirmative action by Bennet.

But why discount the legal impact Bennet had on Salvatore? Both law and pesticide are mechanisms of harm.

As one student wrote: Although there may be a natural and strong normative impulse to recognize the

difference between the “polluter” and the “receptor,” one looking for freedom “from”

something and one looking for freedom “to do” something, Salvatore could be easily

conceptualized as one looking freedom “from” Bennett’s use and Bennett looking for

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freedom “to” continue her organic farming. Furthermore, Salvatore is not “maliciously”

interfering with Bennett’s lawful activity, as was the case in Keeble v. Hickeringill. His

use of pesticides amounts to fair competition which improves society.

Plus, the 90%/10% split between conventional and organic farms can be taken many ways: conventional food is cheaper and that may be a public benefit; organic food may be healthier. The smaller organic market may justify more protection for individual organic farms because conventional farms are easier to find in other places than Salvatore’s land, but then again there may be a greater public interest in the kind of food that supplies most of our eating needs. I gave credit for seriously grappling with the issues even though it was hard to produce a satisfactory answer.

Some people wanted to declare both sides nuisances. While I see the attraction, it just won’t work: if use A is a nuisance, it can’t be wrongful/unreasonable for use B to interfere with use A. Or to put it another way, in order for there to be a remedy (whether injunctive or monetary) there first has to be a right, and there’s no right to engage in a nuisance. You can get to the Spur result by requiring the non-nuisance use to pay for (or split) the costs of abatement as a matter of equity, but that still requires one use to be a nuisance and the other not to be.

A lot of people indeed wanted some sort of pay-to-play solution: enjoin one but require the other to pay damages. The trouble with that was that there was no reason to think either could afford to pay for the other’s harms! So that might just mean no injunction. An injunction is really the most likely remedy for any nuisance found on these facts. Still, here’s an answer that tried very hard to make it work:

The foundation of nuisance law is the principle that individuals should use their property

in such a way as to avoid harming the property of another. However, this principle is very

difficult to apply where two land uses are incompatible. In Bennet v. Salvatore, both parties are

involved in valid land use for agriculture, but Salvatore’s conventional farming interferes with

Bennet’s organic farming because of pesticide drift on windy days. Bennet’s organic farming

interferes with Salvatore’s conventional farming because Salvatore has been found liable for

damages for pesticide drift, but he cannot maintain his farm without spraying pesticides. If

Bennet converts to conventional farming, she stands to lose her $3 million investment in organic

certification, but could cover her costs going forward. If Salvatore converts to organic farming,

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he will have to keep his fields fallow for the statutory three-year period and will likely go out of

business if the organic market is not strong at that point.

Under the common law and the Restatement, either activity could be labeled a nuisance.

In Morgan v. High Penn Oil Co., the North Carolina Supreme Court held that a use is a nuisance

when it is intentional und unreasonable. Use is unreasonable under the Restatement (Second) of

Torts §826 if (a) the gravity of the harm inflicted by the use outweighs its social utility or (b) the

intentional use causes serious harm and the actor could compensate for that harm without going

out of business. Both Bennet and Salvatore are engaged in intentional activity: they both know

their conduct interferes with the other’s use, but they continue to act anyway. Similarly, either

use could be found to be unreasonable: the organic farm may have more social utility because

federal policy encourages organic farming, which would make Salvatore’s continued use

unreasonable; or Bennet’s higher revenue from organic produce may allow her to pay damages

to Salvatore without going out of business, which would make her use unreasonable. There are

several possible approaches to resolve this dispute: (1) declare neither activity to be a nuisance,

(2) find one activity to be a nuisance and enjoin that activity, (3) find one activity to be a

nuisance and require payment of damages, and (4) enjoin one activity, but award damages to the

enjoined actor.

First, declaring neither activity a nuisance will lead to an unsatisfactory result. If both

farms are allowed to continue unabated, Bennet will eventually be driven out of business. Her

farm cannot continue if the pesticide drift exceeds one day per year because she will become

subject to the statutory fallow period before she can again use her property to farm organically.

