Trespass, Nuisance, and the Costs of Determining Property Rights

TRESPASS, NUISANCE, AND THE COSTS OF DETERMINING PROPERTY RIGHTS THOMAS W. MERRILL* THE right to exclude intrusionsby others, we have it on high authority, is "one of the most essential sticks in the bundle of rights that are com- monly characterizedas property."' Yet the right to exclude is not one right;it is itself a collection or "bundle" of rights. With respect to property in land, for example, the rightto exclude dependsto a large extent on whetherthe intrusionin question is subjectto the commonlaw of trespass or of nuisance.2 Generally speaking, when the intrusionis governed by trespass, then there is no exception for de minimisharms, a rule of strict liability applies, and the landholdercan obtain an injunctionto prevent future invasions. When the intrusionis governed by nuisance, however, then there will be no liability absent a showing of substantialharm, as a rule the landholdermust show that the costs of the intrusionoutweigh its benefits, and even then the party subject to the interference may be awardedonly damages ratherthan an injunctionfor future harms. Thus, the right of a landholder to exclude means one thing with respect to certain intrusions-those subject to the law of trespass-but something altogether different with respect to others-those subject to the law of nuisance. * NorthwesternUniversity School of Law. I would like to thank Anthony D'Amato, FrankEasterbrook, Victor Goldberg,Carol Rose, MarshallShapo, and the participantsin a NorthwesternUniversity School of Law Faculty Workshopfor their helpfulcomments on earlierdrafts. ' Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979);see also PruneyardShopping Center v. Robins, 447 U.S. 74, 82 (1979). 2 These are not the only legal doctrinesthat define a landholder'sright to exclude. For example, the action for ejectment serves as an importantsupplement to the action for trespass-allowing one who holds title to land to sue for possession even afterhe has been dispossessed by the defendant. In addition, there are numerousconstitutional, statutory, and common-lawdoctrines that supplementand qualifythese actions-some of which will be consideredin Section IV infra. [Journal of Legal Studies, vol. XIV (January 1985)] ? 1985by The Universityof Chicago. All rightsreserved. 0047-2530/85/1401-0009$01.50 13 This content downloaded from 128.59.161.126 on Fri, 06 Nov 2015 20:31:58 UTC All use subject to JSTOR Terms and Conditions 14 THE JOURNALOF LEGAL STUDIES How do we account for the use of these different legal standardsin defininga landholder'sright to exclude intrusionsby others?And how do we explain the legal system's differentiationbetween those intrusions subject to the rule of trespass and those subject to nuisance? In this article, I will apply a simple economic model in an effort to answer these questions. The centralthesis is that when the costs of transactingare low, the legal system will gravitatetoward rules that determineentitlements at a low cost-such as the strict liabilityrule of trespass. The combinationof low transactioncosts and low entitlement-determinationcosts will max- imize the extent to which conflicts between competinguses of landcan be resolved by markettransactions. In contrast, when the costs of transact- ing are apt to be high, the legal system will incline toward rules for the determination of entitlements that are more expensive-such as the balancing or cost-benefit approach of nuisance. When market mecha- nisms fail, these more expensive entitlement-determinationrules are necessary in order to give judges the needed discretion to adopt what they perceive as the best "compromise" solution (the efficient solution) to land use disputes. AlthoughI will use this economic model primarilyto explainthe differences between trespass and nuisance and the sorts of intrusionscovered by each action, the model has the potential for broaderapplication. In Section IV, I will survey some other issues involving the rights to exclude, use, and transfer property and will suggest that the relationship between transaction costs and entitlement-determinationcosts can account for some of the legal doctrine in these areas. Finally, althoughthe main thrust of the article is positive in its orientation,in Section V I will raise some normativeissues for those who believe that the legal system should be concerned, at least in part, with the maximizationof social utility or wealth. Here, I argue that low-cost mechanical entitlement- determinationrules play an importantrole in facilitatingthe exchange and modificationof property rights-a role often overlooked by commen- tatorswho view them simply as decisionalrules to be appliedin litigation. I. TRESPASS AND NUISANCE Although trespass and nuisance are both