NARRATOR: Thanks for joining this episode of the No. 86 lecture series, where we discuss the foundational principles of Property Law as well as current topics in the academic literature. Today’s episode features James Stern, Professor of Law at William & Mary Law School. His scholarship centers on property and private law theory and on intellectual property, privacy and related issues. As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker. PUBLIUS: In another episode, we talked about some of the very basic, practical principles of Property Law. In this episode, I want to take a more theoretical approach and ask some questions about how we think about property. How does property compare with other parts of private law? JAMES STERN: Property is an unusual or distinct area in private law in a couple of different ways as compared to say contract or tort law. Unlike contract law, property rights apply in general to everybody. This is actually true in two different ways that are easily mushed together, but that are worth noting separately because they're both important. One of them is that the duties that property law imposes apply to we say the whole world. When I am the owner of Blackacre, I have rights against everyone in the world that they not trespass on my land. That's one aspect of it. That's not like contract at all. When you make a contract, it's just between the contracting parties. The other thing that's true about property law is that it has this kind of historical continuity to it. My rights in Blackacre depend on what the person I bought Blackacre from, what their rights were, how good their title was, and so on and so forth going backwards. There is a sense in which this is different. My claims, whatever the rights are that property law gives me, property is doing something that contract law isn't in the sense that it has to reconcile my rights as against everybody else's. When I am the owner of something, that means whatever my rights are, are paramount, they defeat claims of others who would assert the same kind of authority. In contract law, you can have conflicting contracts and that are valid. In property law, you sort of can't have that. You can't have two different sort of pretenders to the throne, two different people who purport both to be the owner of Blackacre 100% separately. The legal system says, "No, one of you is right, and one of you is wrong." That's a major difference. That is operationally much more complicated. Tort law has the same property, I shouldn't say property. Tort law has the same character of imposing duties on everybody else in the world, at least in a lot of situations. Just as someone can't trespass on Blackacre, that's a right that's good against everybody. The same thing is true say in the law of battery, but it's much less complicated to know that because human beings are pretty standard. We're all kind of the same, and a general set of rules is in place there so that it's not really as hard to know what is a trespass and what isn't. There really aren't questions about who the right holder is in any kind of situation in tort. You know. You don't have to undertake a title search to figure out whether you are protected under the law of battery like you do in property. Property is in a different position there. It has much more complexity to it in that sense because it deals with things on a global basis, with rights that are applicable to everyone. That settles your claims to things, your title, on a basis that's true against everyone and where that's not an easy task. Tort law, the law of personal security within tort law might sort of be doing the same thing, but the problem is trivially easy there. Not so in property, which makes it much, much harder. Property is about stuff that you only have a kind of contingent relationship to, unlike say your physical body. For that reason, it's much harder to know just what the boundaries of your rights are and for any given thing, who the right holder is. It gets pretty complicated. PUBLIUS: One way of talking about the boundaries of property rights is the concept of “right to exclude.” Can you discuss what that means and why it’s important? JAMES STERN: One of the things that people who write about property have looked at a whole lot is what is referred to the right to exclude. The ability to prevent use of a particular resource by others. In principle, you might have that within a contract. Contracts can provide for exclusion in various ways, on the one hand. And on the other hand, not all resources are really that well described by the language of excluding someone. What does it mean to exclude someone from a chose in action. A chose in action is a legal right to sue someone. You may be able to sell those or accounts receivable. What does it mean to exclude someone from accounts receivable? I get what that means when it comes to Blackacre, it means you can't enter Blackacre but you're not going to enter accounts receivable. You're not going to commit a trespass to accounts receivable. Now, maybe we can adjust the concept a little bit to get that in place, but what's really critical in the context of property and intangible assets like that tends much more to be the question of who it belongs to. What can be helpful about recognizing this principle at work is just appreciating the extent to which titling problems of various kinds are central to the way property law plays out. To the rules of property law, to the institutions that support it and to the situations where a property solution to things is likely to be used. The right to exclude, generally it's a way of describing the right of an owner or other person with a property right to prevent use of the