Экзамен зачет учебный год 2023 / Yun-chien Chang, A Comparative and Economic Analysis of Access to Landlocked Land. A Case for a Hybrid of Property and Liability Rules

A Comparative and Economic Analysis of Access to Landlocked Land: A Case for a Hybrid of Property and Liability Rules

Yun-chien Chang*

Abstract

Access to landlocked land is a universal legal entanglement, but surprisingly no law and economic scholars have systematically analyzed this issue. The doctrines in the U.S., called “easements of necessity” and “statutory easements,” are similar to those in civil-law jurisdictions, and they have intuitive appeals: as for statutory easements, owners of servient land should be compensated; easements should be necessary; and the location of the passage should cause the least damage to the servient land. As for easements of necessity, the landlocked owners can only gain access over land held by the grantor at the time of the conveyance, and the easements are gratuitous.

Using economic analysis, this article argues that these doctrines can be understood as an application of what I call “hybrid rule,” an unheralded mixture of the property rule and liability rule. This hybrid rule is more efficient than the two prototypical entitlement protection rules because it facilitates voluntary transactions between landlocked owners and owners of servient land and reduces cost externalization. More specifically, the hybrid rule stipulates that the extent of statutory easements should be set at where the marginal social benefit of prescribed passage is about to sharply decline, and passage locations should be determined following the least damage rule. As for easements of necessity, the limited access rule and the gratuity requirement make economic sense from an ex ante viewpoint.

Keywords

Easement of necessity, statutory easement, legal servitude of passage, landlocked, bargaining power, transaction cost, economic value, fair market value

* Assistant Research Professor & Deputy Director of Center for Empirical Legal Studies, Institutum Iurisprudentiae, Academia Sinica, Taiwan. Email: kleiber@sinica.edu.tw.

J.S.D., New York University School of Law.

I thank the anonymous referees for the European Law and Economics Annual Conference, Avi Bell, Omri Ben-Shahar, Wen-tsong Chiou, Jim Ely, Jr., Lee Anne Fennell, Octavio Ferraz, Amnon Lehavi, Eric Posner, Lior Strahilevitz, and participants of the Law and Economic Workshop at Bar-Ilan University Faculty of Law and the 2012 Law and Society Meeting for helpful comments and suggestions.

Funding by National Science Council of Taiwan (Grant no. 100-2410-H-001-005) is deeply appreciated. Jung Chen, Yi-sin Chen, and Po-jen Huang provided helpful research assistance.

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I. INTRODUCTION: THE HYBRID RULE

"Few things are as certain as death, taxes and the legal entanglement that follows a sale of landlocked real estate."1

Every jurisdiction has landlocked parcels, and thus has to deal with their problems of accessing public roads. Civil-law countries in Europe and East Asia, as well as Louisiana group the related access doctrines under the heading of “legal servitude of passage,”2 whereas in most states in the U.S., the access problems are dealt with by the “easement of necessity”3 doctrine in the common law and “statutory easement”4 prescribed by state statutes. In both civil law countries and the U.S., the basic structures of the legal solutions to access to landlocked land are similar.5 As for statutory easements, the common requirements are necessity of the passage, compensation to neighbors, and the least damage to the neighboring servient land. As for easement of necessity, gratuitous right of way is granted to a landlocked owner, if her land becomes landlocked due to severance.

The access problem is essentially how to balance between respecting the land use plan of the innocent neighbors and preserving the value of the landlocked land. At the first look, the legal servitude of passage is a doctrine that deviates from the property rule, the default in property law (Smith 2004: 1722) and adopts the liability rule.6 The core insight of this article, however, is that the access doctrine should be interpreted as a hybrid rule of the property rule and the liability rule. Put differently, the most efficient balance here is not a dichotomous choice of either rule. Nevertheless, since Calabresi and Melamed (1972), most literature (Ayres and Talley 1995; Ayres and

1Bob Daniels and Sons v. Weaver, 106 Idaho 535, 538, 681 P.2d 1010, 1013 (Ct. App. 1984).

