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Up for grabs: a workable system for the unilateral acquisition of chattels.

This paper is about the everyday occurrence of coming across an object in the world and evaluating whether or not it is up for grabs. My project explores the shared space at the precipice of the laws of finders, abandonment, destruction, and conversion: a space we often inhabit, but wherein our rights in relation to an object are indiscernible ex ante under current law. I propose a system by which actors and courts may evaluate the reasonableness of a person's actions from the moment he or she chooses to acquire a chattel unilaterally. My system derives from the signals chattels convey to us--signals that have everything to do with context and little or nothing to do with value.
INTRODUCTION

I. INSUFFICIENT GUIDANCE FROM THE LAWS OF UNILATERAL
   SEQUENTIAL ACQUISITION
   A. The Law of Abandonment (Cell 1)
   B. The Law of Destruction (Cell 2)
   C. The Law of Finders (Cell 3)
   D. The Law of Converters (Cell 4)

II. SPECTRUMS, NESTING, AND NOTICE:
   A WORKABLE SOLUTION
   A. The Nesting Theory Explained
      1. Signals Along Two Spectrums:
         Identification and Uniqueness
      2. Nesting
      3. Notice
      4. Revisiting the Matrix in Nesting Terms
        a. The "Cell 1 or Cell 3" Confusion Clarified
        b. The Content of Cell 2
   B. The Nesting Theory at Work
          1. Fungible Chattels
            a. Cash, Part 1: Environmental Context
               (And Then I Found Five Dollars)
            b. Cash, Part 2: Value
               (The Million-Dollar Question)
            c. Mass-Produced Chattels: Scarves and Bottles
            d. Collections: Handbags and Laptops
            e. Sentimental Fungibles: A Favorite Sweater
            f. Fungibles that Identify Owners:
               Labels; Vehicles and Other Registered Chattels;
               One Million Dollars in the Shtetl
          2. Unique Chattels
            a. Uniques that Identify Owners: Sensitive Documents
              (Credit Cards, IDs, and Letters); Applications
               b. Uniques that Do Not Identify Owners:
                  Art, Crafts, and Jewels; Photographs
   C. Case Law Revisited

CONCLUSION


INTRODUCTION

A moment's reflection reveals the perhaps unintuitive fact that our world is populated with more objects than people. (1) With so many objects in the world, it is a marvel that one rarely, if ever, confronts a chattel for which the question "Do I own this?" proves difficult. (2) A more complicated question arises when one encounters a chattel one does not own and asks, "May I own this?" That question addresses the laws and norms of acquisition.

I narrow the scope of this project with two bifurcations, ultimately arriving at an analysis of unilateral sequential acquisition. The first bifurcation distinguishes bilateral and unilateral acquisition. We acquire most chattels bilaterally, in transfers governed by the laws of contract, sale, gift, bailment, and the like. Consent does much, but not all, of the work in bilateral acquisition? In some circumstances, the law permits chattels to be acquired unilaterally, with consent playing less of a role. (4) The difference between bilateral and unilateral acquisition is, in verbs, one of receiving versus taking. This project is confined to unilateral acquisition.

The second bifurcation recognizes that unilaterally acquired chattels are of two kinds: chattels that have been owned before and chattels that have not been owned before. If a chattel has never been owned before, such as a thing newly created or newly captured, then the laws of unilateral first acquisition apply. If a chattel has been owned at some point in its history, then the new owner has acquired it in sequence, and the laws of unilateral sequential acquisition apply. I limit the scope of this project to the latter category: unilateral sequential acquisition.

The substance of this paper involves two further distinctions. First, while a chattel acquired by unilateral sequential acquisition is by definition one that has been owned in the past, it may nonetheless be owned or unowned at the time it is acquired. Second, one can effect unilateral sequential acquisition in one of two ways: legally or wrongfully. These distinctions yield the following matrix, to which I refer throughout the paper:
Figure 1: Unilateral Sequential Acquisition of Chattels

                   Legal Acquisition   Wrongful Acquisition

Unowned Property   1. Abandonee              2. Wrongful
Acquired                                     Repossessor

Owned Property
Acquired            3. Finder                 4. Converter

Cells 1 through 4 describe the four possible statuses of an
individual effecting 2 unilateral sequential acquisition, (5)
numbered in order from the