concerned with the right to exclude intrusionsby others, they govern differentsorts of physical phe- nomena. Trespass applies to relatively gross invasions by tangible ob- jects-persons, cars, buildings and the like.3 Nuisance applies to more indirectand intangibleinterferences-noise, odor, smoke, funeralhomes, See Section III infra. This content downloaded from 128.59.161.126 on Fri, 06 Nov 2015 20:31:58 UTC All use subject to JSTOR Terms and Conditions TRESPASSAND NUISANCE 15 and so forth.4 For the moment, we need not consider the exact line of demarcationbetween the underlyingphenomena or the rationalefor that line. I will returnto this issue and discuss it at length in Section III. It is first necessary to understandthe legal consequences of classifyinga given interferenceas being subject to the rule of either trespass or nuisance. For this purpose, it is useful to refer to some simple examples drawn from recent cases. Suppose A and B are adjacentlandholders. In case 1,5 B has a long driveway which runs along his common border with A. At the end of this driveway, B has a loadingdock. In orderfor B's trucks to turn around and unload at the loading dock, B's agents must drive onto and back off from A's property. An intrusionof this sort-the repeated drivingof trucks on and off a neighbor'sproperty-is the sort of gross, tangibleinvasion that is governed by the law of trespass. In case 2,6 B has a factory which makes a great deal of noise when in operation;A has a family residence. For many years, B operates only one eight-hourshift, which does not unduly disturb A. Subsequently, in an effort to increase production,B starts operatingthree shifts aroundthe clock. As a conse- quence, A can no longer sleep at night. This kind of intrusion-the repeated invasion of a neighbor's peace and quiet by sound waves-is governed by the law of nuisance.7 In terms of both substantive and remedial doctrine, there are major differences in the law that will be applied in case 1 and case 2. Substan- tively, the principaldistinction8 is the standardof care that courts apply in determiningwhether the interferenceis actionable; that is, whether A's propertyinterest includes the right to exclude B's offendingintrusion or B's property interest includes the right to engage in the offending intrusion free of any exclusion from A. These disparitiesare most pronounced 4 See Section III infra. 5 Warsawv. ChicagoMetallic Ceilings, Inc., 35 Cal. 3d 564, 199Cal. Rptr.773, 676 P.2d 584 (1984).No questionwas presentedas to whetherthe intrusionswere a trespass,but only whetherthe intruderhad, because of the passage of the statute of limitations,acquired a prescriptiveeasement. 6 Wilson v. InterlakeSteel Co., 32 Cal. 3d 229, 185Cal. Rptr. 280, 649 P.2d 922 (1982). 7 Id. 8 Two other differencesshould be brieflynoted. First, there is a traditionaldistinction in terms of who has "standing" to bring an action to exclude an interferencewith land. Trespasscan be broughtonly by a possessor of land. Restatement(Second) of Torts ?? 157, 158(1965). Nuisance, on the other hand,can be broughteither by a possessoror by one who has a nonpossessory ownership interest (a reversion or remainder,for example) that is "detrimentallyaffected" by an interferencewith land.Id. ? 821E(1979). Second, the statute of limitationsfor trespassis typicallylonger than the statuteof limitationsfor nuisance.See, for example, Martinv. Reynolds Metals Co., 221 Or. 86, 342 P.2d 790 (1959),cert. denied, 362 U.S. 918 (1960);Fairview Farms, Inc. v. ReynoldsMetals Co., 176F. Supp. 178(D. Or. 1959). This content downloaded from 128.59.161.126 on Fri, 06 Nov 2015 20:31:58 UTC All use subject to JSTOR Terms and Conditions 16 THE JOURNALOF LEGAL STUDIES with respect to intentionalintrusions-a categorywhich includesnot only actions in which B specifically intends to interfere with A's interest in land, but also actions undertakenby B which B knows will interferewith A's interest.9Thus, if B directs his agents to back up their trucks to the loading dock, knowing that they must drive on A's propertyto do so, B will be chargeablewith an intentionalintrusion, even though he harbors no specific intent to injureA. Similarly,if B knows that his factory makes enough noise to disturb sleeping neighbors, his decision to operate the factory at night constitutes an intentional interference, even though he has no specific intent to disturbanyone's sleep."1 Intentionalintrusions subject to the rule of trespass are governed by a standardof care which is "exceptionally simple and exceptionally rigor- ous."" In order to establish an actionabletrespass, all that A need show is that B is responsiblefor an invasion of the column of space that defines A's possessory interest under the ad coelum rule.12 No weighing or balancingof costs and

Load more