2Legal servitudes, according to Louisiana Civil Code Article 659, are “limitations on ownership established by law for the benefit of the general public or for the benefit of particular persons.”

In this article, I will use legal servitude of passage as the umbrella term for “easement of necessity” and “statutory easement.”

3This article treats “easement of necessity,” “easements by necessity,” and “ways of necessity” as synonyms.

4This article uses “statutory easement,” “(legal) right-of-way,” and “(legal) right of passage” interchangeably.

5See Bradbrook (1983) for a comparative study of doctrines in the common-law jurisdictions.

6Ian Ayres, in a series of articles (see, e.g., Ayres and Talley (1995); Ayres and Balkin (1996); Ayres (1998)), and ultimately a book (Ayres 2005), has advocated wider use of the liability rule, which, Ayres argues, is often more efficient than the property rule. Rose (1997) points out that the shadow examples Ayres and others (e.g., Kaplow and Shavell 1996) use are contract law and accident law, not property law. Property scholars generally agree that the property rule should be the norm in the area of property law (Krier and Schwab 1995; Epstein 1997; Rose 1997; Epstein 1998; Smith 2002; 2004). Kaplow and Shavell (1996: 723) also favor the “use of property rules for protection of possessory rights in things.” Elsewhere, in Chang (2012a), I have argued for the dominance of property rules over liability rules in the area of property, recognizing that call-option liability rules are justified in certain circumstances. This article thus will not treat the liability rule as the default or starting point and omit the review of the liability rules literature.

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Balkin 1996; Kaplow and Shavell 1996; Ayres 1998; 2005) implicitly or explicitly characterizes the structure of entitlement protections as an either-or choice; that is, in a certain context, either the property rule or the liability rule is more efficient and thus should be adopted, excluding the other rule. Bell and Parchomovsky (2002), using the term “pliability rule,” enriches the debate and furthers our understanding of the Cathedral by pointing out that the method of protecting entitlements is pliable—fulfillment of a certain condition can trigger the transformation of property rules to liability rules (or vice versa)—and it is more efficient to structure certain entitlements in this way. Their framework includes temporal pliability rules such as “the zero-order pliability rule” under which the property rule is succeeded by a no-liability rule (expiry of patent being a case in point), as well as simultaneous pliability rule under which property rules are used to protect the entitlement against some parties, whereas liability rules are used to protect it against others (think plagiarism versus fair use).

Bell and Parchomovsky (2002) and others, however, do not exhaust the possibility of mixing property rules and liability rules. Namely, the possibility of mixing property rules and liability rules simultaneously between the same two parties has not been identified and analyzed. This article examines in detail a specific context in property law—access to landlocked land—and argues that a specific type of hybrid rules—a liability rule of limited extent plus a residual property rule—is more efficient than pure property or liability rules in solving the access issue. Property rules and liability rules are prototypes, but prototypes are not always the most efficient.

Access to landlocked land may seem like a petty problem faced by only a handful of landowners, while in fact, every jurisdiction (civil-law or common-law) has doctrines (statutory or court-made) that address the access issue, suggesting its practical importance. Additionally, the specific hybrid rule proposed here has broader implications, such as landlocked country’s access to seas7 or landlocked cities access to interstate highways.

More generally, the hybrid rule proposed here belongs to a family that might be called “split-the-difference rule.”8 In a property dispute, the title holder usually demands injunction, or property rule protection, whereas the other party would prefer (uncompensated) tolerance from the title holder. Compensation for the loss by title holder (or, liability rule) is the well-known mid-point in the injunction-tolerance continuum. That is, the liability rule itself can be construed as a split-the-difference

7So far, no such doctrine exists in international law, because international law is consent-based, and not being behind the veil of ignorance, countries bordering the sea are unwilling to agree to such doctrines. I thank Eric Posner for this point.

8I thank Lior Strahilevitz for this point and the label.

