Yearly Archives: 2017

Trusts as Ownerless Property

Jul 4, 2017 Sjef Van ErpAdd a Comment

When comparing common law and civil law in the area of property, the trust is always presented as a legal institution of ownership typical for the common law and absent in the civil law. The trust, then, represents one of the major differences between these two legal traditions. While such a formal differentiation might be justifiable, the civil law indeed, like the common law, often generates institutions with some of the attributes of the common law trust but with varying characterizations of interest.

Alexandra Popovici’s article discusses the unique characteristics of instruments with trust-like qualities in civil systems, and she reveals the drafting history around the Québec Civil Code treatment of the issue.

Since the French Revolution (1789), and the ensuing abolition of the feudal system with its “ownership” of the feudal lord (“dominium directum”) and “ownership” of the person in possession (“dominium utile”), the civil law made a rigorous choice for a unified approach to ownership.

The French Declaration of Human and Civic Rights of 26 August 1789 stated in article 17 that the “right to property is inviolable and sacred.” This was reflected in article 544 of the French Civil Code, which defines ownership as “the right to enjoy and dispose of things in the most absolute manner, provided they are not used in a way prohibited by statutes or regulations.”¹ The consequence of this approach is that an object can only have one subject as owner (although several subjects can be co-owners, but they then share full ownership rights). All others who claim property entitlements are seen as having only a limited property right.

In the case of a trust, however, the trustee is entitled (“owner”) at common law and the beneficiary has an entitlement (“ownership”) in equity.

From a civil law perspective, this is a – forbidden – split ownership. Still, civil lawyers also accept the great advantages of trust law and have devised ways to achieve them: permitting someone to manage property (which is separate from the manager’s other property) for the benefit of another, who is also seen as having a property entitlement. In order not to go against the basic premise of the unity of ownership, the solution chosen was that the “trustee” concluded a contract with either the “settlor” or the “beneficiary” under which the trustee agreed to use her property rights only for the benefit of the beneficiary. The beneficiary, however, is not given any property right.

Civil law systems differ in their approach as to how far they are willing to protect the beneficiary.²  Québec, a leading civil law jurisdiction in North America, has chosen its own, rather fascinating, solution. The trust property is owned by no one, so the unitary concept of ownership is not violated, whereas at the same time both trustee and beneficiary seem to exercise what looks like property rights. In other words, exercise of property rights is separated from entitlement to property rights.

The Québec Civil Code (Article 1261) states that “(t)he trust patrimony, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right.” In other words: according to Québec law, no one “owns” the trust property. It is a patrimony (in civil law the term for the whole of a person’s assets and debts) managed by the trustee as a non-owner. Also, the beneficiaries are non-owners.

This approach to trust law was, until recently, very specific for Québec, but has now reached the European continent. The new Civil Code of the Czech Republic states in Article 1448, paragraph 3: “The rights arising from the right of ownership in the property in a trust are exercised by the trustee in his own name and on the account of the trust; however, the property in a trust is not owned by the administrator or the founder, or the person entitled to receive a performance from the trust.” The text is clearly based upon the Québec model.

In her article, Alexandra Popovici gives an overview of the Québec Civil Code’s drafting history, which is very intriguing. It appears that approaching the trust property as an “affected patrimony” is derived from ideas developed by the French author Pierre Lepaulle. His ideas were almost forgotten on the continent of Europe, partly because at the end of his career he came back on his earlier views and began to consider the trust as a legal person, but not in Québec.

Popovici explains that, in the final draft of the Québec Civil Code (as presented by the Québec Ministry of Justice), Lepaulle’s older ideas suddenly resurfaced. It seems that this happened under the influence of a rather theoretical article by Pierre Charbonneau, a Québec notary, published in 1983, which was based upon German pandectist writings from the 19^th century. The approach taken earlier by the Supreme Court of Canada in Royal Trust Co. v. Tucker, in which the court (Beetz, J.) qualified the trust as “a sui generis property right”, was set aside.³

The Québec approach, although now followed in the Czech Republic, is not followed in the two leading civil jurisdictions in Europe: France and Germany. Their trust law is far more pragmatic and less based upon what seems an ideological desire, having its roots in anti-feudalism so characteristic of the French Revolution, to keep the civil law unaffected by the common law’s fragmented ownership.