Because organic farming is encouraged under federal policy, the court should be reluctant to

allow both activities to continue unabated.

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Second, enjoining one activity will solve the nuisance problem, but the court will be

forced to choose between equally valid land uses. In Estancias Dallas Corp. v. Shultz, the Texas

Court of Civil Appeals determined that an apartment complex’s industrial air conditioner located

fifty-five feet from a residence was a nuisance and enjoined operation of the air conditioner. The

court arrived at this decision even though the residence was valued at $25,000 and it would cost

over $150,000 to move the air conditioner. The court in Bennet will have to choose whether to

engage in a purely economic valuation and compare the costs of either farm going out of

business or converting or whether to take subjective value into account as the Estancias court did

in determining that quiet enjoyment of one’s home had more inherent value than operation of an

apartment complex. The economic test is troublesome, because it is not clear whether the loss of

Bennet’s $3 million investment converting to conventional farming would outweigh Salvatore’s

potential loss if he is forced to convert, but unable to profit from organic farming. The subjective

valuation is equally troublesome, because the court will have to weigh the value of a federally

encouraged activity with the potential loss of Salvatore’s livelihood.

Third, finding one activity to be a nuisance and requiring payment of damages does not

solve the problem at the root of the dispute. If Bennet’s farm is a nuisance, she could pay

damages to Salvatore without going out of business, but the continued operation of Salvatore’s

farm would put Bennet’s organic farm out of business anyway. If Salvatore’s farm is a nuisance,

his low profit margins would make it difficult for him to pay permanent damages without going

out of business and/or the continued operation of his nuisance farm would drive Bennet’s organic

farm out of business anyway. Thus, the Bennet court would have a difficult time following the

rationale in Boomer v. Atlantic Cement Co. that led to the award of permanent damages.

Fourth, the court could follow the reasoning in Spur Industries v. Del Webb and enjoin

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one use but award damages to the enjoined use. In Del Webb, the Arizona Supreme Court

enjoined the operation of a feed lot, but required a developer to pay “a reasonable amount of the

cost of moving or shutting down” the feed lot. The court reasoned that the developer had come to

the nuisance because the feed lot had been in operation prior to the development’s expansion that

led to the nuisance complaint. Bennet and Salvatore began operations on the same day, so neither

could be said to have come to the nuisance, but the overall approach might still lead to the best

result in Bennet v. Salvatore. As discussed above, Salvatore cannot continue to operate a

conventional farm without forcing Bennet into the statutory fallow period. Further, Bennet’s

organic crops sell for two to three times the price of conventional crops, which might give her

some overhead to offset reasonable costs of Salvatore’s conversion to organic farming. Finally,

organic farming is a federally encouraged activity, so the conversion of Salvatore’s farm to an

organic farm is in line with federal policy. Therefore, the court should find Salvatore’s

conventional farm to be a nuisance, but award Salvatore reasonable damages to allow him to

remain in business as he waits out the statutory fallow period.

9. Fracking

(15 points) Hydraulic fracturing, also known as fracking, is the process used to extract previously inaccessible natural gas from underground. Fracking involves pumping millions of gallons of water mixed with chemicals deep into the earth to break up the prehistoric shale rock that traps the natural gas. Fracking has been blamed for water and soil contamination and earthquakes in the vicinity of fracking operations, though defenders of the industry contest many of the causal links. Since the most cost-effective operations run 24 hours a day, fracking also results in significant noise and light. Because of the location of the gas and the development of technology to reach it, fracking can occur under much land that was not previously considered suitable for mining.