Cells 1 through 4 describe the four possible statuses of an individual effecting a unilateral sequential acquisition, (5) numbered in order from the most secure title (abandonee) to the least secure title (converter). In reverse order: a wrongful acquisition of owned property (Cell 4) is a conversion. (6) Under nemo dat quod non habet, (7) a converter (along with his criminal cousins, the larcenist, the thief, and the robber) has the least secure of all unilaterally and sequentially acquired titles because the converter's title is void or, at best, voidable. (8)

More secure title vests with the legal acquisition of owned property (Cell 3). This is the finding of lost or mislaid property, (9) as governed by the law of finders. A finder has good title against all but the true owner. (10) Therefore, the finder has a greater degree of ownership than the converter, but the true owner's carve-out renders the finder's rights against the world still incomplete.

How can one wrongfully acquire unowned property (Cell 2)? I will argue that the acquisition of destroyed property and of certain kinds of abandoned property is wrongful because such chattels give notice to the acquirer that they ought not to be repossessed. Here I recognize something that scholars have so far neglected (11): although the chattel itself may, as an empirical fact, be abandoned or destroyed, not all abandoned property is rightfully recoverable. No predetermined carve-out attaches to a wrongful repossessor's title the way, for example, a carve-out for true owners attaches to a finder's title. However, case law demonstrates that the wrongful repossessor's interest is not completely secure, because a court may upset his interest. (12)

Finally, the legal unilateral sequential acquisition of unowned property (Cell 1) is the act of claiming abandoned property, and is governed by the law of abandonment. I call one who claims abandoned property an "abandonee." Full ownership of the acquired object vests in the abandonee, and his rights are secure. (13)

It is clearly preferable to inhabit Cell 1, because only in Cell 1 does complete and secure ownership vest in the taker, (14) Problematically, the law of abandonment--the governing law of Cell 1--relies not on the signals transmitted to the abandonee but on the intent of the abandoner. (15) Placing the focus on the abandoner's intent would be less problematic if the objective intent of a person who loses a chattel were distinguishable from the objective intent of a person who abandons the same chattel. (16)

But consider Dorothy, a New Yorker in winter. Dorothy's mother taught her well, so Dorothy is appropriately dressed: bundled in a scarf her mother bought at a department store and sent to Dorothy early in the winter season. After a pleasant day about town, Dorothy arrives home and realizes, to her disappointment, that she and her scarf have parted company. Where and when this misfortune occurred she can only begin to guess, but certainly it was not her intent to abandon it. Although the scarf is not particularly distinctive, she is determined to scour every inch of New York, from the Bronx to the Battery, to locate the scarf her mother so lovingly sent to her. The scarf, then, is merely lost. When Stanley discovers it--let us say, on Mercer Street--and picks it up, (17) is he not a finder, inhabiting Cell 3? He is.

Now, a counterfactual: Dorothy sets out on the town as before, wearing her new scarf. But this time, just as Dorothy turns onto Mercer Street, she receives an unexpected phone call from her mother. Somehow the whole conversation gets off on the wrong foot, and after several minutes of passionate arguing about nothing significant, Dorothy ends the call, steaming.

In a fury, she pulls the scarf from her neck and throws it in the street, thinking, Take that, Mothert. I don't ever want to see this scarf again! Quite clearly, the scarf is now abandoned. So when Stanley comes across it later in the day (or at any future time) and takes it, he is an abandonee, inhabiting Cell 1.

Between the two scenarios, Stanley's perspective as to the scarf has not changed. Yet the law affords Stanley different rights depending on Dorothy's unknowable intent. This misplaced focus on Dorothy's intent leads to a real-world problem: How does an actor know whether he is in Cell 1 or Cell 3?

There are consequences to misjudging the situation. An actor who believes he inhabits Cell 1 (an abandonee) but who really inhabits Cell 3 (a finder) might exercise rights he does not have. He might, for example, consume or destroy the chattel. Unfortunately, if he does that--if he exercises dominion over it to the exclusion of the true owner's rights--the actor unwittingly relocates himself to Cell 4 (a converter), (18) Any system that permits an individual to inadvertently land in Cell 4 is a flawed system. (19) To foreclose the possibility of becoming an accidental converter, we need a method for determining ex ante whether one who unilaterally, sequentially, and legally acquires a chattel has done so in the context of Cell 1 or Cell 3.

