Property – Contracts

Two first year courses at most law schools.  As with most law school subjects, you don’t get into a lot of depth.  The professor peppers you with strange problems, like the rule against perpetuities or the battle of the forms.

I’ve been thinking about a more fundamental aspect of the two subjects lately, though.  In New York, and I’m sure most other places, the law provides that a money judgment becomes a lien against the real property of the judgment debtor.  Put another way, if you are alleged to owe someone money and they get a judgment against you for it, then they automatically, by operation of law, have a claim – a “lien” – against any land you own in the state.  Liens can be “foreclosed”:  that is, the property against which the lien exists can be sold to “satisfy” the judgment.

Here’s the thought:  the constitution has a special place of honor for the “right to property” but no such favor is given to contract rights.  Yet someone else’s contract right can trump your right to property.

This doesn’t seem right, does it?

I sometimes think that the legal regime suffers from too little appreciation for the importance of property rights, not too much.

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4 responses to “Property – Contracts

  1. Zarepheth

    I think we need a better understanding of property rights. For instance, a person’s property should include only what they produce through their own labor, what they acquire as a gift from someone who freely (not under duress, compulsion, deception) gives of their own property, or what they acquire through legitimate trade with the products of their labor for the property of someone else.

    But separate from the property rights of individuals should be the property rights of the community as a whole – namely land, natural resources, and the the benefits and privileges that exist or have value because of the community rather than the individual.

    Once we’ve clarified this, then having a good appreciation for property rights will make a difference. Otherwise we’ll continue to have abject poverty right beside great abundance, where a few receive the benefit of everyone else’s labor while contributing far less in return.

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    • Hi Z.

      Appreciate the interest. I think that, like a lot of these things, this is a job for lawyers. Which sounds strange. Nobody thinks lawyers should do anything lest they screw everything up, and at present it’s hard to blame them.

      Still, there is property and there is property. Fundamentally we distinguish between “real” property (land and “improvements” like buildings. This is lawyer property talk) and “personal” property, which is anything else.

      The nature of the idea of property rights is that the “community” doesn’t have them, except the same way individuals do. I don’t think that could be changed without destroying the very idea of property.

      Thus the government, for example, can own real property the same way anyone else can. But it doesn’t have some over-arching community property rights, which seems to be what you are suggesting. In fact, your suggestion is really a throwback to when everything was owned by the King, who granted various “estates” or other property interests as he pleased, which could also be revoked as he pleased.

      It was a great advance when these ideas were abolished in favor of truer ownership by people other than the King. Substitute “community” for King, and this seems to be what you are suggesting.

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      • Zarepheth

        In the distant past of some societies, the “king” understood that his position was that of a trustee, with a fiduciary responsibility to serve the best interests of the people in his kingdom. But however the community chooses its leaders, whether by elections, duels, heredity, or some other means, if the leasders actually work to serve the interests of their constituents, the world would be a much better place.

        In order to act in the best interests of the community, the community leaders require resources. It takes land, natural resources, and labor to build roads, bridges, locks, dams, airports, harbors, and all the other infrastructure of a modern society. All that infrastructure is supposed to help everyone, with no individual having superior rights to it over their neighbors. At the same time, most of us want to live in a free society; free to work or not work, free to choose what work we’ll do or avoid. In order to get labor, to construct and maintain all this infrastructure, the community leaders must either compel the populace through force or persuade with trade. I’d much prefer the persuasion by trade method.

        Now, if the community as a whole (or the community’s leaders, the government) requires resources and labor, should the government impose a tax on individual labor? Or should the government impose a tax on land, natural resources, and special privileges? Or should the government just make everyone slaves and force us to labor for it?

        By imposing a tax on individual labor, some of my labor is taken from me. Even worse, the tax is usually imposed on the whole value of the product rather than the value added by labor. This is a huge disincentive to work. It is also akin to slavery where 100% of my labor belongs to someone else.

        By imposing taxes on land, natural resources, and special privileges, individuals are reimbursing the community for resources the individual is using but which the individual’s labor did not create. In our current system where we allow private ownership of land, natural resources, and special privileges, those who do not have those resources have to pay for them, at full market value, but the wealth is given to another private party. That party may, or may not, use the wealth to serve the community – usually they keep it for themselves. If those resources are owned by the community, then the wealth would be used to benefit the whole community.

        Ultimately, the reason a few people in this world are exceedingly wealthy while most people are poor or even in abject poverty is because we allow private parties to own land and natural resources. Whoever gets ownership first has an immediate economic advantage over everyone else. Most with that advantage use it to increase their advantage, eventually gaining an outright monopoly. Every monopoly maximizes its profits by restricting production to raise prices. Which means we have unused capacity, inefficient distribution, and many who want or need the products of the monopoly cannot afford to purchase those products.

        Because of our system of private ownership, each monopoly becomes its own “king”, but rather than serving the best interests of their subjects, they suck the life from their subjects, treating them no better than serfs or slaves.

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        • Z this is a well reasoned and thoughtful comment. Let me address a few things.

          When you talk about the various public works things requiring land and resources you’re certainly correct in noting that this is something government can generally do in the interests of everyone, or the “community” as you might put it. But at present this government ownership extends only to the public works features themselves. Thus the federal government owns and operates the Hoover Dam, for instance.

          But you are suggesting that government/”community” ownership of land become universal, such that all people become renters to one degree or another. Yet the distribution of property and ownership to many is widely regarded as an advance in human freedom; you seem to regard it as a regression.

          Ultimately, the reason a few people in this world are exceedingly wealthy while most people are poor or even in abject poverty is because we allow private parties to own land and natural resources.

          This is not so much something you demonstrate as it is an axiom. It isn’t true. You’re making an interesting observation about the taxation of labor and it’s resemblance to slavery, but you are also setting up a false dichotomy: taxing labor v. taxing property is a false choice. There are other ways to tax besides those two. Imports and exports can be taxed. Sales transactions. Use taxes and fees. It goes on and on.

          You would find the distinction between property and contracts in the law to be helpful if you’d look into it a little more. Here’s an interesting tidbit for you: with respect to disputes over real property, “specific performance” is usually available; with contracts it is not. This is very similar to your aversion to compulsion, which is a good instinct. But it’s too bad you don’t see the inherent and widespread compulsion that would be necessarily entailed by abolishing private property rights.

          I would encourage you to look at this again:

          http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-ii/

          and especially this:

          http://strikelawyer.wordpress.com/2011/12/27/saving-the-world-revised-edition-part-iii/

          One of the things that occurred to me in the wake of our periodic discussions here on the blog was to question the regime of evictions for non-payment. It seems to me this violates the principle that otherwise applies to property and contract rights, in that a basically contractual obligation – that of paying rent – is enforced through a particularly draconian method by the government on behalf of a private party. This should be seen as anomalous, but at present it is one of the most seemingly unalterable features of the legal system.

          It would be fairer, truer and more accurate to rephrase you axiom like this: Ultimately, the reason a few people in this world are exceedingly wealthy while most people are poor or even in abject poverty is that the government specifically enforces the contractual rights of some as over and against the property rights of others.

          Which of course suggests a solution exactly the opposite of the one you propose: more property rights for more individuals, not less.

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