Springfield, an affluent suburb of Disturbia’s capital, has a median household income of more than double the national median. Houses run from $300,000-$800,000. In 2010, Fatboy Industries, Springfield’s (and the nation’s) largest homebuilder, changed the deeds it used for home sales throughout Disturbia. The policy change took place not long after

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geologists announced that Disturbia sits atop an estimated 40-year supply of natural gas trapped in underground shale. Now, Fatboy reserves mineral rights below 500 feet of the surface to Fatboy, giving Fatboy “the perpetual right to drill, mine, explore … and remove any of the subsurface resources on or from the property by any means whatsoever.” Fatboy has used this deed reservation in hundreds of homes throughout Springfield (and the state). Fifty-five, or just over half, of the homes in the exclusive Springfield Acres subdivision were built by Fatboy and sold with this deed reservation; 200 other Fatboy homes with such reservations are scattered throughout Springfield.

Fatboy transfers all mineral rights to its wholly owned subsidiary, Fatboy Energy, which anticipates beginning fracking operations in 2014 assuming that it can get the required regulatory and environmental permissions. Disturbia has authorized fracking in parts of the state, but no one has yet sought permission to frack in or around Springfield. The Disturbia Department of Environment and Natural Resources recently issued a lengthy study concluding fracking can be done safely as long as the right safeguards are put in place, including the provision of bottled water for nearby residents.

Given the controversy surrounding fracking and the inconvenience of shipping in bottled water, however, many people anticipate a fall in home values for properties near fracking operations. “I spent a lot of money and invested heavily in my home,” said Romo Lampkin, a Springfield Acres resident who is an executive at a clothing company, and whose mineral rights have not been separated from the rest of his property. “I don’t want to see it go up in smoke on a fracking site.” But Cecil L’Ively, a resident with a non-Fatboy-built home who has signed a mineral rights lease with a gas company, argues, “Everybody has property rights, and respecting mine means letting me make contracts and collect royalties.”

“If we ever want to sell our house, these deed restrictions are going to hurt us,” said Lampkin. “It’s just the perception, even if they never exercise those rights.” In fact, many lenders won’t finance or refinance a mortgage for property that doesn’t have mineral rights because of the potential danger of property damage, water contamination, and other risks. Many homeowners, like L’Ively, did not consult their mortgages before selling their mineral rights. L’Ively acknowledges that he is technically in violation of the terms of his mortgage, but he knows many homeowners who’ve sold their mineral rights and he’s “never heard” of anyone having a problem. Likewise, Jim Sterling, who recently bought a $530,000 Fatboy home in Springfield Acres, said his real estate agent and lawyer told him the mineral rights clause was a non-issue because “They aren’t drilling here anyway” and because “lenders don’t really check for mineral rights.”

Helen Carter, the developer of Springfield Acres, stated that the homeowner association covenants and restrictions prohibit disruptive commercial activity in the subdivision, and that this was probably true of most of the homes in Springfield. However, with horizontal drilling, drillers could in theory set up operations hundreds of feet away and drill sideways under a subdivision. This would increase costs and the present price of natural gas

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wouldn’t justify such efforts, but if the price increases in the future, horizontal drilling might become profitable.

Springfield adopts a ban on fracking within 500 feet of residential properties that have not transferred their mineral rights to the fracking entity. As a result, Fatboy estimates that it will only be able to engage in fracking on ten properties for which it holds mineral rights in Springfield. Assume that the authority to zone has been sufficiently delegated to the town of Springfield, that Fatboy has exhausted its state challenges to the ban, and that there are no other ripeness issues. Fatboy sues in federal court, alleging a taking. How should the court rule, and why?

There were a number of issues here, primarily: whether Fatboy suffered a total wipeout of some right; whether that was nonetheless ok under the Lucas exception for common law nuisances; whether even if Fatboy didn’t suffer a wipeout the regulation nonetheless went “too far” under Penn. Coal/Penn Central.

First, some people suggested that there was no total wipeout of mineral rights because long-range fracking remained possible, if presently unprofitable. That depends on how you interpret the ban—was it a ban on the underground activity without having all the rights within 500 feet (in which case even long-range fracking would be banned), or was it a ban on having the aboveground fracking equipment within 500 feet? I accepted both interpretations of the ban. Other people suggested that there might be other non-fracking uses for the mineral rights, though from the facts that seems unlikely.