The Sticks in the Chinese Property Rights Bundle

Jun 15, 2017 Gregory M. SteinAdd a Comment

There is ongoing disagreement among Western scholars as to whether property rights are in personam or in rem rights, and scholars’ views have evolved over time. Blackstone emphasized dominion and exclusion. Scholars in the twentieth century shifted the focus to the “bundle of rights.” More recently, some property law scholars have emphasized the view that property is a “law of things.”

As Shitong Qiao, a law professor at the University of Hong Kong, observes in a recent book chapter, most of these scholars adopt a Western perspective. Consequently, these scholars have overlooked the relevance of this discussion to the evolution of property law in developing countries, including China.

Professor Qiao contends that the “sticks in the bundle” approach is best suited to an examination of Chinese property law given how that law has evolved in the past quarter-century. For practical reasons and for internal political reasons, China has had to deal with property rights on a piecemeal basis – what he refers to as a “stick by stick” approach – rather than all at once. As China and its people have experimented, different forms of property have developed in which different groups of sticks are arranged in different ways.

At first glance, China might seem to have adopted an in rem approach. Most notably, the Chinese Constitution and the Property Rights Law of 2007 both appear to treat law as primary, with property rights differing from contract rights. But this in rem view is not entirely accurate. China’s recent land reform is not simply a series of privatization transfers by the state and by agricultural collectives to individual ownership.

To begin with, no land in China has actually been privatized. The right to use land and the legal title to that land have been separated in both the urban and rural settings, though in somewhat different ways. The Chinese state continues to own all urban land while agricultural collectives still own all rural land. This public and collective ownership is an ongoing manifestation of Communist ideology and is seen as necessary for the government to maintain a certain level of credibility.

Meanwhile, the state has sold off the right to use urban land that it continues to own. This system of land use rights arose as property norms began to evolve in the 1980s and 1990s, informally ratifying the separation of ownership and use. These dynamically evolving norms led to changes in law that formally authorized these ongoing transfers of the right to use land.

Chinese land use rights today are a hybrid of contract rights and property rights. Technically, those who acquire land use rights in China obtain only personal contract rights, which are not analogous to the rights in land that are found in common law jurisdictions. In this way, the state has managed to retain considerable control over land while expanding private use of land.

Similar events occurred in rural areas, where farmers created rights in property that changed over time and were later ratified by the government. These rights, too, are personal in nature, and the alienability of rural land is restricted considerably. Meanwhile, as China has urbanized, the government has converted much rural land to urban uses, to the detriment of the former occupants of that agricultural land. The government has statutorily capped the compensation to which the rural land’s former occupants are entitled.

As a result, farmers enjoy little of the massive profit that typically results from the development of their land for urban purposes, with most of that profit going to government bodies and to real estate development entities. In property terminology, the government has retained the “stick” of non-agricultural use, a reality that has led to considerable illegal urban use of land that is still technically designated for agricultural purposes only. This means that rural rights are not rights in rem.

Professor Qiao concludes by noting that “Chinese policymakers have taken the … pragmatic approach of adjusting the bundle of property rights cautiously and carefully while keeping land ownership public.” (P. 32.) Although there is considerable enthusiasm in China for private ownership of land, there are practical constraints to complete privatization. The government has opted instead to allow private experimentation, which it then ratifies if the experiments are successful. During the past three decades, this has meant that ownership and use have been severed and that sticks in the property bundle have been rearranged in different manners to reflect gradual changes in attitude toward private property rights.

Professor Qiao’s chapter contributes to property scholarship in several important and meaningful ways. He reminds his readers that scholarship focusing on Western attitudes toward property can easily overlook non-Western cultures and legal systems. He emphasizes how cultural context influences social and legal attitudes toward property rights. He reminds the reader that China is still in an experimental phase in which private parties test out new approaches and the government endorses the ones that seem to work best.

Thus, when Chinese policymakers “try to accommodate new changes in reality in their daily work through gradual policy and legal reforms, they do not take property as an undivided concept but adjust the rights and obligations of the related parties with great care.” (Id.) In sum, Chinese property law is not evolving in a unitary fashion but rather is changing “stick by stick.”

Zoning for Dollars and Drones?

Jun 1, 2017 Shelley Ross SaxerAdd a Comment

My family was enjoying a sunny Southern California day in our new expansive backyard with a sparkling pool and secluded privacy when, all of a sudden, a drone hovered overhead. It appeared to be watching and taunting us as one of my sons-in-law made a lewd gesture skyward and we all yelled at it to go away.