Here is an interesting twist: from a rule-of-law perspective, there is nothing particularly inexcusable about the ex ante uncertainty inherent in the "Cell 1 or Cell 3" problem. A rule-of-law regime values predictability in the selection of legal standards, not outcomes. (20) That is, a predictable legal standard is not also a guarantee that an actor will be able to predict the legal consequences of his or her actions. The most obvious example of this phenomenon is a strict liability rule.

In the "Cell 1 or Cell 3" problem, the standard is fixed and known: one who unilaterally takes possession of a chattel may be presumed to know, at the moment of taking, that his ultimate rights will rest on the prior owner's intent. This subjective standard renders the taker's precise rights in relation to the chattel unpredictable, even though the standard for determining those rights is known. If the taker misjudges his rights, and liability is assigned ex post, that liability will lie even if the would-be abandonee acted without fault. And so the taker takes--along with the chattel--a risk. (21) Perhaps it is our comfort with risk-taking, and the existence of fixed rules for determining a taker's rights ex post, which allow the "Cell 1 or Cell 3" problem to persist.

But while legal uncertainty is not per se problematic in the general case, the application of this form of strict liability to the lost and abandoned property context is ill-suited, even draconian. Strict liability is typically reserved for inherently dangerous situations (22) and was extended in the twentieth century to particular contexts affecting "powerless" consumers (23) The allocation of lost or abandoned property fits neither of those models for strict liability. (24)

The lack of ex ante guidance to actors is also troubling because ex ante certainty has value, both to the individual actor and to society. Certainty of our legal rights in relation to an acquired object provides actors with a sense that their rights in that object are secure, promoting investment in the object, furthering the efficient use of that object, and allowing actors to use that object in the furtherance of their own goals. (25) Notwithstanding the value of ex ante certainty, the current laws of unilateral sequential acquisition do not provide for it.

This paper proposes a workable system that I call "nesting," which allows individuals to identify their normative position in the matrix ex ante, particularly in regards to Cells 1 and 3. The system also helps define the content of Cell 2, which I call "wrongful repossession." The nesting theory provides guidance for everyday encounters with chattels, and I explicate my theory with hypotheticals geared toward the average individual. The guidelines I propose easily translate to common experience and are ready for application in the real world. The theory also has practical utility as a workable framework for courts evaluating disputes ex post. With this framework, courts may judge the reasonableness of a taker's actions at the moment of taking according to something more objective than the court's own intuition and less problematic from an evidentiary perspective than the prior possessor's subjective intent. (26)

Part I will briefly describe a particular aspect of the four bodies of law comprising unilateral sequential acquisition and the shortcomings of each, insofar as each attempts to provide ex ante guidance to a person unilaterally acquiring a chattel in the world. Part II will explicate my nesting theory and provide examples of the theory at work.

I. INSUFFICIENT GUIDANCE FROM THE LAWS OF UNILATERAL SEQUENTIAL ACQUISITION

Property is a relationship between people, mediated through a resource, (27) with the attendant rights operating in rem. (28) Property's in rem nature requires it to emit signals at its borders. (29) For example, Henry Smith has argued that the right to exclude lowers information costs by communicating a "keep off" message at property's borders to would-be trespassers without requiring an owner to enter into negotiations with every individual in the world who might encounter the property. (30) But the message at the border of a chattel is not always "keep off." The empirical fact that we recognize some property as up for grabs is proof that the message is malleable.

What observable factors signal that the property is abandoned, and what factors cause that signal to change to indicate that the property is not abandoned? In this part, I will show that the laws of unilateral sequential acquisition do not answer those questions. Therefore, those laws provide insufficient ex ante guidance to an individual on the cusp of a unilateral sequential acquisition as to his normative position in relation to the chattel.

A. The Law of Abandonment (Cell 1)

The law of abandonment ties the signal communicating an object's status as abandoned to the abandoner's intent, which means that many objects will look the same to third parties whether they are abandoned or simply lost.

