Friday, May 22, 2015

Shoen v. Zacarias (Cal. Ct. App. - May 22, 2015)

Justice Hoffstadt certainly makes a persuasive case in the opening paragraph of this opinion.  He says:

"A trial court has the power to issue an equitable easement authorizing a trespasser to continue her trespass in exchange for paying damages, but only if, among other things, the hardship on the trespasser in ceasing the trespass is “greatly disproportionate” to the hardship on the land’s owner in losing use of the trespassed-upon portion of her land. [Cites] Here, we address what constitutes a “greatly disproportionate” hardship, and conclude that a trespasser’s hardship in having to remove her portable patio furniture does not qualify. We accordingly reverse the trial court’s issuance of an equitable easement, and remand for further proceedings."

Plus, when you read the opinion, that conclusion seems to make a lot of sense.  At issue is a 500 square foot piece of flat land that sits between two adjacent parcels on a hillside.  One of the hillside property owners ("Ms. Wrong") thinks it's on her piece of land because her property has a set of stairs that goes up there.  So she puts some portable stools, a chaise lounge, and some other miscellaneous -- easily movable -- stuff up there.  Just to hang out on occasion and chill.

But Ms. Wrong is wrong.  The plot of land is actually pretty much entirely on "Ms. Right's" property.  Even though Ms. Right doesn't actually have access to this flat land because there's no real way to get up there from Ms. Right's side of the steep hillside.

Initially, Ms. Wrong and Ms. Right deal with things as reasonable neighbors should.  Ms. Right lets Ms. Wrong hang out there, but says that she reserves the right to change her mind and to kick Ms. Wrong out whenever she feels like it.

Fair enough.  Things go fine like that for seven years or so.

But then Ms. Right changes her mind and wants to kick out Ms. Wrong.  Litigation ensues.

The Court of Appeal ultimately holds -- as presaged by the opinion's opening paragraph -- that the trial court erred by letting Ms. Wrong continue to use the property.  It'd only cost Ms. Wrong $275 to move the chairs and miscellaneous stuff that's on the property off the land.  Justice Hoffstadt holds that's not enough of a "grossly disproportionate" burden to justify letting Ms. Wrong keep using the property belonging to Ms. Right.

Again, when I first read the thing, that made sense to me.  Justice Hoffstadt's right that the doctrine that lets wrongdoers continue a trespass (as long as they pay for it with damages) was an historical development designed to stop illegitimate rent-seeking.  (The Court of Appeal calls this principle "legal extortion", but I'm going to use the contemporary academic term "rent-seeking" instead.)  The classic case is when a fixed structure -- e.g., a garage or home -- is situated barely over a property line.  If we always let the "righteous" property owner (e.g., Mr. Right) get an injunction in such a setting, he'd have inequitable power over the innocent wrongdoer (Mr. Wrong), since the cost to move (or demolish) the structure would be huge.  So Mr. Right could demand a ton of money from Mr. Wrong to waive injunctive relief -- thereby saving Mr. Wrong of the duty to move the structure -- even though the burden on Mr. Right of having the structure a tiny bit over the line is incredibly strong.

We (rightfully) don't like creating such suboptimal incentives.  Hence the rule that if the burden on Mr. Wrong is grossly disproportionate to the burden on Mr. Right, we're not going to grant injunctive relief.  We'll instead just require Mr. Wrong to pay damages.

Fair enough.

Justice Hoffstadt, however, says that in the present case, requiring Ms. Wrong to pay a measly $275 to move the chairs -- a piddling amount -- isn't anything like having to move a house or the like.  It's a tiny sum.  So it's not "grossly disproportionate" to Ms. Right's benefit.  Hence the Court of Appeal reverses the trial court's ruling.  Allowing Ms. Right to potentially win on remand and recover the use of her precious 500 square feet of flat land.

You get it, right?  I certainly did.  Made sense.

But the more I think about it, the more I think that the Court of Appeal may actually be wrong.  Even though Justice Hoffstadt persuaded me at the outset that the result he reached was right both legally and as a matter of basic fairness.