I’m not a gun owner, but the feeling of having no control over the invasion of my property made me appreciate how someone (such as my older brother who does own guns) might feel compelled to shoot down the unmanned aircraft. How can such a trespass be allowed? As a property professor, the concept of owning the air rights above my property in addition to my surface rights seems to be debatably sacrosanct – cujus est solum ejus usque ad coelum – other than as limited by federal aviation requirements or other police power necessities.

Professor Troy A. Rule in his article Drone Zoning identifies the wide variety of complex regulatory challenges engendered by the increasing attractiveness of civilian drones. He addresses questions as to whether drone activity should be regulated at the state or local level rather than at the federal level and how municipal governments should develop drone policies for their communities.

In thinking of a title for this jot about Professor Rule’s thought-provoking article, I was reminded of the phrase “Zoning for Dollars” (a not-so-subtle take off of the 1970s television show Bowling for Dollars), which Jerold S. Kayden used to describe “incentive zoning.” With incentive zoning, municipalities grant developers the right to avoid certain zoning restrictions in return for the developer’s voluntary agreement to provide needed community infrastructure and amenities.¹

Professor Rule explains how to design an efficient drone zoning law at the local level, and he provides charts to illustrate the use of principles of economics to develop these laws. For example, a cost-benefit analysis would show that “drone use should be legally permissible only when and where its net social benefits are greater than zero.” (P. 186.)

However, couldn’t a municipality permit drones where the net social benefits of the drone activity are less than zero so long as the person or company is willing to provide community benefits in the form of “incentive zoning” for drones? Such an approach could allow municipalities to “supply[] the flexibility and local participation needed to optimally balance drone use with landowner safety and privacy in communities” (P. 200), while at the same time obtaining community amenities to offset the social costs of permitting drones.

State and local governments need to be proactive nationally to ensure that they have a strong and unified voice as to the regulatory framework needed to control civilian drone use. As Professor Rule so crucially points out, the Federal Aviation Administration has, so far, chosen to regulate drones on its own instead of “actively inviting state and local governments to join in forming a coordinated drone regulatory system.” (P. 143.) Federal regulation is important for restricting drone activity near sensitive areas such as airports, military facilities, and higher-altitude airspace; managing nationwide drone registration programs; and establishing uniform drone manufacturing and performance standards.

Nevertheless, the potential for local impacts as well as national benefits makes drone regulation ripe for a combined regulation framework at the federal, state, and local levels. A similar longstanding debate about the division of authority among federal, state, and local governments over communications services has resulted in national regulation under the Federal Communications Commission with very limited state and local control. However, communication services, which are now wireless in many geographic areas, are not as locally intrusive as low-flying drones and may not serve as a viable model of federalism.²

Drone zoning is certainly a local function if viewed from a land use zoning model founded on the state’s delegation of its police power. Professor Rule’s writings on drones and local government should spur state and local action to address the increasing use of civilian drones in our communities.³

Other models of regulation should be considered in addition to local zoning, national preemptive authority, and common law actions such as nuisance and trespass. Perhaps we should restrict drones to overflight of public roads and highways to avoid trespass claims and maintain residential privacy? Individual, temporary permits could be granted to private owners wishing to fly drones over their own property for purposes such as wedding photos or real estate marketing videos.

This permitting method for individual flexibility is the same as Professor Rule’s suggestion for drone zoning exceptions in residential areas. Commercial operations may also consider granting easements over their private properties in exchange for payment by civilian drone users such as Amazon and the newly announced Google X.

Yes, property rules are ancient and convoluted at times, but they should be explored for purposes of regulating civilian drone use in the same way that they have been used for other new ideas and technologies such as intellectual property and “cyberspace.”

Same Base, Different Taste: The Cultural Ingredient in Property Law

May 3, 2017 Donald KochanAdd a Comment

Can we bring preferred legal norms to culture, asking culture to adapt, or do we bring culture to the formation of legal norms, asking law to adapt? This is not just a normative question causing consideration of moral or consequentialist choices. It is also an empirical one. Regardless of what we think we ought to do or might want to do, the real world may very well be constructed to preordain the sequence. Indeed, the embeddedness of culture in societal architecture may limit the bandwidth of available opportunities for law to act as an influence exogenous to culture.

To understand the interplay between culture and the law, it is useful to evaluate historical developments of legal doctrines from a comparative perspective. That is the eminently valuable project undertaken by Professor Taisu Zhang in his article, Cultural Paradigms in Property Institutions.