Assuming that a fracking ban is functionally equivalent to a ban on exercising mineral rights, we still need to figure out if there’s been a wipeout. Only if we resolve the denominator issue in Fatboy’s favor—treating mineral rights on each lot as a distinct entity—are we likely to find that Fatboy suffered a complete loss of a distinct property right, at least as to lots where the covenants wouldn’t necessarily preclude fracking and maybe even as to all the lots. That is, since mineral rights are distinct property rights long recognized in law (Penn. Coal), the inability to exercise them—at least without buying even more property from other people!—may count as a taking even if their present economic value is limited. Distinct legal rights have important weight in takings analysis even if they aren’t worth much in dollars. (In fact, one Supreme Court case found a taking where the monetary value of the distinct right taken was zero; it’s just that the government didn’t owe compensation, though it did have to pay attorneys’ fees!)

On the denominator question, my expectation is that both the separation of mineral rights from the rest of the fee and the division into lots are likely to come out in Fatboy’s favor, the former because of the long pedigree of mineral rights and the latter because there are good reasons to treat each parcel as distinct, as evidenced by the fact that homeowners buy individual parcels. In both cases, a market has formed for distinct rights even in the absence of the regulation at issue, suggesting that these are legitimate rights rather than manipulative attempts by Fatboy to create a taking. Moreover, the parcels at issue here don’t even seem to be physically contiguous, making it very hard to call them a single piece of property. On the other hand, maybe accepting both of these divisions doesn’t make sense: Fatboy’s status as developer could mean that we should treat

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its reservation of rights as something distinct from the parcelization it carried out in order to sell homes—it doesn’t really want to split up the mineral rights into multiple parcels; to the contrary, it wants to have them together in a common pool:

While each deed restriction represented an individual investment because it was tied to

one piece of land Fatboy seems to have had a master plan to use all of the mineral rights

in the area. Further, Fatboy originally owned all of the mineral rights because it owned

all of the land before building houses and splitting into individual deeds. Also, Fatboy

transferred all mineral rights to Fatboy Energy not distinguishing among them at all. All

of these factors make it reasonable to conclude that Fatboy’s property investment was all

of the mineral rights they retained from their original land ownership taken together not

the rights as considered individually attached to deeds. Thus, there has not been a

complete taking of value due to this regulation as Fatboy can still use 3.9% of the it’s

mineral rights. To avoid triggering Lucas it is enough that the government can show that

a significant right is retained and the ability to frack on 10 properties is still as substantial

value to Fatboy.

The nuisance-prevention rationale was also important, since stopping a common-law nuisance isn’t a taking. There was a decent argument that fracking is a nuisance in a residential area. Even if it’s safe, the light and noise may be inappropriate for the area. Some people suggested that Hadacheck wouldn’t apply because in that case the government banned an existing nuisance, whereas the nuisance of fracking hasn’t yet materialized. That can’t be the rationale: (1) Hadacheck involved a ban on brickyards in the area, including not-yet-extant ones, and the Court didn’t suggest any problem with that; (2) it doesn’t make sense to make the legislature wait until the nuisance has materialized, forcing neighbors to suffer the costs of the nuisance and also likely forcing the nuisance-causer to take a big loss in abatement—it’s in everyone’s interest to ban the nuisance ahead of time. What is important is whether we can know in advance whether the use is a nuisance. If all such uses in the area would definitely constitute nuisances, then a ban isn’t problematic; if we defer to the legislature on what constitutes a nuisance, at least in close cases, then an advance ban is also ok. It’s only when we think that some sufficient fraction of the uses wouldn’t necessarily be common-law nuisances that a blanket ban is no longer on all fours with Hadacheck (as interpreted/modified by Lucas):

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While fracking has been blamed for contaminating nearby lands, there is no solid causal

connection. Additionally, the Disturbia Department of Environment and Natural

Resources issued a lengthy study concluding that fracking can be done safely with the

right safeguards and bottled water provisions. Even though Springfield cannot therefore

assert a nuisance on the basis of environmental harm, the 24-hour nature of fracking and

the significant noise and light could feasibly interfere with quiet enjoyment of residential

property. However, in order to apply to a nuisance, the court should refer to a case-by-

case analysis. This broad regulation, completely banning fracking within 500 feet of

residential properties goes too far. It seems to do more than simply place restrictions on

fracking, such as sound restraints or time restraints, and instead completely bans the

activity in a certain space. Therefore, this regulation goes too far to be considered simply

abating a common-law nuisance.