resource by others. That is generally manifest with land, we say well the right to exclude means you can't cross the boundary, you can't enter the column of space represented by land. The right to exclude you from personal property, generally we think that means don't touch it, don't use it. What's useful about the right to exclude as a concept is, I think, two things in particular that it helps us to see. One, is that property tends to be ... the duties that property imposes on people tend to be bright line and boundary driven. A trespass is not, for the most part, a highly contextual determination. It's a bright line rule, it might even literally be a bright line rule. Cross this boundary line and you've committed a trespass. If you stay on the other side you haven't committed a trespass. It's simple and blocky like that. We might think it's an imperfect approximation for what it is that we really care about, which is interference with the owners preferred use of the resource, but it's a pretty darn good one. That's one thing that's helpful about it, is it captures this important bright line quality of property law. The other thing that's helpful about it, although the language that's used is, I think in some ways kind of poorly chosen, it gives people the wrong idea. Property is fundamentally a matter of rights that are negative. When I say negative I don't mean they're in a bad mood or they tend to be pessimistic. When I say they're negative I mean that the duties that they impose on other people are duties of abstention. Duties not to act in a particular way as opposed to duties to act in some particular way. So, whatever the owners interest are that are protected through the law of property are only protected as against the undertaking of particular actions. Other people in the world are told not to do stuff, they're not told there's anything they actually have to do. If I want to build a house on my property, I can't through the law of property, command that other people come and help me do that. All I can do through the law of property is demand that they not get in the way of my doing that. That they not enter the property. That's an important feature of property law and one of the reasons why that exist is because property rights apply on such a broad basis, to everyone in the world, there a default set of rights, background set of rights that apply to everybody and it would be very hard to have a system of affirmative duties that are imposed on others. But, leaving that aside, it's just a useful thing in the first place to realize that in general the duties that are imposed by property law are negative ones. They're duties to refrain from acting, not duties to do anything in particular. It can be helpful to talk about the right to exclude, but there are also some unhelpful aspects of talking about it that way. One way in which it can be unhelpful is that it can give a misleading picture of what property is about by suggesting that property is this nasty enterprise where what you're dealing with as opposed to inclusion, you're excluding people all the time. It's not really about that, it's not different say, from the law of battery in the sense of being a negative right. A right that other people shouldn't hit you, but it isn't the case that other people have to come along and have a positive duty to make you look good or feel good or whatever else as you walk down the street. That would be equally untenable and the feature that we're talking about with exclusion, that's analogous to the law of battery, don't touch people without permission, that's the kind of bright line rule and it's a negative rule. It's a don't rule, not a do rule. That can get lost however, in describing it as a right of exclusion. The other thing that can lead you astray a little bit is, I think generally speaking, property rights, a truer way to describe what's going on is that property rights confer control or as they say, dominium in older language of property, over particular subject matters. Over particular things. It gives the owner of a resource or the holder of a property the ability to allow or disallow particular uses of resources. Exclusion can give the wrong sense of that and then sometimes a strange fit. It's odd to talk about excluding someone from a diamond necklace which is a small object, it's not like you're going inside it like you are if it's a piece of land. You can actually ... exclusion is a pretty good word for land because what you're doing is you're telling people to keep out. But, a keep out sign doesn't make much sense on a necklace. No one is going inside it. That's even more true for intangibles like a bank account or a claim of money that's owed to you. What does it mean to say keep out of that? I think it can be at least useful to think about an alternative way of formulating what we're talking about, which is that what property entails are rights to control what's done with resources. Rights to allow or disallow particular resources by the owner or by others. PUBLIUS: Can you elaborate on what you mean by that? What sort of alternative formulation might be helpful? JAMES STERN: In an article I wrote called, The Essential Structure of Property Law, I tried to figure out what it was that distinguished property rights from other kinds of rights. This is a question that, it's sort of a theoretical question, but it's got some importance and I sometimes describe it like this, if you're walking down the street and you ran into a legal right, how would you know whether it was a contract right or a property right? What are the hallmark features of property rights that make them that? One of the things that people have talked about a lot in