The essential structure of property law.

Author:Stern, James Y.

This Article examines a characteristic of property entitlements fundamental to the structure of property systems that has received scant academic attention, a characteristic referred to as the mutual exclusivity principle. According to this principle, a property system does not allow for the existence of incompatible rights. Two people cannot separately be the owners of the same resource, for instance. By contrast, two people can each hold valid but contradictory contract rights to the resource. Although the existing property literature has stressed the "exclusive" nature of property, the various ways in which property is imagined to be exclusive, such as by conferring "rights to exclude," fail to capture the essence of property as a distinct legal institution. Unlike these alternative conceptions of exclusiveness, the mutual exclusivity principle holds true across the range of different types of property entitlements, including not just fee simple ownership but also security interests and servitudes, and across the range of assets subject to property law, including not just land and physical objects but also intangibles like intellectual property and corporate shares.

Recognizing the role of the mutual exclusivity principle yields a number of practical insights. It helps explain various institutional features of property law, such as the system of future interests, the use of possession-based rules, the role of recording systems, and the negative, thing-based structure of property entitlements. It illuminates connections between property and other fields like corporations law and it calls into question aspects of existing doctrine, such as the preferred status of exclusion rights under the U.S. Constitution's Takings Clause. It also modifies the influential theory that property law is heavily shaped by problems of high information costs: while existing accounts seem to suppose that property law entails relatively high information costs because it imposes a relatively broad set of duties on others, many of the information cost problems identified in the literature actually result from the mutual exclusivity problem, rather than from the breadth of property duties.

At a more general level, understanding the centrality of the mutual exclusivity principle suggests some change in direction is called for within the wider property literature. American property scholarship has been preoccupied with questions about the scope and strength of property rights, overlooking the separate problem of ascertaining who happens to hold a given right, a problem distinctive to property law. Property, this Article argues, is at least as much about title chains, patent searches, and creditor priorities as it is about trespass, remedies, and eminent domain.

TABLE OF CONTENTS INTRODUCTION I. THE SENSE OF EXCLUSIVITY A. Prevailing Notions B. The Mutual Exclusivity Principle II. THE PRIMACY OF MUTUAL EXCLUSIVITY A. Standard Property Paradigms 1. Security Interests 2. Future Interests 3. Servitudes and Easements 4. IP and Other Intangibles B. The Reality of Property: Trespass Versus Title C. Objections III. UNDERSTANDING PROPERTY A. Identifying Property B. Mechanics and Doctrine 1. Possession, Delivery, and Certification 2. Recording and Registration 3. Things and Negative Rights C. The Information Cost Thesis CONCLUSION INTRODUCTION

Two people cannot both be complete owners of the same thing: if Amy owns Blackacre, then Bob does not, and vice versa. This statement requires some clarification. Amy and Bob can certainly be co-owners, with each holding what is effectively a 50 percent share of the property. Such divisions are sometimes described by saying that each co-owner holds an "undivided" interest in the property, but that is just a way of expressing the notion that both owners have equal rights in the asset they jointly own. (1) It does not mean that each holds a separate ownership, unencumbered by the other's interest. It simply isn't possible for Amy and Bob both to own 100 percent of Blackacre individually, independent of one another. That would be absurd.

It may take a moment to absorb this idea-precisely because it is so obvious--but it is fundamental to the structure of property law. Suppose, for instance, that Blackacre was originally owned by Olivia and that Olivia made separate contracts to sell Blackacre, one with Amy and one with Bob. As far as contract law is concerned, it is altogether possible that both contracts are valid and binding. (2) If Olivia then conveys the property to Amy, she will be liable to a suit by Bob for breach of contract; if she conveys to Bob, she will be liable to a suit by Amy. In contract law, rights to Blackacre can be multiplied. In property law, however, they cannot. It simply isn't possible for Olivia to convey separate and independent ownerships to both Amy and Bob. Why not? Because that's just how the concept of property works.

The example just given illustrates what this Article will call the mutual exclusivity principle in property law, a core attribute of property that to date has received little attention, or even recognition, from scholars. The mutual exclusivity principle holds that if one person's property right is legally valid, no one else can hold valid a property right that contradicts it. The concept of a property system does not allow for the coexistence of rights with mutually exclusive content. It is structured as a kind of zero-sum game, in which the validity of one right necessarily means other incompatible property rights cannot also be valid. (3) This is true not only for ownership rights but for all rights classified as property.

Appreciating the mutual exclusivity principle helps reshape debates about the idea of property and the role that property plays within a larger legal system. The last decade has seen a proliferation of interest in the theoretical underpinnings of private law, and especially of property. (4) In particular, scholars have sought to understand the formal structure of property and the features that distinguish property from other branches of law, like contract--what are referred to as questions of "essentialism" in property law. Without a doubt, the overwhelming focus of attention in this sometimes--contentious debate has been the supposedly exclusive character of property. (5) It is widely thought that property often has something to do with exclusiveness, and the question is just how important exclusiveness is to its structure and operation.

Commentators understand this exclusivity quite differently, however, (6) and differences between competing understandings are often overlooked. (7) Sometimes exclusivity is thought of as a matter of absolute control over an individual resource, (8) sometimes as a matter of rights to exclude others, (9) sometimes as a private domain of independent decisionmaking. (10) These competing versions of exclusivity ultimately give rise to different understandings of what property is and does, which can have important practical implications. To give one example, federal copyright law, echoing the language of the Constitution's "Intellectual Property Clause," (11) grants copyright holders various "exclusive rights" in their creations, (12) while patent law grants patent holders the "right to exclude." (13) Are these the same thing? (14) And do these forms of exclusivity mean copyrights and patents should be treated as property rights? (15)

Despite its importance and the attention it has received from scholars, exclusivity in property law remains poorly understood. The prevailing understandings of its exclusive character all overlook the most fundamental element of exclusivity in property law, the mutual exclusivity principle--though the principle seems to be an assumption that they each depend upon and take for granted. This Article argues that the mutual exclusivity principle is one of the critical conceptual lynchpins that hold the institution of property together and reflects the most basic functional concerns that animate it. In contrast to the sorts of exclusivity discussed in the existing literature, the mutual exclusivity principle holds true for property entitlements of all kinds, not just fee simple ownership, and it effectively describes the boundary that distinguishes property rights from rights not considered to be property. Other exclusivity-based accounts of property are generally unable to explain what is exclusive about entitlements like a security interest or ownership of an assignable debt claim, much less why these are classified as property entitlements.

The thesis of this Article is not normative but descriptive and conceptual. It seeks to understand property from the inside, partly because this is a valuable perspective in its own right but also because a richer understanding of the formal architecture of property is necessary for any sophisticated analysis of the institution, whether functional or normative. Before we can evaluate property in its various manifestations, we must first understand how it works, and in many ways its conceptual structure remains hidden in plain sight.

Recognizing the mutually exclusive structure of property rights gives us a better grasp of property in a number of ways. It sheds light on the origin of a variety of distinctive doctrinal and institutional features in property law, such as the system of future estates, titling mechanisms and recording procedures, reliance on possession, and the use of rights in individual "things" to organize property law. The mutual exclusivity principle also provides guidance in areas of law in which a test to distinguish between property and other legal relationships is needed; it also calls into question the apparent premises behind various doctrines affecting property, such as the rules concerning "per se" takings under the Takings Clause.

A clearer appreciation of the mutual exclusivity principle also suggests shifts...

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