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rule. The hybrid rule proposed here splits the difference between the property rule and the liability rule, whereas the pliability rules proposed by Bell and Parchomovsky (2002) are also mid-points scattered in the multi-dimensional space of entitlement protection. From this perspective, a variety of split-the-difference rules can be identified and even categorized.

Another interesting and unheralded example of the split-the-difference rule is the solution proposed by the court in Pile v. Pedrick II, 167 Pa. 296, 300 (1895).9 In this case, Pedrick unintentionally built a wall that projected onto Pile's land by 1 3/8 inches. Pile demanded injunction to tear down the encroaching stone wall, whereas Pedrick offered to use the stone wall as party wall (basically, requesting uncompensated tolerance). In Pile v. Pedrick II, the second verdict of this case, the court modified the decree to permit the removal of the stone wall to be made within one year from the filing date. Put differently, between property rule now and uncompensated tolerance forever, the court chooses a mid-point—property rule in one year. This ruling creates some room for Coasean bargaining between Pile and Pedrick (both parties need to cool off, perhaps). And the bargaining result is presumably more efficient than either extreme position (property rule now and uncompensated tolerance forever).

The hybrid rule advanced here also facilitates Coasean bargaining between the landlocked owner and her neighbor. Under the property rule, the bargaining power of the neighbors (owners of possible servient land) is much larger than that of the landlocked owners. Voluntary transactions therefore may fail to go through, rendering landlocked parcels worthless. Under the (unconstrained) liability rule, landlocked owners can acquire their desirable extent of passage rights and thus do not have incentive to further bargain with the neighbor. Nevertheless, because the compensation assessed by the court under the liability rule generally fails to take into account the neighbor’s subjective value, and the court does not always accurately assess property value, landlocked owners often does not fully internalize the total social cost of their easement. By contrast, under my proposed hybrid rule, only limited passage right is awarded to landlocked owners, and much, but not all, of the value of the landlocked land will be preserved, thus balancing the bargaining power between two parties. Once the playing field is leveled, an optimal extent of passage can be attained through voluntary transactions (which will fully compensate any further loss of the neighbor). In other words, beyond the limited extent of passage that the neighbors are forced to accept, the neighbors’ entitlements are protected by the property rule.

9 I thank Lior Strahilevitz again for this example.

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A caveat of using the split-the-difference rule in property law is that ex ante strategic behaviors by non-title holders have to be kept at bay. For example, landlocked owners, recognizing that they only have to pay “fair market value”10 (rather than “economic value”11) when accessing public road through statutory easements, may refuse to bargain with their neighbors altogether. To facilitate Coasean transactions, the statutory easement doctrines make it very clear that statutory easement is not available to land that becomes landlocked due to owners’ voluntary act, such as severance and blocking an existing road. Without such qualifying stipulations, owners would have less or no incentives to bargain for a passage right and petition for a prescribed one. In a case like Pile v. Pedrick II, the court is willing to adopt the split-the-difference rule probably because the encroacher in this case is anything but acting strategically, as he hired a surveyor to ascertain the land boundary before building, to avoid trespassing, but the surveyor made a mistake. If a negligent or even intentional encroacher can also enjoy a one-year cushion before tearing down the building, some developers who only have temporary needs in encroaching might skip the bargaining process. Put it more generally, when ex ante strategic behaviors can be reduced to the minimum through careful design of the supporting doctrines, the split-the-difference rule can focus on inducing the most efficient allocation of entitlements ex post. That is, the split-the-difference rule can take the encroaching building and landlocked land as given, not worrying about its ex ante effect on relevant parties’ incentives to act and bargain.

In what follows, I will demonstrate how to interpret economically the doctrines regarding access to landlocked land, particularly why the hybrid rule laid out above is more efficient than the pure property or liability rule in this context. This article is structured as follows: Part II compares legal servitude of passage doctrines in the U.S., China, Japan, Taiwan, Germany, France, the Netherlands, Russia, Italy, and Portugal, laying the grounds for the following economic analysis. Part III describes the fundamental economic rationales for what are called statutory easements in the U.S. Parts IV, V, and VI provide economic analysis of the three major requirements for statutory easements: compensation to the neighbors, necessity of the passage, and the least damage to the neighboring land, respectively. Part VII economically justifies what is called the easement of necessity doctrine in the U.S. Part VIII concludes.