Zhang exposes the sometimes “muted” perspective regarding the strong cultural influence and sociological concerns in property law’s development and its theoretical understanding. By comparing and contrasting his project against many of the other influential comparative property theory endeavors, Zhang identifies both the alignments his study has with previous literature but also where his richer understanding of culture’s role fills gaps or omissions in the existing body of analysis.

There is little doubt that property theory has been dominated by economic analysis, especially in recent years, with our definition of utility most often correlated with wealth enhancement. Zhang does a great service by forcing property scholars to question whether that focus has too greatly marginalized the study of culture as a factor in property law’s development. According to Zhang, we may very well need to “re-culturalize” property theory.

The article makes a convincing point that social culture is a critical ingredient in the creation and evolution of property law institutions. Even where the same base of interactive arrangements and concerns necessitates the development of legal institutions, the content of laws and norms nonetheless takes on different tastes depending on the cultural ingredients added to the base.

To test his hypothesis, Zhang conducts rigorous country studies—comparatively studying the evolution of land mortgage law and related legal institutions in China, England, and Japan during the two centuries before large-scale industrialization. His descriptive account is vital to making an informed normative and comparative assessment of the relative advantages and disadvantages of divergent property norms within and between different societies.

Zhang’s study reveals that, “[a]lthough the negotiation of mortgage norms tended to be a rich-versus-poor process almost everywhere, the actual laws and customs that emerged from this process were profoundly different from country to country.” (P. 351.) For example, England developed a pro-creditor and pro-rich set of land mortgage norms, while China developed a pro-debtor and pro-smallholder set of land mortgage norms (with Japan similar to England but with some variations). He traces this divergence to cultural difference, including, for example, that England placed a premium on land wealth while Chinese culture was more concerned with age and generational seniority as drivers of status privileges.

Zhang explains that social status in some societies is chosen, or “distributed,” based on cultural factors, such that those with the highest status might not favor predominately wealth-enhancing or principally materialist-based norms. Furthermore, there is often a link between social status and political status within a culture.

Property “winners” are often chosen by the political process, so that status-based power (which is often defined by culture) can drive political choices designed to preserve status for the winners. If they are winners in the political process based on some non-material calculus, then we should expect that the political choices of property norms might also be based on some non-material calculus.

Consequently, those with status-based power, no matter how attained, may choose property norms that reinforce or enhance a status norm that may in fact be non-material. In fact, some status norms can become culturally sustaining “despite having strongly negative material consequences.” (P. 349.)

But how is what Zhang describes more than just elites protecting their economic self-interest? He argues that position is not necessarily distributed culturally based on economic considerations, so the maintenance of status similarly will not necessarily involve perpetuating one’s own economic self-interest. In fact, pursuing economic ends might not be the controlling value in a particular culture, and such pursuit might even threaten one’s ability to maintain his or her cultural social status.

Zhang ultimately concludes that his cultural theory “is particularly powerful—perhaps indispensable—in explaining large-scale institutional differences between societies” (P. 348) regarding how they regulate the use and transfer of property. The article is rich with revelations about various country-level differences in property institutions that “deserve country-level explanations.” (P. 352.)

Zhang’s work helps us understand why shared social cultural values, particularly regarding sociopolitical status distribution, help explain the divergent legal and institutional property-based choices made between these societies. Indeed, he concludes that culture is better than utilitarian bargaining, self-interest, wealth maximization, or other functionalist theories of norm formation at explaining why different societies might choose to structure their law to favor different status distribution norms.

Given culture’s empirically proven influence on the historical development of property institutions, we should continue to expect that local cultural factors might very well be influencing property use and regulation today. By recognizing that influence, property theorists can better contextualize and compare property norms across jurisdictions. Zhang’s work helps us understand why culture is an explanation of the property norms we have, how culture is a driver of the property norms that develop in a given society, why culture can present opportunities for law’s development, how culture can be a barrier or limitation on the alteration of property norms, and how navigating culture becomes necessary whenever one is operating within a legal system of property institutions.

Of Persons, Property, and Frozen Eggs

Apr 10, 2017 Tanya MarshAdd a Comment

William Blackstone’s Commentaries on the Laws of England bifurcated the physical universe into persons and property. In Blackstone’s description of English law, there were categories of persons (just as there were categories of property)—freemen, slaves, and wives “protected” by coverture. But each of those categories of persons consisted of whole, living natural persons. Blackstone recited the prevailing scientific and theological view of the day, that life began upon the “quickening” of “an infant … in the mother’s womb.” Blackstone similarly recited the prevailing legal view of when personhood ended—upon death. But while Blackstone clearly set forth the parameters of personhood, he failed to acknowledge that the borders of “property” did not neatly correspond, leaving the possibility of physical objects that were neither persons nor property.