As I will demonstrate, value may be as unhelpful as the prior owner's subjective intent in distinguishing lost and abandoned chattels ex ante, even though value is a marginally more objective measure. Consequently, one cannot choose, ex ante, to become an abandonee. One can only choose to gamble on the possibility that he is an abandonee, take the object, and learn ex post whether his gamble has earned him the full bundle of ownership rights accordant to an abandonee, or whether his bundle bears a carve-out for the true owner. The law of abandonment, therefore, creates the risk of becoming an accidental converter.

All chattels can be abandoned. (31) This is so notwithstanding clever scholarly assertions to the contrary, (32) made in light of the fact that title to real property cannot be abandoned in this country. (33) Abandoned personal property is that "to which an owner has voluntarily relinquished all right, title, claim and possession with the intention of terminating his ownership, but without vesting it in any other person." (34) Abandonment focuses on the intent of the abandoner, and insists on a manifestation of that intent. (35) But scholars acknowledge that property sporting the outward manifestation of its owner's intent to abandon may look exactly like lost property. This means abandoned property (and, correlatively, lost property) may be transmitting conflicting messages. When objective indications fail to illuminate the prior owner's intent, only subjective intent remains. Of course, without the gift of clairvoyance, subjective intent is indecipherable to third parties.

And yet we do not, for the most part, misread the signal. We do not discover Dorothy's handbag, loaded with her cell phone, wallet, cosmetics, and more, and conclude that she has abandoned it. Why not? There must be something about abandoned property that gives it a unique signature such that we recognize it as abandoned.

In a legal landscape saturated with law and economics scholarship, one might hypothesize that the answer to the "Cell 1 or Cell 3" dilemma lies in value: a valuable thing is presumptively lost, while a worthless thing is presumptively abandoned. Abandonment has generated little scholarship, (36) but in an important recent work Lior Strahilevitz approaches abandonment with an eye toward the value of the thing abandoned, tracking both subjective value and market value. (37) He observes that even property with both positive market value and positive subjective value (to the abandoner) is abandoned with some frequency, for reasons that include garnering attention, signaling wealth, triggering an entertaining scene, and benefitting others. (38) The abandonment of positive value property, he observes, can make it "difficult to discern whether it is abandoned, lost, or mislaid, and thus challenging for the finder to determine his rights and responsibilities." (39) The "confusion costs ... [imposed on] third parties who are charged with respecting in rem rights" are relatively high in this context. (40) Value, it seems, has not solved the problem of determining ex ante whether an object has been abandoned or whether it has been lost. But value does help to highlight that problem.

Explicit notice is a ready fallback. In a regime that permits the abandonment of positive market value property, physically labeling abandoned property as abandoned and advertising its availability (in both the cyber and physical worlds) would dramatically reduce confusion costs. (41) However, notwithstanding the Craigslist phenomenon (42) and the occasional "free car!" placard, the world shows little sign of making the labeling of abandoned positive value property the rule rather than the exception. (43) And perhaps it is for the best. Although explicit labeling would surely reduce confusion costs, the hesitation costs surrounding an abandoned chattel might very well go up, thus increasing the net negative externalities of abandonment. What is the source of the abandonee's hesitation?

The idea is a variant of the famous lemons problem. In the lemons problem, information asymmetry causes bad products (in used car lingo, "lemons") to drive good products ("peaches") out of the market in a self-reinforcing cycle. (44) Applied to abandonment, an information asymmetry exists between the abandoner and the abandonee as to the quality of the thing abandoned. Lacking equal information, the abandonee hesitates, suspects the worst, and likely undervalues positive value abandoned chattels, thereby depressing the market for abandoned goods. For example, when Stanley comes across a scarf in the street--a scarf up for grabs--he might be glad to take it. But when the same scarf is actually labeled "abandoned," he may wonder why it has been so labeled. (45) Stanley's imagination sets to work and, conjuring all manner of fictitious histories for the garment before him, he supposes the scarf cannot be as good as it appears; otherwise it would not have been abandoned. He hesitates, and does not take the scarf. These types of refusals will increase the amount of abandoned property that is not reclaimed, increase waste, and hence raise disposal costs for the rest of society.

