PROPERTY EXAM

 

Professor Perritt

Spring 2007

Model Answer

 

QUESTION I

 

A.                 Ardian should sue Timberpond for copyright infringement. Before he can do so, he must register his copyright with the Copyright Office. Once the copyright is accepted for registration (a more or less automatic process)—or in some jurisdictions, after he has applied—he then may sue in federal court and has the benefit of a presumption that the copyright is valid.

 

In any event, the copyright clearly is valid now. The Albanian song is a musical work, and musical works explicitly are eligible for copyright. Second, the song was original. While Ardian worked from research on Albanian folk music, he definitely wrote a new song. Third, the work was “fixed” in a tangible medium from which it can be retrieved. The whole purpose of the chord chart was to permit Ardian to “retrieve” the song at the time he performed it.

 

Ardian also must establish that Timberpond infringed his copyright. Timberpond certainly did so in two respects. First of all by “enhancing” the song as recorded, he prepared a derivative work. Preparation of a derivative work is one of the rights exclusively reserved to the owner of a musical-work copyright under Section 106 of the Copyright Act. Second, Timberpond publicly performed the song, and that also is a right exclusively reserved to the owner of a copyright in a musical work under Section 106. The performance right does not exist for copyrighted song recordings, but Ardian has no copyrighted sound recording and is not pursuing copyright infringement on that theory.

 

Timberpond will defend on two grounds—first of all that no fixation occurred. He will claim that the chord chart was insufficient, and that the recording made by the mayor’s daughter did not constitute fixation because it was not authorized by Ardian and the fixation requirement requires that fixation be done by the copyright claimant. Second, he will argue that his preparation of the derivative work and public performance qualify as “fair use” under Section 107.

 

But these are weak defenses. As explained above in the answer to this question, the chord chart probably does qualify as fixation. Second, the fair use argument is weak. Assuming that Timberpond got paid, he cannot claim that the purpose of his prima facie infringement was educational or otherwise nonprofit. Second, he used the entire song. Third, his use of the song probably decreased the market value of the song to Ardian. While the Timberpond performance may have made the song more popular, it probably reduced the value of any further exploitation by Ardian himself because the audience would insist on the Timberpond performance.

 

On balance, I think Ardian has a very strong case. His only real vulnerability is that Timberpond might persuade a court that his performance of Ardian’s song has so increased the value that that drives the market-effect element of fair use into his favor. Now that Timberpond has popularized the song, and given that Ardian and not Timberpond owns the copyright to the song, Ardian can make much more money on it—perhaps even licensing it to Timberpond to perform in the future. Under that scenario, Ardian could not recover from Timberpond’s performance at the festival, but he could enjoin future performances by Timberpond unless Timberpond pays Ardian for a license.

 

B.                 First, I would want to know if the ordinance was authorized by state statute or could be characterized as ultra vires. If the ordinance was ultra vires, it is entirely invalid, and the sheriff’s seizure of the çiftelia was a trespass to chattel and also possibly a trespass to land when he entered their house to take it. Under these circumstances, Ardian and Linda could recover damages in those tort actions—assuming they could overcome any immunity defenses.

 

Assuming the ordinance was authorized by state statute, as it probably was, by some general zoning power statute, Ardian and Linda have a strong substantive due process argument. They certainly were deprived of their property (the çiftelia) by the state through its agent the sheriff. Property interests are not fundamental so they must further show that substantive due process was violated because there was no rational relationship between the taking of their çiftelia and a legitimate state interest. The county probably can prevail, given judicial deference to legislative governmental bodies, on an argument that there is a legitimate state interest in promoting public music festivals. But Ardian and Linda can argue that the nexus between what the state did and its asserted interest is too attenuated. While the taking of their çiftelia did enable one performer to perform a particular song that proved popular, the ordinance is wildly under inclusive. It is under inclusive in that it only authorizes seizure of “unusual musical instruments”—and the context indicates the county board intended only to authorize seizure of a çiftelia. Any legitimate ordinance seeking to advance the county’s interest in success musical performances would cast a much wider net, perhaps requiring people to contribute lawn chairs and umbrellas and loud speakers if necessary, and surely requiring the contribution of any kind of musical instrument that might be needed.

 

Even if they fail on their substantive due process argument, they have a strong takings argument. While the county may take private property for public use, through a private performer Timberpond, under Kelo, it must compensate those whose property has been taken. The two difficulties that Ardian and Linda will face here are (1) establishing a taking, and (2) establishing anything other than nominal dollar value for that which has been taken. Intuitively, this surely seems like a taking: the sheriff confiscated their property and kept it for a significant period of time. But they may have a hard time fitting it into the categories the courts have established as constituting takings. First of all this does not fit comfortably within the category of Loretto because it is not a permanent physical invasion; it is manifestly temporary. Second, it hardly can be said that they have been deprived of all economic use of the property because it was returned to them quickly with greatly enhanced value. So to establish a taking they must navigate their way through the formula established by Pennsylvania Coal and Penn Central and, given that a substantial part of Penn Central’s bundle of sticks was eliminated by the City of New York and found nevertheless not to be a taking, that may be an uphill battle.