Separately: Supposing that some fracking can be carried out safely, as the state of Disturbia has determined, is that the end of the matter? Even assuming safety, the disruption caused by noise and light, the need to bring in bottled water, and the negative effects on nearby home values might also be enough to constitute a nuisance, though one could argue that the benefits of extracting natural gas suffice to at least make the matter unclear, at least if we’re using a balancing test. Here’s one argument against the nuisance rationale:

The ban prohibits fracking only within 500 feet of residential properties, which is

unlikely to eliminate any potential nuisance caused by Fatboy's operations. Fatboy will

still need to supply water bottles to nearby residents, and residents will still experience

interferences from light and noise. Furthermore, it does not eliminate fracking all

together, which would arguably prevent water and soil contamination and possibly

earthquakes. Therefore, it is not a nuisance-control regulation.

Homeowners’ apparent inability/unwillingness to plan for the effects on their mortgages and home values may also matter—though it’s also perfectly reasonable to say that those aren’t

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Fatboy’s problems and Fatboy shouldn’t be forced to bear the cost of homeowners’ poor planning. It’s only the externalities—the costs that fracking imposes on neighbors who haven’t separated their mineral rights—that would matter from that perspective.

If we aren’t in Lucas wipeout territory, and also not in common-law nuisance territory, then we have to conduct a Penn Central analysis considering: (1) the character of the government action, (2) the economic loss suffered by the party regulated, and (3) the frustration of distinct investment backed expectations (DIBEs). E.g.:

Regarding the first factor, the government seems to be acting in order to prevent

substantial harms to the public in the form of light and noise disturbances around the

clock and the potential threat of earthquakes and other natural disasters. However, FE

will likely argue that the causal relationship between natural disasters and fracking is

unproven and will cite the study done by the Disturbia Department of Environment and

Natural Resources which found that fracking can be done safely, so long as bottled water

is provided. The government’s actions seem especially warranted in reducing the light

and noise that may disturb residents, but because of the dubious causal connection

between natural disasters and fracking, and because 500ft. is probably not enough space

to avoid an earthquake, its actions do not seem to be entirely appropriate in protecting its

citizens from natural disasters. Regarding the second factor, the government has taken

away the value of 245 of the 255 sets of mineral rights that FE holds. However, because

horizontal drilling may become profitable, and because the technology to do such drilling

currently exists, it is not clear that the extent of the harm is too great. Finally, regarding

the third factor, FE may have had DIBEs to frack, but those expectations might not have

been reasonable given the new nature of the industry, its supposed link to natural

disasters, the interference it stands to impose on nearby residents, and the public

suspicion of fracking techniques. Furthermore, because these rights were acquired by

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Fatboy Industries in the process of engaging in another business, residential development,

its DIBEs can be likened to those of the owners of Grand Central Station in Penn

Central. Grand Central station was primarily created as a method of profiting from

railway transportation, and the ability to build office buildings above it was an added

bonus. Similarly, the residential developments were created primarily to profit from

selling houses, and the mineral rights were an added bonus. As such, as the court was in

Penn Central, the court should be less considered about Fatboy Industries’, and its

subsidiary FE’s, ability to profit off of additional aspects of their business operation.

Ultimately, the court should find that FE was not reasonable in expecting to be able to

conduct a loud and extensive mining operation beneath a suburban development.

Consequently, under Penn Central, the regulation should not be considered a taking.