This gap in English and American common law first caused problems when medical schools began to teach through anatomical study. Medical students needed cadavers to dissect, but prevailing Christian belief in literal resurrection discouraged voluntary donation. As a result, a market in fresh cadavers, rudely disinterred from their graves, emerged. Although these corpses had a market value, English and American authorities were frustrated that grave robbers could not be prosecuted for conversion and related crimes because of the clear common law doctrine, articulated by Blackstone, that human remains are not property.

Medical and scientific advances in the past century have expanded our understanding of the common law gap between persons and property and challenged us to reassess those boundaries, particularly with respect to human tissue with value for transplantation, therapy, or research. Professor Browne Lewis, The Leon and Gloria Plevin Professor of Law at Cleveland-Marshall College of Law, adds to this emerging niche of scholarship at the intersection of property law and bioethics by analyzing the legal status of frozen human eggs.

Lewis notes that the legal status of biological materials is important because “the ability of people to recover damages may be impacted by whether they have any legally recognized property interests” in them. (P. 651.) She explains that in the event of a dispute between a fertility clinic and a customer, the “owner” of the frozen eggs may receive damages for a conversion or bailment claim only if the eggs are legally protected property.

One of the most provocative and interesting sections of Lewis’ article discusses surrogacy contracts and what the nature of those transactions suggests about the legal status of “babies conceived using assisted reproductive technology.” (P. 652.) Lewis argues that these children are “treated like market place goods.” (Id.)

Lewis cites several cases where surrogacy agreements were analyzed in accordance with contract law principles rather than family law. In a 1993 California case, Lewis argues, “the court enforced the terms of the surrogacy contract in order to give the [parties procuring the surrogacy services] the benefit of their bargain,” and in so doing “the court appeared to treat the baby like any other subject of a contract.” (P. 654.)

Lewis cites these cases as evidence that “society has accepted babies being treated like property.” (P. 656.) If babies are essentially treated as property, Lewis implicitly argues, surely frozen eggs should be treated as such. These arguments, uncomfortable as they may be, are undoubtedly worthy of engagement.

When I first read Lewis’ article, I was disturbed by her casual use of the concept of “ownership.” She asserts, for example, that parents have “an ownership interest” in their children “against everyone but the other parent.” (P. 686.) She also asserts that “when eggs are inside of a woman’s body, it seems clear that she has an ownership interest in them.” (P. 666.)

In fact, though, at least since Blackstone’s time, the common law has treated human tissue attached to or within the human body as part of the person itself, and once separated from the body as part of the gray space between persons and property. There is certainly no clear and established legal precedent holding that human tissue is ever property that can be owned, even when part of one’s own body.

But these statements by Lewis—a respected bioethics scholar who is obviously quite familiar with the cases and relevant scholarship—are useful because they reveal the disconnect and tension between social and legal conceptions of personhood and ownership. They also illustrate the problems courts face in trying to navigate in the void between persons and property.

For example, Lewis discusses the landmark case of Moore v. Regents of the University of California, 793 P.2d 479 (Cal. 1990). In that case, the Supreme Court of California held that Moore could not assert a conversion claim against the doctor that removed and retained his rare and valuable cells because he had no expectation in exerting control over those cells after they were removed from his body.

Significantly, though, the court skillfully avoided stating that Moore “owned” his cells while they were still in his body. The Court also explicitly dodged the question of whether human biological material could never be considered personal property. The passionate dissent of Justice Arabian perhaps reveals why the majority thought it wise to sidestep those questions:

Plaintiff has asked us to recognize and enforce a right to sell one’s own body tissue for profit. He entreats us to regard the human vessel—the single most venerated and protected subject in any civilized society—as equal with the basest commercial commodity. He urges us to commingle the sacred with the profane. He asks much.

Moore, 51 Cal. 3d at 148.

There are arguments in favor of treating biological materials, like frozen eggs, like property. There are also arguments against. The common law will obviously be of little help in resolving this quagmire. Lewis’ article gives the reader a useful framework for thinking about these sensitive issues at the intersection of bioethics and law, while also offering some provocative insights for this ongoing debate.