 

But even if they can establish, what would the remedy be? In the usual takings case, if a taking has occurred, the governmental actor is obligated to pay the fair value of the property thus taken. But in the instant case, the market value of the çiftelia has been vastly increased by what happened because of the taking so it’s not clear that any meaningful relief would be available to Ardian and Linda. They would be entitled to an injunction if the çiftelia is likely to be taken again—if Timberpond comes back to town, for example.

 

C.                 Representing Richardson, my best argument is to establish that the çiftelia was Linda’s sole property. If it was, she could sell it to Richardson and he therefore owns it and need not give it back to Ardian or pay him damages. Indeed the only way that Ardian can recover anything against Richardson is to show that Ardian had some kind of property interest in the çiftelia. One possibility can be ruled out fairly quickly and that is tenancy by the entirety. While Ardian and Linda were married, there is no indication that any tenancy by the entirely arose because there was no conveyance; Linda made the çiftelia herself; it did not exist until she made it.

 

Ardian’s best argument, and the one most dangerous to my client, is that the çiftelia constituted community property, given than it came into the marriage during the marriage rather than being previously owned, and that neither marital partner by him or herself has the power to convey community property. That argument, if successful, is probably the only way that Ardian could invalidate the conveyance to Richardson. Even then, we could argue that a marital partner may have the power to “manage” community property and that that is what Linda did by selling the çiftelia to Richardson. Under this theory, Linda must account to Ardian for the value; in other words the proceeds from the sale of the çiftelia become community property, but that’s not Richardson’s problem.

 

A weaker argument for Ardian and therefore a less threatening possibility for us is that the çiftelia may constitute a tenancy in common because Ardian contributed some value to its construction, by his research and his helping with the design. If a tenancy in common can be established then what Linda conveyed to Richardson was not a fee simple interest in the çiftelia but rather only a tenancy in common. In that case, Richardson and Ardian are now tenants in common and each has an undivided half interest in the çiftelia which means that Richardson must let Ardian use it, or must compensate him for any use by Richardson that constitutes an ouster of Ardian’s legitimate rights.

 

D.                 California, where Ardian and Linda live, is a community property state. But even if they lived in a common law state, the outcome would not be much different. In divorce, community property is divided between the two spouses, presumptively on a 50-50 basis. In most common law states, the rule is that each spouse individually owns property that he or she created or earned, but the property owned by both of them shall be distributed “equitably” in a divorce. Usually, this means 50-50. But there surely is room for a court in either type of jurisdiction to take equitable factors into account, such as Ardian’s greater contribution to the creation of the song, and Linda’s greater contribution to the creation of the musical instrument. Therefore, the most likely outcome is that Ardian would end up with the song and Linda would end up with the çiftelia, assuming she has not already sold it to Richardson, but even in that case that means she would get the entire $600,000 proceeds from the sale to Richardson.

 

QUESTION II

 

A.                 Because the easement was recorded and validly indexed, it is unlikely to be invalidated by the Illinois Recording Statute. The only possible way of avoiding this argument is if the developer recorded his deed first, in which case the Illinois Recording Statute would make the later-recorded easement invalid as against him.

 

The strongest argument is that the easement violates the Rule Against Perpetuities. It is a shifting executory interest subject to two independent conditions precedent. The first condition is the failure to construct “structures” within six months after the conveyance to the developer. This restriction would not violate the Rule Against Perpetuities since it is certain to occur or not well within a life in being plus 21 years. But the second condition precedent, which becomes operative if structures are constructed within six months, is not certain to occur within the period prescribed by the Rule Against Perpetuities. The structures might become dilapidated and the developer might become known as a slumlord 800 years from now. Because the first condition is already defeated (structures have been built), making the second condition applicable, the conveyance is invalid because it violates the rule. Otherwise the easement would persist as a contingent cloud on the title forever. The only possible way to avoid this is to argue that the second condition applies to the specific developer personally and therefore is voided when the developer dies without allowing the structures to become dilapidated or becoming known as a slumlord. Thus the developer’s life would be the measuring life, and the condition could be validated under the Rule Against Perpetuities. But this is a weak argument. Far more likely is that the term “developer” refers to the developer and his assignees or heirs.

 

In a wait and see jurisdiction, the easement would sort of be in suspension until whatever time period—usually something like 80 years—has run so that the circumstances could be examined to see if either of the conditions precedent had occurred, thus making the easement vest and become possessory. In such a jurisdiction, the developer cannot be certain of completely extinguishing the validity of the easement but he could forestall any activity under the easement for the long time period provided by any wait and see statute.

 

The possibility of invalidating the easement under the Rule Against Perpetuities is very strong.