Distinguishing between lost and abandoned property on the basis of an abandonee's value analysis is problematic for another reason: we are notoriously bad at determining the market value of a thing. (46) Furthermore, even for The Price is Right's most successful player, sometimes value is simply unobservable. (47) There are easy cases. In most circumstances, the BIC pen will be less valuable than the Apple computer, and observably so. But consider a one-of-a-kind hand-knit sweater, personally constructed by hypothetical Milanese designer Giacomo and consequently worth tens of thousands of dollars or more. Now imagine that there are countless knockoffs of this celebrated sweater throughout the world, all shockingly cheap and identical in appearance to the real thing. The average finder cannot discern the difference. Even if very expensive things were never abandoned, counterfeits demonstrate why the "cheap things are abandoned; expensive things are not" rule of thumb would still fail an actor ex ante. If Stanley cannot tell whether a sweater he finds on Mercer Street is a priceless Giacomo original or a worthless counterfeit, then value analysis leaves him no better off than having to guess at the prior owner's unknowable intent.

Distinguishing between abandonees and finders on the basis of the prior owner's unknowable intent reveals a glitch in the law that value analysis cannot repair. Subjective value is as unknowable as subjective intent. Relying on market value does not help the actor, as market value is sometimes unobservable and our talents for accurate appraisal are limited. Finally, since even positive-value objects are frequently abandoned, perfect market valuation would be of only limited use in determining ex ante whether an actor is a finder or an abandonee. The solution must lie elsewhere.

B. The Law of Destruction (Cell 2)

What information does the law of destruction provide about an actor's position in the matrix ex ante? Besides abandonment, destruction is the only way one can unilaterally sever his or her ownership interest in a chattel. (48) Since both abandonment and destruction sever the ownership interest, one might presume that, like abandoned chattels, destroyed chattels are up for grabs. But as I will explain, (49) special rules ought to apply to the acquisition of destroyed chattels. Those rules will locate the acquirer of a destroyed chattel in Cell 2 (a wrongful repossessor), not Cell 1 (an abandonee). As a preliminary matter, then, it is important to understand what a "destroyed" chattel is.

Where is the meaning to be found? We know empirically that what we would, in everyday terms, call the destruction of one's own personal property is as commonplace as its abandonment. Yet there is little scholarship on an owner's right to destroy, and what scholarship does exist focuses on whether the right to destroy should be curtailed. (50) Meanwhile, the common law's aversion to waste (51) has resulted in suppression of the right to destroy (52) and, with some exceptions, (53) the case law has tended to focus on real property, (54) not personal property.

It may be most fruitful, then, to turn to the dictionary for a definition of "destroyed" chattels. Black's Law Dictionary defines destruction as "[t]he act of destroying or demolishing; the ruining of something" and as "[h]arm that substantially detracts from the value of property, esp[ecially] personal property." (55) By resorting to value, the dictionary definition invites the unilateral acquirer to encounter one of the same shortcomings discussed above, (56) namely that value is not always observable. For example, consider a laptop that appears new and functional. Unbeknownst to the would-be acquirer, the prior owner has irreversibly tampered with the laptop so that it shuts down automatically every sixty seconds. The value of the computer is surely "substantially" diminished, but the would-be acquirer cannot discern that ex ante.

In practice, destruction varies depending on the legal context, ranging from complete depletion of an item's value to inefficient or wasteful disuse. (57) Although destruction encompasses a range of possible harms, it is nevertheless distinct from damage, which Black's Law Dictionary defines as "[l]oss or injury to person or property." (58) One enters the realm of destruction only when the loss or injury is so great as to render the value at least "substantially" diminished, or in clearer cases, "ruin[ed]." (59) I note the distinction between damage and destruction because I will argue only that it is wrong to recover destroyed chattels, not damaged chattels.

The law already proscribes the recovery of some destroyed chattels. For example, livestock and corpses are destroyed (i.e., dead) chattels with limited repossession possibilities. (60) On the other hand, shredded documents are explicitly repossessable. (61) Notwithstanding these specific scenarios and a few others, (62) the law does not make clear whether, as a general matter, destroyed property is up for grabs. (63) Similarly, the rights that do or do not vest in the person who unilaterally acquires a destroyed chose are so far undefined.

C. The Law of Finders (Cell 3)

One who acquires lost property is a finder and, with one exception, (64) a finder has good title against all but the true owner. (65) Laws governing finders of lost or mislaid property (66) often give effect to a prime policy objective: maximizing the likelihood of reuniting the chattel with its true owner. (67) These laws also strive to distinguish a finder from a thief. (68) However, the law of finders assumes that a finder knows he is a finder, and not an abandonee.