10Fair market value is “the amount a willing buyer would pay a willing seller of the property, taking into account all possible uses to which the property might be put other than the use contemplated by the taker” (Dana and Merrill 2002: 169–170).

11Economic value equals fair market value plus the party’s subjective premium (also known as subjective value) (Blume and Rubinfeld 1984: 619; Fennell 2004: 963–965; Miceli and Segerson 2007: 20). Subjective premium is sometimes called the “consumer’s surplus”(Krier and Serkin 2004: 866).

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II. DOCTRINES: A COMPARATIVE LOOK

The American common law and the civil law adopt different approaches to resolve the access problem of landlocked land. The American common law develops the doctrine of “easement of necessity” (also called “easements by necessity” or “ways of necessity”), implying an easement right for parcels that become landlocked after partition or partial transfer of a property. Nevertheless, the American common law “never developed a general method for providing access to landlocked property” (Restatement (Third) of Property: Servitudes § 2.15 comment a (2000)), but a number of states, through statutes, permit landlocked owners to condemn easements over neighboring land (Hernandez 2005: 112). Moreover, statutory easements are considered “private takings” (Bell 2009: 546)12 and administrative agencies or courts are often involved in the process of establishing a statutory easement (Merrill and Smith 2010: 204; Bruce and Ely 2011: 4:14). By contrast, most major civil codes recognize both easements of necessity and statutory easements. Louisiana, a state with the civil-law tradition and a civil code, uses an umbrella term “legal servitude of passage” to cover the two types of easements (Wilmore 1986; Sentell 1994; Yiannopoulos 1996; Merwe 1999; Huffstetler 2002). Besides, although civil lawyers may debate the nature of such easements — legal servitude versus expansion and limitation of ownership (Wang 2010: 181) — analogy to private condemnation is rarely, if ever, made.

In what follows, I will summarize the legal servitude of passage doctrines in the U.S. and civil-law countries. Section A reviews what are called easements of necessity in American common law, whereas Section B describes what are called statutory easements in the U.S.

A. Easements of Necessity

In American common law, an easement of necessity is granted when the following four requirements are met: (1) prior common ownership of the dominant and the servient land parcels; (2) transfer of part of the land (severance); (3) (strict or reasonable) necessity for an easement at severance; and (4) continuing (strict or reasonable) necessity for an easement (Bruce and Ely 2011: 4:6). No compensation needs to be paid to the owner of the servient land (or simply “neighbors” hereinafter), though.

The doctrines in civil law jurisdictions are very similar to the American ones.13

12The U.S. Supreme Court, in Leo Sheep Co. v. United States, 440 U.S. 668, 680 (1979), has recognized that easements of necessity and eminent domain are alternative ways to reach the same results.

13See the German Civil Code §918, Japan Civil Code §213, French Civil Code §684, Taiwan Civil

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If, as a result of a partition or a partial transfer, a land parcel becomes landlocked, its owner is implied by law to have an easement over a neighboring parcel which was originally part of the co-owned land (in the case of partition) or separated from the landlocked parcel because of a previous partial transfer. Moreover, the passage must be furnished gratuitously.

B. Statutory Easements

Statutory easements in the U.S. are enacted by state legislatures and do not have the same contents. According to Bruce and Ely (2011: 4:14), the statutory easement law can be summarized as follows:14

Code §789, Swiss Civil Code §694, the Dutch Civil Code §5:57, Italian Civil Code §1054, and Louisiana Civil Code §694.

Although China’s Property Law of 2007 borrows from the German and Swiss Civil Codes through emulating the Taiwan Civil Code (Chang 2012b), and these three civil codes all contain provisions on easement of necessity, the only relevant provision in China’s Property Law of 2007 is very general—§87 stipulates that when one’s neighbor must use her land for passage, she must provide “necessary convenience.”