What I ultimately understood -- and what's really critical to understanding both the doctrine as well as the proper result in the present case -- is that we're exclusively talking about relative burdens here.  Yes, Justice Hoffstadt is right that the the burden on Ms. Wrong \-- i.e., the $275 she'd have to spend to move the furniture, plus maybe the loss of her ability to quietly enjoy the 500 square feet of land -- is not especially high.  No where near as high as in your classic "move the house six inches" case.

But that's not dispositive.  To reiterate:  We're talking about relative burdens here, not the "absolute" nature of the burden.  To justify only requiring damages (and not granting an injunction), the burden on Ms. Wrong must merely be "grossly disproportionate" to the burden on Ms. Right.  So we have to compare the burden on Ms. Wrong to the burden on Ms. Right.

Admittedly, the fact that the burden on Ms. Wrong here is so small (e.g., $275) makes it fairly easy for Ms. Right (at least in most cases) to establish that this tiny burden is not grossly disproportionate to hers.

So let's check what the burden is on Ms. Right.

The correct answer to which is:  Absolutely none.  Not a burden in the slightest.

Admittedly, normally, you'd say that the burden on Ms. Right is that she doesn't get to use herself the property that's being used by Ms. Wrong.  True enough.

But the critical fact here is that it's undisputed that Ms. Right can't use the property herself even if Ms. Wrong is kicked out.  Ms. Right doesn't have a stairway to the property.  The only stairway to it is on Ms. Wrong's property.  And the hillside's too steep to walk up.

So if Ms. Wrong doesn't use it, nobody uses it.  No one at all.

Couldn't Ms. Right just build a staircase to the thing?  Yep.  She could.  But the parties agree both how much that'll cost as well as how much it'd be worth.  The 500 square feet of land is worth $5000 without a staircase to it and $15,000 with access via a staircase.

But it'd cost Ms. Right over $100,000 to build a staircase to it.  A $100,000 staircase to a $15,000 piece of land.

Which makes no rational economic sense.  Which means it won't happen.

Ms. Right will thus never use the property.  So what's the burden on Ms. Right resulting from Ms. Wrong's use of the property?

Absolutely zero.  Nada.  Nothing.  $0.

So now lets compare the relative burdens.  The burden on Ms. Wrong of having to move the chairs is $275.  The burden on Ms. Right of having no access to the property is $0.

To put it differently, the burden on Ms. Wrong is literally an infinitely greater multiple than the burden on Ms. Right.

Which means, in my mind, that the burden on Ms. Wrong is indeed "grossly disproportionate" than the burden on Ms. Right.  Which in turn means that the trial court was right and the Court of Appeal is wrong.  Ms. Wrong should be able to continue to use the property -- property that would not in any event be used by Ms. Right -- so long as she pays for it.

The limited relief granted by the trial court only makes its decision even more equitable.  The trial court didn't let Ms. Wrong use the property forever.  She only let her use it for 15 years.  And it also made her pay for it.  The full value of the property, no less.  The 500 square feet are worth $5000 to Ms. Right (since she doesn't have stairs to it).  The trial court makes Ms. Wrong pay Ms. Right this entire amount -- the full value of the property -- merely for 15 years of access.

So Ms. Right is out literally nothing.  She gets paid the full value of the property.  Property she can't use anyway.  Plus she gets the property back in 15 years.

The more I think about it, the more I'm convinced that's the right result.  The socially optimal result, no less.  We want property to be used.  To be enjoyed.  Only Ms. Wrong can do that.  So we should let her.  As long as she compensates Mr. Right.  Who's not injured anyway (since she can't use the land in any event).  And who we pay the full value of the land anyway.

That's a win-win.  For the landowners.  For society.  For everyone.

It's true that such a result stops Ms. Right from having full "legal ownership" of her land.  But every single one of these equity cases do the same thing.  When, as here, the benefit to the landowner isn't nearly as great as the benefit to the innocent wrongdoing party, we balance the equities.  And, here, to me, that means that Ms. Wrong should get access, Ms. Right doesn't lose access (since she'll never have it anyway since she doesn't have stairs), and Ms. Right gets fully paid.

The only thing that Ms. Right can't do is to seek rent from Ms. Wrong.  But that's precisely what we want to avoid in the first place.

So it's a great opinion by Justice Hoffstadt.  One that makes a ton of sense.

The only problem with it is that it's actually wrong.