The law of finders seems to capitalize on confusion costs, and often takes for granted that a thing is not abandoned. This is reflected in the various approaches to finding that states have adopted. (69) The requirements are more or less onerous, depending on the jurisdiction, but reporting requirements and fines for failure to report are common, (70) In New York, for example, the law does not recognize abandoned chattels at all without explicit notice of abandonment.(71) As a result, property that is de facto abandoned is de jure merely lost. (72)

Perhaps to avoid the evidentiary problems that flow from abandonment's subjective intent requirement, the law makes finding a kind of default rule. (73) The draconian statutes codifying the law of finders therefore solve the "Cell 1 or Cell 3" difficulty by simply outlawing Cell 1, or at least making it very hard to enter Cell 1 without explicit notice of abandonment (or litigation). (74) The social cost of such a proscriptive regime is high; there are socioeconomic benefits to abandonment because abandonment is often the least costly and least wasteful method of severing one's ties to a chattel. (75) Surely a more nuanced and forgiving approach to the "Cell 1 or Cell 3" problem is needed.

D. The Law of Converters (Cell 4)

Lastly, we turn to conversion law for insight into whether and how an actor embroiled in the "Cell 1 or Cell 3" dilemma can avoid becoming an inhabitant of Cell 4 (a converter). From a security-in-title perspective, Cell 4 is the least desirable iteration of a unilateral sequential acquisition because a converter's title is void or, at best, voidable. Recall that a finder who believes he is an abandonee may exercise rights inconsistent with those of the true owner and inadvertently become a converter. Though it seems unlikely an equitable court would harshly punish a truly innocent converter, without a workable means of determining ex ante whether one is a finder or an abandonee, the good faith converter may nevertheless face a replevin action or a damages award. (76)

Civil conversion (77) is the exercise of rights contrary to those of the true owner, (78) The easiest way to avoid becoming a converter of found chattels, of course, is to refuse to engage with those chattels. (79) But assuming, as we must, that one wants to pick up the chattel and engage with it, one avoids becoming a converter by being aware of the rights the true owner may have. (80) Typically, one need not pry deeply into the relationship another owner has with his chattel. The right to exclude and the correlative duty to stay away (81) do much of the work here, keeping the diligent actor safe. (82) However, as the phenomenon of acquiring abandoned chattels proves, chattels do not always communicate a resounding "keep off" message at their borders. When that happens, it becomes possible to innocently interfere with a true owner's rights.

An actor who picks up a found chattel has acquired possession, but possession alone does not vest full title, (83) In the clearest case, acquisition by wresting the object from the arms of a weaker party does not bestow title, (84) From this foundational axiom arise the correlative limitations on ownership for objects acquired in other void ab initio fashions. (85) For instance, the American law concerning good faith purchasers for value holds that a thief has void title and a defrauder has voidable title. (86) Pursuant to the nemo dat principle, (87) a thief with void title cannot transfer a stolen object to another party. Therefore, notwithstanding possession, the good faith purchaser of a stolen object has bad title only. Even though the object itself may communicate no information as to the identity or indeed the existence of a true owner, possession alone cannot guarantee title to a possessor.

Yet a party in possession of an object that bears no information about competing owners is surely reasonable in relying on the adage that "possession is nine-tenths of the law" and in asserting ownership on that basis. Nine-tenths, after all, is a good bet, even if it is only a bet (and even if it is only an adage). Problematically, if the gamble runs afoul, ignorance of the circumstances may not be a useful defense in a subsequent conversion action. (88)

It is unfortunate that unilaterally acquired chattels do not announce aloud whether they are lost or abandoned (or stolen, etc.). That intelligence would rescue from confusion, hesitation, and potential liability all of us who have ever encountered an object in the world and wondered if it was up for grabs. Perhaps, though, our chattels do speak, conveying the essential information in no uncertain terms. We only require a means of deciphering the messages they transmit.
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Title Annotation:Introduction through I. Insufficient Guidance from the Laws of Unilateral Sequential Acquisition, p. 807-828
Author:Corriel, Matt
Publication:University of Pennsylvania Law Review
Date:Feb 1, 2013
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