Alternatively, as to distinct investment-backed expectations:

They have based these expectations off of a recent report from the Disturbia Department

of Environmental and Natural Resources, which said that fracking, can be conducted

safely if certain procedures are in place. Also, Disturbia has authorized fracking in on

other areas. O’Connnor reminds us in Palazzalo that the timing of regulations matters

because we make our distinct investment-backed expectations in reliance of new

regulations. Even though these reserves were only recently discovered by geologists in

2010, and Disturbia is only beginning to authorize fracking, there is still a sufficient basis

for Fatboy to base its expectation that it could use its underground properties to frack.

One wrinkle under Penn Central was that Fatboy didn’t lose the right to frack absolutely; it was merely required to invest more—buy mineral rights from nearby landowners—or sell its rights to someone who’d done so. Once someone had assembled sufficient mineral rights, they could go ahead and frack. Was this increased cost, and increased risk of holdouts, sufficient to go too far? Though my guess is that this is still a substantial disruption and that the hypothetical prospect of

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assembling enough rights isn’t enough to take this out of the “takings” box (consider that in Penn. Coal the mining company could still have undermined any land if it had bought back the surface rights, an arguably similar situation), here’s a pretty good attempt to argue the other side:

Here, we can say that the court isn’t wiping out Fatboy’s mineral rights, but rather just

limiting his ability to use them on certain conditions. There is nothing stopping Fatboy

from attempting to buy all of the mineral rights in a neighborhood and conducting

fracking. For conceptual severance problem, the court isn’t invalidating his mineral

rights, or even a large majority of them, they are simply making him take other people’s

mineral rights into account as well. It is hard to look at the mineral rights to each home as

a separate taking, in this case, because it would be nearly impossible to only conduct

fracking under one piece of property, and therefore effect one home’s mineral rights (or if

it was possible, not economically feasible). Therefore, for Fatboy to even conduct

fracking, he would need to aggregate his mineral rights. So we can look at the total effect

of the regulation on his rights as a whole.

Other considerations: if mineral extraction was unlikely to be allowed due to private covenants on (many of) the lots on which Fatboy built, then it’s hard to say Fatboy had legitimate investment-backed expectations in fracking. It shouldn’t have counted on being able to violate its own agreements. The possibility of long-range fracking may change this calculus—but that’s uncertain enough that it’s hard to call it a distinct investment-backed expectation.

Here’s a whole answer that covered a lot of ground well:

Fatboy’s argument is that this is a regulatory taking, and that the government must either

abandon its regulation or pay just compensation. Fatboy’s reservation of the mineral rights in the

deeds it sold is a genuine property interest, and the regulation will no doubt harm that property

interest. Nonetheless, the court should rule that this regulation is not a taking. It is permissible on

the grounds of nuisance-prevention. It is also permissible as an exercise of the police power that

does not go “too far” or interfere too onerously in Fatboy’s investment-backed expectations.

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Finally, it is not a total wipeout of Fatboy’s property interest.

Under Hadacheck v. Sebastian, nuisance control is never a taking. This rule alone

justifies Springfield’s regulation. The city will argue (persuasively) that operating a fracking

facility in this affluent suburb constitutes a nuisance, based on the potential for pollution, 24-

hour noise and light, and the general safety concerns that arise when heavy industry operates

nearby a residential area. The potential for earthquakes alone may be enough to make this an

“ultrahazardous” activity and thereby a nuisance under the Restatement. Fatboy will counter that

some of these risks are debatable, and it will point out that the location of the actual fracking

operation could be somewhat removed from any residential communities. Nonetheless, a

government does not need certain proof that a given activity will meet a threshold of harmful

effects; it has wide latitude to regulate activities as nuisances as long as it has a reasonable belief

that the activities will cause harm to nearby properties. There is ample evidence here that a

fracking operation would be a nuisance in a community like Springfield, just as a feedlot was a

nuisance to surrounding housing in Spur Industries and just as a brickyard was a nuisance in

Hadacheck. (It’s true that the Spur and Hadacheck dealt with pre-existing nuisances, while this

case deals with a potential nuisance that hasn’t yet come to fruition. Nonetheless, the character of

the activity envisioned here is at least as harmful to residential properties as the activities at issue

in other nuisance cases.)