discussions of property is something people refer to as the right to exclude. I suggested that the essence of property, in an important way, the thing that really makes property systems distinct has as much to do with something I call the mutual exclusivity principle than it does a right of exclusion. In some ways that's a helpful concept, the right to exclude, and in other ways it can be misleading. The Mutual Exclusivity Principle is a basic assumption, presupposition of property systems that what ... the kinds of claims we're dealing with, the kinds of legal entitlements we're dealing with are valid as against all other claimants. That is to say it's a system where we reconcile, we build into it, the reconciliation of all competing claims. We may not do this administratively, it's possible that you can have on the books, there could be mistakes out there where there are conflicting property claims, but that's a mistake. That's not the way it's supposed to be. In contract law it's, I guess theoretically possible I could offer to sell you the Brooklyn Bridge and I'd actually be bound under that contract. Maybe it's void, it's fraudulent, or something like that, but generally speaking the same person who offers to sell the same piece of property to two different people can be contractually bound to both of them and have to pay damages to both of them. But, property law is not like that. Property law allocates stuff that's out there and tries to reconcile all these different claims among different people. That's why bankruptcy law operates at the interface of contract and property. That's one place where contract claims, where you've basically promised the moon and the sky to others, you've promised to pay more money out than you actually have. It gets brought down to earth, sort of speak, and made real. It gets converted into property and in a bankruptcy proceeding you take the so called property of the debtors or the debtors' estate, you consolidate it all together and you try to pay off different claimants and that's where the rubber meets the road. That's where the claims of contract law, which are just personal as between different entities even if it's a corporation, is personal in the sense that it's not attached to particular resources. What bankruptcy does is it converts those into actual stuff. Once you've got property rights in it, those property rights are good against the world, it's actually yours when you get paid out of the bankruptcy estate. You can see a system like this in a lot of different areas, some of which we'd call property, some of them we might not. Think of a telephone exchange, it just won't work if two people have the same phone number. They could share a line but at some point you've got to stop that. You can't have multiple houses on the same street that are assigned the same number, at least the system won't work the way we want it to. Now, you can't assign different people the same web domain name, that won't work either. All of this is ... that basic approach is baked into property. Property takes stuff that's out there, it allocates it among people and it determines on a conclusive basis that one persons claims are of superior to other peoples claims in the same resource. It has a much wider scope of concern than is the case with contract law. Contract law in any particular dispute is concerned with the rights of the parties between each other. Property law is concerned with rights on a global basis, it ultimately seeks to resolve really who is, at the end of the day, in charge of this particular resource. That's the Mutual Exclusivity Principle. It is one of the chief reasons why property potentially presents tremendous complexity and a property law system responds to that complexity by trying to simplify the rules. Sometimes that simplification can be kind of hard, as first year law students will find out, but at the end of the day it's still simpler than it would be if the rules weren't simplified and you had a proliferation of different approaches to property law. I think there are lots of different features that are explicable in the system of property once you have this concern and focus. Once you realize, among other things, that the information costs that are imposed on others because the system seeks to be so universal in figuring out peoples claims, the information costs can be really quite staggering. It's the reason that we have devices out there to reduce information costs, like the recording office or other titling mechanisms. So you've got a place to go, like with a web domain name, you can go and look up and see has this name been claimed? Is there someone who has it? By the way, who is it? I'll go find them. But, there's a definitive resolution of that, a central clearinghouse that answers that question because you got to know, who's is it at the end of the day. You can't have multiple people with valid claims to the same web address. In terms of practical applications, it helps explain again and again where these different informational demands within the property system come from and helps explain why it is that you need to have the kinds of institutional responses that we frequently see within the law of property like deed registries, title recording, things like this, why there's concern with title insurance and how you draw the line between what property and contract is. At the end of the day, the essence of a property right is it assigns control, in particular resources, not as against two individual parties, but on a wholesale basis. It's not personal in that sense. There are a whole raft of different places in the law where you've got to figure out just what is property. Constitutional law is