14 Readers who are interested in individual state laws may refer to the statutes in Alabama, Arkansas, and Kansas excerpted below.

Alabama: ALA. CODE § 18-3-1 (1997) stipulates that “[t]he owner of any tract or body of land, no part of which tract or body of land is adjacent or contiguous to any public road or highway, shall have and may acquire a convenient right-of-way, not exceeding in width 30 feet, over the lands intervening and lying between such tract or body of land and the public road nearest or most convenient thereto provided written approval is obtained from the municipal government and the planning board of such municipality.”

Arkansas: ARK. CODE ANN. §§27-66-401 (a)(1) (Michie 1994) “When the lands, dwelling house, or plantation of any owner is so situated as to render it necessary to have a road from such lands, dwelling house, or plantation to any public road or navigable watercourse over the lands of any other person and the other person refuses to allow that owner the road, the owner may petition the county court to appoint viewers to lay off the road, provided the owner gives written notice to the person twenty (20) days before application to the court and attaches the written notice to the petition.” §§27-66-402 (c) “If they or a majority of them are of the opinion that a road is necessary and proper, as prayed in the petition, they shall lay out and describe the road in a manner that produces the least inconvenience to the parties through whose land the road shall pass.” §§27-66-402 (d)(2) “The measure of damages shall be the difference in the fair market value of the lands immediately before the access easement is ordered and the fair market value of the lands after the access easement is ordered. §§27-66-403(a)(3)(B)(ii)(b)(2)(B) “In determining whether the respondent substantially prevails on the disputed issues, the court shall consider the respondent's success on the merits regarding the: (i) Necessity of the road; (ii) Route of the road; (iii) Width of the road; and (iv) Damages to the lands over which the road passes.” §§27-66-403(a)(3)(B)(ii)(c) “The order shall state that:(1) The respondent retains title to the lands over which the road passes; and (2) The road is for an access easement only and is not an easement for any other purpose, including a public utility.” §§27-66-403(a)(3)(B)(iv) “The respondent shall have no responsibility for the maintenance of the road established under this subchapter.”

Kansas: KAN. STAT. ANN. § 68-117 (2002) “Whenever the premises of any person shall be so completely surrounded by adjoining lands, the property of others or by such lands and water, as to be without access to any public highway, then such person may petition the board of county commissioners of the county in which such premises lie for a road, and one road only, through some

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“numerous state legislatures have enacted statutes authorizing the owner of landlocked property to condemn a private right-of-way over neighboring land. Some way-of-necessity statutes apply only to certain limited types of landlocked property….These statutes vary in several particulars, but each requires the claimant to establish present necessity and to compensate the owner of the servient estate….One who creates the necessity by voluntarily landlocking one's own property generally cannot obtain a statutory right-of-way….The degree of necessity required also may be at issue. In at least two states, a claimant must establish strict necessity in order to obtain a statutory right-of-way. But in many jurisdictions, courts interpret local statutes as mandating only reasonable necessity. Such a standard still requires the claimant to establish more than convenience and does not assure the claimant of the most direct access or of the precise form of access the claimant prefers. Moreover, a court may consider alternative routes over the servient estate and weigh the relative interests of both parties. In this regard, it has been held that the servient owner should be allowed to establish that an alternative route over the servient estate is acceptable and less burdensome than the proposed route…. Several statutes limit the width of the easement. Others provide general guidelines for determining the portion of the servient estate over which the easement should run. Some measures address both issues.”