The regulation is also justified as a legitimate exercise of the government’s police power.

Under Pennsylvania Coal v. Mahon, a government can regulate property as long as it doesn’t go

“too far.” Fatboy will likely point to the factual similarities between this case and Pennsylvania

Coal, where a taking was found. But the cases are distinguished in crucial ways. The

Pennsylvania regulation at issue was specifically aimed at the mining company’s reserved

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property rights in minerals below homes. Here, the regulation is aimed at just the opposite:

protecting homes that have not been separated from the rest of their property. Unlike the

Pennsylvania regulation, the Springfield regulation imposes no direct action whatsoever on

properties under which the mining company has reserved mining rights. It’s simply unlucky

happenstance for Fatboy that the houses from which it reserved mining rights are so intermingled

with other houses that still have mining rights attached. It’s this intermingling that is causing

potential harm to Fatboy, but this intermingling was not caused by the government or by its

regulation.

Fatboy can argue, under Penn Central v. New York, that the regulation nonetheless

impermissibly interferes with the company’s distinct investment-backed expectations. It will

argue that it went to great lengths to reserve these property interests – which are indeed genuine

and possibly valuable interests – and the regulation is working a grave diminution in value on

those property interests. But Fatboy’s case for true “distinct investment-backed expectations” is

weak. Even aside from the regulation, Fatboy likely wasn’t going to be able to drill in most areas

of Springfield anyway, due to the private covenants limiting disruptive commercial activity.

Fatboy, in fact, was in a unique place to be aware of those restrictive covenants because of its

status as homebuilder (typically one would expect the homebuilder to have a close relationship

with developers, who likely put some of the covenants in place). Fatboy, of course, can counter

that its investment-backed expectations were based on the possibility of doing horizontal drilling

from several hundred feet away; that sort of drilling would not be affected by the private

covenants. But the profitability of horizontal drilling is highly speculative at this point. And there

is no evidence that Fatboy ever had any concrete plans or expectations about its ability to build

in Springfield (indeed, nobody – including Fatboy – has as yet sought permission to drill in or

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around Springfield). Mere speculation about a hypothetical economic activity is not sufficient to

justify Fatboy’s argument that it had distinct investment-backed expectations which were

imposed upon by Springfield’s regulation. (Contrast Penn Central, where the company had clear

plans to develop a skyscraper.)

Finally, Fatboy can argue that this case falls under Lucas v. South Carolina Coastal

Council. If the regulation effects a total wipeout of Fatboy’s property interest, then it is definitely

a taking unless the activity being banned wasn’t part of Fatboy’s title to begin with based on

background common-law principles of property law and nuisance law. It’s arguable whether or

not an operation such as fracking would have been an inherent limitation on title under the

common law (we can be sure that the process of extracting gas from prehistoric shale was

unknown at common law!), but that question is irrelevant because the regulation does not effect a

total wipeout. Fatboy has reserved mineral rights for 255 homes in Springfield (the 55 in

Springfield Acres, plus the 200 scattered throughout the city); after the regulation, it will be able

to take advantage of the mineral rights on 10 of those properties. Of course, this does raise a

denominator question. And it should be noted that federal courts (where this suit is occurring) are

much more likely than state courts to engage in conceptual severance. But there doesn’t seem to

be much logical basis to sever the 245 properties where the interest is not longer usable from the

10 properties where the mineral interest is still usable. A court should consider all the mineral

rights together as a bundle, and although the regulation leaves Fatboy with only a small portion

of the mineral rights it initially obtained, it definitively is not a total wipeout. Those 10 properties

where the mineral rights are usable are property interests with clear value. Fatboy’s property

value has not been reduced to zero (or virtually zero). Moreover, Fatboy is free to try to beef up

its mineral rights by obtain rights from other Springfield residents – based on Cecil L’Ively’s

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comments, it appears that at least some homeowners are willing or even eager to bargain away

their mineral rights.

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