one, bankruptcy law is another, tax law, a whole range of different areas where there are rules that apply to property. Property is just a textual element in a legal provision and you've got to be able to figure out whether something is or isn't property and the Mutual Exclusivity Principle, looking out for these hallmark features helps to answer that question and helps you see when we're talking about rights that are on the property side of things versus merely contract or Tort on the other. With Tort there may be a slightly different basket of considerations that come into bearing. Tort tends not to be, unless we're talking about property Tort's, which you can think of as part of the law of property. Unless we're talking about property Torts, we're not dealing with rights and resources that are external to ourselves and so that is the dividing line there. That's the basic concept and I think it's helpful in coming at those kinds of questions and it's just helpful in general in understanding why property law plays out the way it does, what are its basic concerns and what's at the heart of what the legal system has to deal with with property, which is as often as not, it's with title disputes and questions like that as much as it with questions about whether something is a trespass or a nuisance or questions along those kinds of lines. What's a violation versus not a violation? A lot of it is how do we figure out who's this is? How do we figure out whether a particular claim on a resource is valid or not? PUBLIUS: One more question about how scholars talk or think about property rights. Can you explain the “bundle of rights” theory? Is it useful or not? JAMES STERN: So, one of the things that people debate in at least the literature about property these days is something referred to the bundle of sticks or bundle of rights metaphor. Like a lot of things in one's study of the law, this is a two edge sword. Its got its pluses and its got its minuses. The bundle of rights metaphor can often be used as a way of explaining the ways in which property rights differ in different context, so that property in different kinds of resources a little bit different. So we say, water law gives you one bundle of rights and oil and gas law gives you a slightly different bundle of rights. As ownership in those different kinds of context looks a little bit different from each other. It also can refer to the ways in which individuals customize their rights and properties. If you start out with that big, whole pizza pie of ownership, it may be that the owner then gives different pieces of the pie to different people. The owner might grant an easement to a neighbor, the owner might mortgage the property giving a security interest to a bank, and the bundle of rights is a way of describing the way in which a particular right or stick from within this imaginary bundle has been given to someone else. That's all well and good. Now, of course we could say that about other things as well, other areas of law, but no area of law is without differentiation in different context, but fine. There's a different version of the bundle of rights or bundle of sticks metaphor though that's also out there and that I think can be quite misleading and do some damage in peoples understanding of things and that's maybe better encapsulated by the phrase, "Property is just a bundle of rights." It's just a bundle of sticks. You hear that a lot too. The idea there is well, because property can vary in these different ways, it's therefore infinitely plastic. You can do with it whatever you want. It has no necessary form, it does have to have any common elements and it can be changed at will, willy nilly. It's a deep issue in the law of property how much change should be accommodated across time compared to the expectations of owners and the need for stability. That's a basic, fundamental theme in property law, is this need to strike a balance and often the bundle of rights is invoked as a way of saying you can do whatever you want, there isn't any there, there, there are no basic features of property law, it's just there to be refashioned however you like it and that I think is a non-sequitur. It doesn't follow from the fact that there's some variation, that there's infinite variation or that there's nothing that can be said about the commonalities in property law as compared to the differences. This can particularly come up in situations where we're talking about protecting property, whether constitutionally or otherwise, the notion that property is just a bundle of rights tends to suggest you can do whatever you want and there's never any incursion of a protected interest there and that seems to me to prove too much any right can be broken down into sub rights, your right not to be battered or your right not to have malpractice committed against you by your doctor. These you could also describe as a bundle of different rights, but we don't do that and it's a rhetorical move that's made with property that I think can be damaging to peoples understanding of how it really works and what's going on. NARRATOR: Thank you for listening to this episode of the No. 86 Lecture series on Property Law. The spirit of debate of our Founding Fathers animates all of the No. 86 content, encouraging discussion and critical reflection relative to how each subject is widely understood and taught in law schools and among law students. Subscribe to the No. 86 Lecture series on your favorite podcast platform to have each episode delivered the moment it’s released. You can also go to fedsoc.org/no86 for lectures and videos on Federalism, Separation of Powers, the Judiciary and more. Thanks for listening. See you in class!