In civil-law jurisdictions, the legal servitude of passage doctrines that correspond to the statutory easement doctrines in the U.S. are similar to each other, though with some interesting variations. Landlocked land is defined as a land parcel lacking the connection to a public road.15 A statutory right-of-way is granted to landlocked owners to pass through neighboring land. The passage has to be (reasonably)

portion of the adjoining lands. The petition shall set forth the use and purposes of such proposed road. Upon presentation of such petition, the commissioners shall proceed in accordance with the provisions of K.S.A. 68-101 to 68-110, both sections inclusive, and K.S.A. 68-115 and 68-116, to lay out such road, make returns of plats, and allow damages, if any should be held or allowed: Provided, Said road shall not be less than forty (40) feet nor more than one hundred (100) feet in width and shall be laid out upon the quarter or quarter-quarter section lines when practicable. The said road when so ordered by the board of county commissioners shall be platted and recorded in the office of the register of deeds and shall become a public way, subject to restrictions contained in the petition: And provided further, That the owner or owners, their grantees, successors or assigns, of the land specifically benefited by the establishment of such public road, shall forthwith pay all expenses of establishing said road, including all damages, if any should be held or allowed and thereafter forever maintain and keep the same in repair and without any expense or liability to the township or other municipality in which such road is so laid out and established.”

15 Article 210 Section 2 of the Japan Civil Code also includes cases “where an owner cannot access the public roads unless he/she passes through ponds, lakes, rivers, waterways or seas, or in cases where there is a considerable difference in height between the land and the public road.”

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necessary.16 Landlocked owners are required to compensate those of neighboring parcels.17 The doctrine regarding the location of the right-of-way is the most diverse. Some civil codes just stipulate that the right-of-way shall be set at the place that “causes the least damage to the neighboring land,”18 while some civil codes add an additional requirement that the passage should be the shortest possible.19 In addition, some civil codes emphasize the “voluntary act exception”;20 that is, an owner who intentionally makes her parcel landlocked is not eligible for a statutory easement. Portuguese Civil Code §1552 adopts a unique rule, under which such owners can still acquire statutory easements through paying heightened damages, which cannot surpass twice the amount of the ordinary damages, and are assessed according to the culpability of the landlocked owners. Finally, a few civil-law jurisdictions emphasize that the landlocked owners may have the right to construct a road (instead of merely passing) if necessary.21

There are similarities and differences between the American doctrines and the civil-law doctrines. They both require that the passage be necessary and compensation be paid (both being vague on the compensation standard). In addition, “voluntary landlocked owners” can obtain legal servitude under neither tradition. The major differences between them are the location of the right-of-way. Most, if not all, civil-law jurisdictions adopt the least damage rule, while the state statutes in the U.S. seem to shy away from using similar language.22 Interestingly, when lawmakers adopt a more specific criterion, those in civil-law jurisdictions focus on the length of the passage, often prescribing that the passage must be the shortest possible. By contrast, the American state legislatures usually choose to specify the maximum and minimum width of the easement, but some states also prescribe that the route has to be the shortest (Bruce and Ely 2011: 4:14).

16For example, German Civil Code §917, Taiwan Civil Code §787, the Dutch Civil Code §5:57, and Louisiana Civil Code §690.

The French law seems to give landlocked owners more leeway, as Article 682 of the French Civil Code stipulates that the right of way shall be “sufficient for the complete servicing” of the landlocked land.”

17For example, German Civil Code §917, Taiwan Civil Code §787, Japan Civil Code §212, French Civil Code §682, Russian Civil Code §274, Italian Civil Code §1053, Swiss Civil Code §694, the Dutch Civil Code §5:57, and Louisiana Civil Code §689.

18For example, Taiwan Civil Code §787, Japan Civil Code §212, Swiss Civil Code §694, and Portuguese Civil Code §1553.

19For example, French Civil Code §683, Italian Civil Code §1051, the Dutch Civil Code §5:57, and Louisiana Civil Code §692.

20For example, German Civil Code §918, Taiwan Civil Code §787, the Dutch Civil Code §5:57, and Louisiana Civil Code §693.

21For example, Japan Civil Code §211, Taiwan Civil Code §788, and Louisiana Civil Code §691. An interesting variation to this doctrine is Russian Civil Code §274, which stipulates that the legal

servitude of passage guarantees passage “across the neighboring land plot both on foot and by a motor vehicle.”

22 Arkansas is one exception, using “the least inconvenience,” and the state of Wyoming adopts the “least possible damage” rule. See footnote 14.

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