 

The may be an argument that the easement is invalid because it is a third-party easement. But this will not work because (a) it is not a third-party easement; it was conveyed separately; and (b) the old rule against reserving easements in favor of third-parties has mostly been abandoned.

 

It makes no difference that there may be claims against Mark for breaches of warranties or covenants subsumed into the deeds. Even if meritorious, these claims would not render the easement invalid.

 

 

B.                 Assuming that everyone recorded his or her deeds in the order in which they were conveyed, Lock does not have a very strong recording-statute argument that construction of the facilities under the easement can be enjoined. The only possibility on this line of argument is that the failure of the Recorder of Deeds to index the deeds properly rendered the recording of the misindexed deeds invalid, thus triggering the Illinois Recording Statute and allowing Lock to argue that the easement was invalid as against him because he recorded without notice of the recorded easement. This is unlikely to succeed because the prevailing view is that misindexing does not extinguish the legal effect of the actual recording, which was done.

 

Two arguments are far stronger. The first is that the easement has not become possessory because (a) “structures” have been constructed on the property and they have neither become dilapidated nor has the developer become known as a slumlord. Thus even if the easement might allow building the facility some day, it is not possessory yet.

 

A second, almost as strong, is that what the owner of the easement proposes to do is not privileged by the easement because it exceeds its scope. The easement permitted the grantee to build cell phone facilities. That’s not what the easement owner is doing. But this argument would confront counterarguments that what the easement owner proposes to do would impose no greater burden on the servient estate than building cell phone facilities and therefore the easement should be interpreted flexibly enough to permit the proposed activity.

 

Somewhat weaker arguments are that this is an easement in gross which does not run with the land. Therefore it burdens Mark, but not his successors in interest. This is a weak argument because the modern rule is that easements in gross do run with the land.

 

I should note that the existence of possible claims against Mark for breaches of warranties or covenants subsumed into the deeds through the merger doctrine are irrelevant to the answer to this question. The question asks how to to prevent construction of the facilities under the easement, and nothing about the warranties or covenants of title would permit that relief against the easement owner.

 

C.                 The best argument for the conservation group is tenancy at sufferance. Adverse possession or easement by prescription is unlikely to be helpful because nothing in the facts suggests that the time period necessary for adverse possession or easement by prescription has run.

 

Easement by sufferance arises when a tenant holds over beyond the termination of a lease, and the landlord takes no action to evict the holdover tenant. Typically, the period of a tenancy at sufferance is equal to the period of the express lease. The facts do not say what the term of the original lease was, and the usual rule is that the period for a tenancy at sufferance cannot exceed one year. Under this theory, the conservation group could obtain an injunction against any interference with their leasehold. Construction on the property certainly would interfere with the birds, coyotes, foxes, rabbits, and diamondback rattlesnakes that their leasehold entitles them to observe, and thus could be enjoined. The developer would, no doubt, make an argument that there is nothing incompatible between the construction and full enjoinment of the leasehold, but that is a weak argument given the relationship between construction equipment and the aforementioned animals.

 

The developer stands in the shoes of Lock as the conservation group’s landlord. He thus has the usual covenants and warranties burdening landlords. Construction would clearly violate the covenant of quiet enjoyment because it would interfere with the possessory interest owned by the lessee-conservation group.

 

D.                 Thatch has a number of good arguments against Mark. First of all it is unlikely that the statute of limitations has run against breach of the present covenants in the general warranty deed given by Mark to the developer, Thatch’s predecessor. Second, she also has arguments that the future covenants have been breached. The covenants in the general warranty deed (sometimes called warranties) run with the land, and Thatch therefore can assert these warranties and covenants against Mark even though he is a remote grantor. The most interesting covenants are the covenant against encumbrances and the covenant of quiet enjoyment.

 

Both the lease to the conservation group and the easement definitely constituted encumbrances and therefore conveyance by Mark without disclosing these violated that covenant. His only possible defense on this theory is that the developer had actual knowledge of the encumbrances—actual or constructive knowledge. This is a weak argument because it is unlikely that the deed of the easement was recorded before the developer recorded his deed. So the easement is outside Thatch’s chain of title. Also, since the easement owner would have done nothing on the property before either the developer or Thatch took possession, there would be no constructive notice or even inquiry notice. Likewise, seeing a few birdwatchers or rattlesnake watchers on the property is unlikely to have put either the developer or Thatch on inquiry notice that there was some kind of inconsistent use going on. So the argument that the covenant against encumbrances has been violated is strong.

 

Mark will argue that Thatch surely saw the nature lovers on the property and, by failing to inquire further or to object, she accepted conveyance of the property subject to the lease.

 

An equally strong argument is that Mark breached the covenant of quiet enjoyment. Both the conservation group’s use of the property and the easement owner’s possible use of the property interfere with the full possessory rights of Thatch. Both were brought about by the conduct of Mark through his conveyance of the easement and the lease and therefore she has a strong case of breach of the covenant of quiet enjoyment.